30th Aug 2006 07:01
Vislink PLC30 August 2006 Vislink plc Interim results for the six months ended 30 June 2006 Vislink plc ("The Group"), a leading supplier of microwave radio and satellitetransmission products for the broadcast and security markets and of CCTV systemsfor the marine security market has today announced its interim results for thesix months to 30 June 2006. Financial summary---------------------------- -------- -----------For the six months ended 30 June 2006 2005 £'000 £'000---------------------------- -------- -----------Revenue 50,764 35,753Operating profit 6,234 2,527Adjusted* operating profit 6,910 3,046Profit before taxation 6,076 2,092Earnings per share - basic 2.73p 1.07pAdjusted* earnings per share - basic 3.08p 1.33p---------------------------- -------- ----------- *Adjusted operating profit is operating profit before the amortisation ofacquired intangibles. Adjusted earnings per share are calculated on the samebasis. Highlights: • Group sales increased by 42.0% to £50.76 million (2005 - £35.75 million) • The Group's operating profit was up by 146% to £6.23 million (2005 - £2.53 million) • The Group's adjusted operating profit was up by 127% to £6.91 million (2005 - £3.05 million) • Adjusted earnings per share increased by 132% to 3.08 pence (2005 - 1.33 pence) • The Group's net cash inflow from operating activities in the period was £6.57million (2005 - £0.23 million outflow) • The Group ended the period with net cash of £3.92 million (31 December 2005 - £2.16 million) Bob Morton, Chairman of Vislink said: "The Group has had a record half year and has entered the second half with astrong order book. The Board is encouraged by current trading and continues tolook forward to the rest of the year with enthusiasm and confidence." - ends - For further information on 30 August 2006, please contact: Ian Scott-Gall, Chief Executive 01488 685500James Trumper, Group Finance Director 01488 685500 Chairman's StatementResults for six months to 30 June 2006The Board is pleased to report that the Group has continued to deliver asignificant improvement in its trading, with a record performance for the firstsix months of 2006. The Group's order intake for the period increased to £48.78 million (2005 -£46.90 million). Group sales from continuing operations were up 42% to £50.76million (2005 - £35.75 million). The Group's reported operating profit from continuing operations was up by 146%to £6.23 million (2005 - £2.53 million). The adjusted operating profit, beingoperating profit from continuing operations before the amortisation of acquiredintangibles, was up by £3.86 million to £6.91 million (2005 - £3.05 million).Each of the Group's regional businesses have reported higher sales and adjustedoperating profits in the period. The UK business reported an operating profit of£1.83 million (2005 - £1.46 million) before the amortisation of acquiredintangibles; operating profits in the US business of MRC increased to £5.74million (2005 - £2.00 million) and at Hernis the operating profit increased to£0.73 million (2005 - £0.54 million). Net interest costs were lower at £0.16 million (2005 - £0.44 million) including£0.11million of interest arising from the discounting of the deferredconsideration in respect of the Link acquisition (2005 - £0.13 million). TheGroup made a profit on continuing activities after interest charges but beforetax of £6.08 million (2005 - £2.09 million). The Group's net cash inflow from operating activities in the period was£6.57million (2005 - £0.23 million outflow). The Group had net cash of £3.92million at 30 June 2006 (31 December 2005 - £2.16 million). Earnings Per Share The reported basic undiluted earnings per share for the period were 2.73 pence(2005 - 1.07 pence). After adjusting for the amortisation of acquiredintangibles, the Group's adjusted earnings per share were 3.08 pence (2005 -1.33 pence). Dividends The Group's stated strategy is to only recommend a final dividend and thereforeas in previous years the Board is not recommending an interim dividend. Business Review US business MRC, the US business, has seen its external sales increase to £29.98 million(2005 - £16.64 million) as a result of both the 2GHz re-channelisation programmein the US and an increase in its international sales to £4.41 million (2005 -£2.27 million). Operating profits increased by 187% to £5.74 million (2005 -£2.00 million). The US domestic broadcast market remains strong with demand being driven by the2Ghz re-channelisation programme. The international broadcast market continuesto grow for MRC. Good progress is also being made in developing the US defenceand law enforcement markets. UK business The UK business comprises the Advent satellite communications business, the Linkwireless camera business and the Venezuelan TV contract. External sales for thebusiness were £14.99 million (2005 - £14.41 million). The adjusted operatingprofit increased by 25% to £1.83 million (2005 - £1.46 million) before the £0.68million amortisation of acquired intangibles in respect of the acquisition ofLink (2005 - £0.52 million). Link has continued to perform strongly in all of its markets. In the UK the BBCEnglish Regions have appointed Link as their preferred supplier for wirelesscamera systems and have ordered LinkXPs for thirteen BBC regions. Link hasbenefited from the launch of HD products in the UK and internationally and alsofrom the 2GHz re-channelisation programme in the US. Advent returned to profitability in the period. The business has opened aSingapore office for the Asian region and won significant orders from Sun TV inIndia. Skylogic have ordered more ground stations following on from last year'ssuccessful installations for the winter Olympics in Turin. The Venezuelan TV contract is scheduled to be completed during the second half. Hernis Hernis has made an excellent start to the year. Orders for the period increasedby 54% to £8.75 million (2005 - £5.69 million) due to the growth in the offshoreoil and gas markets and the marine LNG carrier market. Significant ordersreceived in the period included a contract for the installation of Hernis camerasystems on four new LNG carriers for Samsung Heavy Industries in Korea, astorage tank farm for Qatar and two contracts with Jurong Shipyard in Singaporefor two ultra-deepwater semi-submersible drilling rigs. Hernis sales increasedby 23% to £5.80 million (2005 - £4.70 million) and operating profits increasedby 35% to £0.73 million (2005 - £0.54 million). Strategy and Prospects The Group's strategy is to maintain organic sales growth from the development ofthe worldwide defence, security and law enforcement markets. These marketsrequire communication systems that are mobile, are able to cope with difficultenvironments and require minimal infrastructure with a high bandwidth to copewith a variety of data. In addition there is a significant trend toward theconvergence of terrestrial microwave and satellite in these markets. These areall features inherent in the Group's broadcast contribution products. There is amajor benefit to the Group in developing its channels to these markets. In the defence, public safety and homeland security markets the Group now hasproducts that provide rapidly deployable tactical, multi-agency video and datacommunications from vehicles, airborne platforms, point to point microwave andsatellite links. Group sales in the period for these markets increased by 80% to£5.77 million (2005 - £3.21 million). The Group's broadcast products continue to offer the most flexible range of TVcontribution technology systems that transmit live video signals back to thestudio. The different applications of live contribution technology define ourbroadcast markets. The migration of the industry towards High Definition (HD)and IPTV is underpinning long-term confidence in the contribution market. The Group is developing new products to meet the increasing demands for greatermobility, HD and IP based systems. The Group sees the move from StandardDefinition (SD) to HD within the professional broadcast market as a stronggrowth opportunity. MRC and Link are expected to continue to benefit from the 2GHz re-channelisationprogramme in the US over the next two and a half years. In addition Advent, Linkand MRC are all seeing increased demand from the international professionalbroadcast markets. The marine, offshore and onshore markets are currently strong for Hernis. Theirgrowth has been fuelled by the high oil price and the increasing demand fornatural resources that has encouraged investment in a number of shipping andexploration projects around the world by the oil and gas industry. In summary, the Group has had a record half year and has entered the second halfwith a strong order book. The Board is encouraged by current trading andcontinues to look forward to the rest of the year with enthusiasm andconfidence. ALR Morton, Chairman August 30, 2006 CONSOLIDATED GROUP INCOME STATEMENTfor the six months ended 30 June 2006 Six months Six months Year ended to 30 June to 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) Notes £'000 £'000 £'000Continuing operationsRevenue 2 50,764 35,753 85,072Cost of sales (32,052) (24,506) (56,452) --------- --------- --------- 18,712 11,247 28,620Sales and marketing (5,591) (3,077) (8,952)Research and development (2,456) (2,272) (4,950)Administrative costs (4,233) (3,286) (7,407)Other expenses (198) (85) (170) --------- --------- ---------Operating profit fromcontinuing operations 2 6,234 2,527 7,141------------------------- ------- --------- --------- --------- Operating profit is analysedas:Adjusted operating profit 6 6,910 3,046 8,348Amortisation of acquiredintangibles (676) (519) (1,207)------------------------- ------- --------- --------- ---------Finance costs 3 (242) (475) (872)Investment income 3 84 40 96 --------- --------- ---------Profit on continuingactivities beforetaxation 6,076 2,092 6,365 Tax on profit on ordinaryactivities 4 (2,363) (741) (2,883) --------- --------- ---------Profit for the period fromcontinuing operations being profit attributable toshareholders 3,713 1,351 3,482 ========= ========= ========= Earnings per share expressed in pence per share: From continuing operations - basic 6 2.73p 1.07p 2.66pFrom continuing operations - diluted 6 2.68p 1.06p 2.62p ========= ========= ========= Dividends No dividends have been declared and approved in respect of the six month periodsending 30 June 2006 and 30 June 2005 (see note 5). CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the six months ended 30 June 2006 Six months Six months Year ended to 30 June to 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) Notes £'000 £'000 £'000 Opening shareholders'equity 37,815 25,001 25,001 ---------- --------- --------- Profit for thefinancial period 3,713 1,351 3,482Share options - value of employee services 59 42 75Dividends 5 (681) (246) (246) ---------- --------- ---------Movements in the profit and loss account 3,091 1,147 3,311Translation difference on foreign currency net investments (1,161) 1,027 1,765Shares issued 66 7,470 7,687Disposal of investment in own shares 60 4 51 ---------- --------- ---------Total movements inshareholders' equity 2,056 9,648 12,814 ---------- --------- ---------Closing shareholders'equity 39,871 34,649 37,815 ---------- --------- --------- CONSOLIDATED GROUP BALANCE SHEETas at 30 June 2006 30 June 2006 30 June 2005 31 December 2005 (Unaudited) (Unaudited) (Audited) Notes £'000 £'000 £'000 Assets Non-current assets Goodwill 23,013 23,181 23,393Intangible assets 6,492 7,394 6,854Property, plant and 4,891 4,785 4,547equipmentFinancial assets - availablefor sale investments 109 - 43Deferred tax assets 929 1,602 835 --------- --------- --------- 35,434 36,962 35,672 --------- --------- ---------Current assets Inventories 15,973 11,117 13,345Trade and other receivables 14,023 15,686 17,032Financial assets - availablefor sale investments - 259 - Net cash and cash 8 7,658 2,100 7,122equivalents --------- --------- --------- 37,654 29,162 37,499 --------- --------- ---------Liabilities Current liabilitiesFinancial liabilities -borrowings 8 235 2,660 3,794Trade and other payables 22,898 17,216 22,206Current tax liabilities 1,151 1,060 816Provisions 825 620 732 --------- --------- --------- 25,109 21,556 27,548 --------- --------- --------- --------- --------- ---------Net current assets 12,545 7,606 9,951 --------- --------- --------- Non-current liabilities Financial liabilities -borrowings 8 3,500 2,795 1,169Deferred tax liabilities 2,372 3,232 2,608Other non-current liabilities 2,236 3,752 3,878Provisions - 140 153 --------- --------- --------- 8,108 9,919 7,808 --------- --------- --------- --------- --------- --------- 39,871 34,649 37,815 --------- --------- ---------Capital and reservesCalled up share capital 3,418 3,392 3,412Share premium account 4,422 4,165 4,362Investment in own shares (49) (156) (109)Merger reserve 30,565 30,565 30,565Translation reserve (2,449) (2,026) (1,288)Profit and loss account 3,964 (1,291) 873 --------- --------- ---------Total shareholders' equity 39,871 34,649 37,815 --------- --------- --------- CONSOLIDATED GROUP CASH FLOW STATEMENTfor the six months ended 30 June 2006 Six months Six months Year ended to 30 June to 30 June 31 December 2006 2005 2005 (Unaudited) (Unaudited) (Audited) Notes £'000 £'000 £'000Cash flow from operatingactivitiesCash generated from/(used in)operating activities 7 6,569 (230) 9,602Investment income 84 40 96 Finance costs (183) (387) (567) Taxation paid (2,325) (413) (2,670) --------- --------- ---------Net cash generated from/(used in) operating activities 4,145 (990) 6,461 --------- --------- --------- Cash flows from investingactivities Acquisition of subsidiary - (2,445) (2,445) Proceeds from sale of property, plant andequipment 2 - 130Purchase of property,plant and equipment (1,063) (596) (1,014)Expenditure on capitalised development costs (869) (467) (1,054)Acquisition of investments (66) - (43) --------- --------- ---------Net cash (used in) investing activities (1,996) (3,508) (4,426) --------- --------- --------- Cash flows from financingactivities Net proceeds from issue ofordinary share capital 66 4,470 4,687Net proceeds from sale of own shares held 60 4 51Proceeds from issue of newbank loan 8 3,500 - -Repayment of borrowings 8 (3,678) (1,307) (3,084)Repayment of loan notes 8 (1,285) - (54)Dividend paid to shareholders - - (246) --------- --------- ---------Cash (used in)/generatedfrom financing activities (1,337) 3,167 1,354 --------- --------- --------- Effect of foreign exchange rate changes 8 (276) 212 514 --------- --------- --------- Net increase/(decrease) in cash and cash equivalents 536 (1,119) 3,903Net cash and cash equivalents at beginning of period 7,122 3,219 3,219 --------- --------- ---------Net cash and cash equivalents at end of period 8 7,658 2,100 7,122 --------- --------- --------- NOTES TO THE INTERIM ACCOUNTSfor the six months ended 30 June 2006 1. BASIS OF PREPARATION This interim report has been prepared under the historical cost convention. Theaccounting policies are the same as those presented in the audited financialstatements for the year ended 31 December 2005 and those that are anticipated tobe in force at 31 December 2006. The preparation of the interim report inconformity with generally accepted accounting principles requires the use ofestimates and assumptions that affect the reported amounts of assets andliabilities at the date of the financial statements and the reported amount ofrevenues and expenses during the reporting period. Although these estimates arebased on management's best knowledge of the amount, event or actions, actualresults ultimately may differ from these estimates. This interim report is unaudited and does not constitute audited accounts withinthe meaning of the Companies Act 1985. The accounts for the year ended 31December 2005, on which the auditors gave an unqualified audit opinion, wereprepared in accordance with International Financial Reporting Standards andIFRIC interpretations, and have been filed with the Registrar of Companies. 2. SEGMENTAL ANALYSIS The Group's internal organisational and management structure and its system ofinternal financial reporting to the Board of Directors is based on thegeographical location of its businesses. These comprise three regions, the UK,the United States of America (US) and Norway. The UK comprises the broadcastbusinesses of Advent Communications (satellite products), projects and thewireless camera systems of Link. The US comprises the microwave radio broadcastbusiness of MRC. Norway comprises the marine CCTV business of Hernis. The table below shows the analysis of Group external revenue, by geographiclocation. Revenue Operating Profit ------------------------------------------ ------------------------------------------ Six months to Six months to Year ended Six months to Six months to Year ended 30 June 2006 30 June 2005 31 December 30 June 2006 30 June 2005 31 December (Unaudited) (Unaudited) 2005 (Unaudited) (Unaudited) 2005 £'000 £'000 (Audited) £'000 £'000 (Audited) £'000 £'000By geographic locationUK - broadcast(note a) 20,276 17,032 34,523 1,150 942 888US - broadcast 30,161 16,757 47,403 5,741 2,003 7,414Norway - marine CCTV 5,798 4,699 10,044 725 540 942Central costs - - - (1,026) (698) (1,802)Inter-segmental transactions (5,471) (2,735) (6,898) (356) (260) (301) -------- -------- --------- --------- -------- --------Group total 50,764 35,753 85,072 6,234 2,527 7,141 -------- -------- --------- --------- -------- -------- Notes: a) For the six months ended 30 June 2006 the UK operating profit is after charging £676,000 in respect of the acquired intangibles (six months to 30 June 2005 - £519,000 and year to 31 December 2005 - £1,207,000). Secondary format - geographical segments The Group manages its business segments on a global basis. The operations arebased in three main geographical areas. The UK is the home country of theparent. The operations are located geographically as described in the tableabove. The sales analysis in the tables below are based on the geographical location ofthe customer, product category and customer category. Geographic revenue analysis Six months to Six months to Year ended 31 30 June 2006 30 June 2005 December 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000By market:UK & Ireland 3,847 3,091 5,478 Rest of Europe 4,367 5,403 12,330North America 26,397 15,349 41,835South America 5,338 7,904 12,548Middle East 3,132 520 2,010Asia 7,153 2,908 9,282Africa 151 170 606Other 379 408 983 -------- -------- -------- 50,764 35,753 85,072-------------------------------- -------- -------- --------Analysis of revenue by productcategoryMicrowave radio and wirelesscamera products 32,942 18,101 49,070Satellite products 8,697 6,240 15,576Broadcast projects 3,327 6,713 10,370Marine CCTV products 5,798 4,699 10,044Other - - 12 -------- -------- -------- 50,764 35,753 85,072 -------------------------------- -------- -------- --------Analysis of revenue by customercategoryBroadcasters 39,276 27,984 66,017Defence, security and lawenforcement 5,771 3,206 7,745Marine, oil and gas 5,188 4,563 9,803Other 529 - 1,507 -------- -------- -------- 50,764 35,753 85,072-------------------------------- -------- -------- -------- 3. FINANCE COSTS - NET Six months to Six months to Year ended 31 30 June 2006 30 June 2005 December 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000Interest payable on bank borrowing (114) (348) (537)Interest payable onother loans (16) (1) (43) Unwinding of discountingassociated with deferredconsideration (112) (126) (292) -------- -------- ---------Finance costs (242) (475) (872)Investment income 84 40 96 -------- -------- ---------Finance costs - net (158) (435) (776)-------------------------------- -------- -------- --------- 4. TAX ON PROFIT ON ORDINARY ACTIVITIES Six months to Six months to Year ended 31 30 June 2006 30 June 2005 December 2005 (Unaudited) (Unaudited) (Audited) £'000 £'000 £'000The tax charge for the periodcomprises: 179 27 149UK current tax chargeOverseas current tax charge 2,513 862 2,755 Deferred tax (credit) (329) (148) (21) -------- -------- --------- 2,363 741 2,883-------------------------------- -------- -------- --------- The tax charge for the six months ended 30 June 2006 is based on the effectivetax rate, which it is estimated will apply to earnings for the full year. 5. DIVIDENDS No interim dividend is proposed for the period. In 2005 there was no interimdividend and the final dividend of 0.5 pence per share was approved at theAnnual General Meeting on 24 May 2006 and paid on 21 July 2006. 6. EARNINGS PER ORDINARY SHARE Earnings per share is calculated by reference to a weighted average of135,912,000 ordinary shares in issue during the period, excluding shares held bythe Employees' Share Ownership Plan (30 June 2005 - 126,812,000 and 31 December2005 - 131,052,000). The diluted earnings per share is after taking account of a further 2,439,000shares (30 June 2005 - 945,000; 31 December 2005 - 1,631,000) being the dilutiveeffect of share options. Adjusted earnings Vislink believes that adjusted operating profit, adjusted profit before tax,adjusted earnings and adjusted earnings per share provide additional usefulinformation on trends to shareholders. Vislink uses these measures for internalperformance analysis and incentive compensation arrangements. The principaladjustment is in respect of the amortisation of acquired intangibles.The reconciliation between reported and adjusted earnings and basic earnings pershare is shown below: Six months to Six months to Year ended 30 June 2006 30 June 2005 31 December 2005 Earnings Basic EPS Earnings Basic EPS Earnings Basic EPS £'000 pence £'000 pence £'000 penceReportedearnings 3,713 2.73p 1,351 1.07p 3,482 2.66pAmortisationof acquiredintangiblesafter tax 473 0.35p 337 0.26p 845 0.64p -------- -------- -------- -------- -------- --------Adjustedearnings 4,186 3.08p 1,688 1.33p 4,327 3.30p -------- -------- -------- -------- -------- -------- 7. NOTES TO THE CASH FLOW STATEMENT Net cash flow from operating activities comprises: Six months to Six months to Year ended 31 30 June 2006 30 June 2005 December 2005 £'000 £'000 £'000Continuing operations Net profit 3,713 1,351 3,482Adjustments for:Taxation 2,363 741 2,883Depreciation 621 476 1,081Loss on disposal of property,plant and equipment 41 16 5Amortisation of development costs 488 477 968Amortisation of acquired intangibles 676 519 1,207Share options - value of employeeservices 59 42 75Investment income (84) (40) (96)Finance costs 242 475 872Changes in working capital (excluding the effect of theacquisition of subsidiaries)(Increase) in inventories (3,156) (1,419) (3,377)Decrease in trade and otherreceivables 2,399 1,430 619(Decrease)/increase in payables (765) (3,925) 2,150(Decrease) in provisions (28) (373) (267) --------- -------- ---------Net cash inflow/(outflow) fromoperating activities 6,569 (230) 9,602 --------- -------- --------- 8. NET CASH The movements in cash and cash equivalents and borrowings in the period were asfollows: Net cash and Short term Other Total cash borrowings borrowings net cash equivalents £'000 £'000 £'000 £'000At 1 January 2006 7,122 (3,794) (1,169) 2,159New bank borrowings 3,500 - (3,500) -Repayment of borrowings (3,678) 2,509 1,169 -Payment of loan notes (1,285) 1,285 - -Issue of loan notes - (235) - (235)Other cash movements in the period 2,275 - - 2,275Exchange rate adjustments (276) - - (276) --------- --------- --------- ---------At 30 June 2006 7,658 (235) (3,500) 3,923 --------- --------- --------- --------- Loan notes are issued in respect of the deferred consideration associated withthe acquisition of Link Research Limited on 11 February 2005. 9. APPROVAL A committee of the Board of Directors approved this report on 30 August 2006. Independent review report to Vislink Plc Introduction We have been instructed by the company to review the financial information forthe six months ended 30 June 2006, which comprise the consolidated interimbalance sheet as at 30 June 2006, and the related consolidated interimstatements of income, cash flows and changes in shareholders' equity for the sixmonths then ended and related notes. We have read the other informationcontained in the interim report and considered whether it contains any apparentmisstatements or material inconsistencies with the financial information. Directors' responsibilities The interim report, including the financial information contained therein, isthe responsibility of, and has been approved by the directors. The Listing Rulesof the Financial Services Authority require that the accounting policies andpresentation applied to the interim figures should be consistent with thoseapplied in preparing the preceding annual accounts except where any changes, andthe reasons for them, are disclosed. This interim report has been prepared in accordance with the basis set out inNote 1. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4issued by the Auditing Practices Board for use in the United Kingdom. A reviewconsists principally of making enquiries of Group management and applyinganalytical procedures to the financial information and underlying financial dataand, based thereon, assessing whether the disclosed accounting policies havebeen applied. A review excludes audit procedures such as tests of controls andverification of assets, liabilities and transactions. It is substantially lessin scope than an audit and therefore provides a lower level of assurance.Accordingly we do not express an audit opinion on the financial information.This report, including the conclusion, has been prepared for and only for thecompany for the purpose of the Listing Rules of the Financial Services Authorityand for no other purpose. We do not, in producing this report, accept or assumeresponsibility for any other purpose or to any other person to whom this reportis shown or into whose hands it may come save where expressly agreed by ourprior consent in writing. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 June 2006. PRICEWATERHOUSECOOPERS LLPChartered AccountantsBristol30 August 2006 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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