7th Mar 2005 07:00
The Vitec Group PLC07 March 2005 7 March 2005 The Vitec Group plc 2004 Full Year Results The Vitec Group plc, the international supplier of products, services andsolutions to the Broadcast, Entertainment and Media industries, announces itsresults for the year ended 31 December 2004. 2004 2003 Turnover from continuing operations £185.4m £170.4m Adjusted, before exceptional items, goodwill amortisationand impairment Operating profit from continuing operations £17.8m £17.8m Pre-tax profit £16.2m £16.1m Basic earnings per share 22.9p 23.9p After exceptional items, goodwill amortisation and impairment Pre-tax profit £12.3m £7.8m Basic earnings per share 15.6p 13.6p Total dividend for the year 15.0p 22.7p KEY POINTS • Strong sales growth; 18% in constant currency, 8.8% in £ sterling terms • Profit before tax, exceptional items, goodwill amortisation and impairment increased by 30% in constant currency, 0.6% in £ sterling terms • Two businesses acquired during the year, both fully integrated • Continued strong cash generation • Enhanced financing arrangements in place • Recommended final dividend of 8.9p per share, making a total of 15p per share, in line with expectations. Commenting on the results, Gareth Rhys Williams, Chief Executive, said: "The year saw strong turnover growth as a result of a number of new productsbeing introduced into growing markets. Photographic continues to benefit froman increase in demand for digital cameras, whilst the Broadcast market is slowlyimproving. "We started 2005 in a much stronger position than at the same time last year,with higher order books and rising volumes. Going forward, Vitec remains exposedto fluctuations in the US dollar, but, as a result of restructuring actionstaken over recent years, the Group is now in better shape. Overall the Boardviews the outlook for 2005 with cautious optimism." Enquiries The Vitec Group plc Gareth Rhys Williams 020 8939 4650Financial Dynamics Rob Gurner 020 7269 7291 CHAIRMAN'S STATEMENT Having joined the Board of Vitec in June, I succeeded Alison Carnwath asChairman in November. Alison retired from the Board at the end of the yearafter almost nine years service and we thank her for her contribution to thedevelopment of the Group. The initiatives taken under Alison's stewardship arebearing fruit and I look forward to building on them. I have visited many of the Group's facilities, met key staff and have beenimpressed by the skill and effort they are bringing to tackling the issues whichface the Group. I would like to take the opportunity of thanking all ouremployees for their contribution to the many changes and improvements they havemade - the underlying progress of the business is beginning to show through. The Board has conducted a review of Group Strategy with the company's newadvisers and we are confident that the business is on the right path to generatevalue for shareholders. The results for 2004 are encouraging in terms oforganic growth from new product development and from improving markets. We arealso benefiting from the reorganisation initiatives that have involved plantclosures and significant structural change, combined with improved financialcontrol. As a result, revenues from continuing operations grew 18% in------constant currency terms and profit before tax, exceptional items, goodwillamortisation and impairment grew 30% in constant currency. Earnings per share, before exceptional items, goodwill amortisation andimpairment, were 22.9p (2003: 23.9p). As announced at the half year, we continueto experience a high underlying tax rate as all of the Group's profits wereearned outside the UK. Nevertheless, tax payments in the year were very low asthe Group benefited from a significant tax credit arising from the sale of theALU business. The lowering of the Group's effective tax rate continues to be apriority. Cash generation continued to be strong, with net cash inflow from operatingactivities of £22.5 million (2003: £28.7 million). Working capital increased asa result of the sales growth, but stock and debtor ratios continued to improve. Acquisition activity To supplement the organic growth, two small businesses were acquired in theyear. As previously reported, our Photographic division strengthened itsin-house distribution activities with the acquisition of Multiblitz, itslong-standing distributor in Germany, in January 2004 for £1.4 million.Multiblitz is now integrated and operates as part of Bogen Imaging. In March2004 we acquired the US assets of Charter Broadcast, a competitor in the rentalarena, for a nominal sum which, with transaction costs, brought the totalacquisition cost to £0.1 million. That business was immediately integrated intoour US network of depots. Both acquisitions are performing well. We continue tolook for further acquisitions that will strengthen our existing position or openup new avenues for growth in related areas. Funding On 25 January 2005 the Group agreed a new, enhanced loan facility, which has aterm of five years. The new facility, which is for an increased amount of £100million, compared to £55 million previously, is for Group companies' currentrequirements and for funding any potential future corporate activity. 2004 dividend In line with the policy outlined in March last year, which stated that over aperiod of two to three years we would move towards an average dividend coverlevel of around 2 times, the Board is recommending a final dividend of 8.9p,giving a total dividend for the year of 15p per share. Since last year, when ournew dividend policy was announced, foreign exchange has weakened against us.However, subject to no further significant weakening in the US dollar, it is ourcurrent intention to maintain the current level of dividend per share for 2005and to seek to return to a dividend cover in line with our stated policy overthe next two to three years. Outlook for 2005 We ended 2004 with the factory and structural reorganisations substantiallybehind us. The benefits flowing from these, which will continue to be deliveredin 2005, have allowed higher spending on R&D and marketing in particular, whichin turn has resulted in much stronger product ranges. We started 2005 in a much stronger position than at the same time last year,with higher order books and rising volumes. Going forward, Vitec remains exposedto fluctuations in the US dollar but, as a result of restructuring actions takenover recent years, the Group is now in better shape. Overall the Board views theoutlook for 2005 with cautious optimism. CHIEF EXECUTIVE'S REVIEW 2004 saw real progress in growing the business. For almost three years we havebeen operating the 'Consolidate-Leverage-Grow' strategy. 2002 and the first halfof 2003 saw multiple plant and facility closures at a time of static sales,while in the second half of 2003 we began to see growth returning. In 2004 wedelivered both operational improvements and significant revenue growth, most ofit organic, due to the multiple new products and services that we have launched.While we expect to see further benefits from the consolidation actions alreadyannounced and implemented, the emphasis on delivery is moving from 'Consolidate'and 'Leverage', to 'Grow'. Results 2004 saw revenues from continuing operations grow 18% in constant currencyterms, including a 4% contribution from acquisitions. Profit before tax,exceptional items, goodwill amortisation and impairment, grew 30% in constantcurrency terms due to the volume increases and the benefits of the plant closureprogramme and other cost control measures, despite increases in UK pensioncosts. Foreign currency is a major factor in the performance of a worldwide businesssuch as Vitec, and the fall in the US dollar, particularly against the euro,continued to have a significant effect, even after the hedging we have in place.In £ sterling terms the sales growth was still strong at 8.8% (from £170.4million to £185.4 million), while operating profit before exceptional items,goodwill amortisation and impairment, was £17.8 million (£17.8 million in 2003),after reflecting adverse transactional and translational impacts of some £4.8million. After a slightly lower interest charge, profit before tax before exceptionalitems, goodwill amortisation and impairment was £16.2 million (£16.1 million in2003). There was a net operating exceptional charge of £2.1 million relatingprincipally to the previously announced restructuring of the commercialoperations within Broadcast Systems. Revenue growth The growth in revenue is coming from a combination of new products and marketgrowth. In order to stimulate product sales we have, in the last two years,launched new intercoms systems, new studio camera pedestal and head products,new battery systems, new photographic tripods, and new lighting truss systems.Every brand has reinvigorated its product portfolio and some have replaced theirrange completely. We continue to win meaningful awards for these new products attrade shows and in trade magazines, which is an encouraging indicator of futureprospects. Many of these new products are being patented which, together with anongoing R&D spend of roughly 5% of non-rental sales, reinforces ourmarket-leading positions. We believe continued innovation is crucial to Vitec'sfuture. The market for our photographic accessories continues to expand, driven by theuptake of digital cameras, which is particularly strong in the '35mm SLR'segment, where we have targeted products for the keen amateur. In our broadcastmarket, many of the major networks have moved rapidly into making programmes in'High Definition' (HD), a digital format that greatly enhances the clarity ofvideo images, which is particularly useful for sports coverage. The US rentalsmarket is reviving somewhat and our Broadcast Services division has developedgreater capacity for HD productions in response. It has also been active incoming forward with new service offerings: in particular for complex 'RealityTV' shows. We also generated growth by entering new markets, in particular AirTraffic Control, where we have installed several large intercom systems. 2004 also saw some major external and internal events that boosted revenues. Thepresidential elections in the US lifted advertising expenditure, whilst theAthens Olympics saw significant contracts for our rental business, as well asproduct sales to broadcasters and freelancers. Internally, operationalimprovements in Photographic reduced lead times to normal levels, convertingsome backlog into sales. While there are no major sporting events in 2005, mostVitec businesses entered 2005 with order books higher than at the start of 2004. Restructuring benefits We continue to improve the operational efficiency of the Group, exploiting ourmanufacturing and purchasing scale in both product divisions, greatly reducingthe negative effect of the falling US dollar. The benefits from therestructuring of our manufacturing, which although offset by mix changes andsome provisions for ageing stock, have underpinned the results for 2004. Ourmanufacturing operations are now focusing on continuous improvement actions for2005 and beyond, which enabled us to announce in July the rationalisation of thecommercial side of the Broadcast Systems business. A cost of £4 million to £5million was anticipated, of which a net £2.1million was charged in 2004. Thisprocess is also going well. Ongoing cost control and better use of our rentalasset base also improved profitability in Broadcast Services. It was encouraging that most of our businesses showed a significant improvementin the second half of the year over the first half, as the effects of earlieractions came through. Executive team During 2004 we strengthened the management team in the Photographic business inItaly and we recently made several key appointments within Broadcast Systems,further improving the team there. With the scaling up of our plant in Costa Ricabehind us, Brian McCluskie, formerly Operations Director, has left the companyand we wish him well in his future career. Photographic 2004 2003Turnover £68.7m £61.5mOperating profit* £12.3m £13.9mOperating margin* 17.9% 22.6% *before exceptional gain of £0.1 million (2003: £nil) and goodwill amortisationof £0.2 million (2003: £0.1 million) The Photographic division saw strong volume growth during 2004. In constantcurrency terms, sales were up 23%, including 6% from the acquisition ofMultiblitz. This underlying growth was driven by the continuing launch of newproducts and the demand for digital cameras, particularly in the digital SLRsegment. However the fall in the US dollar against the euro reduced that growthto 12% in £ sterling terms, and also adversely affected margins. The market for accessories for the professional photographer was stimulated byinnovations such as the new joystick head, whose ergonomically-shaped pistolgrip allows the user to position the camera and activate the shutter with onehand, and the new 303SPH head which facilitates the composition of panoramicshots, useful for capturing architectural images. Manfrotto also has animportant position at the lower end of the video camera support market, cateringto a different channel to our Broadcast brands, where the new 519 Pro-video headgenerated a lot of interest. Also in the professional arena, Litec continued todevelop its presence across Europe; its lighting truss range was augmented withnew tower systems to support the Libera trusses launched last year. The majority of the growth, however, came as a result of the boom in affordabledigital SLR cameras that are now being bought by keen amateur photographers. Thenew Neotec tripod, which is targeted specifically at this user group, has beenselling well ahead of expectations, and there are other products planned forthis exciting segment. Improvements in manufacturing operations have also helped increase volume in2004. The closure of the small plant at Nove in Italy early in the year hassimplified work flow; the IT systems, now rolled out to all but one site acrossthe division, have given greater visibility to suppliers of our needs and,together with efficiency improvements within the factories, allowed Manfrotto tocut its lead-time substantially, converting several weeks of backlog into sales.Manufacturing improvement activities are now focused more on cost reductionactions and on further improving the health and safety culture. Following the disposal of ALU at the end of 2003, the management structure waschanged, with several senior vacancies being filled from outside the Group. TheCampese offices were renovated, generating sufficient space to centralise theoperations and administration functions previously dispersed around the otherplants. This has already driven improved coordination and efficiency. In Augusta representative office was established in Hong Kong in order to better supportour local third party distributors. Broadcast Systems 2004 2003Turnover £86.9m £81.9mOperating profit* £3.9m £3.9mOperating margin* 4.5% 4.8% *before exceptional charges of £2.2 million (2003:£1.9 million), goodwillamortisation of £0.8 million (2003: £0.7 million) and impairment of goodwill of£0.4 million (2003: £nil) The Broadcast Systems division also saw a year of growth, with sales up 13% inconstant currency, 6% in £ sterling. This was a marked improvement followingseveral years of stagnation due to the decline in the broadcast market. Eachunit has new products to promote - the new Quattro-S pedestal from Vinten isparticularly encouraging as it, and the family of new studio/outside broadcastcontrol heads based on the Vector 900, are generating sales in a part of themarket where we already enjoyed a significant market share. Our portable powercompany, Anton Bauer, continued to take market share in Europe, winning ordersfrom TFI in France and RAI in Italy. The Olympics acted as a catalyst for several purchasers, with many of theGroup's products used there, and it was a strong year for robotics products.2004 saw the opening of a sales office in Beijing, which will strengthen ourposition in China as local broadcasters gear up for the 2006 Asian Games and the2008 Olympics. In addition, non-broadcast applications also grew. 2004 saw significantshipments of support devices for surveillance equipment, and of Air TrafficControl intercoms systems to Korea, China and Vietnam, as well as the largecontract for the German Space Operations Centre. This will be used to monitorthe forthcoming Soyuz mission. Margins are improving in this area, as wecomplete the product development work and are able to be more selective aboutthe projects for which we bid. In September we announced that, with the manufacturing restructuring beddingdown, part of the commercial operations of this division would be rationalised.The aim was to reduce internal duplication while ensuring we could maintain thepace of innovation for which our brands are known. These projects are goingwell, they produced benefits in 2004 and are expected to produce furtherbenefits in 2005, on top of those flowing from the plant closures. In CameraSupport we are optimising many of our back office operations in the US andEurope, for which the new IT systems are an important foundation. In Communications the two main companies, Clear-Com and Drake, have beenintegrated and the brand repositioning exercise completed successfully. Bothbrands now have access to all product families, and this has been well receivedby customers. New distributors have switched from other suppliers to join theClear-Com network. As part of these changes, new managing directors have beenrecruited for both the Camera Support and the Communications businesses. During the year, Vinten celebrated 40 years at the site in Bury St Edmunds,England, having moved from North London in 1964, and Sachtler relocated a shortdistance to new facilities at Eching near Munich, where sales, marketing,customer service, and most importantly R&D, will be based. Broadcast Services 2004 2003Turnover £29.8m £27.0mOperating profit* £1.6m £0.0mOperating margin* 5.4% 0.0% *before goodwill amortisation of £0.4 million (2003: £0.5 million) andimpairment of goodwill of £nil (2003: £2.1 million) Broadcast Services saw a 24% growth in US dollar sales, which translated to a10% growth in £ sterling. Many of the drivers of this growth are expected topersist in 2005. The ongoing strengthening of the market, first evident in thelatter part of 2003, continued, buoyed by the backdrop of improving USadvertising spend, and we have benefited from the uptake of High Definition (HD)programming. Operating margin grew from breakeven to 5.4%, and the unitcontinued to generate cash despite increased spend on new rental equipment. Bexel has also captured an increasing number of reality shows as the technicalstandards demanded by producers have steadily risen; examples are Survivor, TheApprentice, The Osbournes, and most recently the latest series of American Idoland Brat Camp. Many of these shows have also needed sophisticated audio systemsfrom ASG, our high end audio integrator. During the year, progress was also madeto widen the range of services offered; for example, Bexel can now help clientsfit-out facilities with fibre optic cabling that allows subsequent events to bestaged more efficiently. The Charter acquisition has gone well, with additional contracts for the depotsin Chicago and Orlando that were taken over, as well as gains from theelimination of surplus equipment. The expanded network of 10 depots means thatbroadcasters can rely on us to support them with assets and technical supportthroughout the country. In 2004 this led to a 'preferred supplier' agreementbeing concluded with Disney, covering ABC and ESPN as well. The second half saw the summer Olympics in Athens, with contracts won for AOB(Athens Olympic Broadcasting) and with two German broadcasters, ARD and ZDF.Both these prestigious contracts went smoothly, a testament to the high levelsof technical service within Bexel that customers have come to rely on. Thesecontracts will not repeat in 2005, but we continue to see underlying growth inrentals. Asset management is a major determinant of success in any rental business, andthe division's new IT systems have facilitated the production of moresophisticated analyses of contracts, asset acquisition costs and revenuegeneration, that enable utilisation to be optimised. This is reflected in animproved ratio of revenues to net assets, 2.4 in 2004 versus 1.7 in 2003. Theapplication of these tools, and the continued use of sub-rentals, has allowedhigher levels of spending on new, frequently High Definition, equipment than inthe year before, while still generating cash. The business entered 2005 with anasset base level better aligned to its needs. During the year the New York and Dallas facilities were upgraded, and inDecember the main Burbank office relocated from its old site with four smallbuildings, to new premises where everyone is under one roof, which will yieldcost and efficiency benefits from 2005. FINANCIAL REVIEW Continuing operations Turnover increased by £15.0 million (from £170.4 million to £185.4 million) or8.8% in the year. There was underlying growth in all three divisions.Photographic and Broadcast Services benefited from a contribution of £3.5million and £1.8 million respectively from the acquisitions of the domesticdistribution activity of Multiblitz in Germany and Charter Broadcast NorthAmerica. Excluding the incremental effect of those acquisitions, underlyingsales growth was £22.6 million or 14%, but this was significantly reduced by theeffects of adverse FX rates on translation, £11.6 million, and transaction, £2.1million. The balance of the growth, £0.8m, came from the full year effect ofacquisitions made part-way through 2003. Gross profit margins fell from 43.6% to 41.3% reflecting a change in mix in anumber of businesses and the adverse effect of FX transactions, particularly inthe Photographic Division. Gross profits were £0.3 million higher than the prioryear before a contribution of £1.9 million from 2004 acquisitions. Net operating expenses, before exceptional items of £2.1 million and goodwillamortisation and impairment charges of £1.8 million, increased by £2.2 million(3.9%) to £58.7 million. £1.2 million of the total increase related to 2004acquired businesses, £4.1m to existing businesses and there was an offsetting FXtranslation benefit of £3.1m. Operating profit before exceptional items and goodwill amortisation andimpairment charges was unchanged at £17.8 million, including contributions of£0.1 million and £0.6 million from the acquisitions of Multiblitz and CharterBroadcast North America respectively. Operating profit margins were 9.6%compared to 10.4% in 2003. The year on year effect of translating overseasprofits was £0.9 million adverse and the effect of exchange rate changes ontransactions after hedging, principally the weaker US dollar against the euro,was £3.9 million unfavourable. There is a net operating exceptional charge of £2.1 million relating principallyto previously announced restructuring plans within the Broadcast Systemsdivision which will enable the Camera Support and Communications businesses tooperate in a more integrated manner. It is expected that the overall charge willbe between £4.0 million and £5.0 million, in line with previous guidance. Goodwill amortisation and impairment. The charge was £1.8 million (2003: £3.4million including £2.1 million impairment charge against the goodwill of the USSystems Wireless business). Taxation. The effective taxation rate on operating profit before exceptionalitems, goodwill amortisation and impairment has increased to 42.0% (2003 39.8%)and includes £1.6 million (9.9% rate) of deferred tax. The tax charge isrelatively high because profits have arisen in high tax jurisdictions but theGroup has incurred net losses in the UK on which it has not benefited from taxrelief. Cash flow and net debt. Cash generation remained strong. However, net debtincreased slightly from £10.4 million to £11.3 million after £1.5 millionacquisition costs and the £2.7 million cash cost of restructuring actions, ofwhich £1.2 million relates to the profit and loss charge in 2004. Net cash inflow from operating activities was £22.5 million (2002: £28.7million), equating to 55p per share (2003: 70p per share). Cash outflow from anincrease in working capital (principally due to a £1.2 million decrease increditors) was £1.4 million (2003: £4.0 million inflow). Capital expenditure andfinancial investments were £10.0 million (2003: £10.2 million), of which £4.8million related to rental assets and £0.8 million to IT projects, partlyfinanced by the proceeds from asset disposals of £1.6 million (2003: £2.4million). Working capital was increased by the effect of the two acquisitions and highervolumes, partially offset by efficiency programmes. Stocks decreased by £0.6million to £32.6 million, whilst stock days decreased to 109 (2003: 126excluding Retail Display). Trade debtors at £26.2 million were £2.0 millionlower than last year with debtor days at 52 days (2003: 60 days excluding RetailDisplay). Trade creditors at £15.7 million were £0.7 million higher than lastyear (whereas other creditors were £1.6 million lower). Amounts recoverable onlong term contracts increased by £1.1 million to £2.1 million. Tax paid in 2004 of £1.4 million reduced considerably from 2003 (£10.8 million).The prior year included the settlement of an historic tax claim of £1.4 million,whereas the current year has benefited from Italian tax credits arising from thesale of the Retail Display business in 2003. Treasury Policy. Financing, currency hedging and tax planning are managedcentrally. Hedging activities are designed to protect profits, not to speculate.Substantial changes to the financial structure of the Group or treasury practiceare referred to the Board. In 2003 the Board approved the use of optioncontracts for hedging foreign currency receipts. As in previous years, a portion of the transactions of subsidiaries in foreigncurrencies is hedged 12 months forward. Forward foreign exchange contracts at 31December 2004 totalled £5.2 million (2003: £16.0 million). In addition, theGroup had simple option contracts, for the sale of US dollars for euros over theperiod January 2005 to December 2005 totalling £9.3 million (2003: £8.4 million)and for the sale of US dollars for £ sterling over the period January 2005 toAugust 2005 totalling £0.9 million (2003: £ nil). Translation of foreigncurrency profits and interest rates are not hedged. Foreign currency net assetsare not hedged other than by normal Group borrowings. The Group operates strict controls over all treasury transactions involving dualsignatures and appropriate authorisation limits. Financing Activities. The average cost of borrowing for the year was 4.8% (2003:4.8%) with the upward trend in interest rates being offset by the transfer ofsome of the Group's £ sterling loans into euros and US dollars. Net interestcover (using profit before exceptional items, goodwill amortisation andimpairment) remained high at 11 times (2003: 10 times). The Group's £55 millionthree-year bilateral credit facility agreements which were due to expire inOctober 2005 were replaced on 25 January 2005 with a five-year £100 millionmulticurrency revolving credit facility agreement, involving five banks. UK pensions. The Group contributes to two UK defined-benefit pension schemes. Atthe end of 2003 the Group closed both schemes to new members, replacing them for2004 onwards with a Group personal pension plan, currently with Standard Life. Afull triennial actuarial valuation was undertaken as at 5 April 2004. At thatdate, the schemes had assets with a combined market value of £28.3 million. Onthe basis of the assumptions adopted, the value of the schemes' assets was equalto 94% of the value placed on the benefits that had accrued to members allowingfor expected future increases in salaries. As a result of the valuation, andfollowing the increase of £0.1 million per annum in company contributions fromthe beginning of 2003, regular contributions were again increased by £0.2million per annum with effect from the date of valuation. In addition,employees' contributions were increased from 1 January 2005. The Group's UKpension charge to the profit and loss account under SSAP 24 has increased from£0.9m in 2003 to £1.5m in 2004 after the effects of accounting for moving from aprevious surplus to a shortfall in scheme assets when compared to accruedliabilities. International Financial Reporting Standards ('IFRS'). The Group has completedits initial investigation into the impact of adopting IFRS with effect from 1January 2004. The areas currently identified as most affecting the profit beforetax and shareholders' funds are as a result of the adoption of IAS 19 EmployeeBenefits (in respect of pensions), IAS 38 Intangible Assets (in respect ofcapitalising major development costs), IFRS 3 Business combinations (in respectof goodwill), IFRS 2 Share Based Payment and IAS 10 Events after the BalanceSheet date (in respect of dividends declared after the balance sheet date). Theexact impact of adopting IFRS, as well as a full analysis of the impact on the2004 published results, will be communicated in May 2005. The Interim resultsfor the six months ending 30 June 2005 will be prepared in accordance with IFRS. Consolidated profit and loss accountFor the year ended 31 December 2004 Before 2004 2003 exceptional items, goodwill amortisation & Goodwill impairment amortisation & Exceptional impairment items Total Total £m £m £m £m £m Turnover Existing operations 180.1 180.1 170.4Acquisitions 5.3 5.3 - Continuing operations 185.4 185.4 170.4Discontinued operation - - 22.4 185.4 185.4 192.8Cost of sales (108.9) (108.9) (111.4) Gross profit 76.5 76.5 81.4Net operating expenses (58.7) (2.1) (1.8) (62.6) (68.9) (1) Operating profitExisting operations 17.1 (2.1) (1.8) 13.2 12.5Acquisitions 0.7 - - 0.7 - Continuing operations 17.8 (2.1) (1.8) 13.9 12.5Loss on disposal of discontinued operation - - - - (3.0) Profit on ordinary activities beforeinterest 17.8 (2.1) (1.8) 13.9 9.5Net interest payable (1.6) (1.6) (1.7) Profit on ordinary activities beforetax 16.2 (2.1) (1.8) 12.3 7.8Tax on profit on ordinary activities (6.8) 0.9 - (5.9) (2.3) (2) Profit on ordinary activities after taxand for the financial year 9.4 (1.2) (1.8) 6.4 5.5Dividends (6.1) (9.3) Retained profit/(loss) for the year 0.3 (3.8)transferred to reserves Basic earnings per share 15.6p 13.6p Diluted earnings per share 15.5p 13.5p Adjusted basic earnings per share(3) 22.9p 23.9p (1) Net operating expenses in the year ended 31 December 2003 included £1.0 million of exceptionalrestructuring costs relating to the closure of Radamec Broadcast Systems' manufacturing facility atChertsey, UK, £0.9 million of exceptional costs relating to the unsuccessful acquisition of EVSBroadcast Systems, and £3.4 million of goodwill amortisation and impairment. No related tax credit wasrecognised on these costs. (2) Includes a tax credit of £4.1 million in respect of the loss on sale of discontinued operation. (3) Adjusted basic earnings per share is presented as the Directors consider that this gives valuableadditional information about the ongoing earnings performance of the Group. There is no material difference between the Group's profit and loss account and the historical costprofit and loss account. Accordingly, no note of the historical cost profit and loss for the period hasbeen presented. Balance sheetsAs at 31 December 2004 Group Company 2004 2003 2004 2003 Restated(1) Restated(1) £m £m £m £m Fixed assets Intangible assets 8.2 10.1 - - Tangible assets 33.9 34.5 1.9 2.0 Investments - - 206.5 154.7 42.1 44.6 208.4 156.7 Current assetsStocks 32.6 33.2 - - Debtors 38.5 42.2 3.2 2.8 Cash at bank and in hand 14.4 15.6 17.5 4.0 85.5 91.0 20.7 6.8 Creditors - due within one year (59.4) (37.3) (148.8) (52.6) Net current assets/(liabilities) 26.1 53.7 (128.1) (45.8) Total assets less current liabilities 68.2 98.3 80.3 110.9Creditors - due after more than one year (0.1) (26.1) - (26.0)Provisions for liabilities and charges (11.4) (12.4) (0.1) (0.1) Net assets 56.7 59.8 80.2 84.8 Capital and reservesCalled up share capital 8.2 8.2 8.2 8.2Share premium account 2.7 2.6 2.7 2.6Capital redemption reserve 1.6 1.6 1.6 1.6Revaluation reserve 1.4 1.5 0.9 0.9Other reserves - - 53.7 53.7Profit and loss account 42.8 45.9 13.1 17.8 Shareholders' funds - equity 56.7 59.8 80.2 84.8 (1) Shareholders' funds have been restated to show the investment held in respect of grants under share optionschemes as a deduction (see Note). Consolidated statement of total recognised gains and lossesFor the year ended 31 December 2004 2004 2003 £m £m Profit for the financial year 6.4 5.5Exchange rate movements on foreign net investments (3.5) (0.9) Total recognised gains and losses relating to the year 2.9 4.6Prior year adjustment for ESOP accounting (see Note) (0.5) - Total recognised gains and losses since the last annual report 2.4 4.6 Reconciliation of movements in consolidated shareholders' fundsFor the year ended 31 December 2004 2004 2003 £m £m Profit for the financial year 6.4 5.5Dividends (6.1) (9.3) Retained profit/(loss) for the year 0.3 (3.8)Exchange rate movements on foreign net investments (3.5) (0.9)Goodwill previously written off included in profit for the financial year - 2.1New share capital subscribed 0.1 - Net decrease in shareholders' funds (3.1) (2.6)Opening shareholders' funds (originally £62.9 million before deducting prior year adjustment of £0.5 million - see Note) 59.8 62.4 Closing shareholders' funds 56.7 59.8 * Consolidated cashflow statementFor the year ended 31 December 2004 2004 2003 £m £m Net cash inflow from operating activities 22.5 28.7Returns on investments and servicing of financeInterest received 0.1 0.2Interest paid (1.7) (2.0) Net cash outflow from returns on investments and servicing of finance (1.6) (1.8)Tax paid (1.4) (10.8) Capital expenditure and financial investmentsPurchase of tangible fixed assets (10.0) (10.2)Sale of tangible fixed assets 1.6 2.4 Net cash outflow from capital expenditure and financial investments (8.4) (7.8)Acquisitions & disposalsPurchase of subsidiary undertakings (1.5) (6.4)Disposal of subsidiary undertakings - 2.6 Net cash outflow from acquisitions and disposals (1.5) (3.8)Equity dividends paid (9.3) (9.3) Net cash inflow before financing 0.3 4.8FinancingIssue of shares 0.1 -Repayment of loans (1.6) (1.9)New unsecured loan(1) - 5.4 Net cash (outflow)/inflow from financing (1.5) 3.5Decrease in cash in the year (1.2) (1.3) (1) In 2003 new unsecured loans of £5.4 million were obtained by ALU srl prior to its sale and weretransferred as part of the disposal of that business. Activity analysis Profit before Turnover Net assets interest and tax 2004 2003 2004 2003 2004 2003 Restated(5) £m £m £m £m £m £m Class of businessBroadcast Systems 3.9 3.9 86.9 81.9 38.2 35.9Photographic 12.3 13.9 68.7 61.5 26.3 29.4Broadcast Services 1.6 - 29.8 27.0 12.3 15.7 17.8 17.8 185.4 170.4 76.8 81.0Goodwill amortisation andimpairment(1) (1.8) (3.4)Exceptional items(2) (2.1) (1.9) 13.9 12.5 185.4 170.4 76.8 81.0Discontinued operation(3) (3.0) 22.4 - 13.9 9.5 185.4 192.8 76.8 81.0 Group net liabilities(4) (20.1) (20.7) 56.7 60.3 (1) Goodwill amortisation relates to Broadcast Systems - £0.8 million (2003: £0.7 million), Photographic- £0.2 million (2003: £0.1 million) and Broadcast Services - £0.4 million (2003: £0.5 million).Impairment losses of £0.4 million (2003: £nil) relate to Broadcast Systems and £nil (2003: £2.1 million)relate to Broadcast Services.The net book value of goodwill relates to Broadcast Systems - £3.3 million (2003: £4.6 million),Photographic - £2.6 million (2003: £1.8 million) and Broadcast Services - £2.0 million (2003: £3.2million). (2) Exceptional items relate to restructuring costs in Broadcast Systems (primarily severance inconnection with the actions taken to enable the business to operate in a more integrated manner) - £2.2million (2003: £1.9 million) and a gain in Photographic relating to restructuring - £0.l million (2003:£nil). (3) The discontinued operation relates to the Retail Display business which was sold on 30 December2003. (4) Group net liabilities include net borrowings, capitalised goodwill, Group dividends payable andcentral creditors and provisions. (5) Net assets have been restated to show the investment held in respect of grants under share optionschemes as a reduction from shareholders' funds (see Note). Activity analysis (continued) Profit before Turnover Net assets interest and tax 2004 2003 2004 2003 2004 2003 Restated(5) £m £m £m £m £m £m Geographic area by originUnited Kingdom (2.9) (2.8) 40.5 31.0 17.6 14.6The rest of Europe 12.7 13.7 66.8 56.4 26.6 29.2The Americas 7.8 6.7 78.1 83.0 31.5 35.9Asia and Australasia 0.2 0.2 - - 1.1 1.3 17.8 17.8 185.4 170.4 76.8 81.0Goodwill amortisation andimpairment(1) (1.8) (3.4)Exceptional items(2) (2.1) (1.9) 13.9 12.5 185.4 170.4 76.8 81.0Discontinued operation(3) (3.0) 22.4 - 13.9 9.5 185.4 192.8 76.8 81.0 Group net liabilities(4) (20.1) (20.7) 56.7 60.3 (1) Goodwill amortisation relates to the United Kingdom - £0.3 million (2003: £0.3 million), The restof Europe - £0.2 million (2003: £0.1 million) and The Americas - £0.9 million (2003: £0.9 million) andimpairment losses relate to the United Kingdom - £0.4 million (2003: £nil) and The Americas - £nil(2003: £2.1 million).The net book value of goodwill relates to the United Kingdom - £2.0 million (2003: £2.7 million), Therest of Europe - £2.5 million (2003: £1.8 million) and The Americas - £3.4 million (2003: £5.1million). (2) Exceptional items relate to United Kingdom - £0.7 million (2003: £1.9 million) , The rest ofEurope - £0.5 million (2003: £nil) and The Americas - £0.9 million (2003: £nil). (3) The discontinued operation is the Retail Display business which was sold on 30 December 2003.Operating profit and in the Retail Display business relate principally to The rest of Europe and TheAmericas. (4) Group net liabilities include net borrowings, capitalised goodwill, Group dividends payable andcentral creditors and provisions. (5) Net assets have been restated to show the investment held in respect of grants under share optionschemes as a reduction from shareholders' funds (see Note). Activity analysis (continued) Turnover 2004 2003 £m £m Turnover by destinationUnited Kingdom 9.9 9.1The rest of Europe 52.6 44.7The Americas 94.3 91.1Asia and Australasia 22.9 21.5Africa and Middle East 5.7 4.0 185.4 170.4Discontinued operation(1) 22.4 185.4 192.8 (1) The discontinued operation relates to the Retail Display business which was sold on 30 December 2003.In 2003, Turnover in the business related to The United Kingdom - £1.2 million, The rest of Europe - £8.0million, The Americas - £11.9 million, Asia and Australia - £0.8 million and Africa and Middle East -£0.5 million. Note Basis of preparation The financial information for the years ended 31 December 2004 and 31 December2003 contained in this preliminary announcement was approved by the Board on 2March 2005. This announcement does not constitute statutory accounts of theCompany within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 31 December 2003 have been delivered tothe Registrar of Companies. Statutory accounts for the year ended 31 December2004 will be delivered to the Registrar of Companies following the Company'sAnnual General Meeting. The auditors have reported on both these sets ofaccounts. Their reports were not qualified and did not contain a statement undersection 237(2) of the Companies Act 1985. The Urgent Issues Task Force (UITF) Abstract 38 changes the presentation of anentity's own shares held in an Employee Share Ownership Plan (ESOP) Trust byrequiring them to be deducted in arriving at the shareholders funds instead ofshowing them as an asset. Accordingly, the prior periods' balance sheets havebeen restated to show shares held in respect of grants under share optionschemes of £0.5 million as at 31 December 2004 and as at 31 December 2003 as adeduction from shareholders' funds instead of as a fixed asset investment. Dividend If approved by shareholders at the AGM on 18 May 2005, the final dividend willbe paid on 20 May 2005 to shareholders on the register at close of business on22 April 2005. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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