Final Results

RNS Number : 8863H

The Vitec Group PLC

02 March 2010

 



NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

2 March 2010

The Vitec Group plc

2009 Full Year Results

Challenging 2009 - well positioned for future growth

Vitec, the international provider of products and services for the broadcast, photographic, MAG (military, aerospace and government) and entertainment industries, announces its full year audited results for the year ended 31 December 2009.

Results	2009	2008	% Change	% Change At CER**
Revenue	£315.1m	£337.7m	-7	-19
Before significant items*
Operating profit	£24.5m	£38.4m	-36	-54
Profit before tax	£22.7m	£35.4m	-36	-55
Basic earnings per share	36.5p	55.9p	-35	-55
After significant items*
Operating profit	£2.9m	£28.2m	-90	n/m
Profit before tax	£1.8m	£25.5m	-93	n/m
Basic earnings per share	7.5p	48.0p	-84	n/m
Free cash flow	£22.7m	£19.0m
Net debt	£40.6m	£53.0m
Total dividend per share	18.3p	18.3p

Key points

·    Resilient performance in Imaging business, helped by growth in camera bags and the premium Gitzo brand

·    Videocom division severely affected by economic downturn, although Litepanels LED business continued growth trend

·    £21.9 million cost reduction programme fully implemented - at a cost of £10.9 million

·    Excellent cash performance from enhanced working capital management

·    Strong balance sheet: net debt reduced from £53.0 million to £40.6 million

·    Final dividend maintained at 10.9p; full year dividend maintained at 18.3p

·    Launch of three core market strategy

*Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group. 2009 significant items in operating profit total a charge of £21.6 million and comprise restructuring costs (£10.9 million), amortisation of acquired intangibles (£8.5 million), impairment loss on property, plant and equipment (£1.5 million) and loss on disposal of business (£0.7 million). 2008 significant items in operating profit totalled a charge of £10.2 million. Significant items in the profit before tax total a charge of £20.9 million (2008: £9.9 million) after a gain of £0.7 million (2008: £0.3 million) relating to volatile financial instruments.

**CER: Constant Exchange Rates

Commenting on the results, Stephen Bird, Chief Executive, said:

"2009 was a challenging year.  However, we produced a very good cash performance, implemented our cost reduction programme and launched a new focused strategy which will leverage our existing strengths and capabilities into higher growth markets.

"The last quarter of 2009 saw our markets stabilise, following a significant decline in activity in the first half and this stabilisation has continued into the current financial year.

"We believe that the opportunities in our three core markets will allow us to replace the shortfall arising from the end of the BAS contract, but we expect that the trading environment will remain challenging in 2010.  However, the prompt action we took last year to manage our cost base, combined with our strong balance sheet and clear strategic direction, will ensure that the Group is well positioned to benefit from a recovery in our markets."

Enquiries:

The Vitec Group plc                                          

Stephen Bird, Chief Executive                                                         Telephone: [phone]

Richard Cotton, Group Finance Director

Financial Dynamics       

Susanne Yule / Sophie Kernon                                                        Telephone: [phone]

Notes

1.   This statement is based on information sourced from management estimates.

2.   Current market exchange rates as at 26 February 2010: £1 = $1.52, £1 = €1.12, €1 = $1.37.

3.   2009 average market exchange rates: £1 = $1.56, £1 = €1.12, €1 = $1.40

4.   2008 average market exchange rates: £1 = $1.85, £1 = €1.26, €1 = $1.46

5.   Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect Vitec's current expectations concerning future events and actual results may differ materially from current expectations or historical results.

6.   The Company's AGM will be held on Monday 17 May 2010. The Annual Report and Accounts and Notice of AGM will be posted to shareholders and available on the Company's website from 12 April 2010.

Vitec is an international group principally serving customers in the broadcast, photographic and Military, Aerospace and Government (MAG) markets. Vitec is based on strong, well known premium brands on which its customers worldwide rely. Vitec is organised in three divisions: Videocom, Imaging & Staging and Services.

Videocom designs and distributes systems and products used in broadcasting and live entertainment, film and video production, and MAG.

Imaging & Staging designs, manufactures and distributes equipment and accessories for professionals and keen amateurs in photography, video and events.

Services provides equipment rental, workflow design and technical support for camera, video, audio, fibre optic and wireless, technology used by TV production teams and film crews.

More information can be found at our website: www.vitecgroup.com.

2009 Overview

In 2009 the Group delivered solid results despite some end markets being significantly depressed. Highlights of the year included:

·      Very strong cash performance - net debt reduced from £53.0 million to £40.6 million;

·      The resilience of our Imaging business, where revenue was down only 2.6% in constant currency;

·      The successful execution of restructuring and cost reduction programmes which are delivering an annualised saving of £21.9 million at a cost of £10.9 million;

·      The development of a focused three market strategy; and

·      Some signs of order stabilisation in the last quarter.

Financial performance

Reported revenue declined by 7% to £315.1 million, a fall of 19% in constant currency, as markets contracted as a result of general economic weakness. The decline impacted our broadcast markets most severely, resulting in a 25.8% constant currency decline in Videocom, and a 24.2% constant currency decline in Services revenues. Within Imaging & Staging, Staging's markets were also strongly impacted but Imaging's markets proved more resilient, with the division down by only 9.4% in constant currency.

Operating profit* reduced to £24.5 million (2008: £38.4 million) as volumes remained under pressure throughout the year. The impact was mitigated by timely attention to cost reductions and careful focus on gross margins which reduced by only 1.3 pts to 39.3%. Profit before tax* was £22.7 million, down from £35.4 million in 2008. Adjusted earnings per share* were 36.5p (2008: 55.9p). EBITDA* reduced to £40.1 million (2008: £51.2 million) reflecting the decline in Operating Profit*, partially offset by an increase in depreciation to £15.6 million (2008: £12.8 million).

Cash generation was very strong. Deliberate action to reduce working capital levels, careful deferral of capital investments and prudent management of our tax positions ensured that free cash of £22.7 million (2008: £19.0 million) was generated. This includes the outflow of £5.5 million of the committed £10.9 million in restructuring costs.

The Group's balance sheet has strengthened: although our net debt / EBITDA ratio remained unchanged at 1.0 times. Net debt at 31 December 2009 reduced to £40.6 million (2008: £53.0 million) and drawings under our £125 million committed banking facility (which extends to 2013) were reduced to £52.7 million, or 42.1% (2008: 51.9 %).

The Board is recommending an unchanged final dividend of 10.9p per share (2008: 10.9p). Subject to approval by shareholders at the Annual General Meeting, the dividend will be paid on 20 May 2010 to shareholders on the register at the close of business on 23 April 2010. This brings the full year dividend to 18.3p (2008: 18.3p).

* Before significant items. Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see note 6).

Key Actions

Cost Reduction

Management has acted decisively to restructure the business and reduce costs to mitigate the effect of lower volumes, and to make it leaner and more efficient. Great care has been taken to protect our product development and sales capabilities, and not to damage our ability to take full advantage of the market recovery when it comes.

In aggregate, the Group delivered restructuring plans this year which will save £21.9 million per annum, approx £17.0 million of which has benefitted 2009, and all of which will benefit 2010. The measures cost a total of £10.9 million - all of which was charged as significant items in 2009. Of the £10.9 million, £5.5 million was expended in 2009, and the balance will be expended in 2010 and beyond.

Some of the cost savings were capacity driven, where direct and indirect headcount was reduced as far as possible in line with volume reductions. Further cost savings arose following a fresh look at the cost structure, and will allow the business to be run more effectively and efficiently in the future: these savings will be maintained when the market recovers. Other savings were a result of reductions in discretionary expenditure, for example marketing expenses, related to weaker economic conditions.

Three Market Strategy

Following a reappraisal of available markets, we unveiled our new Strategic Direction at an investor event in London on 22 October 2009 (materials and video are available on our website, www.vitecgroup.com).

The essence of this strategic direction is a focus on three markets which will provide us with significant growth opportunities from the organic development of our existing capabilities and strengths. Our approach and offering to them can be briefly described as follows:

Broadcast & Video

Vitec has leading brands in the Broadcast & Video market and will continue to maintain its premium position. Growth opportunities in the Broadcast & Video market will come from:

·      LED lighting (where the energy saving over traditional lighting is significant);

·      Business and industry applications for our existing broadcast products and technology, taking advantage of the growth in video production by non-broadcast entities;

·      microwave systems (outside the US using our global presence); and

·      robotics (as production becomes more automated).

We continue to expect the Broadcast & Video market overall to grow at 5% pa between 2009-12.   

Since October 2009, we have:

·      continued to broaden the range of LED products supplied and identified further opportunities in the Broadcast & Video market that will be addressed by product launches at the NAB trade show in April;

·      grown our microwave systems business outside the US with key wins in Brazil and China and recruited a vice president of Asia Sales in Singapore; and

·      recruited a specific team to develop a range of "small camera accessories" targeted at the growing demand for ergonomic solutions around the camera, which will be launched at the NAB trade show in April.

Photographic

Vitec has traditionally supplied its accessories (tripods, bags, etc) to professional and serious amateur photographers. We will continue to maintain our premium market position and market share among that user group. However, recognising that most of the growth in SLR sales is likely to be among non-professionals, Vitec will enter new segments leveraging the Manfrotto brand. This will entail the development of an integrated range of accessories targeting new consumers and channels.  Whilst the Photographic market is expected to grow at 2-4% pa between 2009-12, we expect to grow faster as we extend our product range and appeal to this wider audience. Our confidence is enhanced by the latest forecast of SLR growth from CIPA, the trade association of Japanese camera manufacturers. CIPA forecasts volume growth of SLRs in 2010 of 11% over 2009, compared with 2% in 2009 over 2008.

Since October 2009, we have:

·      conducted further research with focus groups to refine the product and brand positioning needed to broaden our customer reach, which has confirmed our view of the market potential; and

·      started the development of an integrated range of tripods, bags and lighting products under the Manfrotto brand that will culminate in the launch of several new products at Photokina in September. 

Military Aerospace and Government (MAG)

Having established our microwave technology as the brand leader in the US broadcast market in the last two years, we intend to leverage this technology into the MAG market, which we have identified as an attractive opportunity for the Group given the market size, forecast growth rates and technology fit. Our products are used in three applications:   

·      law enforcement where they help police authorities to improve their situational awareness - e.g. crowd control - and surveillance where our miniature products will be supplied to national agencies to help in covert operations; and

·      military vehicles where our video technology can be used in unmanned applications to assess threats and thus to minimise loss of human life.

We continue to expect the MAG market served by our products to grow at 9% pa between 2009-12.

Since October 2009, we have:

·      undertaken a further review of actual and potential military programmes, which has confirmed our confidence in the potential market for our products;  

·      supplied our products for use in an unmanned vehicle application by a governmental agency, and continued to showcase our technology to a variety of governmental agencies, armed forces and purchasers to develop credibility in the military markets; and

·      continued to supply to a variety of law enforcement agencies in the US.

Board changes and Employees

Stephen Bird joined the Group as CEO in April 2009, and has successfully worked with Richard Cotton who joined as Group Finance Director in November 2008. Together they have formed a strong executive leadership team, which has provided operational focus and a good performance in a difficult trading environment during 2009, as well as the new strategic direction, purpose and priorities clearly articulated at our Strategy Day in October 2009.

The Group was well served by the former Executive team of Gareth Rhys Williams (CEO) and Alastair Hewgill (Group Finance Director). We are particularly grateful for Alastair's support during the transition between management teams.

Throughout the Group, decisive actions have been taken by our committed teams, and this has delivered a good performance in difficult conditions. Decisions regarding our employment levels during the year have been addressed with fairness and integrity. We thank all employees for their endurance and continuing commitment and service to our shareholders and customers.

Outlook

2009 was a challenging year.  However, we produced a very good cash performance, implemented our cost reduction programme and launched a new focused strategy which will leverage our existing strengths and capabilities into higher growth markets.

The last quarter of 2009 saw our markets stabilise, following a significant decline in activity in the first half and this stabilisation has continued into the current financial year.

We believe that the opportunities in our three core markets will allow us to replace the shortfall arising from the end of the BAS contract, but we expect that the trading environment will remain challenging in 2010.  However, the prompt action we took last year to manage our cost base, combined with our strong balance sheet and clear strategic direction, will ensure that the Group is well positioned to benefit from a recovery in our markets.

Operational Review

Imaging & Staging Division

The Imaging & Staging Division has a strong reputation with two main groups of creative professionals: firstly photographers and videographers, whether they are shooting commercially, independently or for pleasure; and secondly live and corporate event production and touring bands who need versatile trussing and staging sets.

	2009	2008	r %
Revenue	£141.8m	£135.8m	4.4%
Operating Profit*	£17.7m	£15.6m	13.5%
Operating Margin*	12.5%	11.5%	1.0pts

Markets

The photographic market - the primary market for the division - proved more resilient than others, particularly in the hobbyist/keen amateur segments. Our camera supports business saw a marginal reduction in volumes, although the premium Gitzo brand delivered growth, and our bags business grew more than 20% compared with last year, as it continued to expand sales and take market share. According to the Japanese Camera and Imaging Products Association (CIPA), shipment of digital SLR cameras in 2009 was up just 2% on 2008, at around 10 million pieces, after several years of growth of over 30% year on year. CIPA forecasts the digital SLR market to resume expansion in 2010, growing by 11%.

In other markets - supports for video, lighting and cine/films applications - volumes were affected more by economic weakness, although we retained our market shares. Expenditure in the live and corporate events market, where our Litec and Tomcat brands operate, was significantly affected by the economic downturn with a consequent reduction of our volumes. However, the touring industries sector proved resilient, enabling our Brilliant Stages business to make significant gains.

Operations

Revenue for 2009 was £141.8 million, an increase of 4.4% over 2008 (a decrease of 9.4% in constant currency). Operating profit* rose 13.5% to £17.7 million (a decrease of 10.8% in constant currency) due to the positive exchange rate effect, a reduction in capacity and cost containment implemented across the businesses. The division delivered strong cash generation especially from working capital management, in particular inventory, as a consequence of logistics centralisation.

The Supports business held up well in difficult market conditions by taking advantage of its strengthened lightweight compact systems offer, which is particularly suited to compact DSLR and HD video cameras. It launched 22 new products throughout the year, with the new MY tripod family, new Manfrotto centre ball heads and Gitzo Ocean offerings being particularly well received.

The Bags business delivered another year of strong growth, successfully expanding the Kata and National Geographic collections and increasing market penetration in both existing and new regions. The business continued to introduce successful models and leveraged existing distribution synergies within the division.

Manfrotto Distribution (previously known as Bogen Imaging) reported a growth in sales due to favourable exchange rates, and good results in Europe. Manfrotto Distribution UK had an outstanding year despite the economy, while Japan and the US held up well, operating in markets particularly affected by the general economic climate.

It was a difficult year for Staging, with the live event market which it serves experiencing a sharp decline. We undertook decisive restructuring action to reduce the operating cost base. This resulted in a significant reduction in the direct and indirect workforce, as we positioned the business optimally for the recovery of the market. This process included the disposal of IFF in March, and the move of more production to Slovakia.

Key achievements

·      Review of our current strategy resulted in the 'Manfrotto Powerbrand' plan.

·      Successful penetration of fast-growing consumer electronic and e-tailing channels.

·      Italian plant relocation and rationalisation, as well as consolidation of European logistics.

·      Kata 3N1-30 won Best Camera Bag in Gear of the Year Awards organised by the two biggest UK photo magazines.

·      Two new own-distribution companies will start operations in 2010 in China and Hong Kong.

* Before significant items. Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see Segment reporting).

Videocom Division

Our Videocom Division specialises in the design and distribution of high-quality equipment principally for professionals engaged in producing and transporting video content for the global media industries - broadcast, film, live events and education. More recently, our world-leading products and technologies have successfully entered the military, aerospace and government (MAG) markets, where our mission-critical visual communication and surveillance products are increasingly sought after.

	2009	2008	r %
Revenue	£147.0m	£172.6m	-14.8%
Operating Profit*	£8.5m	£21.7m	-60.8%
Operating Margin*	5.8%	12.6%	-6.8pts

Markets

Broadcast and film markets across all continents suffered from reduced advertising revenues, which in turn reduced opex and capex spend. In particular, H1 was very challenging, with many planned studio upgrades (mostly high definition migration) suspended. The market also saw state broadcasters adopt a 'wait-and-see' approach. H2 saw some signs of stabilisation with a limited number of suspended projects coming off hold and presenting us with the opportunity to make some gains. Brazil and Central/Southern America has proved to be more resilient and we have seen growth in these markets. The business and industry market was more resilient, driven by the live entertainment (especially US) and independent videographer segments. The MAG market has seen increasing demand for video systems in law enforcement and unmanned vehicles, as well as in the miniaturisation of transmitting technologies.

Operations

Revenue for 2009 was £147.0 million, a decrease of 14.8% on 2008 (25.8% in constant currency). Despite difficult Broadcast markets, our Litepanels business increased its revenue by 33% in 2009, moving to new, larger facilities to support this. This growth was both domestic and international, including a key contract win in Vietnam.

As part of the ongoing drive for greater efficiency, our OConnor business consolidated into the existing Burbank site, allowing the subsequent closure of the Costa Mesa facility. Due to the effect of the economic downturn on our studio and outside broadcast (OB) vans business, we reacted decisively by restructuring fixed costs to protect profitability.

In RF Extreme, equipment sales for the BAS project finished in late Q3 with the BAS integration activity expected to finish in H1 2010. Over the past two-and-a-half years, RF Extreme has delivered on all BAS project expectations set out at the time of acquisition, in addition to increasing market share and profitability, and becoming the market leader in this area. RF Extreme continues to consolidate its activities in the Hackettstown area and new product introductions have been specifically targeting higher margin opportunities.

Key achievements

·      Litepanels successfully entered the broadcast studio market with projects at CBS in Florida and Vietnam, and at Bloomberg in London. New products, such as the 1x1 series bi-colour, flood and spot models, performed well in the market. Litepanels also received the first technical Emmy for excellence in broadcast lighting for 60 years.

·      Anton/Bauer showed growth in revenues, due mainly to successes in the cine power supply line and medical cart power systems (e.g., Yale hospital).

·      RF Extreme grew in US law enforcement with a high-profile and flexible wireless video surveillance system implemented on helicopters used by the Houston police. It won a multi-million dollar wireless video links contract for a military customer - with most of the shipments in 2010. Additionally, RF Extreme enjoyed some major success in the Broadcast market in Brazil.

* Before significant items. Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see Segment reporting).

Services Division

Our Services Division provides rental equipment and technical support for the most demanding broadcast productions, from the world's first in-flight concert to a Papal visit. We are also an integrator/dealer for high-end audio equipment, provide comprehensive maintenance services and offer fibre optic systems design and installation services along with resale of used broadcast hardware.

	2009	2008	r %
Revenue	£26.3m	£29.3m	-10.2%
Operating Profit*	(£1.7m)	£1.1m	n/m
Operating Margin*	(6.5%)	3.8%	-10.3pts

Markets

The first half of 2009 saw a sharp decline in overall television advertising expenditure. This resulted in a reduction in the amount of hardware used in the coverage of many live or recorded broadcast events, with a corresponding decline in hardware rental and service offerings. However, large appointment-viewing events provided an opportunity for our major event unit to capture market share, winning contracts to support the US Tennis Open and the Miss Universe pageant. Several large events saw increased audience size in 2009 and in turn, required more and sophisticated hardware and engineering support.

The second half saw some market stabilisation. With the advent of the US autumn sports seasons, core equipment rentals saw some improvement and the run-up to the Winter Olympic Games in Vancouver provided support for the fibre-optic operation.

Operations

Revenue for 2009 was £26.3 million, a decrease of 10.2% over 2008 (a decrease of 24.2% in constant currency). Coupled with a non-Olympic year, this decline closely mirrors the overall drop in broadcast advertising revenues, the key driver of TV programme production. Rental margins were driven down by increased price pressure from the more competitive marketplace. 

The decrease in revenue resulted in cost reductions and restructurings that provided material savings in 2009. Bexel closed two branches in Orlando and Las Vegas - both regions are now served by other nearby branches. In spite of the decisive cost reduction actions taken, operating profit* for the division declined to a loss of £1.7million. However the cost reductions have re-aligned the business for current activity levels. In addition 2009 saw the implementation of several new processes designed to improve margins and efficiencies.

Our fibre-optic unit picked up several new clients in markets such as theme parks, houses of worship and academics.  The professional audio unit was more sought after for large project consulting and major systems design, resulting in a constant performance over 2008. The major event unit achieved its revenue goals in 2009, confirming our strategy to focus more on major event support and long term relationships.

Key Achievements

·      Award of a multi-year agreement to provide facilities to the host broadcaster for the Olympics, OBS, providing guaranteed revenue and significant additional rental potential.

·      Contract with Sony Broadcast & Professional Products Division to serve as the engineering and logistics agency for the introduction of two new products to the US marketplace.

·      Supported Litepanels to break into live sport and entertainment market. Secured the specification of Clear-com intercom and RF Extreme microwave products, now in use on rentals to major reality shows and televised sporting events.

* Before significant items. Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see Segment reporting).

Financial Review

Revenue 

Revenue decreased by £22.6 million to £315.1 million, a decline of 6.7% in the year. After deducting £51.7 million (12.4%) for favourable foreign exchange, there was a £75.9 million (19.5%) decrease in organic revenue. Acquisitions made partway through 2008 contributed £1.6 million (0.4%), net of the IFF disposal.

Operating profit 

The table below sets out an analysis of the decline in operating profit before significant items* between 2008 and 2009. The variances are based on management's best estimates and are not a statutory presentation.

Operating profit before significant items* 2008-09 Variance Analysis (£m)
2008 Operating profit*		38.4
Gross margin effects:
- Volume, mix and efficiency	(40.4)
- Sales price less cost inflation	2.7
Operating expenses	13.0
		(24.7)
Acquisitions/disposal		0.3
Foreign exchange effects:
- Translation	6.6
- Transaction after hedging	3.9
		10.5
2009 Operating profit*		24.5

Operating profit before significant items* was £24.5 million, 36.2% lower than 2008. The Group's operating profit margin fell from 11.4% to 7.8%, reflecting the volume reductions from weaker markets, notably broadcasting. Before beneficial foreign currency effects of £10.5 million over the year, the decrease in operating profit* was 54.2%. 

Profit before tax before significant items* was £22.7 million, down from £35.4 million in 2008. Adjusted earnings per share before significant items* was 36.5p (2008: 55.9p).

* Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see note 6).

Net financial expense

Net financial expense before significant items* totalled £1.8 million (2008: £3.0 million) and decreased principally because of low interest rates and lower levels of borrowing across the year.

* Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group  (see note 6).

Taxation

The effective taxation rate on operating profit after net finance expense but before significant items* was 32% (2008: 34%). The Group's tax charge is higher than the UK statutory rate because the majority of its profits arise in overseas jurisdictions with high tax rates.

* Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see note 6).

Significant items

These comprise restructuring costs of £10.9 million (2008: £nil) in line with estimates announced earlier in the year, office relocation expenses of £1.5 million (2008: £nil), and loss on disposal of IFF £0.7 million (2008: £nil).

The amortisation of acquired intangibles increased to £8.5 million (2008: £7.1 million) mainly due to the full-year effect of Litepanels (acquired in August 2008), and has been included in significant items*. The annual impairment review of goodwill led to no impairment charge in 2009 (2008: £2.1 million for Tomcat Global).

There was no provision charged against equity accounted investments in 2009 (2008: £1.3 million for Media Numerics) nor profit on sale of property (2008: £0.3 million) which were also included in significant items* in the prior year.

Finance income included in significant items* consisted of a £0.7 million gain (2008: £0.3 million gain) due to currency movements on loans not accounted for as net investment hedges.

The tax credit of £8.6 million (2008: £6.6 million) relates to deferred tax.

* Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see note 6).

Acquisitions / Disposal

There were no acquisitions in 2009 (2008: £9.7m) but there were earn out payments relating to acquisitions made in prior years of £3.0 million (2008: £2.1 million). These payments are detailed in the table below. The disposal of IFF generated £0.7 million net proceeds (2008: £ nil).

Earn out payments for previous acquisitions
Business	Division	Acquisition date	Acquisition consideration for cash	Earn out period
			£m
Autoscript	Videocom	31 Oct 06	1.0	2007-08
Staging SK	Imaging & Staging	01 Feb 07	0.1	2007-08
Litepanels	Videocom	21 Aug 08	1.8	2008-11
Talkdynamics	Videocom	10 Oct 08	0.1	2008-11
Total acquisition consideration in 2009			3.0

Cash flow and net debt 

Cash generated from operations was strong at £42.8 million (2008: £44.3 million), despite weaker sales and operating margin and restructuring costs, as working capital management was enhanced and delivered strong cash benefits.

Improvements in working capital were the main contributor to the increased free cash flow of £22.7 million (2008: £19.0 million) which also benefited from lower capital expenditure and lower tax payments. 

EBITDA* reduced to £40.1 million (2008: £51.2 million) reflecting the decline in Operating Profit*, partially offset by an increase in depreciation to £15.6 million (2008: £12.8 million).

Working capital (Q4 average inventory, trade and other receivables, trade and other payables, derivative financial instruments and current provisions) decreased as a percentage of annualised Q4 revenue to 16.4% (2008: 17.7%) due largely to enhanced controls, more than offsetting the unwinding of RF Extreme's BAS deferred revenue.

Inventory decreased by £24.5 million to £51.9 million at the year-end, reflecting lower activity and holding levels - Inventory days reduced to 97 (2008: 118 days). Trade receivables decreased with the lower revenue and were £35.0 million as at the year end (2008: £46.6 million) and debtor days improved to 41 (2008: 44 days). Creditor days also reduced to 41 (2008: 44). Inventory, debtor and creditor days are stated in constant currency at year-end exchange rates; inventory and creditor days are based on Q4 cost of sales (excluding exchange gains/losses) while debtor days are based on Q4 revenue.

The cost reduction programme costing £10.9 million in the year resulted in cash outflows of £5.5 million in 2009. The remainder will be spent in 2010 and beyond.

Capital expenditure including capitalised development costs and financial investments totalled £15.3 million (2008: £17.6 million), of which £7.2 million (2008: £4.7 million) related to rental assets, partly financed by the proceeds from rental asset disposals of £1.5 million (2008: £1.7 million).

Tax paid in 2009 of £4.3 million was significantly lower than 2008 (£6.7 million), mainly due to the lower profit and timing effects.

The Group's strong free cash flow resulted in a material decrease in net debt to £40.6 million (2008: £53.0 million).

Treasury

Financing, currency hedging and tax planning are managed centrally. Hedging activities are designed to protect profits, not to speculate. Any substantial changes which are planned to the financial structure of the Group or to its treasury practice are first referred to the Board for approval.

The Group operates strict controls over all treasury transactions involving dual signatures and appropriate authorisation limits. 

As in previous years, a portion of the transactions of subsidiaries in foreign currencies is hedged, with the US dollar contracts as at 31 December 2009 set out below. 

Currency millions	December 2009	Average rate	December 2008	Average rate
US dollars sold for Euros
Forward contracts	$29.3	1.37	$10.0	1.26
Options (3)	$7.3	1.45	$24.7	1.50
US dollars sold for Sterling
Forward contracts	$29.9	1.59	$8.3	1.51
Options	$nil	-	$6.7	1.85

(3)Includes cylinder options in 2008, where the mid-point of range is taken

The Group does not hedge the translation of its foreign currency profits. A proportion of the Group's foreign currency net assets are hedged using normal Group borrowings and forward contracts.

Financing activities 

The Group's principal financing facility is a five-year £125 million committed multicurrency revolving loan agreement involving five banks, expiring on 8 August 2013. At the end of December 2009 £52.7 million (2008: £64.9 million) of the facility was utilised.

The average cost of borrowing for the year was 1.4% (2008: 4.0%) reflecting the worldwide downward movement in interest rates. Net interest cost (consisting of net interest payable and commitment fees) was £1.6 million (2008: £3.1 million), reflecting lower interest rates and lower debt over the year. Net interest cover (using operating profit before significant items*) remained high at 15 times (2008: 12 times). 

With regard to the management of capital, the Group's primary objective is to ensure its continuance as a going concern. In respect of gearing, the Board seeks to maintain an efficient capital structure without exposing the Group to unnecessary levels of risk; the Group has operated comfortably within its loan covenants during 2009. The Board believes the current capital structure is appropriate for the Group, bearing in mind its current strong cash generation, dividend policy and its typical ongoing level of acquisition activity.

* Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group  (see note 6).

UK pensions

At the end of 2003 the Group closed both of its UK defined benefit schemes to new members. Since 2004 a Group personal pension plan has been made available for new employees with Standard Life. In November 2005 the defined benefit schemes were merged. As at 31 December 2009 the number of active members in the merged scheme was 130 (2008: 158). Total scheme members were 645 (2008: 643).

A triennial actuarial valuation was undertaken as at 5 April 2007. This was agreed by the Company and the Trustees on 4 July 2008.

The Group's UK defined benefit pension liabilities under IAS 19 (amended) as at 31 December 2009 were estimated by the Group's actuaries to be £47.1 million (2008: £35.2 million) with a deficit of £6.1 million (2008: £0.4 million). Whilst the asset value has grown to £41.0 million (2008: £34.8 million), the pension liabilities have increased by a greater amount due largely to lower bond yield rates assumed in the discounting assumptions.

Post balance sheet events

There have been no significant post balance sheet events.

Principal Risks and Uncertainties

US market

53% of 2009 revenue was from the Americas, principally the USA, so the Group remains susceptible to any major deterioration in demand for its products and services from US customers. It is difficult to mitigate this risk but the Group seeks to reduce its dependence on the US by actively widening its sales and distribution activities, particularly into Asia.

Foreign exchange

The great majority of the Group's profit is earned in overseas currencies and is therefore subject to translation risk if sterling strengthens. To mitigate this, a proportion of the Group's foreign currency net assets are hedged using normal Group borrowings and forward contracts. 

In addition, many of the Group's businesses sell worldwide from various countries of manufacture, so the Group is subject to transaction risk, particularly that of a weaker US dollar. The Group partially hedges its major foreign exchange receipts by selling currency 12-18 months forward on a rolling basis. In addition the Group seeks to outsource parts, where appropriate, to low-cost countries, whose currencies are frequently either dollar-denominated or linked to the dollar.

Markets

The Group's two broadcast divisions are at risk from a reduction in the capital expenditure requirements of its broadcast customers and, in the US, their rental requirements. This dependence is changing as broadcasting moves from TV to delivery by other modes such as internet and mobile services. To mitigate this, the Group markets its products and services to all of these producers of broadcast video material, as well as to the religious, corporate and government sectors. 

With the acquisition of RF Extreme, the Group has benefitted from the BAS Relocation Project, which entails the conversion of part of the microwave spectrum that broadcasters use, from analogue to digital technology. Whilst there was further revenue from this project in 2009, product shipments on the project have now completed, and the business will need to generate other revenue in the US and abroad to mitigate this reduction in sales.

Imaging products are principally used by both professionals and keen amateurs. Whilst sales of cameras forecast to continue to grow, there is a risk that recessionary conditions may lead to adverse sales pressures in these markets.

Low-cost competition

The Group is at risk from low-cost competitors who may sell similar products at lower prices, particularly for higher volume items such as the simpler photographic tripods. While the Group also sources those cheaper products from lower-cost countries, it combats this threat by patenting its technologies wherever possible and taking action against any infringement, continuously innovating its products and employing its significant marketing and distribution capabilities.

Strategy

The business growth opportunities outlined in the strategic direction communicated by the Group in October 2009 are based on market research commissioned by the Group with external experts. There is the risk that the sampling data used in this research is unrepresentative of the population. Success with the MAG strategy is significantly dependent on continuing government funding in the targeted areas. In both the photographic and MAG strategies there is execution risk in successful delivery of appropriate products to the market.

Cautionary statement

This announcement contains forward looking statements that are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries and sectors in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results to differ materially from those currently anticipated.

Consolidated Income Statement

For the year ended 31 December 2009

 

	2009			2008
	Before significant items £m	Significant items (1) £m	Total £m	Before significant items £m	Significant items (1) £m	Total £m
Revenue	315.1		315.1	337.7		337.7
Cost of sales	(191.2)		(191.2)	(200.6)		(200.6)
Gross Profit	123.9		123.9	137.1		137.1
Operating expenses	(99.4)	(21.6)	(121.0)	(98.7)	(10.2)	(108.9)
Operating profit/(loss)	24.5	(21.6)	2.9	38.4	(10.2)	28.2
Finance income	2.4	0.3	2.7	3.4	0.7	4.1
Finance costs	(4.2)	0.4	(3.8)	(6.4)	(0.4)	(6.8)
Net Finance expense	(1.8)	0.7	(1.1)	(3.0)	0.3	(2.7)
Profit/(loss) before tax	22.7	(20.9)	1.8	35.4	(9.9)	25.5
Taxation	(7.2)	8.6	1.4	(12.0)	6.6	(5.4)
Profit/(loss) for the year (attributable to Equity Shareholders)	15.5	(12.3)	3.2	23.4	(3.3)	20.1

(1) See Note 6

Earnings per share

Basic earnings per share                                               7.5p                                               48.0p

Diluted earnings per share                                             7.4p                                               47.9p

Dividends per ordinary share

Prior year final paid 10.9p                                           £4.6m

Current year interim paid 7.4p                                     £3.2m         

Current year final proposed 10.9p                                £4.6m

Consolidated Statement of Comprehensive Income

For the year ended 31 December 2009

	2009 £m	2008 £m
Profit for the year	3.2	20.1
Other comprehensive income
Actuarial loss on pension obligations	(6.1)	(1.8)
Revaluation reserve on property	-	(0.2)
Currency translation differences on foreign currency subsidiaries	(20.8)	30.7
Net gain/(loss) on designated effective net investment hedges	4.0	(2.6)
Amounts released to income statement in relation to cash flow hedges	3.4	(0.3)
Effective portion of changes in fair value of cash flow hedges	0.9	(3.7)
Other comprehensive income for the year, net of tax	(18.6)	22.1
Total comprehensive income for the year (attributable to Equity Shareholders)	(15.4)	42.2

 

 

Consolidated Balance Sheet

As at 31 December 2009

		2009 £m	2008 £m
Assets
Non-current assets
Property, plant and equipment		54.6	63.6
Intangible assets		58.2	71.6
Trade and other receivables		0.3	1.2
Deferred tax assets		18.1	17.8
		131.2	154.2
Current assets
Inventories		51.9	76.4
Trade and other receivables		45.5	60.2
Derivative financial instruments		1.7	0.7
Current tax assets		-	0.8
Cash and cash equivalents		12.1	14.9
		111.2	153.0
Total assets		242.4	307.2
Liabilities
Current liabilities
Bank loans and other borrowings		-	3.0
Trade and other payables		46.5	71.5
Derivative financial instruments		0.3	7.4
Current tax liabilities		6.6	9.7
Provisions		8.6	4.1
		62.0	95.7
Non-current liabilities
Bank loans		52.7	64.9
Other payables		0.1	0.1
Post-employment obligations		11.0	5.9
Provisions		4.4	5.7
Deferred tax liabilities		1.0	1.5
		69.2	78.1
Total liabilities		131.2	173.8
Net assets		111.2	133.4
Equity
Share capital		8.6	8.5
Share premium		9.0	7.5
Translation reserve		5.5	22.3
Capital redemption reserve		1.6	1.6
Cash flow hedging reserve		0.6	(3.7)
Retained earnings		85.9	97.2
Total equity		111.2	133.4

Consolidated Statement of Changes in Equity

As at 31 December 2009

	Share capital	Share premium	Translation reserve	Capital redemption reserve	Cash flow hedging reserve	Retained earnings	Total equity
	£m	£m	£m	£m	£m	£m	£m
Balance at 1 January 2008	8.4	7.0	(5.8)	1.6	0.3	85.8	97.3
Total comprehensive income for the year Profit for the year	-	-	-	-	-	20.1	20.1
Other comprehensive income
Actuarial loss on pension obligations	-	-	-	-	-	(1.8)	(1.8)
Revaluation reserve on property	-	-	-	-	-	(0.2)	(0.2)
Currency translation differences on foreign currency subsidiaries	-	-	30.7	-	-	-	30.7
Net loss on designated effective net investment hedges	-	-	(2.6)	-	-	-	(2.6)
Amounts released to income statement in relation to cash flow hedges	-	-	-	-	(0.3)	-	(0.3)
Effective portion of changes in fair value of cash flow hedges	-	-	-	-	(3.7)	-	(3.7)
Total other comprehensive income	-	-	28.1	-	(4.0)	(2.0)	22.1
Total comprehensive income for the year	-	-	28.1	-	(4.0)	18.1	42.2
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends paid	-	-	-	-	-	(7.7)	(7.7)
Own shares (Treasury) purchased	-	(0.7)	-	-	-	-	(0.7)
Own shares (Employee benefit trust) purchased	-	-	-	-	-	0.2	0.2
Equity-settled transactions	-	-	-	-	-	0.8	0.8
New shares issued	0.1	1.2	-	-	-	-	1.3
Total transactions with owners	0.1	0.5	-	-	-	(6.7)	(6.1)
Balance at 31 December 2008	8.5	7.5	22.3	1.6	(3.7)	97.2	133.4
Balance at 1 January 2009	8.5	7.5	22.3	1.6	(3.7)	97.2	133.4
Total comprehensive income for the year Profit for the year	-	-	-	-	-	3.2	3.2
Other comprehensive income
Actuarial loss on pension obligations	-	-	-	-	-	(6.1)	(6.1)
Currency translation differences on foreign currency subsidiaries	-	-	(20.8)	-	-	-	(20.8)
Net gain on designated effective net investment hedges	-	-	4.0	-	-	-	4.0
Amounts released to income statement in relation to cash flow hedges	-	-	-	-	3.4	-	3.4
Effective portion of changes in fair value of cash flow hedges	-	-	-	-	0.9	-	0.9
Total other comprehensive income	-	-	(16.8)	-	4.3	(6.1)	(18.6)
Total comprehensive income for the year	-	-	(16.8)	-	4.3	(2.9)	(15.4)
Transactions with owners, recorded directly in equity
Contributions by and distributions to owners
Dividends paid	-	-	-	-	-	(7.8)	(7.8)
Own shares (Treasury) purchased	-	0.7	-	-	-	(0.7)	-
Own shares (Employee benefit trust) purchased	-	-	-	-	-	(0.6)	(0.6)
Equity-settled transactions	-	-	-	-	-	0.7	0.7
New shares issued	0.1	0.8	-	-	-	-	0.9
Total transactions with owners	0.1	1.5	-	-	-	(8.4)	(6.8)
Balance at 31 December 2009	8.6	9.0	5.5	1.6	0.6	85.9	111.2

Consolidated Statement of Cash Flows

For the half year ended 31 December 2009

	2009 £m	2008 £m
Cash flows from operating activities
Profit for the year	3.2	20.1
Adjustments for :
Taxation	(1.4)	5.4
Depreciation	14.3	11.6
Impairment losses on property, plant & equipment	2.5	-
Net gain on disposal of property, plant and equipment	(1.0)	(1.6)
Amortisation of acquired intangible assets	8.5	7.1
Amortisation of capitalised software and development costs	1.3	1.2
Goodwill impairment	-	2.1
Loss on disposal of business	0.7	-
Provision against equity-accounted investment	-	1.3
Fair value (gains)/losses on derivative financial instruments	(0.6)	0.4
Cost of equity-settled employee share schemes	1.4	1.7
Financial income	(2.7)	(4.1)
Financial expense	3.8	6.8
Operating profit before changes in working capital & provisions	30.0	52.0
Decrease in inventories	16.6	8.7
Decrease in receivables	10.3	3.8
Decrease in payables	(19.6)	(21.0)
Increase in provisions	5.5	0.8
Cash generated from operating activities	42.8	44.3
Interest paid	(2.1)	(3.7)
Tax paid	(4.3)	(6.7)
Net cash from operating activities	36.4	33.9
Cash flows from investing activities
Proceeds from sale of property, plant and equipment	1.6	2.6
Purchase of property, plant and equipment	(13.6)	(16.4)
Software costs capitalised as intangible assets	(1.1)	(0.9)
Development costs capitalised as intangible assets	(0.6)	-
Purchase of other intangible assets	-	(0.3)
Acquisition of subsidiaries, net of cash acquired	(3.0)	(11.8)
Disposal of business	0.7	-
Interest received	-	0.1
Net cash used in investing activities	(16.0)	(26.7)
Cash flows from financing activities
Proceeds from the issue of shares	0.5	0.5
Purchase of own shares by Employee Benefit Trust	(0.6)	-
Purchase of treasury shares	-	(0.7)
(Repayment)/Borrowing of bank loans and other borrowings	(11.2)	4.1
Dividends paid	(7.8)	(7.7)
Net cash used in financing activities	(19.1)	(3.8)
Increase in cash and cash equivalents	1.3	3.4
Cash and cash equivalents at 1 January	14.9	7.3
Effect of exchange rate fluctuations on cash held	(4.1)	4.2
Cash and cash equivalents at 31 December	12.1	14.9

Segment reporting

Primary format - by business segments

	Imaging & Staging		Videocom		Services		Corporate and unallocated		Consolidated
	2009	2008	2009	2008	2009	2008	2009	2008	2009	2008
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Revenue from external customers:
Sales	141.8	135.8	145.1	171.0	6.1	6.3	-	-	293.0	313.1
Services	-	-	1.9	1.6	20.2	23.0	-	-	22.1	24.6
Total revenue from external customers	141.8	135.8	147.0	172.6	26.3	29.3	-	-	315.1	337.7
Inter-segment revenue (1)	0.7	2.3	3.4	2.0	-	-	(4.1)	(4.3)	-	-
Total revenue	142.5	138.1	150.4	174.6	26.3	29.3	(4.1)	(4.3)	315.1	337.7
Operating profit before significant items	17.7	15.6	8.5	21.7	(1.7)	1.1	-	-	24.5	38.4
Other operating income	-	0.3	-	-	-	-	-	-	-	0.3
Provision against equity-accounted investment	-	-	-	-	-	-	-	(1.3)	-	(1.3)
Amortisation of acquired intangible assets	(0.8)	(0.7)	(7.7)	(6.4)	-	-	-	-	(8.5)	(7.1)
Impairment of goodwill	-	(2.1)	-	-	-	-	-	-	-	(2.1)
Restructuring costs	(2.3)	-	(8.2)	-	(0.4)	-	-	-	(10.9)	-
Impairment losses on property	(1.5)	-	-	-	-	-	-	-	(1.5)	-
Loss on disposal of business	(0.7)	-	-	-	-	-	-	-	(0.7)	-
Segment result	12.4	13.1	(7.4)	15.3	(2.1)	1.1	-	(1.3)	2.9	28.2
Net finance costs									(1.1)	(2.7)
Taxation									1.4	(5.4)
Profit for the year									3.2	20.1
Segment assets	84.0	104.2	102.2	140.2	24.7	27.3	1.3	2.0	212.2	273.7
Unallocated assets
Cash and cash equivalents							12.1	14.9	12.1	14.9
Current tax assets							-	0.8	-	0.8
Deferred tax assets							18.1	17.8	18.1	17.8
Total assets									242.4	307.2
Segment liabilities	25.2	31.0	40.7	51.4	2.1	1.9	2.9	10.4	70.9	94.7
Unallocated liabilities
Bank loans							52.7	67.9	52.7	67.9
Current tax liabilities							6.6	9.7	6.6	9.7
Deferred tax liabilities							1.0	1.5	1.0	1.5
Total liabilities									131.2	173.8
Cash flows from operating activities	19.3	8.4	6.0	15.7	4.7	3.2	6.4	6.6	36.4	33.9
Cash flows from investing activities	(5.1)	(6.0)	(4.1)	(1.2)	(5.7)	(3.0)	(1.1)	(16.5)	(16.0)	(26.7)
Cash flows from financing activities	-	-	(2.8)	-	-	-	(16.3)	(3.8)	(19.1)	(3.8)
Capital expenditure (including assets acquired within acquisitions)
Property, plant and equipment	4.1	5.6	2.3	6.5	7.2	4.7	-	-	13.6	16.8
Intangible assets	1.0	0.6	0.7	7.9	-	-	-	-	1.7	8.5

⁽¹⁾Inter-segment pricing is determined on an arm's length basis.

Secondary format - by geographical segments

	The rest of Europe		United Kingdom		The Americas		The rest of the World		Corporate and Unallocated		Consolidated
	2009 £m	2008 £m	2009 £m	2008 £m	2009 £m	2008 £m	2009 £m	2008 £m	2009 £m	2008 £m	2009 £m	2008 £m
Revenue from external customers:
by location of customer	74.9	87.8	21.6	20.6	167.1	178.0	51.5	51.3	-	-	315.1	337.7
Segment assets	52.1	67.0	31.5	40.4	108.9	143.1	18.4	21.2	1.3	2.0	212.2	273.7
Unallocated assets
Cash and cash equivalents									12.1	14.9	12.1	14.9
Current tax assets									-	0.8	-	0.8
Deferred tax assets									18.1	17.8	18.1	17.8
Total assets											242.4	307.2
Cash flows from operating activities	14.7	13.5	8.2	5.6	5.4	4.9	1.7	3.3	6.4	6.6	36.4	33.9
Cash flows from investing activities	(3.5)	(5.5)	(1.0)	(3.7)	(10.1)	(11.5)	(0.3)	(1.2)	(1.1)	(4.8)	(16.0)	(26.7)
Cash flows from financing activities	-	-	-	-	(2.8)	-	-	-	(16.3)	(3.8)	(19.1)	(3.8)
Capital expenditure (including assets acquired within acquisitions)
Property, plant and equipment	4.0	5.7	0.7	3.5	8.7	7.5	0.2	0.1	-	-	13.6	16.8
Intangible assets	0.5	0.5	0.1	1.5	0.9	6.5	0.2	-	-	-	1.7	8.5

 

1.   Basis of Preparation

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted for use in the EU in accordance with EU law.

The financial information set out herein does not constitute the Company's statutory accounts for the year ended 31 December 2009 but is derived from those accounts and the accompanying directors' report.  Statutory Accounts for 2009 will be delivered to the Registrar of Companies in due course.  The auditors have reported on those accounts; their report was unqualified and did not contain statements under Section 495 (4)(b) of the Companies Act 2006.

The comparative figures for the year ended 31 December 2008 are not the Company's statutory accounts for the financial year but are derived from those accounts which have been reported by the Company's auditors and delivered to the Registrar of Companies.  The report of the auditors was unqualified and did not contain statements under Section 237 (2) or (3) of the Companies Act 1985

2.   Basis of Segmentation

Segmental data in this statement is analysed on the basis of the divisional management structure (Imaging & Staging, Videocom (previously Broadcast Systems), Services (previously Broadcast Services)) that the Group operates under.

3.   Earnings per share

Basic earnings per share of 7.5 pence (2008: 48.0 pence) is based on profit for the year attributable to equity shareholders of £3.2 million (2008: £20.1 million) and the weighted average number of shares of 42,483,776 (2008: 41,886,616). Basic earnings per share before significant items of 36.5 pence (2008: 55.9 pence) is based on profit for the year attributable to equity shareholders but before the impact of significant items of £15.5 million (2008: £23.4 million).

4.   Dividend

The directors have recommended a final dividend of 10.9 pence per share, which will absorb £4.6 million (2008: 10.9 pence absorbing £4.6 million). The dividend will be paid on 20 May 2010 to shareholders on the register at the close of business on 23 April 2010.

5.   Key Exchange Rates

	Weighted average		Year end
	2009	2008	2009	2008
EUR / USD	1.40	1.47	1.43	1.39
GBP / USD	1.56	1.85	1.61	1.44
GBP / EUR	1.12	1.26	1.13	1.03

6.   Significant items

Significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group and in making projections of future results.

Significant items comprise the following:

	2009 £m	2008 £m
(a) Operating expenses
Profit on the sale of property assets	-	0.3
Provision against equity-accounted investee	-	(1.3)
Loss on disposal of business	(0.7)	-
Restructuring costs	(10.9)	-
Impairment loss on property	(1.5)	-
Impairment of goodwill	-	(2.1)
Amortisation of acquired intangible assets	(8.5)	(7.1)
	(21.6)	(9.2)

In 2008, profit of £0.3 million arose on the sale of property assets in the Imaging & Staging division.

In 2008, the Group held a 29% interest in Media Numerics Ltd, which was accounted for as an equity-accounted investment.  Full impairment provision of £1.3 million was made against this investment because Media Numerics Ltd was insolvent.

On 27 March 2009, the Group divested the IFF Staging business.  The disposal gave rise to a loss of £0.7 million. 

Restructuring costs of £10.9 million comprise £2.3 million within Imaging & Staging division, £8.2 million within Videocom division and £0.4 million within Services division.  These costs relate to actions implemented or committed across all divisions in response to the severe downturn in market conditions.

An impairment loss on property of £1.5 million arose in the Imaging & Staging division.

	2009 £m	2008 £m
(b) Other financial income / (expense)
Currency translation gains	0.3	0.7
Net fair value gains/(losses) on financial instruments	0.4	(0.4)
	0.7	0.3

The currency translation differences which arise on certain intra-Group funding balances are recorded in significant items within other financial income.

The Group uses options as part of its hedging of future foreign exchange cash flows.  As such options are held to maturity, the ultimate net amount charged to the income statement in respect of any option will always equate to the initial premium paid for that option.  However, as a result of the time value of such options being marked-to-market at each balance sheet date, volatile income and expenses can be introduced between periods and such amounts are therefore identified as significant other financial income or expense.

	2009 £m	2008 £m
(c) Taxation
Current tax credit	3.1	-
Deferred tax credit	8.2	8.8
Deferred tax charge	(2.7)	(2.2)
	8.6	6.6

Liabilities provided for tax exposures arising in prior years amounting to £3.1million are no longer required.

The total deferred tax assets recognised in the period were £8.2 million (2008: £8.8 million) as follows:

(a)  Deferred tax assets were generated during the year as a result of the restructuring activities that took place within the Group.  This has resulted in a deferred tax credit of £5.2 million (2008: £nil).

(b)  A deferred tax asset of £2.8 million (2008: £2.3 million) has been recognised as a result of timing differences between the amortisation for accounting purposes of intangible assets acquired on the acquisition of RF Extreme and Litepanels in the US and the amortisation of these assets for tax purposes.

(c)  A deferred tax asset of £0.2 million (2008: nil) has been recognised to offset deferred tax liabilities, recognised in the Consolidated Statement of Comprehensive Income, arising on unrecognised gains on cash flow hedges.

Certain deferred tax assets have been written down to nil, reflecting an assessment of their likely future recoverability.  This has resulted in a deferred tax charge of £2.7 million (2008: £nil).

7.   Reconciliation of Decrease in Cash and Cash Equivalents to Movement in Net Debt ⁽¹⁾

	2009 £m	2008 £m
Increase in cash and cash equivalents	1.3	3.4
Net repayment / (borrowing) of loans	11.2	(4.1)
Decrease / (Increase) in net debt resulting from cash flows	12.5	(0.7)
Effect of exchange rate fluctuations on cash held	(4.1)	4.2
Effect of exchange rate fluctuations on debt held	4.0	(18.1)
Effect of exchange rate fluctuations on net debt	(0.1)	(13.9)
Movements in net debt in the year	12.4	(14.6)
Net debt at 1 January	(53.0)	(38.4)
Net debt at 31 December	(40.6)	(53.0)

⁽¹⁾ Net debt constitutes cash and cash equivalents, bank overdrafts and bank loans & other borrowings.

 

END

 

 

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