Preliminary Results

RNS Number : 7196A

Vislink PLC

25 March 2013

 



Vislink plc

Results for the year ended 31 December 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, has today announced its results for the year ended 31 December 2012.

Financial Headlines

	2012	2011	% Change
Order intake	£50.1m	£52.8m	-5.1%
Revenue	£57.2m	£50.3m	+13.7%
Adjusted* operating profit/(loss)	£3.1m	£(0.2)m
Adjusted* earnings/(loss) per share	2.5p	(0.2)p
Operating profit/(loss)	£2.2m	£(3.6)m
Profit from discontinued activities	-	£0.3m
Profit/(loss) attributable to shareholders	£2.1m	£(2.8)m
Basic earnings/(loss) per share	1.9p	(2.6)p
Net cash	£8.1m	£10.1m
Total dividend per share (pence)	1.25p	1.25p

*Adjusted operating profit is operating profit from continuing operations before the amortisation and impairment of acquired intangibles, and other non-recurring costs. Adjusted earnings per share is calculated on the same basis after taking account of related tax effects.

Key points

·     Good performance from Broadcast and Surveillance, with both segments delivering revenue growth

·     Planned cost reductions were achieved whilst maintaining investment in sales channels and Research and Development

·     The adjusted operating profit for 2012 was £3.1 million compared to the loss of £0.2 million in 2011

·     Gigawave was fully integrated into the business throughout the year and its product range benefited both Broadcast and Surveillance

·     Strong portfolio of products with recent launches such as the 'MSAT' Man Portable Data System immediately delivering revenues and receiving good feedback from the market place

·     The USA and Western Europe remain the largest markets for Broadcast, but the Group is strengthening its routes to market in the key growth markets in the rest of the world

·     Order intake in the fourth quarter was disappointing resulting in overall orders for 2012 being down 5.1 per cent on 2011. However, recent activities have seen the development of a strong pipeline in 2013

·     The Group remains debt free, with Net Cash of £8.1m

·      Our strategy for the Group, announced in November 2011, is on track

John Hawkins, Executive Chairman of Vislink said:

"2012 was a year of sustained profitable growth for the Group. We achieved our objective of improving profitability with cost reductions whilst continuing in our investment in sales channels and Research and Development.  We have increased revenues in both Broadcast and Surveillance and delivered a substantial increase in profit over 2011.

Both our long term and short term objectives are wholly aligned to deliver our financial objectives which, if successful, will provide long term growth and generate an increase in value for our shareholders."

- ends -

For further information please contact:

John Hawkins, Executive Chairman	[phone]
Ian Davies, Group Finance Director	[phone]
Andrew Hayes / Charlie Jack / Katie Matthews Hudson Sandler	[phone]
Shaun Dobson N+1 Singer	[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 defence, law enforcement and public safety. With offices in the UK, USA, Australia, UAE, South Africa and Singapore and manufacturing operations in the UK and the USA we employ over 200 people worldwide and have net assets of £47m. Our solutions include the design and manufacture of microwave radio, satellite transmission and wireless camera systems.

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

Forward-looking statements

Certain statements in this announcement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to be correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise. Nothing in this announcement should be construed as a profit forecast.

Executive Chairman's Statement

For the year ended 31 December 2012

Introduction

The core competence of Vislink is the collection of wireless high quality, live video and associated data from the field to the point of usage.  We provide solutions to two core markets; the broadcast market for the collection of live news, sport and entertainment events, and the video surveillance markets such as law enforcement and public safety.

2012 was a year of sustained profitable growth for the Group. We achieved our objective of sustaining quarter on quarter growth in revenues and profits. We have reduced our cost but increased revenues and produced a substantial increase in profit over 2011.

2012 was a tremendous year for profiling our technology as we dominated events such as the Olympics and the Queen's Diamond Jubilee celebrations. In fact if you add up all of the outside broadcast events around the world, Vislink would be delivering two thirds of these to broadcasters by deploying Vislink products.

During the year we have further strengthened our management teams in operations, marketing and product development.

We successfully introduced a new lightweight satellite terminal, MSAT, to both the surveillance and broadcast markets. The MSAT has begun volume shipments and we have high hopes for this product and will use the design philosophy to rebrand and refresh our family of satellite products. We successfully developed our first cellular based product, LiveGear. In this product area we see high growth opportunities by integrating cellular applications into our wireless camera backs and standalone cellular products. These products allow live video to be fed straight into a website and will open up new markets for our products, including magazine and newspaper publishers who are extending their reach into new markets and developing their digital assets.

As we stated in our November 2011 strategy document, Vislink is the market leader in the broadcast market with its range of wireless video contribution products representing around 20 per cent of the market.  Equally relevant to us in the future will be the deployment of our core technology into the surveillance markets. Here, we see increased demand for high quality video delivered wirelessly for application in aerial surveillance, unmanned ground and airborne vehicles and also the deployment of these devices in new market areas such as building and remote pipeline inspections.

In 2013 we will focus on the exploitation of our core technology into some of these new markets and begin to develop our services strategy to encourage recurring revenue opportunities for our business.  An example of this will be the deployment of full service offerings in satellite and cellular application areas where we will launch a renewal model for these services, including the billing of airtime. This 'full service' approach will make it easier for our customers to deploy the technology that we offer. 

Our philosophy is to involve customers at the beginning of an idea to ensure it is what they want, to develop it quickly so we fully exploit the opportunity, produce it efficiently, support it globally and build a sustainable relationship with customers.

All our regions are now profitable and are contributing to our success, with a particularly good turnaround in the Americas which has gone from an adjusted loss of £0.8 million in 2011 to an adjusted profit of £0.4 million in 2012. 

Whilst markets are tough we have been able to grow in 2012 both in revenues and profits through our global presence.  We have seen good growth in the Americas, the Middle East and somewhat surprisingly in Europe, driven in part by the acquisition of Gigawave which has now been fully integrated into the Group structure.

Financial Results

Group revenues were £57.2 million (2011: £50.3 million) which was up 13.7 per cent on the previous year. Orders received were £50.1 million (2011: £52.8 million), down 5.1 per cent on last year (including the full year effect of the Gigawave acquisition).

As at 31 December 2012 the order book stood at £5.2 million (2011: £12.4 million).  Order intake in the fourth quarter was disappointing.  In this quarter, we also took the decision to carry out a comprehensive review of the order book. As part of this review we took the decision to remove a number of specific orders which primarily related to government funded projects that had been significantly delayed.  As a result of the fourth quarter net order intake, overall orders for 2012 finished down 5.1 per cent on 2011. However, recent activities have seen the development of a strong pipeline in 2013, that gives us confidence that our strategy remains on track.

Whilst we grew our business we achieved this with fewer people, reducing our overall workforce from 269 to 244. This was achieved whilst maintaining our investments in product development, sales and marketing, but by reducing the levels of middle management and administration. Our model going forward is scalable and we deploy contract manufacturing of our key components to enable us to grow profitably without the need to hire lots of additional staff. At the same time we are bringing in new skills and graduates to accelerate our capabilities in the IP (internet protocol) and cellular development areas.

The reported operating profit was £2.2 million (2011: loss of £3.6 million) after charging £1.6 million in respect of the amortisation of acquired intangibles (2011: £1.2 million) and crediting £0.7 million of non-recurring costs (2011: charged £2.2 million). Non-recurring costs include £0.3 million in respect of a contractual dispute and a credit of £1.0 million in respect of deferred consideration not paid.

The Group has maintained a strong balance sheet throughout the year and remains debt free. Net cash was £8.1 million (2011: £10.1 million). There was some working capital increase throughout the year associated with our growth and building some inventory for the new MSAT product to fulfil the pipeline.

The business generated cash of £3.7 million (2011: £0.5 million) from operating activities throughout the year. As a result of adjustments to the Gigawave balance sheet the final deferred consideration and associated cash payments for the Gigawave acquisition was adjusted down from £1.5 million to £0.75 million with £0.5 million paid in December 2012 and the balance of £0.25 million paid in January 2013. 

Earnings per share

The reported basic undiluted earnings per share for the year was 1.9 pence (2011: loss per share of 2.6 pence). 

After adjusting for amortisation and impairment of acquired intangibles the Group's adjusted earnings per share was 2.5 pence (2011: adjusted loss per share of 0.2 pence).

Dividends

The Board is proposing that the full year dividend be maintained at 1.25 pence per share (2011: 1.25 pence).

Acquisitions

In 2012 we have concentrated on organic growth and the successful integration of Gigawave which is reflected in this set of results and our debt free balance sheet.  We anticipate adding a number of 'bolt on' acquisitions principally to drive our services strategy and to provide a contribution to our three year growth target of £80 million revenue and £8.0 million adjusted operating profit by the end of 2014. 

Strategy

Our strategy for the Group, announced in November 2011, is on track. The Board reviewed progress in October 2012 and taking into account organic development, a strong balance sheet and opportunities for 'bolt on' acquisitions, the Board remains confident of achieving its 2014 objective of £80 million revenue and £8.0 million adjusted operating profit for the Group compared to revenues of £43.1 million and an adjusted operating loss of £8.4 million at the end of 2010.

We will continue to develop our core competence in wireless video contribution for both the broadcast and surveillance markets.  We will exploit the strengths of our established brands; Advent, Gigawave, Link, MRC, PMR and LiveGear.

We will maintain investment levels through our core product development, particularly in IT based technology such as 3G/4G, WiFi and both private and public Cloud infrastructure.

We see growth in video applications to further the appeal of our customers' websites through increased use of video content as well as enhancing the appeal of live programming, particularly sports. Our continued efforts in miniaturisation of high quality video contribution coupled with the integration of microwave, satellite communication, WiFi and cellular to deliver ultimately first mover advantage to our customers,  whether in traditional broadcast or in 'special operations' in surveillance, will be key to our future and will therefore become our concentration and focus.

The London Olympics, US Presidential Election and the Queen's Diamond Jubilee showcased our strength and capabilities in 2012.

Vislink currently has the widest product portfolio in the broadcast contribution sector and has consolidated its number one position in today's fragmented market.  Our market share is currently 20 per cent and in fact we are growing our global share. 

The Group sees an almost equal opportunity in the surveillance area where we have estimated the market for our wireless video application to be circa £200 million globally. We grew this sector of our business by 26.3 per cent in 2012 and anticipate that this will grow much faster during the next two to three years as organisations continue to invest in homeland security, border control and more agile, better equipped defence organisations utilising technology capable of monitoring and deploying assets more efficiently and more safely through the utilisation of high definition wireless, miniaturised video.

For example there is a growing demand for unmanned aircraft and other vehicles where our experience in providing wireless video contribution has been transferred.  New applications have now been packaged and sold giving Vislink access to new markets such as video assist for film production, defence applications deploying MSAT, and first-to-the-scene journalists utilising MSAT for news gathering.

The introduction of cellular technology in our LiveGear range of wireless camera applications allows us for the first time to offer a 'full service approach' to our customers. The new technology phenomenon is the concept of machine to machine internet (M2M), 'the Internet of Things' (IOT), which we have developed with our latest range of wireless camera backs.  These enable the Group to develop recurring services revenues by deploying and supporting their devices which connect to public mobile networks, enabling Vislink to begin offering a managed service to customers. 

Our acquisition strategy will seek opportunities for Vislink to further expand its services offering providing recurring revenues to the Group which at the present time has limited visibility of its orders beyond three months.

The financial goal is for profitable growth to £80 million of annual revenue within three years (December 2014) with an adjusted operating profit margin of 10 per cent.  We expect growth from a combination of organic growth and 'bolt on' acquisitions in services and IP/software technologies assisting our desire to build recurring revenues into our business model.

The Board, management and employees

We continue to benefit from the experience brought about by the enhancement of the Board in 2011 by increasing our depth of experience in the broadcast and surveillance markets.

We also witnessed the smooth handover of the Group Finance Director role from James Trumper, who remained with the Group until August 2012 at which time Ian Davies was appointed as Group Finance Director.  

Within the business units we strengthened our marketing product management, operations capabilities, and began to hire graduates bringing in engineering with IP and cellular expertise to supplement the rich skill base of our existing RF engineering groups.

On behalf of the Board I would like to thank all our employees for their enthusiasm, hard work and dedication to the Group throughout the year.  2012 saw a renewed momentum in faster product development and an increase in the pace of the business which all employees have enthusiastically embraced. 

Current outlook and trading

Our markets continue to be challenging.  However, the Group enters 2013 with a renewed confidence buoyed by the introduction of new products that are gaining momentum in the market place.

We are confident of maintaining our organic growth and see opportunities continuing in Asia and Latin America for both our broadcast and, in particular, our surveillance products.  We believe that we can continue to scale our business whilst maintaining the current levels of expenditure in R&D and sales and therefore obtaining better utilisation of our key assets and improving our profit and cash generation.

We have a good strategy and will continue to concentrate on successful execution.

Both our long term and short term objectives are wholly aligned to deliver our financial objectives which, if successful, will provide long term growth and generate an increase in value for our shareholders.

John Hawkins
Executive Chairman

25 March 2013

OPERATING AND FINANCIAL REVIEW

For the year ended 31 December 2012

Regional Operations

	2012 £'m	2011 £'m	Change %
UK business	37.8	31.2	+21.2
US business	25.3	24.2	+4.5
Inter-Segmental	(5.9)	(5.1)	+15.7
Total Revenue	57.2	50.3	+13.7
UK business	4.9	2.5
US business	0.4	(0.8)
Central	(2.2)	(1.9)
Total adjusted operating profit/(loss)	3.1	(0.2)

The UK has benefitted from revenue growth in the Middle East and also the full year benefit of Gigawave, which was acquired in June 2011.  The addition of the Gigawave product range has enabled growth in both the UK and Europe against the background of relatively flat markets.

In 2011, Gigawave contributed a net adjusted operating loss of £0.6 million on revenue of £5.6 million.  As we have previously announced, we fully integrated Gigawave into the UK operation in the first quarter of 2012 and hence no separate operating profit is disclosed.  The anticipated cost savings on this integration have been achieved and the product portfolio and brand has enhanced earnings in 2012.

The UK has also benefited from strong inter-segmental sales, with strong demand for satellite products in South America.

UK revenue including Gigawave products increased to £37.8 million for 2012.  UK adjusted operating profit increased to £4.9 million.

The US has seen significantly improved financial performance, with overall revenue growth and reduced costs delivering a turnaround in the profitability of the business.  Revenues have increased by 4.5 per cent to £25.3 million and the adjusted operating profit has improved from a £0.8 million loss in 2011 to a £0.4 million profit in 2012

Revenue by Market

	2012 £'m	2011 £'m	Change %
Broadcast revenues by region
UK & Europe	12.3	10.1	+21.8
Americas	20.3	18.3	+10.9
Middle East and Africa	8.1	7.5	+8.0
Asia / Pacific	6.4	6.4	0.0
Broadcast	47.1	42.3	+11.3
Surveillance	10.1	8.0	+26.3
Total Revenue	57.2	50.3	+13.7

Broadcast

Total revenue in Broadcast was £47.1 million (2011: £42.3 million).  This total benefitted from a full year of Gigawave product, which sold principally in the UK and Europe, and the Middle East, although there were also some sales to the Americas. In 2011 post acquisition trading, Gigawave contributed revenue of £4.5 million. 

The USA and Western Europe remain the largest markets for our Broadcast business.  The 10.9 per cent increase in revenue in the Americas reflects a strengthening of revenues in the USA against a market that is perceived to be relatively flat. 

Major events that supported revenue included the Presidential Election in the USA and the Olympics in the UK.

In Asia / Pacific, the Group opened a sales office in Australia in early 2012 which will provide strong local support for our business partners in the region and a focus on the anticipated spectrum change.

South America remains a key market, with the World Cup in 2014 and the Olympics in 2016 in Brazil, providing an impetus for further investment in both Broadcast and Surveillance in the region.

Surveillance

Total revenue increased from £8.0 million to £10.1 million and this increase benefitted from a full twelve months of Gigawave products.  In 2011 Gigawave contributed £1.1 million in post acquisition revenues and in 2012 the Group continued to benefit from the airborne down link range of products. 

The USA is still the largest market for the Group for Surveillance products, with the US Government both directly and indirectly being a key customer.  Sales cycles can be long, but the Group is well positioned on a number of initiatives and programmes and expects this to be an increasingly significant source of revenue going forward. 

The launch of the Advent Mantis 'MSAT' Man Portable Data System provided an immediate boost to revenues in UK Surveillance sales in 2012.  Weighing only 12.5kg and providing a 5Mbps link within five minutes, it provides robust functionality that is now providing secure military communications in operational environments.

There are further opportunities for this range to be extended and to provide additional solutions for both Surveillance and Broadcast applications.

Business Performance:  Technology

Expenditure on Research and Development in 2012 was £5.1 million (2011: £5.4 million) representing 9 per cent of revenues (2011: 11 per cent).

The business has capitalised development costs of £2.8 million (2011: £2.2 million).  Amortisation of development costs was £2.6 million (2011: £2.1 million) and this is included in the reported Research and Development expenses in the consolidated Group income statement. 

Key product introductions included the new 'MSAT' Man Portable Data Terminal which was launched at CABSAT in March 2012 and exhibited prominently at IBC in September 2012.  The system is specifically designed for rapid deployment in hostile or emerging environments, but has seen increasing interest for broadcast applications such as newsgathering.  Further products are being developed based on this design concept. 

Our LiveGear bonded cellular solution exhibited at the Consumer Electronics Show (CES) in Las Vegas in January 2013.  Cellular is providing an increasingly important option for newsgathering for initial image capture.  The Group believes it will benefit from its ability to develop a hybrid solution of microwave and cellular for wireless video capture.

We are also continuing to expand our 'IP' transport based technologies through both organic teams and third party technology partnerships.

Our engineering teams remain focussed on continuing to strengthen our market, brand and technology presence.  We have continued to strengthen our hardware and software design teams and have recruited both graduate and more experienced engineers.

FINANCIAL REVIEW

The Group's reported trading performance is summarised as follows:

	2012 £'m	2011 £'m	Change %
Continuing business
Revenue	57.2	50.3	+13.7
Gross profit	22.5	20.7	+8.7
Gross margin %	39.4%	41.2%	-1.7pts
R&D expenses	(5.1)	(5.4)	-5.6
SG&A expenses	(14.3)	(15.5)	-7.7
Adjusted operating profit/(loss)	3.1	(0.2)
Amortisation of acquired intangibles	(1.6)	(1.2)
Non-recurring items	0.7	(2.2)
Reported operating profit/(loss)	2.2	(3.6)
Net finance costs	-	-
Profit/(loss) before tax	2.2	(3.6)
Taxation	(0.1)	0.5
Profit/(loss) after tax - continuing business	2.1	(3.1)
Discontinued activities
Profit after tax from discontinued operations	-	0.3
Profit/(loss) attributable to equity shareholders	2.1	(2.8)
Basic earnings/(loss) per share - continuing operations	1.9p	(2.6p)
Adjusted earnings/(loss) per share1 - continuing operations	2.5p	(0.2p)

¹          Adjusted EPS is calculated on operating profit before the amortisation and impairment of acquired intangibles, and other non-recurring costs after taking account of related tax effects.

Goodwill impairment

The Group tests goodwill annually for impairment, or more frequently if there are indications that goodwill and acquired intangibles might be impaired. Given the current uncertain economic environment the Board has undertaken a full impairment review. The basis for the review was to assess the strategic plans and to discount the future expected cash flows using the Group's weighted average cost of capital in accordance with IAS36 "Impairment of Assets". The Board considered the estimated discounted cash flows from the business plan for the next two years and beyond. The Board also reviewed the performance in 2012 against the projections used in the impairment review undertaken last year.

Having reviewed all the relevant calculations and the sensitivities the Board concluded that there had been no impairment in the current year (2011: no impairment).

Non-recurring items

The Group credited £0.7 million of non-recurring costs to the consolidated income statement. The credit comprised:

·      £0.3 million costs associated with a contractual dispute; and

·      £1.0 million gain in respect of adjustments to deferred consideration.

Finance costs

There was a net interest credit of £0.03 million (2011: credit of £0.02 million). The Group operated with a net cash balance throughout the year and earned finance income of £0.03 million.

Taxation

There was a net tax charge for the year of £0.1 million (2011: credit of £0.5 million). The current tax charge in the year was £0.2 million (2011: £nil). There was a deferred tax credit of £0.1 million (2011: £0.5 million).

The effective tax rate of 5.0 per cent for the year is lower than the standard UK corporation tax rate applicable during the year of 24.5 per cent (2011: 26.5 per cent) due to the level of losses utilised in the period and the recognition of previously unrecognised losses.

At 31 December 2012 tax payable was £0.01 million (2011: tax payable of £nil).

Discontinued activities

On 29 December 2010 shareholders approved the disposal of the entire issued share capital of HERNIS Scan Systems AS ("HERNIS") to Cooper Industries for £32.5 million. The disposal was completed on 30 December 2010. The results of HERNIS have been treated as a discontinued operation. The profit from discontinued operations in the year was £nil (2011: £0.3 million).

Net assets

The balance sheet at 31 December 2012 is summarised as follows:

£'million	2012	2011
Intangible assets	28.7	30.9
Property, plant and equipment	2.7	3.6
Other non-current assets and (liabilities)	-	(2.2)
Current assets and liabilities	7.9	4.5
	39.3	36.8
Cash and cash equivalents	8.1	10.2
Net assets	47.4	47.0

The increase in net assets in the year of £0.4 million comprises the profit for the financial year of £2.1 million and the value of employee services of £0.2 million, offset by £1.4 million of dividends paid and a foreign exchange loss on translation of overseas operations of £0.5 million.  

Working capital

Our key metrics for managing working capital are days sales outstanding (DSO) for trade receivables and net inventory days. The table below shows that trade receivables have increased to 72 days whilst inventory days have increased due to the introduction of new satcom products.  We will continue to focus on reducing inventory days into 2013.

Days (source: Group management accounts)	2012	2011
Trade receivables - days sales outstanding1	72	63
Inventory days2	119	95

¹Trade receivables at the end of the financial year divided by quarter 4 revenue multiplied by the number of days in quarter 4

²Net inventory at the end of the financial year divided by quarter 4 material costs of sales multiplied by the number of days in quarter 4

Cash flows

The Group held cash and cash equivalents of £8.1 million at 31 December 2012 (2011: £10.2 million). The table below summarises the cash flows for the year.

£'million	2012	2011
Cash generated from operating activities	3.7	0.5
Net cash used in investing activities	(4.3)	(5.8)
Proceeds from sale of HERNIS	-	0.8
Repayment of borrowings	-	(0.9)
Returns to shareholders	(1.4)	(6.6)
Effects of foreign exchange	(0.1)	-
Net (decrease)/increase in cash and cash equivalents	(2.1)	(12.0)
Cash and cash equivalents at 1 January	10.2	22.2
Cash and cash equivalents at 31 December	8.1	10.2

There was a net cash inflow from operating activities in the year of £3.7 million (2011: £0.5 million).

The cash outflow from investing activities amounted to £4.3 million (2011: £5.8 million) which comprised £0.1 million in respect of proceeds from the sale of property, plant and equipment (2011: £0.1 million); £1.3 million of deferred consideration paid in respect of previous acquisitions (2011: £0.9 million); £nil paid out in respect of the acquisition of subsidiaries (2011: £2.3 million) and £3.1 million in respect of capital expenditure and the capitalisation of development costs (2011: £2.7 million).

At 31 December 2012 all borrowings had been repaid in full.

Returns to shareholders were in the form of a dividend payment of £1.4 million (2011: £1.4 million). In 2011 the returns to shareholders also included a return of £5.0 million through the Tender Offer (a total outflow of £5.2 million including costs).

Returns to shareholders

It is the Group's stated strategy to only recommend a final dividend. The Board is recommending that the dividend be maintained at 1.25 pence per share (2011: 1.25 pence). The payment of the dividend will absorb approximately £1.4 million of cash. Subject to the approval of shareholders, the dividend will be paid on 19 July 2013 to those shareholders on the register at 28 June 2013. 

Pensions

The Group operates defined contribution pension schemes, where it contributes a pre-determined amount proportionate to the salaries of the participating employee to the scheme.

Principal risks and uncertainties for the Group

The Group may be affected adversely by global economic conditions

The operating and financial performance of the Group is influenced by the economic conditions of the regions in which it operates, particularly the UK, Continental Europe and the USA. The Group is mitigating its reliance on these regions by expanding its activities in Asia / Pacific, the Middle East and Africa. However the current strained global economic conditions and the volatility of international markets could result in a general reduction in business activity and a consequent loss of income for the Group. The global credit market conditions mean financial institutions are applying more stringent lending criteria and the availability of debt is low by historical comparison, which may mean that it may be more costly for the Group to raise funds to take advantage of opportunities, should additional funding be required.

The Group expects to weather the current economic climate through focus on its existing customers as well as developing new relationships and partnerships through expanding its international presence. Improving the operational efficiency of the Group combined with cost reductions already undertaken will help underpin the performance of the Group going forward.

Risks associated with the Group's markets

The markets in which the Group operates are mature and highly competitive with respect to price, geographic distinction, functionality, brand recognition and the effectiveness of sales and marketing.

Due to price pressure, the Group may experience fluctuations in future operating results. If the Group is unable to offset any reductions in selling prices and margins by increases in volumes and/or by decreases in operating expenses, turnover and profitability may be affected negatively. Competition could be intensified due to companies entering certain markets with new products or favourable cost structures. In such events Group sales, margins and/or market shares may decrease.

Group management and the business units are aware of the competitive risks in its markets and regularly review competitor activity in order to create strategies to protect the Group's position as far as possible.

Reputational risks for operational incidents

Many of the Group's products are for mission critical services, such ensuring live news is available in real time or that mission critical video surveillance is uninterrupted. There is the risk that product failure will cause loss of services to Vislink customers, bringing damage to the Group's reputation. Customer service and support is a key part of the Group's offering to customers to mitigate such damage.

Operations overseas

The Group conducts its business in multiple jurisdictions and, as a result, assumes the accompanying risks which may include government regulations and administrative policies could change quickly. Governments could expropriate assets; burdensome taxes or tariffs could be imposed. Political changes in the business environment in which the Group operates and economic downturns, political instability and civil disturbances could disrupt the Group's business activities. Where appropriate the Group will take out insurance to cover political risks. Management monitor the exposure that the Group has to higher risk countries.

The Group's business may be affected by the default of customers in respect of monies owed to the Group.

As a consequence of its normal operations, the Group often has significant amounts owed to it by its customers. In the current market environment, the Group's operating and financial performance may be impacted by increased exposure to the default of customers, which may reduce the Group's cash flows.

The Group policy is to limit its exposure by setting credit limits for each customer, where possible by reference to published credit ratings, to manage its exposure. In addition on larger contracts the Group seeks deposits and advance payments to maintain a positive cash flow and to cover its costs.

Senior management and senior personnel

The Group is dependent on members of its senior management team and skilled personnel. Its future success will depend in part on its ability to attract and retain highly skilled management and personnel. If the Group does not succeed in attracting and retaining skilled personnel, it may not be able to grow its business as anticipated. Further, the departure of certain senior employees from the Group could, in the short term, have a material adverse effect on the Group's business. The Board gives regular consideration to succession planning.

Foreign exchange

The Group's exposure to market risk, liquidity risk, credit risk and cash flow interest rate risk remains largely unchanged from the position at 31 December 2011.

The Group's principal risks and uncertainties continue to be the impact of foreign exchange rates on margins for non-domestic sales in each of our businesses. The Group mitigates this risk as far as possible through hedging expected foreign exchange receipts when appropriate.

The Group is exposed to the translational risk of fluctuations in the value of sterling when translating overseas results and assets. The exchange risk to the Group in terms of its reported results lies in the translation of the results of our trading entities in the United States. The Group accounting policy is to translate the profits and losses of overseas operations using the average exchange rate for the financial year and the net assets and liabilities of overseas subsidiaries at the year end exchange rate. It continues to be Group policy not to hedge the foreign currency exposures on the translation of overseas profits or losses and net assets or liabilities as they are considered to be accounting rather than cash exposures.

In 2012 the net assets of the Group decreased by £0.1 million on the translation of foreign currency net investments (2011: increased by £0.1 million) as a result of the strengthening of the US dollar against sterling.

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

Rate compared to £ sterling	Average rate, 2012	Average rate, 2011	Year end rate, 2012	Year end rate, 2011
US dollar	1.585	1.60	1.617	1.55

If the results for the year to 31 December 2011 had been translated at the 2012 average rate then the translation impact would be to increase prior year revenue by £0.2 million and increase the loss before tax by £0.03 million.

Risk management

The Board regularly reviews the full range of business risks facing the Group. The approach adopted is to identify, evaluate and manage the likely impact of risk on the Group's business objectives. Where the risks are unavoidable they are managed through business controls and where appropriate through insurance and treasury activities.

The Group has a programme of regular risk assessment, which incorporates internal control reviews of both a financial and non-financial nature. A process of continuous review has been in place throughout the year at an operating company level to consider the risk environment and the effectiveness of controls. The results of reviews, initiatives and progress on implementing control improvements are regularly reported to the Board.

John Hawkins, Executive Chairman

Ian Davies, Group Finance Director

25 March 2013

CONSOLIDATED GROUP INCOME STATEMENT

for the year ended 31 December 2012

		2012	2011
	Notes	£'000	£'000
Continuing operations
Revenue	3	57,203	50,314
Cost of sales		(34,655)	(29,613)
Gross profit		22,548	20,701
Sales and marketing expenses		(8,654)	(8,749)
Research and development expenses		(5,053)	(5,361)
Administrative expenses		(5,751)	(6,822)
Other expenses		(883)	(3,403)
Operating profit/(loss)	4	2,207	(3,634)
Operating profit/(loss) is analysed as:
Adjusted operating profit/(loss)		3,090	(231)
Amortisation of acquired intangibles		(1,589)	(1,214)
Non-recurring items	3,4	706	(2,189)
Finance costs	5	(4)	(29)
Finance income	5	29	46
Profit/(loss) before taxation		2,232	(3,617)
Taxation	6	(112)	515
Profit/(loss) after taxation		2,120	(3,102)
Profit for the year from discontinued operations		-	255
Profit/(loss) for the year being profit attributable to equity shareholders		2,120	(2,847)
Basic earnings/(loss) per share:
From continuing operations	8	1.9p	(2.6)p
From discontinued operations		0.0p	0.2p
Total		1.9p	(2.4)p

Diluted earnings/(loss) per share

There is no difference between basic and diluted earnings per share (note 8).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2012

		2012	2011
		£'000	£'000
Profit/(loss) for the year		2,120	(2,847)
Exchange differences on translation of overseas operations		(576)	138
Total comprehensive income/(loss) for the year		1,544	(2,709)

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the year ended 31 December 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 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	(617)		617			(5,200)	(5,200)
At 31 December 2011	2,848	4,900	617	30,565	4,730	3,398	47,058
At 1 January 2012	2,848	4,900	617	30,565	4,730	3,398	47,058
Retained profit for the year	-	-	-	-	-	2,120	2,120
Exchange differences on translation of overseas operations	-	-	-	-	(576)	-	(576)
Share based payments: value of employee services	-	-	-	-	-	188	188
Dividends payable	-	-	-	-	-	(1,413)	(1,413)
At 31 December 2012	2,848	4,900	617	30,565	4,154	4,293	47,377

CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION

as at 31 December 2012

		2012	2011
	Notes	£'000	£'000
Assets
Non-current assets
Intangible assets		28,676	30,876
Property, plant and equipment		2,695	3,560
Deferred tax assets		1,211	432
		32,582	34,868
Current assets
Inventories		9,533	8,540
Trade and other receivables		10,214	9,769
Cash and cash equivalents	11	8,131	10,184
		27,878	28,493
Liabilities
Current liabilities
Trade and other payables		10,893	12,803
Current tax liabilities		70	41
Financial liabilities: borrowings	11	-	37
Provisions for other liabilities and charges		838	842
		11,801	13,723
Net current assets		16,077	14,770
Non-current liabilities
Deferred tax liabilities		700	-
Other non-current liabilities		-	1,498
Provisions for other liabilities and charges		582	1,082
		1,282	2,580
Net assets	3	47,377	47,058
Shareholders' equity
Ordinary shares	10	2,848	2,848
Share premium account	10	4,900	4,900
Capital redemption reserve	10	617	617
Merger reserve		30,565	30,565
Translation reserve		4,154	4,730
Retained earnings		4,293	3,398
Total shareholders' equity		47,377	47,058

CONSOLIDATED GROUP STATEMENT OF CASH FLOWS

for the year ended 31 December 2012

		2012	2011
	Notes	£'000	£'000
Cash flows from operating activities
Cash generated from/(absorbed by) operations	9	3,918	(408)
Interest (paid)		(4)	(42)
Taxation (paid)/received		(165)	907
Net cash generated from operating activities		3,749	457
Cash flows from investing activities
Interest Received		29	46
Acquisition of subsidiary (net of cash acquired)		-	(2,312)
Proceeds from sale of subsidiary		-	755
Proceeds from sale of property, plant and equipment		127	84
Deferred consideration in respect of previous acquisitions		(1,312)	(886)
Purchase of property, plant and equipment		(379)	(522)
Expenditure on capitalised development costs		(2,759)	(2,198)
Net cash (absorbed by) investing activities		(4,294)	(5,033)
Cash flows from financing activities
Repayment of borrowings	11	(37)	(895)
Dividend paid to shareholders	11	(1,413)	(1,413)
Repurchase of own shares	11	-	(5,200)
Net cash (absorbed by) financing activities		(1,450)	(7,508)
Net (decrease) in cash and cash equivalents		(1,995)	(12,084)
Cash and cash equivalents at beginning of year		10,184	22,230
Effect of foreign exchange rate changes	11	(58)	38
Cash and cash equivalents at end of year		8,131	10,184
Net cash comprises:
Cash and cash equivalents		8,131	10,184
Borrowings		-	(37)
Net cash at end of year	11	8,131	10,147

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2012

1.   GENERAL INFORMATION

Vislink plc ("the Company") and its subsidiaries (together "the 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 defence, law enforcement and public safety. With offices in the UK, USA, Australia, UAE, South Africa and Singapore and manufacturing operations in the UK and the USA we employ over 200 people worldwide and have net assets of £47m. Our solutions include the design and manufacture of microwave radio, satellite transmission and wireless camera systems.

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

The registered number of the Company is 4082188.

This preliminary announcement was approved for issue on 25 March 2013.

 

2.   BASIS OF PREPARATION

These results have been prepared on a going concern basis in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU), IFRIC interpretations and with those parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The financial information set out herein does not constitute the Company's statutory financial statements for the year ended 31 December 2012 but is derived from those financial statements and the accompanying directors' report. The financial information has been prepared in accordance with our accounting policies published in our financial statements for the year ended 31 December 2011. Statutory accounts for the year to 31 December 2012 will be delivered to the Registrar of Companies in due course.

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

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.

Repurchase of own shares: where the Group purchases the parent company's equity share capital the consideration paid, including any directly attributable incremental costs (net of income taxes) is deducted from equity attributable to the company's equity holders until the shares are cancelled.  When the shares are cancelled, share capital is reduced by the nominal value of the cancelled shares and a capital redemption reserve is created at an equivalent value.

Application of new or amended EU endorsed accounting standards

A number of amendments to published standards and interpretations are effective for the Group for the year ended 31 December 2012. The Group has reviewed the effect of these amendments and interpretations, and has concluded that they have no material impact on these consolidated financial statements.

New standards and interpretations not yet adopted

There are a number of new standards, amendments to standards and interpretations that are not yet effective for the year ended 31 December 2012, and have not been adopted early in preparing these consolidated financial statements. None of these are anticipated to have any material impact on these consolidated financial statements

3.   SEGMENTAL REPORTING

The Group's internal organisational and management structure and its system of internal financial reporting to the Board of Directors are based on the geographical location of its businesses. These comprise two regions: the UK, and the United States of America (US). Each business location has its own managing director who sits on the Executive Management Board under the chairmanship of the Executive Chairman to oversee the running of the Group. The chief operating decision-maker has been identified as the Executive Management Board. The Executive Management Board reviews the Group's internal financial reporting in order to assess performance and allocate resources. The same information is provided to the Board of Directors of Vislink plc. Management has therefore determined that the operating segments for the Group will be based on these businesses.

The table below shows the analysis of Group external revenue and operating profit from continuing operations by business segment.

	UK	US	Inter segmental	Central	Total
Year to 31 December 2012
Broadcast	29,227	17,845	-	-	47,072
Surveillance	3,390	6,741	-	-	10,131
External revenue	32,617	24,586	-	-	57,203
Inter-segmental	5,227	686	(5,913)	-	-
Total revenue	37,844	25,272	(5,913)	-	57,203
Adjusted operating profit/(loss)	4,942	397	-	(2,249)	3,090
Amortisation of acquired intangibles	(352)	(1,237)	-	-	(1,589)
Non-recurring items	(330)	-	-	1,036	706
Group total operating profit/(loss)	4,260	(840)	-	(1,213)	2,207
Year to 31 December 2011
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
Adjusted operating profit/(loss)	2,482	(820)	-	(1,893)	(231)
Amortisation of acquired intangibles	(205)	(1,009)	-	-	(1,214)
Non-recurring items	(1,091)	(326)	-	(772)	(2,189)
Group total operating profit/(loss)	1,186	(2,155)	-	(2,665)	(3,634)

Geographic external revenue analysis

The sales analysis in the table below is based on the geographical location of the customer for each market that the Group serves. There are no individual customers that represent more than 10 per cent of Group revenues.

			2012			2011
	Broadcast £'000	Surveillance £'000	Total £'000	Broadcast £'000	Surveillance £'000	Total £'000
By market
UK and Europe	12,259	3,352	15,611	10,086	1,206	11,292
Americas	20,358	6,385	26,743	18,280	6,434	24,714
Middle East and Africa	8,085	87	8,172	7,555	278	7,833
Asia / Pacific	6,370	307	6,677	6,375	100	6,475
	47,072	10,131	57,203	42,296	8,018	50,314

Net assets

The table below summarises the net assets of the Group by their geographic location. Balance sheet reporting is disclosed by the geographic location of the assets and liabilities of the Group as this is consistent with the presentation of internal information provided to the Executive Management Board and the Board of Directors.

	2012 £'000	2011 £'000
By market:
UK	28,692	26,241
North America	18,685	20,817
	47,377	47,058

4.   OPERATING PROFIT

The following items have been included in arriving at the operating profit/(loss) for the continuing business:

	2012 £'000	2011 £'000
Depreciation of property, plant and equipment	915	1,136
Amortisation of acquired intangibles	1,589	1,214
Operating lease rentals	415	905
Loss on sale of property, plant and equipment	75	83
Repairs and maintenance expenditure on property, plant and equipment	162	152
Exchange losses/(gains) charged/(credited) to profit and loss	288	(98)
Research and development expenditure:
-       Expensed in the year	5,053	5,361
-       Capitalised expenditure	2,759	2,198
-       Amortisation and impairment of development cost	2,564	2,121
Non-recurring items
The following items of unusual nature, size or incidence have been charged in arriving at the operating loss for the year and are described as non-recurring.
	2012 £000	2011 £000
Rationalisation and redundancy costs	3	1,273
Costs associated with the integration of Gigawave Limited	-	585
Provision against contractual issues	330	-
Adjustments to deferred consideration	(1,039)	-
Acquisition and disposal costs	-	331
	(706)	2,189

The Group has incurred rationalisation and redundancy costs of £0.003 million in the year (2011: £1.3 million). In 2011 a further £0.6 million of cost was incurred as a result of the decision to integrate the business of Gigawave into the UK operations of the Group. 

At 31 December 2012 the Group had a provision in place which relates to a contractual dispute of £0.3 million (2011: £nil).

There were adjustments to deferred consideration to the value of £1.0 million in the period as these amounts are no longer required to be paid (2011: £nil).

Acquisition and disposal costs comprise the costs associated with the acquisition of Gigawave (£0.2 million) and disposal costs of £0.1 million associated with the aborted sale of WTS.

5.   FINANCE INCOME - NET

	2012 £'000	2011  £'000
Interest payable on bank borrowing	(2)	(19)
Finance lease liabilities	(2)	(10)
Finance costs	(4)	(29)
Finance income	29	46
Finance income - net	25	17

Finance income is derived from cash held on deposit.

6.   INCOME TAX EXPENSE

	2012 £'000	2011 £'000
Current tax
UK corporation tax	26	-
Foreign tax - current year	-	-
Foreign tax - prior year adjustment	163	-
Total current tax	189	-
Deferred tax
UK corporation tax	(474)	(279)
Foreign tax	397	(236)
Total deferred tax	(77)	(515)
Total taxation	112	(515)

A number of changes to the UK Corporation tax system were announced in the Finance Act 2010 and the March 2011 Budget Statement. As a result legislation has been substantively enacted to reduce the main rate of corporation tax from 28 per cent to 26 per cent from 1 April 2011. Further reductions are proposed to reduce the rate by 1 per cent per annum to 23 per cent by 1 April 2014. These further changes had not been substantively enacted at the balance sheet date and, therefore, are not included in these financial statements.

Accordingly, the Group's UK profits for this accounting period are taxed at an effective rate of 24.5 per cent (2011: 26.5 per cent). Foreign corporation taxes for other jurisdictions are calculated at the rates prevailing in the respective jurisdictions.

Deferred tax has been provided for at the rate of 23.0 per cent (2011: 25.0 per cent). There was not a material impact on the deferred tax charge as a result of the change in deferred tax rates.            

There is no tax impact associated with items that have been taken directly to equity. There is no tax impact for the Group associated with the dividend proposed (note 7).

7.   DIVIDENDS

The directors are proposing a final dividend in respect of the financial year ending 31 December 2012 of 1.25 pence per share, which will absorb an estimated £1.4 million of shareholders' funds. It will be paid on 19 July 2013 to shareholders who are on the register of members on 28 June 2013.

8.   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 year, 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 113,063,000 ordinary shares in issue during the year (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 year.  At 31 December 2012 there were 733,000 dilutive share options (31 December 2011: 25,000) and therefore there is no material 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:

	2012		2011
	Earnings £'000	Basic EPS Pence	Earnings £'000	Basic EPS Pence
Reported earnings/(loss) per share	2,120	1.9p	(3,102)	(2.6)p
Amortisation of acquired intangibles after tax	1,508	1.3p	892	0.7p
Non-recurring items after tax	(788)	(0.7)p	2,013	1.7p
Adjusted earnings/(loss) per share	2,840	2.5p	(197)	(0.2)p

 

9.   CASH FLOW FROM OPERATING ACTIVITIES

Net cash flow from operating activities comprises:

	2012 £'000	2011 £'000
Profit/(loss) before taxation - continuing operations	2,232	(3,617)
Profit before taxation - discontinued operations	-	-
Depreciation	915	1,136
Loss on disposal of property, plant and equipment	75	83
Acquisition related costs	-	233
Impairment of goodwill	-	-
Amortisation and impairment of development costs	2,600	2,121
Amortisation of acquired intangibles	1,589	1,214
Share options - value of employee services	188	107
Finance income from continuing operations	(29)	(46)
Finance costs from continuing operations	4	29
Net finance income from discontinued activities	-	-
Share of loss of associate	-	-
(Increase)/decrease in inventories	(1,185)	677
(Increase)/decrease in trade and other receivables	(678)	919
(Decrease) in payables	(1,381)	(3,128)
(Decrease) in provisions	(412)	(136)
Net cash inflow/(outflow) from operating activities	3,918	(408)

 

10.  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 31 December 2011 and 2012	113,902	2,848	4,900	617	8,365

There were no share options exercised in the year to 31 December 2012 under any of the existing employee share option schemes (2011: nil).

11.  NET FUNDS

The movements in cash and cash equivalents and borrowings in the year are as follows:

	Cash and cash equivalents £'000	Other borrowings £'000	Total net funds £'000
At 1 January 2012	10,184	(37)	10,147
Cash flow for the year before financing	(545)	-	(545)
Cash and borrowings acquired with subsidiary	-	-	-
Purchase of subsidiary	-	-	-
Repurchase of own shares	-	-	-
Repayment of borrowings	(37)	37	-
Dividend paid to shareholders	(1,413)	-	(1,413)
Exchange rate adjustments	(58)	-	(58)
At 31 December 2012	8,131	-	8,131

Ends.

 

END

 

 

FR JTMPTMBATBAJ