Half Yearly Report

RNS Number : 0328L

Vislink PLC

30 August 2012

 



Vislink plc

Interim results for the six months ended 30 June 2012

Vislink plc ("The Group"), the global technology business specialising in solutions for the collection and delivery of high quality video and associated data for the broadcast and surveillance markets, today reports its interim results for the six months ended 30 June 2012.

Results for the six months ended 30 June	2012 £'m	2011 £'m
Continuing operations:
Revenue	27.5	20.0
Operating profit/(loss)1	1.4	(1.9)
Operating margin1	5.0%	(9.7%)
Profit/(loss) before tax1	1.4	(1.9)
Reported operating profit/(loss) and profit/(loss) before tax	0.7	(3.7)
Earnings/(loss) per share1	0.9p	(1.0)p
Reported earnings/(loss) per share	0.5p	(2.0)p
Cash generated from/(absorbed by) operating activities	0.5	(3.2)
Net cash	8.4	10.12

¹Adjusted to exclude the amortisation and impairment of goodwill and acquired intangibles, and other non-recurring costs.  

² Net cash at 31 December 2011

Key points

·     Performance on-track and in line with expectations

·     Orders received in the period grew 2% to £25.4m (H1 2011: £25.0m)

·     Underlying revenue* was 17% higher at £22.4m (H1 2011: £19.1m)

·     Integration of Gigawave complete;expected synergies being realised

·     Framework contract  signed with UK integratorfor recently launched MSAT satellite manpack - first orders received

·     Good start to second half

·     Hernis escrow cash of £4.9m released 6 July 2012

* Underlying revenue is reported revenue excluding the contribution from Gigawave.

John Hawkins, Executive Chairman of Vislink, said:

"We believe that the Group is capable of exploiting the continuing growth of video content contribution both in our traditional broadcast market and also in other vertical markets and we are pleased with the market response to our new products and the steady momentum the business is gaining following the completion of the strategic review in 2011.  Our three year objective of reaching £80m of sales and £8m profit before tax remains realistic and achievable; developing recurring revenues within our business remains a priority.

We are cautiously optimistic that the second half of 2012 will show further improvement in trading.  We have a strong order book which underpins our third quarter revenue. The Group has net cash of £8.4m. The Board therefore remains confident about the future prospects for the Group."

- ends -

Enquiries:
Vislink plc: John Hawkins, Executive Chairman	[phone]
Vislink plc: James Trumper, Finance Director Singer Capital Markets: Shaun Dobson	[phone] [phone]
Hudson Sandler: Andrew Hayes / Charlie Jack	[phone]

About Vislink plc

The Vislink Group is a global technology business specialising in the collection and delivery of high quality video and associated data from the field to the point of usage. Vislink provides solutions to the broadcast market for the collection of live news, sport and entertainment events and to the surveillance market including law enforcement and public safety customers. With offices in the UK, USA, Australia, China, UAE and Singapore we employ over 250 people worldwide and have annual revenues in excess of £50m. Our solutions include the design and manufacture of microwave radio, satellite transmission and wireless camera systems; our manufacturing operations are in the UK and the USA.

The Company is listed on the Main Market of the London Stock Exchange (LSE:VLK). For further information, visit www.vislink.com.

Forward looking statements

This interim report includes 'forward-looking statements'. All statements other than statements of historical fact included in this presentation, including, without limitation, those regarding Vislink's financial position, business strategy, plans (including development plans and objectives relating to the Company's products and services) and objectives of management for future operations, are forward-looking statements. These statements contain the words "anticipate", "believe", "intend", "estimate", "expect" and words of similar meaning. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding the Company's present and future business strategies and the environment in which the Company will operate in the future. These forward-looking statements speak only as at the date of this document. The Company expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statements contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Past business and financial performance cannot be relied on as an indication of future performance.

Executive Chairman's Statement

For the six months to 30 June 2012

The Group performed in line with expectations for the six months ended 30 June 2012, achieving an adjusted operating profit of £1.4m on revenues of £27.5m. Orders received in the period increased by 2% to £25.4m. During the period certain markets were challenging, with decision making cycles in both broadcast and surveillance becoming longer in some regions.   Nevertheless, our core North American and Western European markets witnessed good growth and we have a strong pipeline. We have been managing our logistics well so as to reduce our lead times and counter balance order delays.

We have successfully launched our new Mantis portable lightweight tri-band satellite terminal ("MSAT") to the surveillance market. We have already signed a framework contract with a UK defence integrator who, in July, placed its first orders for the MSAT to provide services into the UK defence forces. Further orders are expected from other agencies outside of the UK in the second half. We will be launching a broadcast version of the MSAT in September at the International Broadcast Convention in Amsterdam.  The positive reception from the market for this product is a strong endorsement of the significant investment that Vislink continues to make in its R&D and its ability to quickly respond to market need with new products.  

Operationally we have completed the integration of Gigawave into our UK business and we are starting to see the benefits of synergies in sales and product development and from a lower cost base.

In line with our strategy for growth, we launched our first cellular M2M products that utilise the public cellular networks at the National Association of Broadcasters show in April.  The products, branded LiveGear, were well received with first orders expected in the third quarter.  The uniqueness of LiveGear is that it provides broadcasters with the versatility of being able to use the device utilising traditional licensed communication methods (microwave), coupled with the available public network connectivity (cellular). 

Vislink products have featured strongly at the both the Queen's Diamond Jubilee celebrations, providing the wireless on-shore and on-board coverage of the river pageant, HD wireless camera systems at the Jubilee Concert and RF systems along the route for the Jubilee Procession; and at most of the venues of the London Olympics.

Financial Results

Group revenue for the six months to 30 June 2012 grew 38% to £27.5m (H1 2011: £20.0m). Underlying revenue, being revenue excluding revenue from Gigawave that was acquired in June 2011, was 17% up at £22.4m (H1 2011: £19.1m). Orders received in the period were up 2% at £25.4m (H1 2011: £25.0m). Underlying orders received were down 14% to £20.5m (H1 2011: £23.7m) as we have seen reduced demand for our satellite terminals in the broadcast market; we expect to see a recovery in the second half following the introduction of the MSAT. The order book at 30 June was £10.4m (31 December 2011: £12.4m).

The Group's gross margin has improved by 1.4 percentage points to 40.4% (H1 2011: 39.0%) as we continue to drive the cost of products down through lower manufacturing overhead costs. Our material margin was 52.4% (H1 2011: 52.7%, full year 2011: 51.7%).

With the completion of the integration of Gigawave in the first quarter, we are seeing the benefits come through from lower overheads and synergies. We have maintained our sales, R&D and administration overhead at £9.8m (H1 2011: £9.8m), being 35% of sales compared with 49% last half-year.

The adjusted operating profit was £1.4m (H1 2011: loss of £1.9m) before charging £0.7m in respect of the amortisation of acquired intangibles (H1 2011: £0.6m). There were no charges for non-recurring costs (H1 2011: £1.2m). The profit before tax was £0.7m (H1 2011: loss of £3.7m). Net finance income was negligible.

The Group held net cash of £8.4m at 30 June 2012 (31 December 2011: £10.1m). There was a net cash inflow from operating activities in the period of £0.5m (H1 2011: outflow of £3.2m). The cash outflow from investing activities amounted to £2.3m (H1 2011: £3.6m) which comprised £0.8m of deferred consideration paid in respect of previous acquisitions and £1.5m in respect of net capital expenditure and the capitalisation of development costs (H1 2011: £1.2m). The cash flow in the second half is expected to be positive as we plan to reduce working capital. In particular we built inventory in the first half to provide a rapid response to any late demand for the London Olympics that will now be consumed. As a consequence of this and taking into account the Group's forecast cash flows and cash requirements, the Directors have concluded that it is appropriate to prepare the condensed consolidated interim financial information on a going concern basis.

Earnings Per Share

The adjusted earnings per share for the period was 0.9p (H1 2011: loss of 1.0p). After charging non-recurring costs and the amortisation of acquired intangibles, the reported earnings per share from continuing operations was 0.5p (H1 2011: loss of 2.0p).

Dividends

The final dividend of 1.25 pence per share in respect of the year ended 31 December 2011 was paid to shareholders on 20 July 2012. As in previous years, the Board is not declaring an interim dividend.

Business Performance

Key performance indicators

The table below sets out the key indicators that are used by management to measure the performance in the business. For orders received and revenue we also report on the underlying performance as the prior year results only included one month's trading from Gigawave which was acquired on 2 June 2011.

Our book to bill ratio in the first half was 92% as revenues exceeded orders received by £2.1m. Our material margin was slightly lower at 52.4% as our mix of business was more heavily weighted to the broadcast market. Total operating costs, including the overheads associated with manufacture and logistics, increased 4% to £13.0m; on a like-for-like basis this is a £2.0m reduction arising from the integration of Gigawave and the overhead reductions undertaken during the first half of 2011. With a £7.5m increase in reported revenues at similar margins, on a cost base that has increased by £0.5m, the adjusted operating profit for the Group improved to £1.4m compared to a loss of £1.9m last year.

Year to 31 December 2011	£'m unless otherwise stated	Six months 30 June 2012	Six months 30 June 2011	Change
	Continuing business:
52.8	Orders received	25.4	25.0	+2%
47.0	Underlying orders received1	20.5	23.7	-14%
50.3	Revenue	27.5	20.0	+38%
44.7	Underlying revenue2	22.4	19.1	+17%
105%	Book to bill ratio	92%	125%
51.7%	Material margin3 as a percentage of sales	52.4%	52.7%	-0.3 pts
26.2	Total operating costs4	13.0	12.5	+4%
(0.2)	Adjusted operating profit5	1.4	(1.9)	-
(0.2)p	Adjusted earnings per share5	0.9p	(1.0)p	-
0.5	Net cash generated/(absorbed by) operating activities	0.5	(3.2)	-

Notes

¹Underlying orders received are defined as orders received excluding orders from Gigawave.

²Underlying revenue is defined as revenue excluding revenue from Gigawave.

³Defined as revenue less material costs in cost of sales.

⁴Operating costs comprise sales and marketing expenses, administrative expenses, and the costs associated with the logistics and R&D.

⁵ Defined as operating profit/(loss) before the amortisation of acquired intangibles and other non-recurring costs. Adjusted EPS is calculated on the same basis after taking account of related tax effects.

Our markets

Orders received from our broadcast market were £21.2m (H1 2011: £21.3m). South America, the Middle East and APAC were behind last half-year in orders received; these are historically strong markets for our satellite products and, based on our prospects, we expect to see a pick up in the second half. In South America and the Middle East we are also finding the decision making cycle is taking longer. In contrast we have seen growth in Europe, driven in part by the events calendar and in North America where we are seeing increasing demand for HD and upgrading of existing fixed microwave link networks.

Broadcast revenues grew by 46% to £24.2m (H1 2011: £16.6m) including £4.2m from the Gigawave brand (H1 £2011: £0.9m). Gigawave has added incremental revenues to markets outside of the Americas. The weakness in order flow from South America led to revenues declining 52% in the region to £1.5m but this has been more than offset by the strong performances from the European and North American markets.

Revenues by market	H1 2012 £m	H1 2011 £m	Change %	H2 2011 £m
Broadcast:
UK & Europe	8.0	3.5	+128	6.6
North America	8.1	4.8	+69	7.8
South America	1.5	3.1	-52	2.6
Middle East and Africa	2.9	2.8	+4	4.7
Asia/Pacific	3.7	2.4	+54	4.0
Broadcast	24.2	16.6	+46	25.7
Surveillance	3.3	3.4	-3	4.6
Total	27.5	20.0	+38	30.3

Orders received from our surveillance market grew to £4.2m (H1 2011: £3.7m). Whilst the surveillance market remains challenging due in part to tightened government budgets around the world, we have had some significant successes. A high profile contract for a city wide surveillance network including multiple airborne downlinks as well as an extensive integrated ground based receive infrastructure was booked and delivered in the period for $0.9m (£0.6m).  The system provides a prime reference site in the US for our full range of capabilities from design through to installation and implementation.  An agreement with a tier one system integrator specialising in aerial surveillance and covert video solutions has been secured which will result in steady business for the next three years, starting in the second half.  The launch of MSAT has been a success and we have already captured a significant order in July and further orders are expected.

Although surveillance revenues lagged the order intake at £3.3m (H1 2011: £3.4m) we expect to see an improvement in revenues in the second half as federal budgets open up and we continue our strategic shift away from selling video transmission components towards providing our customers with complete end-to-end engineered solutions which meet their specific surveillance requirements. Increased system sales will also present greater opportunity for sustainable ongoing technical maintenance services.

Regional operations

	H1 2012  £m	H1 2011 £m	Change %	H2 2011 £m
Revenues
UK business	18.3	11.3	+62	19.9
US business	11.9	10.5	+13	13.7
Inter-segmental	(2.7)	(1.8)	n/a	(3.3)
Total revenue	27.5	20.0	+38	30.3
Adjusted operating profit
UK business	2.6	0.6		1.9
US business	(0.2)	(1.6)		0.8
Central costs	(1.0)	(0.9)		(1.0)
Total adjusted operating profit	1.4	(1.9)		1.7

The UK business has benefited from the integration of Gigawave, a stronger European market and increased demand for HD and wireless camera systems in North America, hence the higher level of inter-segmental revenues. As a result, gross UK revenues are up 62% and underlying revenues were up 28%. US revenues were up 13% as the North American broadcast market improved. Both the UK and US businesses have improved their operating performance by £2.0m and £1.4m respectively. Whilst the US business made a £0.2m operating loss in the period, we expect it to trade profitably in the second half.

Principal risks and uncertainties

The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 20 and 21 of the 2011 Annual Report, a copy of which is available on the Group website at www.vislink.com. The Board considers that these remain a current reflection of the risks and uncertainties facing the business for the remaining six months of the financial year. The Group's risk management process remains unchanged from 31 December 2011 and is described in detail in the 2011 Annual Report. The principal risks considered by the Board relate to global economic conditions and those associated with the Group's markets, reputation, overseas operations, customer defaults, senior management and foreign exchange. The principal exchange rates used in the preparation of this condensed consolidated interim financial information are provided in note 15.

The Board and Management

As previously announced, James Trumper will leave the Group at the end of August. He is succeeded by Ian Davies who joined the Board as Group Finance Director and Company Secretary on 9 August 2012. Ian joins from Victoria PLC where he was Group Finance Director.

Strategy and Outlook

Our strategy is to continue to develop our core competence to provide solutions for the broadcast and surveillance markets. We will exploit the strengths of our established brands and maintain investment levels through our core product development programme, particularly in IT based technologies such as IP transport over 3G/4G and WiFi infrastructures. We will maintain our focus of leveraging opportunities as mature markets transition to HD and less mature markets switch to digital.  We have shown in the last twelve months that we can develop and bring to market competitive new products quickly, and we expect these to generate incremental revenues in the second half of the year. We have a strong development programme for the remainder of the year that will build on this success.

Our intention is to build a clear solutions, services and software offering for our customers. This will take time to build but will ultimately provide the recurring revenues and forward visibility that our current business model does not provide us with. We continue to seek "bolt on" acquisitions to strengthen our software and services capabilities that exploit the growth of cloud based IP transport technologies.

We believe that the Group is capable of exploiting the continuing growth of video content contribution both in our traditional broadcast market and also in other vertical markets that, with the development of unlicensed spectrums include opportunities within the pro-sumer markets. Our three year objective of reaching £80m of sales and £8m profit before tax remains realistic and achievable; developing recurring revenues within our business remains a priority.

The second half has begun positively with orders received of £11.0m (2011: £8.4m) in the 8 weeks to 25 August as we have secured some significant prospects that experienced delays in the first half. The full year outcome is subject to this order intake level continuing throughout the third quarter.

We are cautiously optimistic that the second half of 2012 will show further improvement in trading.  We have a strong order book which underpins our third quarter revenue. The Group has net cash of £8.4m. The Board therefore remains confident about the future prospects for the Group.

 

John Hawkins

Executive Chairman

30 August 2012

 

CONSOLIDATED GROUP INCOME STATEMENT

for the six months ended 30 June 2012

Year ended 31 December 2011 (Audited)			Six months to 30 June 2012 (Unaudited)	Six months to 30 June 2011 (Unaudited)
£'000		Notes	£'000	£'000
	Continuing operations
50,314	Revenue	4	27,497	20,028
(29,613)	Cost of sales		(16,374)	(12,214)
20,701	Gross profit		11,123	7,814
(8,749)	Sales and marketing expenses		(4,561)	(4,505)
(5,361)	Research and development costs		(2,443)	(2,286)
(6,822)	Administrative costs		(2,751)	(2,969)
(3,403)	Other expenses		(648)	(1,744)
(3,634)	Operating profit/(loss)	4,5	720	(3,690)
	Operating profit/(loss) is analysed as:
(231)	Adjusted operating profit/(loss)		1,368	(1,946)
(1,214)	Amortisation of acquired intangibles		(648)	(557)
(2,189)	Non-recurring costs	5	-	(1,187)
(29)	Finance costs	6	-	(2)
46	Finance income	6	13	19
(3,617)	Profit/(loss) before taxation		733	(3,673)
515	Taxation	7	(207)	1,126
(3,102)	Profit/(loss) after taxation		526	(2,547)
255	Profit for the period from discontinued activities		-	257
(2,847)	Profit/(loss) for the period being profit/(loss) attributable to equity shareholders		526	(2,290)
	Basic earnings/(loss) per share:
(2.6)p	From continuing operations	9	0.5p	(2.0)p
0.2 p	From discontinued operations		-	0.2 p
(2.4)p	Total		0.5p	(1.8)p

Diluted earnings/(loss) per share

There is no difference between basic and diluted earnings per share (note 9).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2012

Year ended 31 December 2011 (Audited)			Six months to 30 June 2012 (Unaudited)	Six months to 30 June 2011 (Unaudited)
£'000			£'000	£'000
(2,847)	Profit/(loss) for the period		526	(2,290)
138	Exchange difference on translation of foreign currency net investments		(194)	(437)
(2,709)	Total comprehensive income/(loss) for the period		332	(2,727)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the six months ended 30 June 2012

	Share Capital £'000	Share premium account £'000	Capital redemption reserve £'000	Merger reserve £'000	Translation reserve £'000	Retained earnings £'000	Total £'000
At 1 January 2012	2,848	4,900	617	30,565	4,730	3,398	47,058
Retained profit for the period	-	-	-	-	-	526	526
Exchange difference on translation of foreign currency net investments	-	-	-	-	(194)	-	(194)
Share based payments: value of employee services	-	-	-	-	-	82	82
Dividends payable	-	-	-	-	-	(1,413)	(1,413)
At 30 June 2012	2,848	4,900	617	30,565	4,536	2,593	46,059
At 1 January 2011	3,465	4,900	-	30,565	4,592	12,751	56,273
Retained loss for the period	-	-	-	-	-	(2,290)	(2,290)
Exchange differences on translation of overseas operations	-	-	-	-	(437)	-	(437)
Share based payments: value of employee services	-	-	-	-	-	43	43
Dividends payable	-	-	-	-	-	(1,413)	(1,413)
Repurchase of own shares (note 12)	(617)	-	617	-	-	(5,200)	(5,200)
At 30 June 2011	2,848	4,900	617	30,565	4,155	3,891	46,976
At 1 January 2011	3,465	4,900	-	30,565	4,592	12,751	56,273
Retained loss for the year	-	-	-	-	-	(2,847)	(2,847)
Exchange differences on translation of overseas operations	-	-	-	-	138	-	138
Share based payments: value of employee services	-	-	-	-	-	107	107
Dividends paid	-	-	-	-	-	(1,413)	(1,413)
Repurchase of own shares (note 12)	(617)	-	617	-	-	(5,200)	(5,200)
At 31 December 2011	2,848	4,900	617	30,565	4,730	3,398	47,058

CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION

as at 30 June 2012

31 December 2011 (Audited)			30 June 2012 (Unaudited)	30 June 2011 (Unaudited)
£'000		Notes	£'000	£'000
	Assets
	Non-current assets
30,876	Intangible assets	10	30,197	30,584
3,560	Property, plant and equipment	10	3,050	4,041
432	Deferred tax assets		230	1,536
34,868			33,477	36,161
	Current assets
8,540	Inventories		9,995	10,274
9,769	Trade and other receivables		11,591	10,762
-	Current tax assets		-	730
10,184	Cash and cash equivalents	12	8,362	10,358
28,493			29,948	32,124
	Liabilities
	Current liabilities
12,803	Trade and other payables		15,901	16,334
41	Current tax liabilities		31	-
37	Financial liabilities: borrowings	12	-	1,134
842	Provisions for other liabilities and charges	13	536	944
13,723			16,468	18,412
14,770	Net current assets		13,480	13,712
	Non-current liabilities
-	Deferred tax liabilities		-	770
1,498	Other non-current liabilities		-	1,587
1,082	Provisions for other liabilities and charges	13	898	540
2,580			898	2,897
47,058	Net assets		46,059	46,976
	Shareholders' equity
2,848	Ordinary shares	11	2,848	2,848
4,900	Share premium account	11	4,900	4,900
617	Capital redemption reserve	11	617	617
30,565	Merger reserve		30,565	30,565
4,730	Translation reserve		4,536	4,155
3,398	Retained earnings		2,593	3,891
47,058	Total shareholders' equity		46,059	46,976

CONSOLIDATED GROUP CASH FLOW STATEMENT

for the six months ended 30 June 2012

Year ended 31 December 2011 (Audited)			Six months to 30 June 2012 (Unaudited)	Six months to 30 June 2011 (Unaudited)
£'000		Notes	£'000	£'000
	Cash flows from operating activities
(408)	Cash generated from/(absorbed by) operations	14	498	(3,281)
46	Interest received		13	19
(42)	Interest (paid)		-	(13)
907	Taxation (paid)/received		(16)	31
503	Net cash generated from/(absorbed by) operating activities		495	(3,244)
	Cash flows from investing activities
(2,312)	Acquisition of subsidiary (net of cash acquired)		-	(2,304)
755	Proceeds from sale of subsidiary		-	757
84	Proceeds from sale of property, plant and equipment		150	17
(886)	Deferred consideration in respect of previous acquisitions		(815)	(875)
(522)	Purchase of property, plant and equipment	10	(196)	(359)
(2,198)	Expenditure on capitalised development costs	10	(1,398)	(859)
(5,079)	Net cash (absorbed by) investing activities		(2,259)	(3,623)
	Cash flows from financing activities
-	New borrowings	12	-	216
(895)	Repayment of borrowings	12	(37)	(14)
(1,413)	Dividend paid to shareholders		-	-
(5,200)	Repurchase of own shares		-	(5,200)
(7,508)	Net cash (absorbed by) financing activities		(37)	(4,998)
(12,084)	Net (decrease) cash and cash equivalents		(1,801)	(11,865)
22,230	Cash and cash equivalents at beginning of period		10,184	22,230
38	Effect of foreign exchange rate changes	12	(21)	(7)
10,184	Cash and cash equivalents at end of period	12	8,362	10,358
	Net cash comprises:
10,184	Cash and cash equivalents		8,362	10,358
(37)	Borrowings		-	(1,134)
10,147	Net cash at end of period		8,362	9,224

NOTES TO THE INTERIM FINANCIAL INFORMATION

for the six months ended 30 June 2012

1.   GENERAL INFORMATION

Vislink plc ("the Company") and its subsidiaries (together "the Group") is a global technology business specialising in the provision of secure communications for the broadcast and surveillance markets specialising in wireless, video and IP (Internet Protocol) technologies. The Group has offices in the UK, USA, Australia, China, UAE and Singapore, and employs over 250 people worldwide. The Group specialises in the design and manufacture of microwave radio, satellite transmission and wireless camera systems. The Group has manufacturing subsidiaries in the UK and the USA.

The Company is a public limited company that is listed on the Main Market of the London Stock Exchange. The Company is registered and domiciled in the UK and its registered office is Marlborough House, Charnham Lane, Hungerford, Berkshire, RG17 0EY. The registered number of the Company is 4082188.

This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2011 were approved by the Board of Directors on 23 March 2012 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

This condensed consolidated interim financial information has been subject to a review in accordance with ISRE (UK and Ireland) 2410 by our auditors but has not been subject to an audit.

This interim results announcement was approved for issue by the Board of Directors on 30 August 2012.

 

2.   BASIS OF PREPARATION

This condensed consolidated interim financial information for the six months ended 30 June 2012 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2011, which have been prepared in accordance with IFRSs as adopted by the European Union.

The preparation of the financial information requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from these estimates.

3.   ACCOUNTING POLICIES

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2011, as described in those annual financial statements.

Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings on a country by country basis.

There are no new accounting standards or interpretations that are effective for the first time for this interim period that would be expected to have a material impact on the Group.

 

4.   SEGMENTAL ANALYSIS

For management purposes the Group is organised into two operating divisions that are based on the geographic location of its businesses; the United Kingdom (UK), and the United States of America (US). Each division is managed separately based on the geographic markets served and each is treated as an operating segment and reportable segment in accordance with IFRS8. The operating and reportable segments were determined based on the Group's internal organisational and management structure and its system of internal financial reporting to the Executive Chairman; this reporting system is used to make operational decisions.

The UK business is responsible for the sales and marketing of all Group products and services outside of the Americas. It is also the product centre for the Advent satellite communication products, Gigawave microwave products and the Link wireless camera systems. The US business is responsible for the sales and marketing of all Group products and services in North and South America and Canada. It is also the product centre for the MRC and PMR microwave product brands and the services business of WTS.

Group management is also focussed on developing global revenue growth from the two main markets that it serves, broadcast and surveillance. Segmental reporting is therefore also provided by reference to revenue by market by geographic region.

The Executive Chairman assesses the performance of the operating segments based on operating profit from continuing operations before exceptional items and intangibles amortisation, including impairment ("segment result"). Finance income and expenditure are not allocated to segments as all treasury activity is managed centrally by the Group treasury function. Transfer prices between segments are set on an arm's length basis in a manner similar to transactions with third parties. The segment information for the reportable segments is disclosed below.

	UK		US		Total continuing operations
Six months to 30 June:	2012 £'000	2011 £'000	2012 £'000	2011 £'000	2012 £'000	2011 £'000
Revenue:
Broadcast	14,675	9,439	9,512	7,184	24,187	16,623
Surveillance	994	324	2,316	3,081	3,310	3,405
External revenue	15,669	9,763	11,828	10,265	27,497	20,028
Inter-segmental	2,600	1,577	108	202	2,708	1,779
Total revenue	18,269	11,340	11,936	10,467	30,205	21,807
Inter-segmental					(2,708)	(1,779)
Reported revenue					27,497	20,028
Operating profit:
Adjusted operating profit/(loss)	2,542	613	(163)	(1,601)	2,379	(988)
Central costs					(1,011)	(958)
Group adjusted operating profit/(loss)					1,368	(1,946)
Amortisation of acquired intangibles					(648)	(557)
Non-recurring costs					-	(1,187)
Group total operating profit/(loss)					720	(3,690)

Year to 31 December 2011	UK £'000	US £'000	Inter segmental £'000	Central £'000	Total continuing operations £'000
Revenue:
Broadcast	25,669	16,627	-	-	42,296
Surveillance	1,548	6,470	-	-	8,018
External revenue	27,217	23,097	-	-	50,314
Inter-segmental	3,935	1,122	(5,057)	-	-
Total revenue	31,152	24,219	(5,057)	-	50,314
Operating profit:
Adjusted operating profit/(loss)	2,482	(820)	-	(1,893)	(231)
Amortisation of acquired intangibles	(205)	(1,009)	-	-	(1,214)
Non-recurring costs	(1,091)	(326)	-	(772)	(2,189)
Group total operating (loss)	1,186	(2,155)	-	(2,665)	(3,634)

The secondary revenue analysis below is based on the geographical location of the end customer.

Geographic revenue analysis

Year ended 31 December 2011 (Audited) £'000		Six months to 30 June 2012 (Unaudited) £'000	Six months to 30 June 2011 (Unaudited) £'000
	By market:
4,758	UK and Ireland	3,347	897
6,534	Rest of Europe	5,732	2,802
19,052	USA & Canada	10,044	7,838
5,662	South America	1,666	3,159
6,322	Middle East	2,927	2,763
6,475	Asia	3,059	2,286
1,511	Africa	722	283
50,314		27,497	20,028

 

Net assets

The amounts reported to the Executive Chairman with respect to total net assets are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and the physical location of the asset.

 

31 December 2011 (Audited) £'000		30 June 2012 (Unaudited) £'000	30 June 2011 (Unaudited) £'000
	By market:
22,603	UK	24,490	19,673
20,817	US	19,915	20,733
43,420	Segment net assets	44,405	40,406
3,638	Group net assets	1,654	6,570
47,058		46,059	46,976

5.   NON-RECURRING COSTS

The following items of unusual nature, size or incidence have been charged to operating profit during the period and are described as non-recurring.

Year ended 31 December 2011 (Audited) £'000		Six months to 30 June 2012 (Unaudited) £'000	Six months to 30 June 2011 (Unaudited) £'000
1,273	Rationalisation and redundancy costs	-	962
585	Costs associated with the integration of Gigawave Limited	-	-
331	Costs associated with the acquisition of Gigawave	-	225
2,189	Total non-recurring costs	-	1,187

6.   FINANCE INCOME/(COST) - NET

Year ended 31 December 2011 (Audited) £'000		Six months to 30 June 2012 (Unaudited) £'000	Six months to 30 June 2011 (Unaudited) £'000
(19)	Interest payable on bank and other borrowing	-	(2)
(10)	Finance lease liabilities	-	-
(29)	Finance cost	-	(2)
46	Finance income	13	19
17	Finance income - net	13	17

 

7.   TAX ON PROFIT ON ORDINARY ACTIVITIES

Year ended 31 December 2011 (Audited) £'000		Six months to 30 June 2012 (Unaudited) £'000	Six months to 30 June 2011 (Unaudited) £'000
-	The tax (credit)/charge for the period comprises: UK corporation tax	-	-
-	Foreign tax	-	-
-	Total current tax	-	-
(279)	Deferred tax: UK corporation tax	267	(7)
(236)	Foreign tax	(60)	(1,119)
(515)	Total deferred tax	207	(1,126)
(515)	Total taxation	207	(1,126)

The tax charge for the six months ended 30 June 2012 is based on the effective tax rate that is estimated to apply to earnings for the full year on a country by country basis.

 

8.   DIVIDENDS

No interim dividend is proposed for the period.  In respect of 2011 there was no interim dividend and the final dividend of 1.25 pence per share was approved at the Annual General Meeting on 30 May 2012 and paid on 20 July 2012. The total cash cost of the dividend was £1.4m.

9.   EARNINGS PER ORDINARY SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period, excluding those held in the employee share trust which are treated as cancelled. Earnings per share is calculated by reference to a weighted average of 113,902,000 ordinary shares in issue during the period (30 June 2011: 127,620,000 and 31 December 2011: 119,846,000).

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive shares are those share options granted to employees where the exercise price is less than the average market price of the company's ordinary shares during the period.  At 30 June 2012 there were 167,000 dilutive share options (30 June 2011: nil and 31 December 2011: 25,000). The effect of dilutive shares was not material and therefore there is no difference between basic earnings per share and diluted earnings per share.

Adjusted earnings

The directors believe that the adjusted operating profit, adjusted profit before tax, adjusted earnings and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These measures are used by management for internal performance analysis and incentive compensation arrangements. The term "adjusted" is not a defined term used under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. The principal adjustments are made in respect of the amortisation of acquired intangibles, impairment of goodwill and non-recurring costs and their related tax effects.

The reconciliation between reported and adjusted earnings and basic earnings per share for the continuing business is shown below:

Year ended 31 December 2011			Six months to 30 June 2012			Six months to 30 June 2011
Earnings £'000	Basic EPS pence		Earnings £'000	Basic EPS pence		Earnings £'000	Basic EPS pence
(3,102)	(2.6)	Reported profit/(loss)	526	0.5		(2,547)	(2.0)
892	0.7	Amortisation of acquired intangibles after tax	476	0.4		401	0.3
2,013	1.7	Non-recurring costs after tax	-	-		823	0.7
(197)	(0.2)	Adjusted earnings/(loss)	1,002	0.9		(1,323)	(1.0)

 

10.  PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

Year ended 31 December 2011 (Audited) £'000		Six months to 30 June 2012 (Unaudited) £'000	Six months to 30 June 2011 (Unaudited) £'000
	Property, plant and equipment
3,223	Opening net book value as at 1 January	3,560	3,223
522	Additions	196	359
1,116	Acquisition of subsidiary	-	1,115
(167)	Disposals	(212)	(49)
(1,136)	Depreciation	(479)	(564)
2	Exchange adjustment	(15)	(43)
3,560	Closing net book value	3,050	4,041
	Intangible assets Intangible development costs
5,406	Opening net book value as at 1 January	5,719	5,406
2,198	Additions	1,398	859
195	Acquisition of subsidiary	-	195
(2,121)	Amortisation	(1,270)	(944)
41	Exchange adjustment	(47)	(99)
5,719	Development costs closing net book value	5,800	5,417
	Goodwill and acquired intangible assets
20,982	Opening net book value as at 1 January	25,157	20,982
3,469	Additions	-	2,759
2,519	Additions from acquisition of business	-	2,519
(1,214)	Amortisation	(648)	(557)
(688)	Reductions	-	(285)
89	Exchange adjustment	(112)	(251)
25,157	Goodwill and acquired intangibles closing net book value	24,397	25,167
30,876	Total closing net book value of intangible assets	30,197	30,584

The Group has capital commitments contracted but not provided for of £nil (30 June 2011: £0.1m and 31 December 2011: £0.2m).

11.  CALLED UP SHARE CAPITAL, SHARE PREMIUM AND CAPITAL REDEMPTION RESERVE

	Number of shares '000	Share Capital £'000	Share Premium £'000	Capital redemption reserve £'000	Total £'000
At 30 June 2012 And 30 June 2011, 31 December 2011	113,902	2,848	4,900	617	8,365

There were no share options exercised in the period to 30 June 2012 under any of the existing employee share option schemes (2011: nil).

12.  CASH, BORROWINGS AND LOANS

The movements in cash and cash equivalents, borrowings and loans in the period were as follows:

	Net cash and cash equivalents £'000	Other borrowings £'000	Total net cash/(debt) £'000
Six months ended 30 June 2012
At 1 January 2012	10,184	(37)	10,147
Cash flow for the period before financing	(1,764)	-	(1,764)
Movement in borrowings in the period	(37)	37	-
Exchange rate adjustments	(21)	-	(21)
At 30 June 2012	8,362	-	8,362
Six months ended 30 June 2011
At 1 January 2011	22,230	-	22,230
Cash flow for the period before financing and acquisition of subsidiary	(4,563)	-	(4,563)
Cash and borrowings acquired with subsidiary	71	(932)	(861)
Purchase of subsidiary	(2,375)	-	(2,375)
Repurchase of own shares	(5,200)	-	(5,200)
Movement in borrowings in the period	202	(202)	-
Exchange rate adjustments	(7)	-	(7)
At 30 June 2011	10,358	(1,134)	9,224
Year ended 31 December 2011
At 1 January 2011	22,230	-	22,230
Cash flow for the period before financing and acquisition of subsidiary	(2,264)	-	(2,264)
Cash and borrowings acquired with subsidiary	71	(932)	(861)
Purchase of subsidiary	(2,383)	-	(2,383)
Repurchase of own shares	(5,200)	-	(5,200)
Repayment of borrowings	(895)	895	-
Dividend paid to shareholders	(1,413)	-	(1,413)
Exchange rate adjustments	38	-	38
At 31 December 2011	10,184	(37)	10,147

Cash of £4.9m (30 June and 31 December 2011: £4.9m) was held in an escrow account; this was released from escrow in full on 6 July 2012. The cash was held in escrow to be able to satisfy any potential claims by the buyer of HERNIS Scan Systems AS under the terms of the sale and purchase agreement for breaches of warranties and indemnities.

The Group has bonding and ancillary facilities and an undrawn overdraft facility expiring within one year that are subject to review during 2013, in the normal course of business.  The gross bank overdraft facility is £2.0m, with a net limit of £1.0m. Interest on the overdraft facility is charged at 2.25 per cent over base rate.

 

13.  PROVISIONS FOR OTHER LIABILITIES AND CHARGES

31 December 2011 £'000		30 June 2012 £'000	30 June 2011 £'000
587	Warranty provision	536	784
1,057	Property provision	893	476
280	Rationalisation provision	5	224
1,924		1,434	1,484
842	Amounts due within one year	536	944
1,082	Amounts due after one year	898	540
1,924		1,434	1,484

Warranty provisions are made in respect of the expected future warranty costs in certain businesses based on historic actual costs. Warranty periods on products are generally between one and two years. Other than a warranty provision of $0.3m (£0.2m) all provisions are denominated in sterling.

The property provision is in respect of vacated leasehold properties acquired as part of the Gigawave acquisition and represents the estimated future liabilities associated with the properties.

The provision for rationalisation costs reflects future commitments in respect of redundancy payments that have been announced prior to 30 June 2012.

14.  NOTES TO THE CASH FLOW STATEMENT

 

Net cash flow from operating activities comprises:

Year ended  31 December 2011 (Audited) £'000		Six months to 30 June 2012 (Unaudited) £'000	Six months to 30 June 2011 (Unaudited) £'000
(3,617)	Profit/(loss) before tax	733	(3,673)
1,136	Depreciation	479	564
83	(Profit)/loss on disposal of property, plant and equipment	(21)	32
233	Acquisition related costs	-	225
2,121	Amortisation and impairment of development costs	1,270	944
1,214	Amortisation of acquired intangibles	648	557
107	Share options - value of employee services	82	43
(46)	Finance income from continuing operations	(13)	(19)
29	Finance costs from continuing operations	-	2
677	(Increase)/decrease in inventories	(1,509)	(937)
919	(Increase)/decrease in trade and other receivables	(1,892)	(49)
(3,128)	Increase/(decrease) in payables	1,126	(984)
(136)	(Decrease)/increase in provisions	(405)	14
(408)	Net cash inflow/(outflow) from operating activities	498	(3,281)

15.  FOREIGN EXCHANGE RATES

 

The principal exchange rates used by the Group in translating overseas profits and net assets into GBP are set out in the table below.

31 December 2011	Rate compared to GBP:  Period ended	30 June    2012	30 June    2011
	Average rates for the period
1.60	US dollar	1.58	1.62
	Period end rate
1.55	US dollar	1.57	1.61

16.  RELATED PARTY TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The Group has not entered into any transactions with any related parties who are not members of the Group.                                                                                                .

Statement of directors' responsibilities

The directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·      an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·      material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of Vislink plc are listed in the Vislink plc Annual Report for 31 December 2011, with the exception of the following change in the period: Ian Davies was appointed to the Board on 9 August 2012. A list of the current directors is maintained on the Vislink plc website at www.vislink.com.

On behalf of the Board

John Hawkins

Executive Chairman

James Trumper

Group Finance Director

30 August 2012

Independent review report to Vislink Plc

Introduction

We have been engaged by the Company to review the condensed consolidated interim financial information in the interim results announcement for the six months ended 30 June 2012, which comprises the Consolidated Group Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Shareholders Equity, Consolidated Group Statement of Financial Position, Consolidated Group Cash Flow Statement and related notes. We have read the other information contained in the interim results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial information.

Directors' responsibilities

The interim results announcement is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results announcement in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial information included in this interim results announcement has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial information in the interim results announcement based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency 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.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated interim financial information in the interim results announcement for the six months ended 30 June 2012 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PRICEWATERHOUSECOOPERS LLP

Chartered Accountants

Bristol

30 August 2012

Notes:
(a) The maintenance and integrity of the Vislink plc web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim results announcement since it was initially presented on the web site.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

 

END

 

 

IR EALPNALSAEFF