Final Results

Vitec Group PLC 5 March 2001 5 March 2001 Vitec Group plc Full Year Results to 31 December 2000 Vitec Group plc, the international supplier of products, services and solutions to the broadcast, entertainment and media industries, announces its results for the year to 31 December 2000. 2000 1999 Turnover £200.0m £171.4m Operating profit* £40.1m £38.2m Pre-tax profit* £37.2m £37.1m Headline EPS* 62.8p 54.3p Dividend 21.2p 18.5p *pre exceptional charges and goodwill amortisation HIGHLIGHTS * Turnover up 17 per cent to £200m * Operating profit* of £40.1m, up 5 per cent * Headline earnings up 16 per cent to 62.8p * Majority of Group companies had record years * Good market conditions and strong organic growth * Investing for long term growth Commenting on the results, Philip Cushing, Group Chief Executive said: 'Vitec has seen generally good market conditions, resulting in strong performances from the majority of our businesses. We witnessed good demand from the US broadcasting industry and Asian markets have recovered well. 'The robust conditions experienced during 2000 in Europe and Asia have continued into this year. During the last quarter of 2000, some Group companies saw a softening of demand in the USA, which has continued into the current year; we are therefore cautious about the prospects for the United States. However, we believe the investments we are making will strengthen the Group and provide the basis for good long term growth.' Enquiries Vitec Group plc Philip Cushing 020 8939 4650 Financial Dynamics Richard Mountain 020 7269 7249 OVERVIEW Financial Turnover increased 17% over the prior year. Excluding the impact of acquisitions and currency translation, organic growth in turnover was 10%, compared with 2% in 1999. Gross margins decreased slightly and operating margins, at 20.1%, were 2.2 points lower. This was due to adverse exchange translation rate movements, losses at Vega, lower margins in Retail Display and higher operating costs, as additional investments were made in sales, marketing, distribution and development. Duke City Video, acquired in January 2000 for $12 million, was fully integrated into the operations of Bexel in the second half and its results can no longer be reported separately. In September, the Group acquired a minority interest in Intersense Inc, a US-based high technology start-up company in the virtual reality marketplace, for a cash consideration of $5m. The exceptional costs of £1.9m relate to the relocation of Gitzo's manufacturing activities to Italy and the relocation and restructuring of Vega's business into Clear-Com. Operating profit before exceptional items and goodwill amortisation was £40m (1999: £38m), an increase of 5% on 1999. Profit before tax, exceptional items and goodwill amortisation was £37m, almost unchanged from 1999 and affected by the higher interest charge of £3m (1999: £1m), arising from share buy-backs in the previous year. The tax rate was successfully held at 30.9% (1999: 30.7%) Headline earnings per share increased by 16% from 54.3p to 62.8p. The share buy-backs which took place in 1999 contributed 4.9p (9%) to this increase. These share buy-backs increased the efficiency of the Group's balance sheet and reduced the Group's weighted average cost of capital by approximately 1% to an estimated 8%. Despite the higher debt following the buy-backs, net interest cover for the year remained high at 14 times (1999: 35 times). The Group's strong track record of cash generation continued. Cash flow from operations was £45.8million (1999: £51.1million), equating to 112p per share (1999: 108p per share). Average working capital as a percentage of sales decreased from 26% to 23%. However, working capital increased during the year, largely as a result of higher sales. Dividend payments increased 27% from £7.8million to £9.9million. The increase was due to the 15% increase in the dividend per share in 1999; the payment of three dividends during the year, because the 2000 interim dividend was paid on 1 December 2000, compared with 4 January 2000 for the previous year; and was reduced by the effect of the buy-backs in 1999. The Board recommends a final dividend of 15.6p per share (1999: 13.6p), making a total dividend of 21.2p for the year (1999: 18.5p), an increase of 15%. Effect of Exchange Rates The net effect of the stronger US$ and weaker Euro versus sterling on the translation of Group results was an increase in turnover of £3million and a reduction in profits of £0.4million compared to 1999. At current exchange rates, pro-forma 2000 reported profits would be higher by approximately £1.4 million. Exchange gains on transactions, resulting primarily from the appreciation of the US$ and Yen against the Euro on export sales from Italy, France and Germany, net of related hedging contracts, increased profits by approximately £1.7million. Hedging contracts for 2001 transactions totalled £35 million (1999: £31 million) at 31 December 2000. The effect, net of tax, of exchange rate movements versus sterling, mainly the strengthening of the US$, was to increase shareholders' funds by £4.9 million (1999: reduction of £4.6 million). People The year witnessed a number of senior appointments in the Group. As previously reported, Philip Cushing was appointed Group Chief Executive at the last Annual General Meeting. In July, Andy Crist joined the Group as Chief Executive of the Broadcast Services Division and Andrew Jones joined the Group as Director for Strategy and Development. In October, Simon Derry was promoted to Chief Executive of the Communications & Audio Division. Outlook The Group saw good growth in its core markets in 2000. These robust conditions have continued into 2001 in Europe and Asia. During the last quarter of 2000, some Group companies saw a softening of demand in the USA, which has continued into the current year. It is too early to know how this slowdown will affect the Group, but we are monitoring the situation very closely. However, we believe the investments we are making in our businesses will strengthen the Group and provide the basis for good long term growth. OPERATIONAL OVERVIEW Broadcast Camera Systems Market conditions were favourable during the year and all the Broadcast Camera Systems companies performed well. Demand in the USA was strong, and was supported by the Republican and Democratic political conventions and later by the Presidential campaign. The year saw a significant recovery in the Asian markets, especially in Korea. Some of this was due to the release of projects previously deferred. The Olympic Games in Australia also provided a further boost to sales. Vinten Vinten enjoyed a strong year, achieving particular successes in sales of Quattro heavy duty pedestals and Vector pan and tilt heads to studios in Korea, and good sales of these products in Japan. In the key USA market, sales of lightweight products were well ahead of last year. Vinten maintained its strong robotic pedestal position in the USA, although increases in sales of both robotic and manually operated pedestals were more modest than for the lightweight products. Vinten camera support systems were part of a package selected by Panasonic on behalf of the Sydney Olympics Broadcast Organisation, to ensure the world's leading broadcasters captured the highest quality video images. Nearly 300 camera support systems were used in venues ranging from the Olympic Stadium to the Sydney Superdome and Olympic rifle range. There was considerable development effort in the growing area of virtual reality. Investments in tracking technologies, both lockdown and free roaming tracking systems, were made. The September investment in Intersense, a company with proprietary tracking technology using motion sensors and control software, provides further interesting development possibilities in this area. Sachtler Sachtler had an outstanding year. Sales were strong in the Americas and particularly large increases were achieved in Korea, the Middle East and Eastern and South Western Europe. Sales of camera support and lighting products were both well ahead of last year. Revenues from studio suspension projects were lower, although market interest remains strong. The Speedlok(c) Tripod, a patented rapid deployment system, designed to replace the carbon fibre tripod, was launched in 1999 and produced good sales during the year. The company's range of electronic news gathering lighting was refurbished and the Microsun(c) HMI (daylight) on-board camera light was launched at NAB 2000. Anton/Bauer Anton/Bauer had another excellent year as it continued to expand its worldwide market share. Sales to Asian markets showed large increases, following the establishment of the Singapore office the previous year. US demand remained strong. Anton/Bauer was again the exclusive battery support centre for the world broadcasting community during the Sydney Olympics. The company has co-operated with Panasonic, the key broadcast sponsor of the Olympic Games, the host nation broadcasters and organising authorities since 1992, to provide equipment and on-site support to more than 100 broadcasters at the Olympic Games. In April, the company added the UltraDAYlight to its best selling on-camera range. This is a high efficiency, 25 watt daylight colour module, allowing instant changes to indoor colour lighting when used in conjunction with the existing UltraLight products. In October, the company received an Emmy Award from the National Academy of Television Arts and Sciences in recognition of its contribution to the industry. Photographic & Retail Display Photographic The Photographic businesses enjoyed continued strength in the majority of Asian markets. Sales for the year to this region exceeded the record levels set in 1997. Bogen's sales in the USA were well ahead of 1999 and strong sales performances were seen in Italy and France, notably due to expansion in sales of the video tripod range. The IFF studio lighting suspension business had an exceptional year. Litec, acquired last year, increased sales substantially. Gitzo made a good recovery, with sales well ahead of last year despite continued market weakness in Japan. Overall, sales benefited significantly from the strength of the US dollar and the Yen against the Euro. Sales reflected the full year benefit of the Manfrotto range of carbon fibre products which were launched in late 1999. Manfrotto also acquired the licence to use a revolutionary leg locking mechanism in its tripods. The Gitzo Explorer range of tripods was launched at Photokina 2000. The year saw substantial changes in the manufacturing organisation: a new factory was purchased for IFF, and manufacture of new products in the Gitzo range commenced in Italy, ahead of the relocation of all Gitzo manufacturing from France to Italy. Manufacturing of the Cine heavy duty lighting grip range was combined with the lighter weight photographic lighting range. A new warehousing system was introduced at Bogen and implementation of a new enterprise resource planning system across the whole division was commenced. Retail Display The weak performance of Retail Display in the first half continued for the balance of the year. Economic pressures on two major US customers resulted in substantially lower demand for Alu products. However, there were good increases in sales to European markets. Sales to the rest of the world, although small, were also well ahead. Several new additions were made to the US sales force in the second half in order to widen market penetration. In Europe, the management and the sales staff of the UK operation were restructured and a new showroom opened in London. In Italy, sales resource was increased. The Reed collection of products was successfully launched in December 1999 and sales achieved in its first full year were encouraging. The Spool and Frame collections were introduced at the New York Market in December 2000. A new contract was finalised during the year with Nokia, the mobile communications company. Other product developments included a new cosmetic presentation concept. Expansion work at the Alu building in Italy commenced, adding an additional 6,200m(2) of space, and should be available for occupancy in the second quarter of 2001. Also, Alu's warehousing and packing operation in New Jersey was relocated in order to provide more space and improve warehouse efficiency. Communications & Audio General market conditions were much more favourable than those which existed in 1999. The market in the USA continued to be firm and there was a significant improvement in the international markets. Increased sales in Asia were driven primarily by the Olympic Games in Australia and by strong demand in Japan. The United Kingdom, Germany and Israel also experienced strong growth. Clear-Com Clear-Com had an outstanding year and recovered strongly after a difficult 1999. Both the American and international markets were well ahead in both the Party-Line and Matrix ranges of products, with the most significant gains being achieved with digital Matrix product sales outside the USA. Clear-Com provided the intercom system for the opening ceremony of the Olympic Games with the 72-port Clear-Com Matrix Plus(R) digital intercom system at the heart of the communication system. Over 100 party-line connections were run through the digital matrix and Clear-Com also supplied numerous walkie-talkie and wireless intercom interfaces. Other major customers during the year included KABC-TV in Los Angeles, the US presidential conventions and, in the commercial sector, TRW and Intel. The most important internal initiative in the year was the introduction of an end-to-end customer service programme. As part of the benefit of the programme, delivery, service and repair performance improved dramatically. Online support was introduced, with full technical manuals now available on www.clearcom.com Drake The company started the year with a high backlog of orders and achieved a strong performance in the first half. However, in the second half the market began to soften. Drake maintained its position as the European market leader and secured a number of significant contracts from major broadcasters. An innovative Master Control Room system for control and distribution of external audio feeds was developed and launched at the IBC 2000 exhibition in Amsterdam. The first customer for this predominantly software based product was NRK in Norway. In the UK, major contracts were secured with QVC, the home shopping channel, and with TEAMtalk, the internet sports broadcaster. A fibre Mux/Demux unit was also launched at the IBC exhibition. This provides up to 24 audio channels and enables Drake's Matrix systems and control panels to be multiplexed by optical fibre. In the non-broadcast segment, Drake was awarded further development contracts by DFS (Deutsche Flugsicherung), the German Air Traffic Control authority, to provide networked communications over ISDN and leased-line services. Drake was also contracted to develop the interface electronics for the voice-logging equipment installed by DFS. Demand in the simulation and defence sectors was only moderate. Vega Vega was acquired in October 1999 with the primary objective of investing in new product development in order to refresh its existing ageing product line. As stated in last year's annual report, the company was not expected to be profitable in 2000. Unforeseen delays were encountered in development of the new product and, in the meantime, sales of its existing products continued to decline, resulting in larger than expected losses. In order to accelerate the return to profitability, the business is being relocated to San Francisco and integrated within Clear-Com. Broadcast Services The general market conditions during the year were very good in the USA, the Division's main marketplace. The year was dominated by many large events, notably the Democratic and Republican conventions and the US presidential election. The Division also serviced a number of large international events, including the Americas Cup in New Zealand, the Sydney Olympics and the International AIDS Conference in the Caribbean. Bexel The year began with the acquisition of the assets and business of Duke City Video, which was successfully integrated into Bexel in the first half of the year. The acquisition has significantly enhanced Bexel's ability to service large domestic and international events. Larger contracts included a complete camera flight pack for Fox TV's Today pre-game NFL programme live from the aircraft carrier 'USS Truman' in the Mediterranean Sea. The company's webcasting business continued to grow, particularly through support of digital webcasts by the House of Blues. Other key webcast-related projects included providing encoding solutions to 'ishow', a leading webcasting company providing B2B internet solutions, and support for the complete coverage of the National Association of Home Builders convention and support for the Dallas Cowboys training camp daily webcasts. Bexel was also involved in the webcasting of a number of specialist musical events. The high definition camera segment also continued to grow and the company made significant further investments in high definition camera equipment. In digital cinema, Bexel provided the 24-frame progressive high-definition equipment and expertise used for the special effects in the feature film, 'Loch Ness'. HD equipment was also used to provide screenings for the full-length HD feature, 'Nicolas'. In its core video market, Bexel provided its updated 30-frame multi-camera HD system for the live webcast and concurrent DVD of 'The Fabulous Thunderbirds' as well as the complete HD facilities for the Bangles concert at the House of Blues. Audio Specialties Group 2000 marked the first full year for the integrated audio rental business following its formation in 1999. Overall growth reached record levels. This resulted from a combination of highly targeted marketing programmes, gaining market share in the audio and sound reinforcement markets, the major broadcasting events during the year and large increases in audio visual business within the corporate and industrial sector. Top rental clients in the broadcast sector included Fox Network Sports, Fox Sports Net and the Turner Broadcast Goodwill Games. The top equipment sales customers included broadcasters KABC, KVEA and KJLA, and commercial accounts such as US Naval Research, Disneyland, National Geographic and Warner Brothers. The sales function was restructured during the year into two specialist teams: one to sell wireless microphones and accessories, and the other to sell high-end Matrix intercom equipment supplied by sister-company, Clear-Com, to America's broadcast community. ASG launched a comprehensive continuous improvement process during the year, designed to radically improve customer service standards and organisational efficiency. The year also marked significant progress in e-business, with an extranet for customers and order tracking being introduced. VITEC GROUP plc CONSOLIDATED PROFIT AND LOSS ACCOUNT for the year ended 31 December 2000 2000 2000 2000 2000 1999 £m £m £m £m £m Before exceptional Exceptional Goodwill Total Total items and goodwill items amortisation amortisation Turnover 200.0 - - 200.0 171.4 Cost of sales (93.4) - - (93.4) (78.9) ______ ______ ______ ______ ______ Gross profit 106.6 - - 106.6 92.5 Net operating (66.5) (1.9) (0.6) (69.0) (54.8) expenses ______ ______ ______ ______ ______ Operating profit 40.1 (1.9) (0.6) 37.6 37.7 Net interest payable (2.9) - - (2.9) (1.1) ______ ______ ______ ______ ______ Profit on ordinary 37.2 (1.9) (0.6) 34.7 36.6 activities before tax Tax (11.5) (11.4) ______ ______ Profit on ordinary 23.2 25.2 activities after tax and for the financial year Dividends (8.7) (7.6) ______ ______ Retained profit for 14.5 17.6 the year transferred to reserves ______ ______ Basic earnings per 56.7p 53.3p share Diluted earnings per 56.5p 52.6p share Headline earnings 62.8p 54.3p per share The Board has recommended a final dividend of 15.6p per share (1999: 13.6p) which, together with the interim dividend of 5.6p (1999: 4.9p), totals 21.2p per share for the year (1999: 18.5p). Dividends are covered 3.0 times by earnings before exceptional items and goodwill amortisation. If approved, it will be paid on 23 May 2001 to shareholders on the register at the close of business on 27 April 2001. The financial information in this announcement does not constitute the company's statutory accounts for the years ended 31 December 2000 or 1999 but is derived from those accounts. Statutory accounts for 1999 have been delivered to the registrar of companies, and those for 2000 will be delivered following the company's annual general meeting. The auditors have reported on the accounts; their report was unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985. VITEC GROUP plc SEGMENTAL ANALYSIS for the year ended 31 December 2000 Activity analysis Turnover Operating profit 2000 1999 2000 1999 £m £m £m £m Class of business Broadcast camera systems 67.6 59.9 15.2 13.1 Photographic and retail display 73.8 69.5 18.0 19.7 Communications and audio 21.8 15.9 1.9 1.7 Broadcast services 36.8 26.1 5.0 3.7 ______ ______ ______ ______ 200.0 171.4 40.1 38.2 Exceptional items - - (1.9) - Goodwill amortisation - - (0.6) (0.5) ______ ______ ______ ______ 200.0 171.4 37.6 37.7 ______ ______ ______ ______ By destination By origin 2000 1999 2000 1999 £m £m £m £m Geographical turnover United Kingdom 8.6 7.7 28.3 23.4 The rest of Europe 47.3 44.0 71.1 66.5 The Americas 115.9 99.5 97.6 78.6 Asia and Australasia 25.2 17.5 3.0 2.9 Africa and Middle East 3.0 2.7 - - ______ ______ ______ ______ 200.0 171.4 200.0 171.4 ______ ______ ______ ______ VITEC GROUP plc CONSOLIDATED BALANCE SHEET as at 31 December 2000 2000 1999 £m £m Fixed assets Intangible assets 10.9 10.0 Tangible assets 47.0 37.5 Investments 3.5 - ______ ______ 61.4 47.5 ______ ______ Current assets Stocks 37.8 29.1 Debtors 38.0 32.6 Cash at bank and in hand 19.2 32.8 ______ ______ 95.0 94.5 Creditors - due within one year (38.6) (33.7) ______ ______ Net current assets 56.4 60.8 ______ ______ Total assets less current liabilities 117.8 108.3 Creditors - due after more than one year (46.6) (57.3) Provisions for liabilities and charges (7.5) (5.9) ______ ______ Net assets 63.7 45.1 ______ ______ Capital and reserves Called up share capital 8.2 8.2 Share premium account 2.4 2.3 Capital redemption reserve 1.6 1.6 Revaluation reserve 1.5 1.5 Profit and loss account 50.0 30.6 ______ ______ Shareholders' funds - equity 63.7 44.2 Minority interest - equity - 0.9 ______ ______ 63.7 45.1 ______ ______ VITEC GROUP plc CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2000 2000 1999 £m £m Net cash inflow from operating activities 45.8 51.1 Returns on investments and servicing of finance Interest received 0.8 0.7 Interest paid (3.8) (1.6) ______ ______ Net cash outflow from returns on investments and servicing of finance (3.0) (0.9) ______ ______ Tax paid (12.4) (10.6) ______ ______ Capital expenditure Purchase of tangible fixed assets (14.4) (10.7) Sale of tangible fixed assets 1.6 0.3 Purchase of fixed asset investments (3.5) - ______ ______ Net cash outflow for capital expenditure (16.3) (10.4) Acquisitions Purchase of subsidiary undertakings (7.1) (4.8) ______ ______ Equity dividends paid (9.9) (7.8) ______ ______ Net cash (outflow)/inflow before (2.9) 16.6 financing Financing Issue of shares 0.1 0.6 Repurchase of shares - (50.7) Net (repayment)/receipt of loans (11.0) 41.1 ______ ______ Net cash outflow from financing (10.9) (9.0) ______ ______ (Decrease)/increase in cash in the year (13.8) 7.6 ______ ______ VITEC GROUP plc OTHER INFORMATION for the year ended 31 December 2000 Reconciliation of operating profit to net cash flow from operating activities 2000 1999 Continuing operations £m £m Operating profit 37.6 37.7 Goodwill amortisation 0.6 0.5 Depreciation 11.4 8.6 (Profit) on sale of fixed assets - (0.1) (Increase)/decrease in stock (7.3) 1.3 Increase in debtors (3.8) (0.6) Increase in creditors 5.2 3.4 Increase in provisions 2.1 0.3 ______ ______ Net cash inflow from operating activities 45.8 51.1 ______ ______ Total recognised gains and losses and reconciliation of shareholders' funds 2000 1999 £m £m Profit for the financial year 23.2 25.2 Exchange rate movements on foreign net investments 4.3 (3.5) Tax on exchange differences 0.6 (1.1) ______ ______ Total recognised gains relating to the year 28.1 20.6 Dividends (8.7) (7.6) New share capital subscribed 0.1 0.6 Share repurchases - (50.7) ______ ______ Net increase/(reduction) in shareholders' funds 19.5 (37.1) Opening shareholders' funds 44.2 81.3 ______ ______ Closing shareholders' funds 63.7 44.2 ______ ______

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