Final Results
Vislink PLC
21 March 2005
Vislink plc
Preliminary results for the year ended 31 December 2004
Vislink plc ('Vislink') today announces its preliminary results for the year
ended 31 December 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 year ended 31 December 2004 2003
£'000 £'000
Turnover - continuing operations 67,831 67,966
Operating profit - continuing operations before goodwill amortisation and exceptional
restructuring costs* 2,360 2,074
EBITA 821 (1,786)
(Loss) before taxation (809) (3,371)
Earnings per share excluding goodwill amortisation and exceptional restructuring costs* 0.97p 0.96p
*Goodwill amortisation was £1,132,000 (2003 - £1,167,000) and exceptional
restructuring costs were £1,539,000 (2003 - £3,760,000)
Key points
• The Group is continuing to see growth from the US broadcast business
and Hernis
• Group sales in the second half improved to £37.72 million (first half -
£30.11million)
• Second half operating profits before goodwill and exceptional costs
increased to £1.90 million (first half - £0.46 million)
• After restructuring the UK business has been stabilised and returned to
profitability in December
• Acquisition of Link Research Limited completed on 11 February 2005
• MRC won an initial $30million order in February 2005 for the 2GHz
relocation project
• The Board is recommending that the dividend is maintained at 0.2 pence
per share
Commenting on the results, Bob Morton, Chairman of Vislink plc, said:
'The enlarged Group is well placed to benefit from the opportunities for MRC in
the US market and the synergy from the Link acquisition. The restructured UK
business is expected to be profitable in 2005 and Hernis continues to perform in
line with expectations. The Board considers that the prospects for the current
financial year are encouraging and looks forward to 2005 with enthusiasm and
confidence'
- Ends -
For further information on 21 March 2005, please contact:
Ian Scott-Gall 01488 685500
Chief Executive, Vislink plc
James Trumper 01488 685500
Group Finance Director, Vislink plc
Chairman's Statement
Introduction
The Board are pleased to report that the Group has made significant progress
during the second half of 2004. Second half sales improved to £37.72 million
(first half - £30.11million) and operating profits before goodwill and
exceptional costs increased to £1.90 million (first half £0.46 million).
In the US, Microwave Radio Communications ('MRC') saw another year of growth in
operating profits as it benefited from a strong order intake, particularly from
the US Government. Whilst international sales continued to grow, the domestic US
broadcast market was subdued during the year as the broadcasters' awaited the
outcome of the regulatory changes to their outside broadcast electronic news
gathering operations. This programme of change, known as the 2GHz relocation
project, requires broadcasters in the US to convert to digital equipment and
relocate their radio transmissions to a higher frequency. This requires the
replacement of their existing radio equipment. In February 2005 MRC won an
initial order of $30million to build inventory for the project, which is
expected to be shipped in the second half of this year.
The UK business, in the first half, suffered from weak sales and further trading
losses despite the rationalisation and integration of the business into one
site, as announced at the end of 2003. A further strategic review was therefore
undertaken to restore the UK business to profitability, which resulted in
operational management changes and additional cost reductions. Restructuring
costs associated with the further rationalisation in 2004 amounting to
£1.54million have been provided for in the financial statements. The contract in
Venezuela has made a good contribution during the year and is now entering its
last phase, with completion expected before the end of 2005. The business has
now been stabilised and returned to profitability in December.
Hernis, the Group's marine safety business, enjoyed a year of growth in both
order intake and operating profits over the previous year.
Results for the Year
Group sales from continuing operations were maintained at £67.83 million (2003 -
£67.97 million). In local currency all business units saw sales growth, however
adverse rates of foreign exchange from a weak US dollar depressed sales in
sterling terms relative to 2003 by £3.82 million.
Operating profits before goodwill amortisation and exceptional rationalisation
costs, improved to £2.36 million (2003 - £2.05 million). Again all business
units saw an improvement in their operating results in local currency, but the
adverse exchange rates depressed the operating profits in sterling terms by
£0.49 million relative to 2003. Goodwill amortisation for the year was lower at
£1.13 million (2003 - £1.17 million). Net interest payable increased to £0.49
million (2003 - £0.42 million) as a result of the Group's increased working
capital.
After the exceptional restructuring costs of £1.54 million (2003 - £3.76
million) the Group made a pre-tax loss of £0.81 million (2003 - £3.37 million
loss, including loss on disposal of businesses of £0.08million).
At December 31, 2004 the Group had net debt of £2.35 million (December 31, 2003
- net cash of £3.70 million). There was a net cash outflow during the period
from the absorption of the deposit received on the Venezuelan contract into
working capital and from the restructuring of the UK broadcast business.
Earnings per Share
Earnings per share from continuing operations before goodwill and the
exceptional restructuring costs were 0.97p (2003 - 0.96p). The basic loss per
share was 1.56p (2003 - 3.88p).
Dividends
The Board is recommending a maintained dividend of 0.2p per share. The dividend,
subject to shareholder approval, will be paid on 22 July 2005 to shareholders on
the register as at 1 July 2005.
Acquisition of Link Research Limited
On 14 January 2005 the Board announced that it had entered into a conditional
agreement to acquire Link Research Limited ('Link') for an initial consideration
of £5.0million, to be satisfied by cash and loan notes of £2.0 million and £3
million by the issue of 13,186,813 new ordinary shares at 22.75 pence each. The
maximum potential consideration for the acquisition is £10.75 million. At the
same time the Board announced that the Company proposed to raise £4.64 million
by way of a placing and open offer of 20,414,569 new ordinary shares at 22.75
pence. Details of the transactions were in the circular sent to all shareholders
on 14 January 2005.
On 9 February 2005, the acquisition and the placing and open offer were approved
by shareholders at an Extraordinary General Meeting, and the acquisition of Link
was duly completed on 11 February 2005.
Strategy and Prospects
The Group's strategic objectives continue to be the achievement of an operating
profit return of 10 per cent on sales before goodwill amortisation and central
costs and for the broadcast business to achieve enhanced sales growth through
the development of the government, military and security markets.
MRC has been achieving this level of return and it is expected that the margins
will be further improved by the incremental revenues in the US from the 3 year
2GHz relocation programme. At the same time MRC is maintaining a strong
development program to meet the needs of both the core broadcast market and the
emerging public safety market in the US.
The acquisition of Link and the funds raised through the open offer have
strengthened the Group's strategic position within the broadcast market. Link's
operating profits already well exceed 10 per cent of sales and the vertical
integration of Link products into MRC products for the 2GHz relocation project
will have the effect of further improving Group margins. The appointment of
Link's Managing Director, Len Mann, as Chief Technology Officer for the
broadcast businesses will ensure the coordination of the development programme
for the next generation of microwave and satellite products to meet our
strategic objectives.
The restructuring of the UK based broadcast business has now been completed and
progress is being made in improving both the sales and margins of the business
by the new management team. The development programme to produce new satellite
products to meet the needs of both broadcast and non-broadcast applications has
made good progress. The UK business has retained its project based skill set to
take advantage of new opportunities that are expected to arise in markets where
it has an established track record.
Hernis has experienced an increased demand from the local Norwegian oil and gas
market. The implementation of the International Ship and Port Safety regulations
in July 2004 have broadened the marine security market and, combined with
Hernis' new product introductions, are generating additional sales
opportunities. Hernis' margins are close to the Group's objective.
In summary, the enlarged Group is well placed to benefit from the opportunities
for MRC in the US market and the synergy from the Link acquisition. The
restructured UK business is expected to be profitable in 2005 and Hernis
continues to perform in line with expectations. The Board considers that the
prospects for the current financial year are encouraging and looks forward to
2005 with enthusiasm and confidence.
ALR Morton
Chairman
21 March 2005
Group Profit and Loss Account
for the year ended December 31, 2004
Before Before
goodwill & goodwill &
exceptional Goodwill & exceptional Goodwill &
items exceptional items exceptional
items Total items Total
2004 2004 2004 2003 2003 2003
£'000 £'000 £'000 £'000 £'000 £'000
Notes
Turnover
Continuing operations 67,831 - 67,831 67,966 - 67,966
Discontinued operations - - - 1,425 - 1,425
2 67,831 - 67,831 69,391 - 69,391
Operating profit
Continuing operations before
exceptional restructuring costs and
goodwill amortisation 2,360 - 2,360 2,074 - 2,074
Exceptional restructuring costs - (1,539) (1,539) - (3,760) (3,760)
Continuing operations before goodwill 2 2,360 (1,539) 821 2,074 (3,760) (1,686)
amortisation
Goodwill amortisation 2 - (1,132) (1,132) - (1,167) (1,167)
Continuing operations 2 2,360 (2,671) (311) 2,074 (4,927) (2,853)
Discontinued operations 2 - - - (23) - (23)
Total operating (loss)/profit 2,360 (2,671) (311) 2,051 (4,927) (2,876)
(Loss) on disposal of businesses 3 - - - - (27) (27)
Impairment of long leasehold property 3 - - - - (50) (50)
(Loss)/profit on ordinary activities
before interest 2,360 (2,671) (311) 2,051 (5,004) (2,953)
Interest receivable 93 - 93 38 - 38
Interest payable (591) - (591) (456) - (456)
(Loss)/profit on ordinary activities
before taxation 1,862 (2,671) (809) 1,633 (5,004) (3,371)
Tax on (loss)/profit on ordinary
activities 4 (876) 111 (765) (666) 111 (555)
(Loss)/profit for the financial year 986 (2,560) (1,574) 967 (4,893) (3,926)
Dividends 5 (246) - (246) (202) - (202)
Transfer (from)/to reserves 740 (2,560) (1,820) 765 (4,893) (4,128)
Basic (loss)/earnings per share 6 0.97p (2.53)p (1.56)p 0.96p (4.84)p (3.88)p
Diluted (loss)/earnings per share 6 0.97p (2.52)p (1.55)p 0.95p (4.80)p (3.85)p
Dividend per share 5 0.20p 0.20p
Statement of retained profits
Profit and loss account at January 1,
2004 (3,672) 2,048
Arising in the financial year (1,820) (4,128)
Foreign exchange (864) (1,592)
Profit and loss account carried forward (6,356) (3,672)
Statement of Total Recognised Gains and Losses
for the year ended December 31, 2004
2004 2003
£000 £000
(Loss)/profit for the financial year (1,574) (3,926)
Translation difference on foreign currency net investments (864) (1,592)
Total recognised gains and losses since last Annual Report (2,438) (5,518)
There is no material difference between the reported results and the historical
cost profits and losses.
Reconciliation of Movements in Shareholders' Funds
for the year ended December 31, 2004
2004 2003
Restated
Notes £'000 £'000
Opening equity shareholders' funds as previously reported 26,820 32,700
Adjustment for investment in own shares 1 - (160)
Opening equity shareholders' funds restated 26,820 32,540
(Loss)/profit for the financial year (1,574) (3,926)
Dividends (246) (202)
Translation difference on foreign currency net investments (864) (1,592)
Movement in the year (2,684) (5,720)
Closing equity shareholders' funds 24,136 26,820
Group and Company Balance Sheet
as at December 31, 2004
Group Company
2004 2003 2004 2003
Restated Restated
£'000 £'000 £'000 £'000
Fixed assets
Intangible assets 16,622 18,091 - -
Tangible assets 4,343 4,464 2 5
Investments - - 25,236 25,236
20,965 22,555 25,238 25,241
Current assets
Stocks 8,936 9,099 - -
Debtors 16,988 12,857 442 521
Cash at bank and in hand 3,219 9,540 1,669 83
29,143 31,496 2,111 604
Creditors - amounts falling due within one year 21,005 19,121 3,867 1,559
Net current assets/(liabilities) 8,138 12,375 (1,756) (955)
Total assets less current liabilities 29,103 34,930 23,482 24,286
Creditors - amounts falling due after more than one year 3,378 5,567 16,567 17,578
Provisions for liabilities and charges 1,589 2,543 - -
24,136 26,820 6,915 6,708
Capital and reserves
Called up share capital 2,552 2,552 2,552 2,552
Share premium account 205 205 205 205
Investment in own shares (160) (160) (160) (160)
Merger reserve 27,895 27,895 - -
Profit and loss account (6,356) (3,672) 4,318 4,111
Equity shareholders' funds 24,136 26,820 6,915 6,708
Group Cash Flow Statement
for the year ended December 31, 2004
Notes 2004 2003
£'000 £'000
Net cash (outflow)/inflow from operating activities 7 (3,605) 11,824
Returns on investments and servicing of finance
Interest received 93 38
Interest paid (590) (476)
(497) (438)
Taxation paid (737) (1,223)
Capital expenditure
Purchase of tangible fixed assets (769) (1,137)
Purchase of investments - (76)
Proceeds from sale of tangible fixed assets 2 35
(767) (1,178)
Acquisitions and disposals
Proceeds from sale of businesses - 160
Equity dividends paid (202) (205)
Net cash (outflow)/inflow before financing (5,808) 8,940
Financing
Repayment of bank loans (275) (3,331)
(275) (3,331)
(Decrease)/increase in cash (6,083) 5,609
Reconciliation of Net Cash Flow to Movement in Net Debt
for the year ended December 31, 2004
Notes 2004 2003
£'000 £'000
(Decrease)/increase in cash (6,083) 5,609
Repayment of bank loans 275 3,331
Change in net debt resulting from cash flows 7 (5,808) 8,940
Effect of foreign exchange changes 7 (238) (258)
Movement in net (debt)/cash (6,046) 8,682
Opening net cash/(debt) 3,697 (4,985)
Closing net (debt)/cash 7 (2,349) 3,697
1. Accounting policies
This results for the year ended 31 December 2004 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 with the
exception of the changes caused by the adoption of Urgent Issues Task Force
Abstract 38 'Accounting for ESOP Trusts' ('UITF38').
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 Net Assets
Total Total Total Total Total Total
2004 2003 2004 2003 2004 2003
Restated
£'000 £'000 £'000 £'000 £'000 £'000
By business:
Broadcast 59,871 59,599 2,782 2,451 8,400 11,100
Hernis 7,960 8,367 714 606 3,312 4,117
Central - - (1,136) (983) 12,424 11,603
67,831 67,966 2,360 2,074 24,136 26,820
Exceptional rationalisation costs - - (1,539) (3,760) - -
(note 3)
Goodwill amortisation - - (1,132) (1,167) - -
Continuing operations 67,831 67,966 (311) (2,853) 24,136 26,820
Discontinued operations - 1,425 - (23) - -
Total 67,831 69,391 (311) (2,876) 24,136 26,820
Net assets within Central include group debt, capitalised goodwill and
dividends.
The exceptional rationalisation costs are allocated to the Broadcast businesses
in both 2004 and 2003.
Goodwill amortisation in the continuing operations is in respect of the
businesses of Advent Communications, Multipoint Communications and Microwave
Radio Communications all of which are within the Broadcast business.
Turnover Analysis
Discontinued Operations
Broadcast Hernis Total
2004 2003 2004 2003 2004 2003 2004 2003
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
By market:
UK & Ireland 4,503 7,157 1,014 315 - 1,401 5,517 8,873
Rest of Europe 4,628 4,068 3,902 4,264 - 18 8,530 8,350
North America 24,096 25,899 897 1,271 - 5 24,993 27,175
South America 19,738 2,758 173 48 - - 19,911 2,806
Middle East 2,609 5,747 68 407 - - 2,677 6,154
Asia 3,060 8,724 1,479 1,662 - - 4,539 10,386
Africa 839 5,012 200 19 - - 1,039 5,031
Other 398 234 227 381 - 1 625 616
59,871 59,599 7,960 8,367 - 1,425 67,831 69,391
By origin:
UK & Ireland 32,250 28,903 - - - 1,425 32,250 30,328
Norway - - 7,960 8,367 - - 7,960 8,367
North America 27,621 30,696 - - - - 27,621 30,696
59,871 59,599 7,960 8,367 - 1,425 67,831 69,391
Net Assets Analysis
Total
2004 2003
Restated
£'000 £'000
By market:
UK & Ireland 9,637 12,484
Norway 3,312 4,117
North America 11,187 10,219
24,136 26,820
3. Exceptional items
a) Operating exceptional items
2004 2003
£'000 £'000
Provision for the restructuring of the UK broadcast business
- redundancy and relocation costs 1,082 945
- fixed asset impairment and inventory write down 353 1,913
- onerous property lease commitments 104 902
1,539 3,760
On November 27, 2003 the Group announced the operational restructuring of the UK
broadcast business. This involved the closure of the Luton manufacturing
facility with the consolidation of manufacturing into Chesham. Following the
integration of the facilities further restructuring has taken place in 2004 as
all microwave manufacture in the UK has ceased. No tax assets have been
recognised in respect of the charges above.
b) Non-operating exceptional items
2004 2003
£'000 £'000
Loss on disposal of businesses - 27
Impairment of long leasehold property associated with business disposed of - 50
- 77
The loss on disposal of businesses relates to the sale of the image analysis
business of Data Cell. The long leasehold property was sold after December 31,
2003 at its net book value of £475,000.
4. Taxation
a) Analysis of tax charge in period
2004 2003
The tax charge for the year comprises: £'000 £'000
Current tax
UK Corporation tax - at 30% (2003 - 30%) - -
UK Corporation tax - adjustment in respect of prior years - -
- -
Overseas taxation - current 825 748
Overseas taxation - adjustments in respect of prior years (16) (59)
Total current tax 809 689
Deferred tax
Origination and reversal of timing differences
UK tax (107) (472)
Foreign tax 63 338
Total deferred tax (44) (134)
Tax on ordinary activities 765 555
5. Dividends
2004 2003
£'000 £'000
Final dividend proposed of 0.20p per share (2003 - 0.20p per share) 246 202
6. Earnings per Ordinary Share
Earnings per share is calculated by reference to a weighted average of
101,123,000 (2003 - 101,238,000) ordinary shares in issue throughout the year
(excluding the shares held by the Employees' Share Ownership Plan) and on the
loss for the financial year of £1,574,000 (2003- loss of £3,926,000). Diluted
earnings per share is after taking account of a further 460,000 (2003 - 620,000)
shares being the dilutive effect of share options.
Earnings per share before goodwill and exceptional items excludes after tax
losses relating to goodwill and exceptional items of £2,560,000 (2003 -
£4,893,000).
At the date of issue of the report the total number of shares in issue were
135,674,000.
Basic Diluted Basic Diluted
2004 2004 2003 2003
Basic and diluted loss per share (1.56)p (1.55)p (3.88)p (3.85)p
Adjustment for goodwill and exceptional items 2.53p 2.52p 4.84p 4.80p
Basic and diluted earnings per share before goodwill and exceptional
items
0.97p 0.97p 0.96p 0.95p
7. Notes to the Statement of Cash Flows
(a) Reconciliation of operating profit to net cash inflow from
operating activities
Total Total
2004 2003
£'000 £'000
Operating (loss) (311) (2,876)
Depreciation 849 1,519
Amortisation of goodwill 1,132 1,167
(Profit)/loss on sale of fixed assets (2) 35
(Increase)/decrease in stocks (68) 2,399
(Increase)/decrease in debtors (3,999) 4,388
Increase in creditors 33 3,462
(Decrease)/increase in provisions (1,239) 1,730
Net cash (outflow)/inflow from operating (3,605) 11,824
activities
(b) Analysis of net debt
At Exchange At
January 1, Cash flow movements December 31,
2004 2004
£'000 £'000 £'000 £'000
Cash at bank and in hand 9,540 (6,083) (238) 3,219
Loans (5,843) 275 - (5,568)
3,697 (5,808) (238) (2,349)
8. Directors Responsibilities
The financial information for the year ended December 31, 2004 has been
extracted from the full accounts of the Group, which contain an unqualified
audit report and will be filed, in due course, with Companies House. The
auditors have reported on those accounts; their report was unqualified and did
not contain statements under section 237 (2) or (3) of the Companies Act 1985.
9. Report and Accounts
Copies of the Report and Accounts will be sent to shareholders in due course and
will then be available from the registered office at Marlborough House, Charnham
Lane, Hungerford, Berkshire, RG17 0EY.
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