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Vislink PLC (VLK)

  Print      Mail a friend       Annual reports

Wednesday 01 September, 2004

Vislink PLC

Interim Results

Vislink PLC
01 September 2004


                                   Vislink plc

          Interim results for the six months ended 30th June 2004


Vislink plc ('Vislink') today announces its interim results for the six months
ended 30 June 2004. The Group supplies microwave radio and satellite
transmission products for the broadcast and security markets and integrated CCTV
systems for marine security and petroleum markets.



Financial summary

For the six months ended 30 June                                                                   2004           2003
                                                                                                  £'000          £'000
Turnover - continuing operations                                                                 30,107         34,042
Operating profit - continuing operations before goodwill amortisation                               457          1,100
(Loss)/profit before taxation                                                                     (323)            260
Earnings per share excluding goodwill amortisation and exceptional costs*                         0.16p          0.58p


*Goodwill amortisation was £566,000 (2003 - £584,000) and exceptional costs were
£nil (2003 - £27,000)



Key points
     
•    The Group is continuing to see growth from the US broadcast business and
     Hernis

•    Group's progress has been constrained by the strength of sterling and
     the poor trading of the UK broadcast business

•    A strategic review to restore the core UK business to ongoing profitability 
     is being made which is expected to result in a restructuring charge



Bob Morton, Chairman of Vislink said:

'The Group is continuing to see growth from the US broadcast business and
Hernis. The Board considers that both MRC and Hernis will perform to their
expected levels in the full year. Whilst the Venezuelan contract will make a
significant contribution to the UK business, the Board is carrying out a
strategic review of the UK business where further rationalisation to lower its
cost base, combined with the weak level of demand in its other markets, will
have an adverse effect on the Group's profits for the full year.'


                                   -  ends  -



For further information on September 1st 2004, please contact:

Ian Scott-Gall, Chief Executive                                  01488 685500

James Trumper, Group Finance Director                            01488 685500




Chairman's Statement

Results for the six months to 30 June 2004

The Group has seen continued growth in sales and operating profits from MRC, our
US broadcast business and Hernis our Norwegian marine safety business, in their
local currencies. However overall the Group's progress has been constrained by
the strength of sterling and the poor trading of the UK broadcast business,
despite the first time contribution from the Venezuelan contract, which was won
at the end of 2003.

Group sales from continuing operations declined 11.5% to £30.11million (2003 -
£34.04million). Adverse rates of foreign exchange were responsible for
£2.2million (6.5%) of the reduced sales, whilst the balance was as a result of
lower sales from the UK broadcast business.

The Group's operating profit from continuing operations before goodwill was
£0.46million (2003 - £1.10million). Whilst the adverse effect of foreign
exchange on translation of operating results was responsible for £0.29million of
the decline, the trading losses in the UK business were larger than expected
during the period due to weak sales and disruption caused by the ongoing
rationalisation of the UK business in the first five months of the year. After
goodwill amortisation of £0.57million (2003 - £0.58million) there was an
operating loss of £0.11million (2003 - profit of £0.52million) from continuing
activities.

After net interest costs of £0.21million (2003 - £0.22million) the Group made a
loss on ordinary activities before tax of £0.32million (2003 - profit of
£0.26million).

At 30 June 2004 the Group had net debt of £0.22million (31 December 2003 - net
cash of £3.70million). There was a net cash outflow during the period from the
expected absorption of the deposit received on the Venezuelan contract into
working capital and from the costs of both the rationalisation and trading
losses of the UK business.

Earnings per share

Earnings per share from continuing operations excluding goodwill amortisation
and exceptional costs were 0.16 pence (2003 - 0.58 pence). The basic loss per
share was 0.40 pence (2003 - earnings per share of 0.01 pence).

Dividends

As in previous years the Board is not recommending an interim dividend in line
with the Group's stated strategy to only recommend an annual dividend.

Board of Directors

Mr Eric Walters has resigned as a non-executive director with immediate effect.
The Board would like to thank Eric for his excellent and valuable contribution
to the Group during his term of office since he joined the Board in 1994 and
wish him every success for the future.

Business Review of the half year

MRC, the US broadcast business has seen sales in local currency grow by 8.2% and
operating profits by 20% over the corresponding period for last year. MRC has
seen increasing demand from the emerging public safety and government markets,
whilst demand for the core broadcast products was less than in the previous half
year, following the completion of the digitalisation of the US TV studio's
distribution networks.

Hernis, our specialist marine CCTV business, maintained its sales at the same
level as the first half of 2003, but achieved better margins from increased
domestic business in Norway, resulting in an increase of 20% in local currency
operating profits. The domestic offshore market has been strong this year and
there are also signs of growth in the marine market in the Far East. The
potential opportunities for additional business from the implementation of the
new International Ship and Port Safety regulations ('ISPS') have yet to be fully
realised, although there have been a number of related orders.

The UK business predominantly sells satellite communication products into the
UK, European and international markets outside of North America, as well as
undertaking large system integration projects.  The UK business has benefited
from sales growth in South America with the commencement of the Venezuelan
contract. Group sales increased in the region to £6.10million (2003 -
£1.31million). The Bahrain F1 Grand Prix and the Olympic games have provided
good business, however the UK, Asia and the Middle East markets were weakened by
reduced spend after the end of the Iraqi war compared with the half year to June
2003.

The rationalisation of the UK business which was announced at the end of 2003,
commenced in the first quarter. The UK operations have been integrated onto one
site. Whilst the predicted cost reductions have been made, the UK business has
made a trading loss in the first half of this year equivalent to the full year
loss in 2003 due to weaker sales and poor operational management. Management
changes have been made to strengthen the business. A strategic review and
further cost reductions to restore the core UK business to ongoing profitability
are expected to result in a restructuring charge which will be provided for in
the full year results.

Operational Strategies & Prospects

The Group has previously stated its clear operational strategic and financial
objectives. These objectives continue to be met by the overseas businesses MRC
and Hernis whilst the UK business has been a disappointment.

The strategic focus for the UK business is the completion of the review, the
implementation of its findings and the restoration of its profitability. Its
product markets remain the international broadcast, military and public safety
satellite markets. The new UK lightweight satellite antenna and compact sized
satellite electronics products have been well received. A £1.7million contract
in West Africa has been won. This is expected to be delivered this year subject
to the timely receipt of the financing for the contract. In addition, there are
further project business opportunities in South America.

In the US market the major opportunity for the future is from the planned
regulatory change to the frequency bands used for Electronic News Gathering
(ENG). This opportunity, known as the 2GHZ re-channelisation, has been taken a
step closer following the announcement of the award to Nextel by the Federal
Communications Commission, of part of the relocation of the broadcasters to a
higher band to allow the use of the spectrum for wireless services. As part of
this award Nextel will have to compensate the broadcasters for replacing
existing ENG installations with digital equipment. This is expected to generate
incremental sales for MRC in 2005 through to 2007.

Hernis has developed new products to meet the demands of the new ISPS
regulations. The regulations came into force on 1st July 2004, and Hernis
expects the markets for its products to grow, resulting in new sales
opportunities from the regulatory requirements.

In summary, the Group is continuing to see growth from the US broadcast business
and Hernis. Although their reported growth is lessened by the continuing
strength of sterling, the Board considers that both MRC and Hernis will perform
to their expected levels in the full year. Whilst the Venezuelan contract will
make a significant contribution to the UK business, the Board is carrying out a
strategic review of the UK business where further rationalisation to lower its
cost base, combined with the weak level of demand in its other markets, will
have an adverse effect on the Group's profits for the full year.


A L R Morton
Chairman
1 September 2004




GROUP PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2004
                                                                           Six months to  Six months to Year ended 31
                                                                            30 June 2004   30 June 2003      Dec 2003
                                                                                   £'000          £'000         £'000
                                                                 Notes
Turnover
Continuing operations                                                             30,107         34,042        67,966
Discontinued operations                                                                -          1,347         1,425
                                                                   2              30,107         35,389        69,391
Operating profit
Continuing operations before exceptional rationalisation
costs and goodwill amortisation                                                      457          1,100         2,074
Exceptional rationalisation costs                                                      -              -       (3,760)
Continuing operations before goodwill amortisation                                   457          1,100       (1,686)
Goodwill on continuing operations                                                  (566)          (584)       (1,167)
Continuing operations                                                              (109)            516       (2,853)
Discontinued operations                                                                -           (11)          (23)

Total operating (loss)/profit                                      2               (109)            505       (2,876)
Loss on disposal of businesses                                                         -           (27)          (27)
Impairment of long leasehold property                                                  -              -          (50)
(Loss)/profit on ordinary activities before interest                               (109)            478       (2,953)
Interest receivable                                                                   36             12            38
Interest payable                                                                   (250)          (230)         (456)
(Loss)/profit on ordinary activities before taxation                               (323)            260       (3,371)
Tax on profit on ordinary activities                               3                (85)          (254)         (555)
(Loss)/profit for the financial period                                             (408)              6       (3,926)
Dividends                                                          4                   -              -         (202)
Transfer (from)/to reserves                                                        (408)              6       (4,128)

(Loss)/earnings per share
Basic                                                              5             (0.40)p          0.01p      (3.88) p
Fully diluted                                                      5             (0.40)p          0.01p      (3.85) p

Earnings per share excluding goodwill and exceptional
costs
Basic                                                              5               0.16p          0.58p         0.96p
Fully diluted                                                      5               0.16p          0.58p         0.95p

Dividend per share                                                                     -              -         0.20p





STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 30 June 2004
                                                                            Six months to Six months to Year ended 31
                                                                             30 June 2004  30 June 2003      Dec 2003
                                                                                    £'000         £'000         £'000

(Loss)/profit for the financial period                                              (408)             6       (3,926)
Translation difference on foreign currency net investments                          (317)         (560)       (1,592)

Total recognised gains and losses for the financial period                          (725)         (554)       (5,518)






RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the six months ended 30 June 2004
                                                                            Six months to  Six months to Year ended 31
                                                                             30 June 2004   30 June 2003      Dec 2003
                                                                                                Restated      Restated
                                                                                    £'000          £'000         £'000
                                                                  Notes

Opening equity shareholders' funds as previously reported                          26,980         32,700        32,700
Prior year adjustment in respect of UITF 38                         1               (160)           (84)          (84)
Opening equity shareholders' funds restated                                        26,820         32,616        32,616
(Loss)/profit for the financial period                                              (408)              6       (3,926)
Dividends                                                           4                   -              -         (202)
                                                                                   26,412         32,622        28,488
Purchase of own shares for ESOP trust                                                   -           (76)          (76)
Translation difference on foreign currency net                                      (317)          (560)       (1,592)
investments

Closing equity shareholders' funds                                                 26,095         31,986        26,820





GROUP BALANCE SHEET
as at 30 June 2004
                                                                 Notes
                                                                            30 June 2004   30 June 2003   31 Dec 2003
                                                                                               Restated      Restated
                                                                                   £'000          £'000         £'000
Fixed assets
Intangible assets                                                                 17,458         19,116        18,091
Tangible assets                                                                    4,398          5,614         4,464
Financial assets                                                                       -              2             -
                                                                                  21,856         24,732        22,555


Current assets
Stock                                                                             10,682         11,213         9,099
Debtors                                                            7              13,710         12,958        12,857
Cash at bank and in hand                                                           5,371          4,600         9,540
                                                                                  29,763         28,771        31,496

Creditors - amounts falling due within one year
Borrowings                                                                            35          2,227           276
Creditors                                                                         18,290         12,873        18,845

                                                                                  18,325         15,100        19,121

Net current assets                                                                11,438         13,671        12,375

Total assets less current liabilities                                             33,294         38,403        34,930

Creditors - amounts falling due after more than one year
Borrowings                                                                         5,552          5,832         5,567

Provisions for liabilities and charges                                             1,647            585         2,543

                                                                                  26,095         31,986        26,820


Capital and reserves
Called up share capital                                                            2,552          2,552         2,552
Share premium account                                                                205            205           205
Investment in own shares                                                           (160)          (160)         (160)
Merger reserve                                                                    27,895         27,895        27,895
Profit and loss account                                                          (4,397)          1,494       (3,672)

Equity shareholders' funds                                                        26,095         31,986        26,820






SUMMARISED STATEMENT OF CASH FLOWS
for the six months ended 30 June 2004
                                                                         Six months to  Six months to  Year ended 31
                                                                          30 June 2004   30 June 2003       Dec 2003
                                                                                 £'000          £'000          £'000
                                                                 Notes

Net cash (outflow)/inflow from operating activities                6           (2,961)          2,589         11,824
Returns on investments and servicing of finance                                  (117)          (106)          (438)
Taxation                                                                         (403)          (502)        (1,223)
Capital expenditure                                                              (399)          (579)        (1,178)
Acquisitions and disposals                                                           -            160            160
Equity dividends paid                                                                -              -          (205)
Net cash (outflow)/inflow before financing                                     (3,880)          1,562          8,940
Financing                                                                        (260)        (1,115)        (3,331)

(Decrease)/increase in cash                                                    (4,140)            447          5,609






RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
for the six months ended 30 June 2004
                                                                         Six months to  Six months to  Year ended 31
                                                                          30 June 2004   30 June 2003       Dec 2003
                                                                                 £'000          £'000          £'000

(Decrease)/increase in cash                                                    (4,140)            447          5,609
Repayment of bank loans                                                            260          1,115          3,331
Change in net debt resulting from cash flows                                   (3,880)          1,562          8,940
Effect of foreign exchange changes                                                (33)           (36)          (258)
Movement in net debt                                                           (3,913)          1,526          8,682
Opening net cash/(debt)                                                          3,697        (4,985)        (4,985)
Closing net (debt)/cash                                                          (216)        (3,459)          3,697





NOTES TO THE INTERIM ACCOUNTS
for the six months ended 30 June 2004

     
1.   ACCOUNTING POLICIES

This interim report is unaudited and does not constitute audited accounts within
the meaning of the Companies Act 1985. The interim results have been prepared
using accounting policies and practices consistent with those used in the
preparation of the Annual Report and Accounts for the year ended 31 December
2003, which should be read in conjunction with this report, with the exception
of the changes caused by the adoption of Urgent Issues Task Force Abstract 38 '
Accounting for ESOP Trusts' ('UITF38') that is further discussed below.

The accounts for the year ended 31 December 2003 (on which the auditors gave an
unqualified audit opinion) have been filed with the Registrar of Companies.

UITF38 requires own shares held through an employee share ownership plan trust
to be deducted in arriving at shareholders' funds. The adoption of UITF38 has
the effect of reducing shareholders funds' brought forward by £160,000 with no
effect on the profit and loss account.

     
2.   SEGMENTAL ANALYSIS
                                                    Turnover                          Operating Profit / (Loss)
                                       Six months   Six months                    Six months   Six months
                                               to           to   Year ended               to           to   Year ended
                                     30 June 2004 30 June 2003 31 Dec  2003     30 June 2004 30 June 2003 31 Dec  2003
                                            £'000        £'000        £'000            £'000        £'000        £'000
By business:

Broadcast                                  26,183       29,833       59,599              627        1,241        2,451
Hernis                                      3,924        4,209        8,367              442          407          606
Central costs                                   -            -            -            (612)        (548)        (983)
                                           30,107       34,042       67,966              457        1,100        2,074


Exceptional operating costs                     -            -            -                -            -      (3,760)
Goodwill amortisation                           -            -            -            (566)        (584)      (1,167)
Continuing operations                      30,107       34,042       67,966            (109)          516      (2,853)

Discontinued operations                         -        1,347        1,425                -         (11)         (23)
Group total                                30,107       35,389       69,391            (109)          505      (2,876)



The exceptional costs in 2003 are allocated to the Broadcast businesses.

Goodwill amortisation in the continuing operations is in respect of the
businesses of Advent Communications, Microwave Radio Communications and
Multipoint Communications, all of which are within the Broadcast business.

     
2.   SEGMENTAL ANALYSIS (contd.)

Turnover Analysis

                                                                      Turnover
                                                 Six months to 30   Six months to 30  Year ended 31 Dec
                                                        June 2004          June 2003               2003
                                                            £'000              £'000              £'000
By market:

Continuing operations
UK & Ireland                                                2,707              5,669              7,472
Rest of Europe                                              4,506              4,457              8,332
North America                                              13,101             13,597             27,170
South America                                               6,081              1,305              2,806
Middle East                                                 1,734              3,636              6,154
Asia                                                        1,610              3,447             10,386
Africa                                                        280              1,473              5,031
Other                                                          88                458                615
                                                           30,107             34,042             67,966
Discontinued operations
UK & Ireland                                                    -              1,328              1,401
Rest of Europe                                                  -                 17                 18
North America                                                   -                  1                  5
Other                                                           -                  1                  1
Group Total                                                30,107             35,389             69,391


     
3.   TAX ON PROFIT ON ORDINARY ACTIVITIES

The tax charge for the six months ended 30 June 2004 is based on the effective
tax rate, which it is estimated will apply to earnings for the full year.


4.   DIVIDENDS

No interim dividend is proposed for the period.  In 2003 there was no interim
dividend and the final dividend was 0.2 pence per share.


5.   EARNINGS PER ORDINARY SHARE

Earnings per share is calculated by reference to a weighted average of
101,123,000 ordinary shares in issue during the period, excluding shares held by
the Employees' Share Ownership Plan (30 June 2003 - 101,362,000 and 31 December
2003 - 101,238,000).

The diluted earnings per share is after taking account of a further 746,000
shares (30 June 2003- nil; 31 December 2003 - 620,000) being the dilutive effect
of share options.

Earnings per share before goodwill and exceptional items exclude after tax
amounts relating to goodwill and exceptional items of £566,000 (30 June 2003 -
£584,000; 31 December 2003 - £4,893,000).

                                                        Six months to            Six months to           Year ended
                                                        30 June 2004            30 June 2003            31 Dec 2003
                                                       Basic     Diluted       Basic     Diluted      Basic    Diluted

Basic and diluted (loss)/earnings  per share         (0.40)p     (0.40)p       0.01p       0.01p    (3.88)p    (3.85)p
Adjustment for goodwill and exceptional items          0.56p       0.56p       0.57p       0.57p      4.84p      4.80p

Earnings per share from ongoing operations             0.16p       0.16p       0.58p       0.58p      0.96p      0.95p
excluding goodwill


     
6.   RECONCILIATION OF OPERATING PROFIT TO NET CASH FLOW FROM OPERATING 
     ACTIVITIES
                                                                           Six months to  Six months to Year ended 31
                                                                            30 June 2004   30 June 2003 Dec   2003
                                                                                   £'000          £'000         £'000

Operating (loss)/profit                                                            (109)            505       (2,876)
Depreciation                                                                         406            376         1,519
Amortisation of goodwill                                                             566            584         1,167
(Profit)/loss on sale of fixed assets                                                (2)             34            35
(Increase)/decrease in stock                                                     (1,745)            568         2,399
(Increase)/decrease in debtors                                                     (976)          3,909         4,388
(Decrease)/increase in creditors                                                   (214)        (3,293)         3,462
(Decrease)/increase in provisions                                                  (887)           (94)         1,730
Net cash inflow from operating activities                                        (2,961)          2,589        11,824


     
7.   DEBTORS

Debtors include deferred tax assets of £1,241,000 (30 June 2003 - £933,000 and
31 December 2003 - £1,241,000).


8.   APPROVAL

This report was approved by a committee of the Board of Directors on 1 September
2004.




Independent review report to Vislink Plc

Introduction

We have been instructed by the Company to review the financial information which
comprises the group profit and loss account, statement of total recognised gains
and losses, reconciliation of movements in shareholders' funds, group balance
sheet, summarised statement of cash flows and the related notes. We have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.

Directors' responsibilities

The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors are
responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where any
changes, and the reasons for them, are disclosed.

Review work performed

We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A review
consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom Auditing Standards and therefore
provides a lower level of assurance than an audit. Accordingly we do not express
an audit opinion on the financial information. This report, including the
conclusion, has been prepared for and only for the company for the purpose of
the Listing Rules of the Financial Services Authority and for no other purpose.
We do not, in producing this report, accept or assume responsibility for any
other purpose or to any other person to whom this report is shown or into whose
hands it may come save where expressly agreed by our prior consent in writing.

Review conclusion

On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2004.



PricewaterhouseCoopers LLP
Chartered Accountants
Bristol
1 September 2004



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