Final Results

RNS Number : 8457Y

The Vitec Group PLC

28 February 2013

 



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.

28 February 2013

The Vitec Group plc

2012 Full Year Results

A year of further progress

The Vitec Group plc ("Vitec" or "The Group"), the international provider of products and services for the Broadcast and Video, Photographic, and MAG (military, aerospace and government) markets, announces its audited results for the year ended 31 December 2012.

Results	2012	2011	% Change	% Change
				Organic CER**
Revenue	£345.3m	£351.0m	-1.6%	-1.2%
Operating profit*	£39.3m	£34.5m	+13.9%	+4.2%
Profit before tax*	£36.2m	£33.0m	+9.7%	+2.5%
Adjusted earnings per share*	55.8p	51.4p	+8.6%
Operating profit	£25.6m	£25.3m	+1.2%
Profit before tax	£16.1m	£23.8m	-32.4%
Basic earnings per share	13.6p	34.7p	-60.8%
Free cash flow+	£10.8m	£16.5m	-34.5%
Net debt	£63.7m	£50.4m
Total dividend per share	22.0p	20.5p	+7.3%

Key points

●	Good Broadcast & Video performance, including a strong contribution from Camera Corps at the London 2012 Olympics
●	Photographic business gained market share and grew sales of Powerbrand products
●	MAG activities benefitted from the integration and strong performance of Haigh-Farr
●	13.9% increase in operating profit* and 160 bps increase in operating margin* to 11.4%
●	Profit before tax* rose by 9.7% to £36.2 million
●	Streamlining of certain operations planned in 2013 to strengthen the business
●	Recommended 8.0% increase in final dividend to 13.5 pence per share

* Before charges associated with acquired businesses. Profit before tax and adjusted earnings per share are also before disposal of business. Charges associated with acquired businesses in 2012 were a net charge of £13.7 million (2011: £9.2 million) consisting of £3.6 million for the amortisation of acquired intangible assets (2011: £3.2 million), £0.3 million of transaction costs relating to an acquisition (2011: £0.8 million), £1.0 million of contingent consideration on previous acquisitions (2011: £nil) and £8.8 million goodwill impairment charge relating to IMT (2011: £5.2 million associated with Staging). Disposal of business in 2012 was a £6.4 million loss before tax relating to the Staging business (2011: £nil).

** Organic CER: At Constant Exchange Rates on a comparative basis, excluding year on year effect of acquisitions, full year effect of disposal of business and ceasing distribution of some non-core third party products.

+ Free cash flow: cash generated from operations in the financial year after net capital expenditure, net interest and tax paid.

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

"Vitec has increased profits and achieved an improvement in margins in 2012.

Our core Broadcast business has performed well, benefitting from the acquisition of Camera Corps and its strong performance in the London 2012 Olympics. In the Photographic market, we achieved good growth in sales of our Manfrotto Powerbrand product range. Haigh-Farr performed strongly despite the MAG market remaining challenging with key US government agencies experiencing budget constraints.

Against the background of a challenging economic environment and our limited order visibility, Vitec has decided to take appropriate actions to streamline certain operations, including a further shift to areas of lower cost manufacturing.  These actions better position Vitec for the future and the Board remains confident about the prospects for the Group."

Enquiries:

The Vitec Group plc	Telephone: [phone]
Stephen Bird, Group Chief Executive
Paul Hayes, Group Finance Director
FTI Consulting
Nick Hasell / Susanne Yule	Telephone: [phone]

Notes

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

2.   Current market exchange rates as at 26 February 2013: £1 = $1.51, £1 = €1.16, €1 = $1.31.

3.   2012 average exchange rates: £1 = $1.58, £1 = €1.23, €1 = $1.29.

4.   2011 average exchange rates: £1 = $1.60, £1 = €1.15, €1 = $1.39.

5.   The Company's Annual General Meeting (AGM) will be held on Wednesday, 15 May 2013. The Annual Report and Accounts and Notice of Annual General Meeting will be posted to shareholders and available on the Company's website from 18 March 2013.

Vitec is an international Group principally serving customers in the Broadcast & Video, Photographic and Military, Aerospace and Government (MAG) markets. Listed on the London Stock Exchange with 2012 revenue of £345.3 million, Vitec is based on strong, well known, premium brands on which its customers worldwide rely. Vitec is organised in three Divisions: Videocom, Imaging and Services.

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

Imaging designs, manufactures and distributes equipment and accessories for photography and video.

Services provides equipment rental, workflow design and technical support to TV production teams and film crews.

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

Vitec will be presenting its results to analysts at 8.30am on Thursday 28^th February.  An audio recording of the presentation, along with the presentation slides, will be available on our website after the meeting.  Users can pre-register to access the recording and slides using the following link: http://www.vitecgroup.com/2012AnnualResults/

Directors' responsibility statement

The financial information for the year ended 31 December 2012 contained in this announcement was approved by the Board on 27 February 2013. This announcement does not constitute the statutory accounts of the Company within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts.

Statutory accounts for the year ended 31 December 2011 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 December 2012 will be delivered to the Registrar of Companies in due course. The auditors have reported on these accounts. Their reports were not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Forward looking statements

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. Nothing in this press release should be construed as a profit forecast.

2012 Performance Overview

Vitec increased profits* and delivered improved margins* in each Division during 2012, against a background of a more challenging macroeconomic environment, particularly in the second half of the year. We have been able to achieve this through maintaining and in some cases increasing share in our key markets, making earnings enhancing acquisitions, and by a continued focus on cost management.

Reported revenue fell by 1.6% to £345.3 million (2011: £351.0 million). There was a good performance in our Broadcast & Video businesses which benefitted from the acquisition of Camera Corps and its strong performance at the London 2012 Olympics. The Olympics contributed approximately £3.0 million of operating profit in 2012 including a significant profit from Camera Corps. The Photographic business performed well and ceased the distribution of some lower margin third party products. Our MAG activities benefitted from the integration and growth of Haigh-Farr which was acquired in 2011 and performed ahead of our pre-acquisition expectations. This compensated for a challenging year in our IMT business.

A focus on improving margins and controlling costs resulted in a 13.9% increase in reported operating profit* to £39.3 million (2011: £34.5 million) and a 160 bps increase in operating margin* to 11.4% (2011: 9.8%).

Profit before tax* was 9.7% higher at £36.2 million. Adjusted earnings per share* were up 8.6% at 55.8 pence per share (2011: 51.4 pence per share). Group profit before tax of £16.1 million (2011: £23.8 million) included the impact of charges associated with acquired businesses incorporating a goodwill impairment charge relating to IMT and the impact of the disposal of the Staging business.

Free cash flow⁺ was £10.8 million (2011: £16.5 million) and total cash outflow of £15.1 million (2011: £22.1 million) reflected outflows relating to acquisitions and disposals, purchases of shares to meet share plan commitments and dividend payments.

Net debt at 31 December 2012 of £63.7 million (31 December 2011: £50.4 million) was in line with expectations. The Group's balance sheet remains strong with a year-end net debt to EBITDA ratio of 1.2 times (31 December 2011: 1.0 times), comfortably within our banking covenants.

As a result of our financial performance in 2012 and our confidence in the future, the Board has recommended a final dividend of 13.5 pence per share (2011: 12.5 pence per share) that will be subject to approval at the Company's Annual General Meeting to be held on Wednesday, 15 May 2013. The final dividend, if approved at the 2013 Annual General Meeting, will be paid on Friday, 17 May 2013.

* Before charges associated with acquired businesses. Profit before tax and adjusted earnings per share are also before disposal of business. As defined on page 1 of this announcement.

+ Cash generated from operations after net capital expenditure, net interest and tax paid.

Streamlining of certain operations planned in 2013

Vitec has continued to make good progress in improving its margins and managing its cost base. As part of this process, the Group is streamlining certain operations by downsizing selected activities in the UK, Israel and US and expanding its manufacturing capabilities in Costa Rica to further shift to lower cost manufacturing. These planned actions are intended to better position the Group for the future whilst delivering an attractive return. These plans are expected to incur one-off costs of approximately £9 million, of which £8 million will be cash.

Strategy

We have continued to deliver our strategy to focus on three markets with organic growth opportunities, supplemented with selective acquisitions. Our three markets are:

1 Broadcast & Video

The Broadcast & Video market is served by our Videocom businesses together with the Services business, which supply a variety of products and services to assist in the capture and transmission of video images. Vitec has leading products and brands aimed at television networks and studios, film-makers, outside broadcasters and corporate, religious and educational entities. Our strategy is to maintain our premium product offerings and market share with traditional broadcast customers whilst developing specific products and new channels focused on the needs of the cameraman in the video segment. Where attractive and feasible, we will leverage our products from the Broadcast market into other markets, for example the use of our batteries and chargers for the US medical carts market.

We have increased our share of this market through our ability to bundle products for broadcast studios and on-location needs. In the video sector we have benefitted from a major new range of supports, the Sachtler Ace, designed for the needs of the independent cameraman.

2 Photographic

The Photographic market, served by our Imaging Division, has continued to supply its range of products (tripods, heads, bags and lighting supports and controls) to the professional photographic segment. We have also continued to supply a range of tripods, bags, lighting and other photographic products to the consumer segment as part of our Manfrotto Powerbrand sales initiative.

In the professional segment, we continued to serve the traditional photographic speciality stores and in the consumer segment, we increased our penetration in consumer electronics stores and in mass merchandiser outlets. We continued to grow our online sales to both the professional and consumer segments. Based on independent research data, we have increased our share of the tripods market in the US and in Europe.

3 Military, Aerospace and Government (MAG)

The MAG market is addressed through the IMT and Haigh-Farr businesses and is reported as part of our Videocom segment. IMT is a technology leader for mission-critical visual communication and surveillance products for security and defence applications. Haigh-Farr is a world-leading designer and manufacturer of high quality application-specific antennas serving this market.

The MAG market is dependent on the level of investment by the US Government and key US Government agencies. Although the longer-term prospects for our IMT business remain good, there is limited visibility around the award of significant contracts from agencies that are experiencing budget constraints. The Haigh-Farr business that was acquired in 2011 is performing strongly and ahead of our pre-acquisition expectations in this challenging market.

Geographic Spread

Our growth strategy is supported by the broad geographical spread of the Group. In 2012, 45% of our revenues by destination came from North America, with the remainder split between Europe 33%, Asia-Pacific 17% and Rest of World 5%. Only 10% of our revenue is derived from the UK. We currently have a direct presence in 12 countries around the world: the UK, USA, Brazil, Costa Rica, France, Germany, Italy, Netherlands, Israel, Japan, China and Singapore.

Videocom Division

The Videocom Division mainly serves the Broadcast & Video and MAG markets.

It specialises in the supply of high-quality equipment principally for professionals engaged in producing video content for the media industries globally: broadcast, film and live events. This equipment is also supplied to corporate, educational and religious entities producing video content which we define as the "business and industry" segment. Additionally, it supplies mission-critical wireless communication and surveillance products for the MAG market, serving law enforcement agencies, '3-letter agencies' such as the US Department of Justice, and defence and space customers.

	2012	2011	r %
Revenue	£146.2m	£136.2m	+7.3%
Operating Profit*	£15.8m	£12.7m	+24.4%
Operating Margin*	10.8%	9.3%	+150 bps

* Before charges associated with acquired businesses as defined on page 1 of this announcement.

Markets

We estimate that the Broadcast & Video market for products and services supplied by Vitec is worth around £700 million. This includes the traditional broadcast and film markets as well as the video production market.

Vitec manufactures and supplies the MAG market with microwave transmitters, receivers and antennas. We estimate this market to be worth around a further £400 million. The market remains challenging, but there are good longer-term opportunities in the niche market of wireless transmission of real-time, high quality information.

Operations

Videocom's revenue for 2012 was £146.2 million, an increase of 7.3% from 2011. The acquisition of Haigh-Farr in December 2011 and Camera Corps in April 2012 made notable contributions to 2012 revenue. Organic revenue at constant currency decreased by 3.1%. This included the non-recurrence of $7.9 million (£4.9 million) of sales in the prior year to the MAG market under Auction 66. Operating profit* rose 24.4% to £15.8 million.

There was growth in sales of outside broadcast and video camera supports as well as our range of bags for this market. Demand for our premium studio and robotic camera supports in the key US broadcast market was affected by budget constraints at the major studios and there was no repeat of the sizeable 2011 contracts to supply television studios in Asia.

Our Litepanels LED lighting products benefitted from the launch of new products that broadened our product ranges and enabled us to maintain our leading position in the market. Shortly after the year-end, the US International Trade Commission granted a general exclusion order prohibiting the importation of products infringing a number of Litepanels' patents into the US market. We will continue to protect our intellectual property while granting licenses to other manufacturers as and when appropriate.

Our Anton/Bauer mobile power products performed consistently overall and made good progress in supplying batteries and chargers to power medical carts in hospitals.    

The recently acquired Camera Corps business complements our Broadcast activities. Camera Corps provides leading remote camera systems that are predominantly used at major sporting events. As anticipated, the business benefitted from the UEFA Euro 2012 football championships and more significantly the London 2012 Olympics, delivering a better than expected post-acquisition performance.

Our Haigh-Farr antenna business also performed ahead of our pre-acquisition expectations. The business continues to grow in a challenging defence market and has gained acceptance onto new programmes and supported a number of high profile space applications. These include antennas for SpaceX's Falcon-9 launch vehicle, the first commercial vehicle to dock successfully with the International Space Station, and NASA's Curiosity vehicle which landed on Mars.

IMT, our microwave transmitter and receiver business, was awarded a contract during the year by the US Department of Homeland Security, but is operating in a very challenging market. Although there are good opportunities in this market, there is limited order visibility and no other significant US Government contracts have been awarded. Its overall performance reflects a low level of investment by its US Government driven customer base for this relatively small niche business.

Imaging Division

Our Imaging Division provides premium photographic and increasingly video equipment to both professional and non-professional users. The photographic and video equipment consists primarily of camera supports, tripods, equipment bags, lighting supports, LED lights and lighting accessories. The Division also included the non-core Staging business until its disposal in August 2012.

Imaging including Staging	2012	2011	r %
Revenue	£166.1m	£183.2m	-9.3%
Operating Profit*	£22.3m	£21.2m	+5.2%
Operating Margin*	13.4%	11.6%	+180 bps

The non-core Staging business recorded a loss of £0.6 million (2011: loss of £0.7 million) on sales of £8.2 million (2011: £17.7 million). The performance of the Imaging Division, excluding the Staging business, is summarised below:  

Imaging excluding Staging	2012	2011	r %
Revenue	£157.9m	£165.5m	-4.6%
Operating Profit*	£22.9m	£21.9m	+4.6%
Operating Margin*	14.5%	13.2%	+130 bps

* Before charges associated with acquired businesses as defined on page 1 of this announcement.

Markets

We estimate that the photographic market for product categories supplied or distributed by Vitec is worth around £800 million. Of this, approximately half is purchased by professional photographers who we have supplied historically and whose business is taking images. The remainder is sold to consumers who have a keen interest in photography or, increasingly, a new population of photographers who simply want to record and share images.  Photography continues to attract new consumers as the number and type of image-taking devices increases and the distribution of images via social media becomes more popular.

Operations

Revenue for 2012, excluding the disposed non-core Staging business, was £157.9 million against a comparable £165.5 million last year. This was 0.4% lower on a constant currency basis after taking into account the decision to withdraw from the distribution of certain lower margin third party branded products.

Operating profit* rose by 4.6% to £22.9 million, after excluding the loss-making Staging business, despite a lower level of sales. This reflected activities to improve margins through pricing and cost management. Underlying operating margins for our Imaging activities increased by 130 bps.

We grew sales of our video and lighting supports for the professional market segment, and made good progress with the sale of new products including the Sympla video range. Our Manfrotto Powerbrand product range also performed well, including the more recently introduced LED lights.

The photographic market continued to grow during 2012 with 28% growth in the shipments of inter-changeable lens cameras driven primarily by new higher value compact system cameras. We continue to purchase independent market research data on the photographic market that shows that we have increased our share of the tripod market in the US and Europe. We have also made progress in penetrating online consumer electronic sales channels. Volumes in our bags business declined following a contraction in this market during the year, although our share of this market remained stable.

Since the end of the year, Jessops, a retailer of photographic equipment in the UK, went into administration. Our exposure was small and it has an insignificant impact on our business.

Services Division

Our Services Division provides equipment rental, workflow design and technical support to television production teams and film crews. It provides a complete one-stop solution for top producers globally, enabling customers to deliver the most demanding projects. The Division has a strategy to focus on larger events, where higher levels of service are most needed, and to secure multi-year contracts for these events.

	2012	2011	r %
Revenue	£33.0m	£31.6m	+4.4%
Operating Profit	£1.2m	£0.6m	+100.0%
Operating Margin	3.6%	1.9%	+170 bps

Operations

Revenue for 2012 increased by 4.4% to £33.0 million and profits doubled with the benefit of contracts to supply the London 2012 Olympics and US Presidential election more than offsetting a one-off sale of a large system to a major customer in 2011. Increased margins reflected sales activity and a further reduction in costs through streamlining operations.

Financial Review

Revenue

The Group's revenue for 2012 at £345.3 million was 1.6% lower than the prior year (2011: £351.0 million). Revenue included a £15.4 million contribution from acquisitions partly offset by £9.5 million lower revenue from the disposal of the non-core Staging business and £4.0 million from ceasing to distribute some third party branded products in our Imaging Division. On an organic basis, after excluding the effect of £3.8 million of adverse movements in exchange rates, revenue fell by £3.8 million or 1.2%.

Operating profit

Operating profit* rose by £4.8 million to £39.3 million, an increase of 13.9% despite the lower sales activity. On an organic basis, operating profit grew by £1.4 million after excluding £3.8 million of contributions from acquisitions net of the Staging disposal and ceasing to distribute some lower margin third party products, and £0.4 million of unfavourable exchange rate movements, after hedging.

Operating profit* increased despite the lower revenue as we have focused on improving margins in the current more challenging macroeconomic environment. This includes £1.6 million of benefits from pricing over commodity cost increases (2011: £0.3 million loss) and a £4.8 million reduction in operating expenses during the year. As a result the operating margin* has increased by 160 bps to 11.4%.

We maintained our investment in product development and innovation at 4% of Group product sales (2011: 4%). Research, development and engineering expenditure on a like-for-like basis was £10.8 million (2011: £11.8 million) after adjusting for capitalised expenditure of £0.3 million (2011: £0.1 million) and £0.6 million of amortisation (2011: £0.5 million).

Management's estimate of the main drivers that reconcile the 2011 to the 2012 operating profit* are summarised in the following table:

Operating profit *
2011-12 Variance Analysis (£ million)
2011 Operating profit*		34.5
Gross margin effects:
-     Volume, mix and efficiency	(5.0)
-     Sales price less cost inflation	1.6
Operating expenses	4.8
		1.4
Acquisitions & disposal**		3.8
Foreign exchange effects:
-     Translation	(0.5)
-     Transaction after hedging	0.1
		(0.4)
2012 Operating profit*		39.3

* Before charges associated with acquired businesses. Profit before tax and adjusted earnings per share are also before disposal of business. As defined on page 1 of this announcement.

** Includes year on year effect of acquisitions, full year effect of disposal of business and ceasing distribution of some non-core third party products.

Net financial expense

Net financial expense totalled £3.1 million (2011: £1.5 million). Interest payable was £3.2 million (2011: £1.9 million) and was covered 17 times (2011: 26 times) by earnings before interest, tax, depreciation and amortisation. Vitec has a $50 million private placement facility and a new five year £100 million multi-currency revolving credit facility that was arranged in July 2012. The higher finance costs reflect the full year impact of the $50 million private placement and higher interest charges which reflect market rates on the new revolving credit facility.

Profit before tax

Profit before tax* increased by £3.2 million to £36.2 million (2011: £33.0 million). The reported profit before tax after charges associated with acquired businesses and disposal of business was down by 32.4% to £16.1 million (2011: £23.8 million).

Taxation

The effective taxation rate on operating profit* after net finance expense remained unchanged at 33% (2011: 33%). The Group's tax charge is higher than the UK statutory rate because the majority of its profits arise in overseas jurisdictions with higher tax rates.

Earnings per share

Earnings per share before charges associated with acquired businesses and disposal of a business was 55.8 pence per share (2011: 51.4 pence per share) representing growth of 8.6%. This includes the growth in operating profit* partly offset by a higher net finance expense and a higher weighted average number of shares. The basic earnings per share was 13.6 pence per share (2011: 34.7 pence per share).

Acquisitions and disposals

In April 2012, Vitec acquired Camera Corps in the UK for consideration of £8.7 million. The fair value of the net assets acquired was £3.7 million, including £3.1 million of acquired intangibles, resulting in the capitalisation of £5.0 million of goodwill. The total balance of acquired intangibles at 31 December 2012 was £12.0 million, which will be amortised over an average six year period.

During the second half of the year, Vitec sold its Staging business, which had previously been included in the Imaging Division. The disposal was completed on 13 August 2012 with a net cash outflow, after transaction costs, of £2.1 million. There was a loss on disposal of £6.4 million after transaction costs. This reflected £0.3 million of cash consideration for the business that had £6.3 million of net assets. This was partially offset by a £2.0 million foreign exchange gain recycled to the Income Statement in accordance with IFRS.

Charges associated with acquired businesses

The 2012 charges relate to the Group's acquisition activities and amortisation of previously acquired intangibles. There is also a one off non-cash impairment charge relating to goodwill.

Management has reviewed the carrying value of the IMT goodwill that arose on the acquisition of the business in 2007. Whilst the business has made progress, including being awarded a contract during the year by the US Department of Homeland Security, and there remain good long-term opportunities and prospects, the lack of visibility in future orders, particularly considering budget constraints, has led Management to decide to take a one-off non-cash £8.8 million goodwill impairment charge to fully impair this investment (2011: £5.2 million associated with Staging).

The amortisation of acquired intangibles of £3.6 million (2011: £3.2 million) related to Manfrotto Lighting (previously Lastolite) acquired in March 2011, Haigh-Farr acquired in December 2011 and Camera Corps acquired in April 2012.

Transaction costs of £0.3 million were incurred in relation to the acquisition of Camera Corps (2011: £0.8 million in relation to the acquisitions of Manfrotto Lighting and Haigh-Farr).

Contingent consideration of £0.7 million in respect of the acquisition of Manfrotto Lighting had been provided at 31 December 2011. £0.5 million was paid in the year and the remaining £0.2 million has been credited to the Income Statement (2011: £nil).

In addition, £1.2 million of deferred consideration was accrued during the year to be paid to the previous owners of Haigh-Farr in relation to their 2012 performance targets (2011: £nil).

There was a tax credit of £1.7 million on these charges and the disposal of business (2011: £2.0 million).

Cash flow and net debt

Cash generated from operating activities was £38.4 million (2011: £39.1 million) with the Group maintaining a strong focus on cash generation.

The Group uses a number of key performance indicators to manage cash including the percentage of working capital to sales, inventory days, receivable days and payable days. Inventory, trade receivable and trade payable days are stated at year-end balances; inventory and trade payable days are based on Q4 cost of sales (excluding exchange gains/losses) while trade receivable days are based on Q4 revenue. For the 2011 comparatives, the ratios presented exclude Haigh-Farr which was acquired in the last month of that year.

The working capital to sales metric has increased to 20.0% (31 December 2011: 15.9%) and overall working capital increased by £14.9 million (2011: £5.6 million increase).

Trade receivables days increased to 43 days (2011: 38 days), reflecting a strong sales month in December. Trade and other receivables increased by £4.4 million accordingly (2011: £3.2 million increase) but there was an improvement in ageing on the prior year.

Inventory levels decreased by £1.3 million (2011: £8.4 million increase) to £59.5 million at the year-end, reflecting management focus in this area. As a result of lower sales in the last quarter, inventory days increased to 113 (2011: 109 days).

Trade payable days decreased to 42 days (2011: 49 days) and there was an £11.8 million overall decrease in trade and other payables (2011: £6.0 million increase). This reflects the reduction in inventory, particularly in the latter part of the year, and lower freight, expense, bonus and commission accruals.

Capital expenditure, including capitalised software and development costs, totalled £15.5 million (2011: £16.1 million), of which £7.7 million (2011: £6.4 million) related to rental assets, partly financed by the proceeds from rental asset disposals of £1.6 million (2011: £2.9 million). Services benefitted from a one-off sale of a large system to a major customer in 2011. Overall capital expenditure was equivalent to 1.1 times depreciation (2011: 1.1 times).

Net tax paid in 2012 of £10.8 million was lower than in 2011 of £11.1 million mainly due to lower payments in Italy and the UK partially offset by higher payments in Germany.

Free cash flow⁺ at £10.8 million (2011: £16.5 million) principally reflects changes in working capital, higher net capital expenditure and increased interest payments.

Free cash flow+	2012	2011
Operating profit *	£39.3m	£34.5m
Depreciation (1)	£14.2m	£14.9m
Changes in working capital	(£14.9m)	(£5.6m)
Other adjustments (2)	(£0.2m)	(£4.7m)
Cash generated from operating activities	£38.4m	£39.1m
Purchase of property, plant and equipment	(£14.2m)	(£13.7m)
Capitalisation of software and development costs	(£1.3m)	(£2.4m)
Proceeds from sale of property, plant and equipment and software	£1.8m	£6.4m
Interest paid	(£3.1m)	(£1.8m)
Tax paid	(£10.8m)	(£11.1m)
Free Cash Flow+	£10.8m	£16.5m

* Before charges associated with acquired businesses. Profit before tax and adjusted earnings per share are also before disposal of business. As defined on page 1 of this announcement.

+ Cash generated from operations after net capital expenditure, net interest and tax paid.

(1) Includes depreciation and amortisation of capitalised software and development costs

(2) Includes change in provisions, share based charge, gain on disposal of property, plant and equipment, fair value derivatives and transaction costs relating to acquisitions

There was a £12.7 million net cash outflow relating to acquisitions and disposals during the year (2011: £27.9 million). Dividends paid to shareholders totalled £9.1 million (2011: £8.2 million) and there was a net cash outflow in respect of shares purchased and issued of £4.1 million (2011: £2.5 million). The net cash outflow for the Group was £15.1 million (2011: £22.1 million) which, after £1.8 million favourable exchange (2011: £0.2 million adverse), increased the net debt to £63.7 million (2011: £50.4 million).

Treasury

Vitec manages its financing, hedging and tax planning activities centrally to ensure that the Group has an appropriate structure to support its geographically diverse business. It has clearly defined policies and procedures with any substantial changes to the financial structure of the Group, or to its treasury practice, referred to the Board for approval. The Group operates strict controls over all treasury transactions including clearly defined currency hedging processes to reduce risks from volatility in exchange rates.

The Group is hedging a larger portion of its forecast future foreign currency transactions to reduce the risk from changes in exchange rates from current levels. Our main exposure relates to the US Dollar and the table below summarises the contracts held as at 31 December 2012:

Currency hedging	December	Average rate of	December	Average rate of
	2012	contracts	2011	contracts
US Dollars sold for Euros
Forward contracts	$61.2m	1.29	$30.9m	1.38
US Dollars sold for Sterling
Forward contracts	$17.3m	1.57	$11.4m	1.58

The Group does not hedge the translation of its foreign currency profits. A portion of the Group's foreign currency net assets are hedged using the Group's borrowing facilities.

Financing activities

During July 2012 the Group negotiated a new £100 million five-year multicurrency revolving credit facility involving five relationship banks, which replaces the previous £100 million facility. The new facility expires on 19 July 2017. At the end of December 2012, £42.2 million (2011: £24.4 million) of the facility was utilised.

The Group has a $50 million (£30.8 million) private placement facility which has been drawn down in two tranches of $25 million each. This financing has a combined fixed interest rate of 4.77% and is due for repayment on 11 May 2017.

The Group therefore has £130.8 million of committed facilities at the year-end with drawings of £73.0 million (31 December 2011: £56.6 million).

The average cost of borrowing for the year which includes interest payable, commitment fees and amortisation of set-up charges was 4.0% (2011: 3.6%) reflecting a net interest cost of £3.2 million (2011: £1.9 million).

The Board has maintained an appropriate capital structure without exposing the Group to unnecessary levels of risk and it has operated comfortably within its loan covenants during 2012.

Foreign Exchange

2012 operating profit* included a £0.4 million net adverse foreign exchange effect after hedging, mainly due to unfavourable £/€ rates when compared to 2011.

Board Changes

Maria Richter will not be standing for re-appointment at the Company's AGM on Wednesday, 15 May 2013. She will therefore cease to be a director of the Company with effect from the closing of the AGM having been appointed in February 2007. The Board thanks Maria for her considerable contribution to Vitec during this period of service.

Dividend

The Directors have recommended a final dividend of 13.5 pence per share amounting to £5.9 million (2011: 12.5 pence per share, amounting to £5.4 million). The dividend, subject to shareholder approval at the AGM, will be paid on Friday, 17 May 2013 to shareholders on the register at the close of business on Friday, 19 April 2013. This will bring the total dividend for the year to 22.0 pence per share (up 7.3%).

Principal risks and uncertainties

The Vitec Group is exposed to a number of risk factors which may affect its performance. The Group has a well-established framework for reviewing and assessing these risks on a regular basis, and has put in place appropriate processes and procedures to mitigate against them. However, no system of control or mitigation can completely eliminate all risks. This is a summary of some of the principal risks facing the Group:

●	Demand for Vitec's products

Demand for our products may be adversely affected by many factors, including changes in customer and consumer preferences and our ability to deliver appropriate products or to support changes in technology. In addition, demand may be impacted by competitor activity and demand in our target markets particularly reflecting the current uncertain economic outlook.

We value our relationships with our customers and closely monitor our target markets and user requirements. We maintain good relationships with our key customers and make appropriate investments in product development and marketing activities to ensure that we remain competitive in these markets. In order to limit the impact of the economic downturn the Group executes programmes that simplify processes, reduce costs and allow local management teams to focus more closely on their markets.

●	Major contract awards

Our operating performance and cash flow may be dependent on the timing of major contract awards. The timing of the award of these contracts can be difficult to predict. In addition, the loss, suspension or cancellation of contracts may impact trading performance. In particular our Military, Aerospace and Government segment could be adversely impacted by a lower level of investment in the US defence budget.

We attempt to gain a good understanding of likely demand through developing close relationships with our customers. We also have a broad range of contracts that reduce our dependence on any particular contract or customer. We actively review our orders and trading outlook and manage our resources in line with anticipated activity.

●	New markets and channels of distribution

As we enter new markets and channels of distribution we may achieve lower than anticipated trading volumes and pricing levels or higher costs and resource requirements. This may impact the levels of profitability and cash flows delivered.

We have a thorough process for assessing and planning the entry into new markets and related opportunities. This includes repositioning strategies of our products and services through marketing and advertising. We continuously assess our performance in these markets and the related opportunities and risks. We adapt our approach taking into account our actual and anticipated performance.

●	Acquisitions

In pursuing our business strategy we continuously explore opportunities to enhance our business through development activities such as strategic acquisitions and disposals. This involves a number of calculated risks including: acquiring desired businesses on economically acceptable terms; integrating new businesses, employees, business systems and technology; and realising satisfactory post-acquisition performance.

We mitigate these risks by having a clear acquisition strategy with a robust valuation model. Thorough due diligence processes are completed including the use of external advisers where appropriate. There is a clear focus on integrating acquired businesses and monitoring post-acquisition performance. In the last two years the Group made three acquisitions which have been successfully integrated into our business and completed the disposal of our non-core Staging business.

●	Pricing pressure

We might experience pricing pressure including challenges in raising prices, especially in the current economic climate, or not recovering increases in commodity and other costs. If the price of products does not at least recover movements in commodity costs and other expenses and we are unable to reduce our expenses, our results could be adversely affected.

We ensure that our product and service offering remains competitive by investing in new product development, in appropriate marketing and product support and improving the management of supply chain costs. This allows us to support price increases when required by working closely with our suppliers and managing our expenses and cost base appropriately.

●	Dependence on key suppliers

We source materials and components from many suppliers in various locations and in some instances are more dependent on a limited number of suppliers for particular items. If any of these suppliers or subcontractors fail to meet the Group's requirements, we may not have readily available alternatives, thereby impacting our ability to provide an appropriate level of customer service.

We aim to secure multiple sources of supply for all materials and components and develop strong relationships with our major suppliers. We review the performance of strategically important suppliers globally on an on-going basis.

●	Dependence on key customers

Whilst the Group has a wide customer base, the loss of a key customer, or a significant worsening in their success or financial performance, could result in a material impact on the Group's results.

We monitor closely our performance with all customers through developing strong relationships, analysis of sales trends and financial performance of our key customers. We continue to expand our customer base including entering into new channels of distribution to expand our portfolio of customers.

●

Employees

We employ around 1,900 people and are exposed to a risk of being unable to retain or recruit suitable talent to support the business.

We manufacture and supply products from a number of locations and it is important that our employees operate in a professional and safe environment.

We recognise that it is important to motivate and retain capable people across our businesses to ensure that we are not exposed to risk of unplanned staff turnover. We fairly reward our employees and have appropriate staff recruitment, appraisal, talent management and succession planning strategies to ensure we recruit and retain good quality people across the business.

We take our employees' health and safety very seriously and have appropriate processes in place to allow us to monitor any issues.

●	Laws and regulations

We are subject to a comprehensive range of legal obligations in all countries in which we operate. As a result, we are exposed to many forms of legal risk. These include, without limitation, regulations relating to government contracting rules, anti-bribery provisions, competition, and health and safety laws in numerous jurisdictions around the world. Failure to comply with such laws could significantly impact the Group's reputation and could expose the Group to fines and penalties.

We have resources dedicated to legal and regulatory compliance supported by external advice where necessary. We enhance our controls, processes and employee knowledge to maintain good governance and to comply with new laws and regulations such as the provisions of the UK Bribery Act 2010. The Group has processes in place to ensure that its worldwide business units understand and apply the Group's culture and processes to their own operations.

●	Reputation of Vitec Group

Damage to our reputation and our brand names can arise from a range of events such as poor product performance, unsatisfactory customer service, and other events either within or outside our control.

We recognise the importance of our reputation and attempt to identify any potential issues quickly and address them appropriately. We recognise the importance of providing high quality products, good customer service and managing our business in a safe and professional manner. This requires all employees to commit to and comply with the Vitec Code of Business Conduct.

●	Exchange rates

The global nature of the Group's business means it is exposed to volatility in currency exchange rates in respect of foreign currency denominated transactions, and the translation of net assets and income statements of foreign subsidiaries and equity accounted investments. The Group is exposed to a number of foreign currencies, the most significant being the US Dollar and Euro.

We regularly review and assess our exposure to changes in exchange rates. We reduce the impact of sudden movements in exchange rates with the use of appropriate hedging activities on forecast foreign exchange net exposures. We do not hedge the translation effect of exchange rate movements on the Income Statement or Balance Sheet of overseas subsidiaries.

Outlook

Against the background of a challenging economic environment and our limited order visibility, Vitec has decided to take appropriate actions to streamline certain operations, including a further shift to areas of lower cost manufacturing.  These actions better position Vitec for the future and the Board remains confident about the prospects for the Group.

Going Concern

The Directors have made appropriate enquiries and consider that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.

John McDonough CBE	Stephen Bird
Chairman	Group Chief Executive

Consolidated Income Statement
For the year ended 31 December 2012
		2012	2011
	Notes	£m	£m
Revenue		345.3	351.0
Cost of sales		(198.1)	(204.9)
Gross profit		147.2	146.1
Operating expenses		(121.6)	(120.8)
Operating profit		25.6	25.3
Comprising
- Operating profit before charges associated with acquired businesses		39.3	34.5
- Charges associated with acquired businesses	2	(13.7)	(9.2)
		25.6	25.3
Finance income	3	2.5	3.1
Finance costs	3	(5.6)	(4.6)
Disposal of business	8	(6.4)	-
Profit before tax		16.1	23.8
Comprising
- Profit before tax, excluding charges associated with acquired     businesses and disposal of business		36.2	33.0
- Charges associated with acquired businesses	2	(13.7)	(9.2)
- Disposal of business	8	(6.4)	-
		16.1	23.8
Taxation	4	(10.2)	(8.8)
Profit for the year attributable to owners of the parent		5.9	15.0
Adjusted earnings per share (see note 5)
Basic earnings per share		55.8p	51.4p
Diluted earnings per share		55.3p	50.1p
Earnings per share (see note 5)
Basic earnings per share		13.6p	34.7p
Diluted earnings per share		13.4p	33.9p
Dividends per ordinary share
Prior year final paid 12.5p		£5.4m
Current year interim paid 8.5p		£3.7m
Current year final proposed 13.5p		£5.9m
Average exchange rates
Euro		1.23	1.15
US$		1.58	1.60

Consolidated Statement of Comprehensive Income
For the year ended 31 December 2012
	2012	2011
	£m	£m
Profit for the year	5.9	15.0
Other comprehensive income:
Actuarial (loss)/gain on pension obligations, net of tax	(3.8)	0.4
Foreign exchange gain recycled to the Income Statement on disposal of business	(2.0)	-
Currency translation differences on foreign currency subsidiaries	(8.2)	0.1
Net gain/(loss) on designated effective net investment hedges	2.4	(0.2)
Amounts released to Income Statement in relation to cash flow hedges, net of tax	0.3	0.5
Effective portion of changes in fair value of cash flow hedges	2.1	(1.3)
Total comprehensive (loss)/income for the year attributable to owners of the parent	(3.3)	14.5

Consolidated Balance Sheet
As at 31 December 2012
		2012	2011
		£m	£m
Assets
Non-current assets
Intangible assets		68.2	75.0
Property, plant and equipment		48.6	50.1
Trade and other receivables		0.5	0.4
Derivative financial instruments		0.6	-
Deferred tax assets		14.4	15.8
		132.3	141.3
Current assets
Inventories		59.5	66.4
Trade and other receivables		50.1	50.7
Derivative financial instruments		1.8	0.3
Current tax assets		1.0	0.8
Cash and cash equivalents		10.0	6.9
		122.4	125.1
Total assets		254.7	266.4
Liabilities
Current liabilities
Bank overdrafts		0.7	0.7
Trade and other payables		44.4	58.3
Derivative financial instruments		0.1	1.6
Current tax liabilities		6.6	7.4
Provisions		2.5	4.1
		54.3	72.1
Non-current liabilities
Interest-bearing loans and borrowings		73.0	56.6
Other payables		1.0	1.2
Post-employment obligations		9.4	4.9
Provisions		1.2	1.6
Deferred tax liabilities		1.2	0.7
		85.8	65.0
Total liabilities		140.1	137.1
Net assets		114.6	129.3
Equity
Share capital		8.8	8.7
Share premium		10.4	9.8
Translation reserve		(2.0)	5.8
Capital redemption reserve		1.6	1.6
Cash flow hedging reserve		1.5	(0.9)
Retained earnings		94.3	104.3
Total equity		114.6	129.3
Balance Sheet exchange rates
Euro		1.23	1.20
US$		1.63	1.55

Consolidated Statement of Changes in Equity
	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 2012	8.7	9.8			5.8	1.6	(0.9)	104.3	129.3
Total comprehensive income for the year
Profit for the year	-	-			-	-	-	5.9	5.9
Other comprehensive income
Actuarial loss on pension obligations, net of tax	-	-			-	-	-	(3.8)	(3.8)
Foreign exchange gain recycled to the Income Statement on disposal of business	-	-			(2.0)	-	-	-	(2.0)
Currency translation differences on foreign currency subsidiaries	-	-			(8.2)	-	-	-	(8.2)
Net gain on designated effective net investment hedges	-	-			2.4	-	-	-	2.4
Amounts released to Income Statement in relation to cash flow hedges, net of tax	-	-			-	-	0.3	-	0.3
Effective portion of changes in fair value of cash flow hedges	-	-			-	-	2.1	-	2.1
Contributions by and distributions to owners
Dividends paid	-	-			-	-	-	(9.1)	(9.1)
Own shares purchased	-	-			-	-	-	(4.8)	(4.8)
Share-based payment charge	-	-			-	-	-	1.8	1.8
New shares issued	0.1	0.6			-	-	-	-	0.7
Balance at 31 December 2012	8.8	10.4			(2.0)	1.6	1.5	94.3	114.6
	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 2011	8.6	9.6			5.9	1.6	(0.1)	98.7	124.3
Total comprehensive income for the year
Profit for the year	-	-			-	-	-	15.0	15.0
Other comprehensive income
Actuarial gain on pension obligations, net of tax	-	-			-	-	-	0.4	0.4
Currency translation differences on foreign currency subsidiaries	-	-			0.1	-	-	-	0.1
Net loss on designated effective net investment hedges	-	-			(0.2)	-	-	-	(0.2)
Amounts released to Income Statement in relation to cash flow hedges, net of tax	-	-			-	-	0.5	-	0.5
Effective portion of changes in fair value of cash flow hedges	-	-			-	-	(1.3)	-	(1.3)
Contributions by and distributions to owners
Dividends paid	-	-			-	-	-	(8.2)	(8.2)
Own shares purchased	-	-			-	-	-	(2.8)	(2.8)
Share-based payment charge	-	-			-	-	-	1.2	1.2
New shares issued	0.1	0.2			-	-	-	-	0.3
Balance at 31 December 2011	8.7	9.8			5.8	1.6	(0.9)	104.3	129.3

Consolidated Statement of Cash Flows
For the year ended 31 December 2012
									2012			2011
							Notes		£m			£m
Cash flows from operating activities
Profit for the year									5.9			15.0
Adjustments for:
Taxation									10.2			8.8
Depreciation									12.6			13.2
Amortisation of intangible assets									5.2			4.9
Impairment of goodwill									8.8			5.2
Net gain on disposal of property, plant and equipment and   software									(0.3)			(2.6)
Fair value gains on derivative financial instruments									(0.2)			(0.1)
Share-based payment charge									1.8			1.2
Contingent consideration on previous acquisitions									1.0			-
Disposal of business									6.4			-
Financial income									(2.5)			(3.1)
Financial expense									5.6			4.6
Operating profit before changes in working capital and provisions									54.5			47.1
Decrease/(increase) in inventories									1.3			(8.4)
Decrease /(increase) in receivables									(4.4)			(3.2)
(Decrease)/increase in payables									(11.8)			6.0
(Decrease)/increase in provisions									(1.2)			(2.4)
Cash generated from operating activities									38.4			39.1
Interest paid									(3.1)			(1.8)
Tax paid									(10.8)			(11.1)
Net cash from operating activities									24.5			26.2
Cash flows from investing activities
Proceeds from sale of property, plant and equipment and software									1.8			6.4
Purchase of property, plant and equipment									(14.2)			(13.7)
Capitalisation of software and development costs									(1.3)			(2.4)
Acquisition of businesses, net of cash acquired							7		(10.6)			(27.9)
Disposal of business							8		(2.1)			-
Net cash used in investing activities									(26.4)			(37.6)
Cash flows from financing activities
Proceeds from the issue of shares									0.7			0.3
Own shares purchased									(4.8)			(2.8)
Proceeds from interest-bearing loans and borrowings									18.8			21.6
Dividends paid									(9.1)			(8.2)
Net cash used in financing activities									5.6			10.9
Increase/(decrease) in cash and cash equivalents									3.7			(0.5)
Cash and cash equivalents at 1 January									6.2			6.7
Effect of exchange rate fluctuations on cash held									(0.6)			-
Cash and cash equivalents at 31 December							9		9.3			6.2
Segment reporting
The Group has three reportable segments which are reported in a manner that is consistent with the internal reporting provided to the Chief Operating Decision Maker (considered to be the Board).
		Videocom		Imaging (1)		Services		Corporate and unallocated			Consolidated
		2012	2011	2012	2011	2012	2011	2012		2011	2012		2011
		£m	£m	£m	£m	£m	£m	£m		£m	£m		£m
Revenue from external customers:
Sales		137.1	134.0	166.1	183.2	7.0	7.5	-		-	310.2		324.7
Services		9.1	2.2	-	-	26.0	24.1	-		-	35.1		26.3
Total revenue from external customers		146.2	136.2	166.1	183.2	33.0	31.6	-		-	345.3		351.0
Inter-segment revenue (2)		2.5	2.3	0.2	0.6	0.1	0.1	(2.8)		(3.0)	-		-
Total revenue		148.7	138.5	166.3	183.8	33.1	31.7	(2.8)		(3.0)	345.3		351.0
Segment result		15.8	12.7	22.3	21.2	1.2	0.6	-		-	39.3		34.5
Fair value adjustment to contingent consideration on previous acquisitions		(1.2)	-	0.2	-	-	-	-		-	(1.0)		-
Transaction costs relating to acquisitions		(0.3)	(0.5)	-	(0.3)	-	-	-		-	(0.3)		(0.8)
Impairment of goodwill		(8.8)	-	-	(5.2)	-	-	-		-	(8.8)		(5.2)
Amortisation of acquired intangible assets		(3.1)	(2.6)	(0.5)	(0.6)	-	-	-		-	(3.6)		(3.2)
Operating profit		2.4	9.6	22.0	15.1	1.2	0.6	-		-	25.6		25.3
Finance income											2.5		3.1
Finance costs											(5.6)		(4.6)
Loss on disposal of Staging business		-	-	(6.4)	-	-	-	-		-	(6.4)		-
Taxation											(10.2)		(8.8)
Profit for the year											5.9		15.0
Segment assets		111.6	119.6	90.8	100.3	22.4	22.2	4.5		0.8	229.3		242.9
Unallocated assets
Cash and cash equivalents								10.0		6.9	10.0		6.9
Current tax assets								1.0		0.8	1.0		0.8
Deferred tax assets								14.4		15.8	14.4		15.8
Total assets											254.7		266.4
Segment liabilities		23.1	27.3	27.2	33.2	3.9	3.1	4.4		8.1	58.6		71.7
Unallocated liabilities
Bank overdrafts								0.7		0.7	0.7		0.7
Interest-bearing loans and borrowings								73.0		56.6	73.0		56.6
Current tax liabilities								6.6		7.4	6.6		7.4
Deferred tax liabilities								1.2		0.7	1.2		0.7
Total liabilities											140.1		137.1
Cash flows from operating activities		2.8	3.8	13.1	11.7	5.4	5.7	3.2		5.0	24.5		26.2
Cash flows from investing activities		(14.2)	(1.4)	(6.8)	(3.6)	(5.3)	(3.5)	(0.1)		(29.1)	(26.4)		(37.6)
Cash flows from financing activities		-	-	-	-	-	-	5.6		10.9	5.6		10.9
Capital expenditure
Property, plant and equipment		3.1	3.2	4.2	4.4	6.8	5.8	0.1		0.3	14.2		13.7
Intangible assets		0.6	0.7	0.6	1.2	0.1	0.5	-		-	1.3		2.4
(1) The Imaging and Staging segment has been renamed the Imaging segment following the disposal of the Staging business in the year.
(2) Inter-segment pricing is determined on an arm's length basis.

Geographical segments
	2012	2011
	£m	£m
Analysis of revenue from external customers, by location of customer
United Kingdom	32.9	26.0
The rest of Europe	79.4	89.3
North America	155.5	156.9
Asia Pacific	60.4	61.0
The rest of the World	17.1	17.8
Total revenue from external customers	345.3	351.0
The Group's operating segments are located in several geographical locations, and sell products and services on to external customers in all parts of the world.

1.   Accounting policies

Basis of preparation and statement of compliance These financial statements have been prepared in accordance with EU endorsed International Financial Reporting Standards (IFRS), International Financial Reporting Interpretations Committee (IFRICs) and the Companies Act 2006 applicable to companies reporting under IFRS.

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. Those which may be relevant to the Group are set out below.

IAS 19 Employee Benefits (2011)

IAS 19 (2011) changes the definition of short-term and other long-term employee benefits to clarify the distinction between the two. For defined benefit plans, removal of the accounting policy choice for recognition of actuarial gains and losses is not expected to have any impact on the Group. The Group has considered the impact of the change in measurement principles on the defined benefit liability at 31 December 2012 and concluded that it is not material; this will continue to be monitored during 2013.

2.   Charges associated with acquired businesses
Charges associated with acquired businesses are excluded from key performance measures in order to more accurately show the underlying current business performance of the Group in a consistent manner and reflect how the business is managed and measured on a day-to-day basis. Such costs include non-cash charges such as impairment of goodwill and amortisation of acquired intangible assets, and cash charges such as transaction costs and fair value adjustments to contingent consideration since date of acquisition.
	2012	2011
	£m	£m
Contingent consideration on previous acquisitions (1)	(1.0)	-
Transaction costs relating to acquisitions (2)	(0.3)	(0.8)
Impairment of goodwill (3)	(8.8)	(5.2)
Amortisation of acquired intangible assets	(3.6)	(3.2)
Charges associated with acquired businesses before tax	(13.7)	(9.2)
Tax on charges associated with acquired businesses	1.3	2.0
Charges associated with acquired businesses, net of tax	(12.4)	(7.2)
(1)  A contingent consideration of £1.2 million has been provided for at 31 December 2012 in respect of a prior period acquisition (Haigh-Farr). A contingent consideration of £0.7 million provided within goodwill at 31 December 2011 in respect of a prior period acquisition (Manfrotto Lighting, previously Lastolite), was reversed by £0.2 million. The net charge of £1.0 million is included within administrative expenses, in the charges associated with acquired businesses.
(2) £0.3 million transaction costs were incurred in relation to the acquisition of Camera Corps.
(3) The annual impairment review of goodwill led to a charge of £8.8 million to the goodwill of the IMT business, in the Videocom Division.

3.   Net finance expense
	2012	2011
	£m	£m
Finance income
Expected return on assets in the pension scheme	2.2	2.8
Net currency translation gains	0.3	0.3
	2.5	3.1
Finance expense
Interest payable on interest-bearing loans and borrowings	(3.2)	(1.9)
Interest charge on defined benefit pension scheme liabilities	(2.4)	(2.7)
	(5.6)	(4.6)
Net finance expense	(3.1)	(1.5)

4.   Taxation
	2012	2011
	£m	£m
The total taxation charge/(credit) in the Income Statement is analysed as follows:
Before charges associated with acquired businesses and disposal of business
Current tax	9.8	8.7
Deferred tax	2.1	2.1
	11.9	10.8
Charges associated with acquired businesses and disposal of business
Current tax (1)	-	(0.3)
Deferred tax (2)	(1.7)	(1.7)
	(1.7)	(2.0)
Summarised in the Income Statement as follows
Current tax	9.8	8.4
Deferred tax	0.4	0.4
	10.2	8.8
(1) Current tax credits of £0.3 million were recognised with a corresponding credit to Charges associated with acquired businesses in 2011. This related to the current tax impact of the amortisation of intangible assets in the period.  There is no impact of the amortisation of intangibles to current tax in 2012.
(2) Deferred tax credits of £1.7 million have been recognised. £1.3 million relates to the deferred tax impacts of the amortisation of Intangible assets. The remaining £0.4 million relates to the deferred tax impact of the Staging disposal. In 2011, the impairment of goodwill to the Italian portion of the Staging business resulted in the reversal of a deferred tax liability and a corresponding credit to Charges associated with acquired businesses of £0.7 million with the remaining £1.0 million credit related to the deferred tax impacts of the amortisation of Intangible assets.

5.   Earnings per share Earnings per share ("EPS") is the amount of post-tax profit attributable to each share. Basic EPS is calculated on the profit for the year divided by the weighted average number of ordinary shares in issue during the year. Diluted EPS is calculated on the profit for the year divided by the weighted average number of ordinary shares in issue during the year, but adjusted for the effects of dilutive share options. The Adjusted EPS measure is used by Management to assess the underlying performance of the ongoing businesses, and therefore exclude charges associated with acquired businesses and loss on disposal of business, both net of tax. The calculation of basic, diluted and adjusted EPS is set out below: Profit 2012 £m 2011 £m Profit for the financial year 5.9 15.0 Add back: Charges associated with acquired businesses, net of tax 12.4 7.2 Loss on disposal of Staging business, net of tax 6.0 - Earnings before charges associated with acquired businesses and loss on disposal of business 24.3 22.2 2012 Number 2011 Number 2012 pence 2011 pence 2012 pence 2011 pence Weighted average number of shares '000 Adjusted earnings per share Earnings per share Basic 43,520 43,197 55.8 51.4 13.6 34.7 Dilutive potential ordinary shares: -     Employee share options 311 975 (0.4) (1.2) (0.1) (0.7) -     Deferred bonus plan 115 102 (0.1) (0.1) (0.1) (0.1) Diluted 43,946 44,274 55.3 50.1 13.4 33.9

6.   Dividend
After the Balance Sheet date the following final dividend for year ended 31 December 2012 was recommended by the Directors and subject to approval by shareholders at the AGM on 15 May 2013 will be paid on 17 May 2013. The dividend has not been provided for at the year end and there are no tax consequences.
	2012	2011
	£m	£m
13.5p per ordinary share (2011: 12.5p)	5.9	5.4

7.   Acquisition of Camera Corps
On 10 April 2012, the Group acquired the whole of the share capital of Camera Corps Ltd ("Camera Corps"). Based in the UK, Camera Corps is a world leading provider of speciality remote camera systems used by broadcasters for capturing high quality images. This includes the Q-Ball™ which provides high definition images from a small, highly flexible and easy to operate camera system that is being increasingly used at events including top sporting events such as the Olympics to reality TV shows. The acquisition complements the Group's existing range of broadcast equipment and its products are being marketed through the Group's global distribution network. The Group's Services Division is the existing US distributor of the Q-Ball™. Camera Corps operates within the Videocom Division .
The acquisition was funded from existing cash resources.
A summary of the effect of the acquisition of Camera Corps is detailed below:
	Book value at acquisition	Provisional fair value adjustments	Fair value of net assets acquired
	£m	£m	£m
Net Assets acquired
Intangible assets	-	3.1	3.1
Property, plant and equipment	1.1	(0.3)	0.8
Inventories	0.4	(0.1)	0.3
Trade and other receivables	0.8	-	0.8
Trade and other payables	(1.2)	(0.1)	(1.3)
Cash	0.7	-	0.7
Deferred tax	(0.1)	(0.6)	(0.7)
	1.7	2.0	3.7
Goodwill			5.0
Cash consideration			8.7
The value of the gross trade receivables at acquisition date amounted to £0.3 million reflecting Management's estimate of the fair value to be attributed.
The results of Camera Corps have been included in the Videocom Division and comprise:
			£m
Revenue			7.0
Operating profit (1)			2.3
Had the acquisition been made at the beginning of the year (i.e.1 January 2012) it would have contributed £7.6 million to revenue and £2.3 million to the operating profit of the Group.
(1) Operating profit is stated before amortisation of intangible assets and after allocation of Head Office costs.
An analysis of the cash flows relating to acquisitions is provided below.
			£m
Net outflow of cash in respect of acquisitions
Total purchase consideration			8.7
Transaction costs			0.3
Cash acquired			(0.7)
Net cash outflow in respect of 2012 acquisition			8.3
Contingent consideration in relation to Litepanels, acquired in August 2008			1.5
Contingent consideration in relation to Manfrotto Lighting (previously Lastolite), acquired in March 2011			0.5
Working capital adjustment in relation to Haigh-Farr, acquired in December 2011			0.6
Cash paid in 2012 in respect of prior year acquisitions			2.6
Net cash outflow in respect of acquisitions(2)			10.9
(2) Transaction costs of £0.3 million are included in cash flows from operating activities and net cash consideration paid of £10.6 million is included in cash flows from investing activities.

8.   Disposal

During the second half of the year the Group sold its Staging business, which was previously included in the Imaging Division. The Staging companies were based in the UK, USA, Mexico, Italy and Slovakia. The disposal enables Management to place greater focus on opportunities in the Group's core markets.

The disposal was completed on 13 August 2012. The net cash outflow, after transaction costs, was £2.1 million resulting in a loss on disposal of £6.4 million after taking into account transaction costs together with the net assets disposed (£6.3 million) offset by cash consideration (£0.3 million) and the previously recorded foreign exchange gain that has been recycled to the Income Statement (£2.0 million).

9.   Analysis of net debt
The table below analyses the Group's components of net debt and their movements in the year.
	2012	2011
	£m	£m
Increase/(decrease) in cash and cash equivalents	3.7	(0.5)
Proceeds from interest-bearing loans and borrowings	(18.8)	(21.6)
(Increase)/decrease in net debt resulting from cash flows	(15.1)	(22.1)
Effect of exchange rate fluctuations on cash held	(0.6)	-
Effect of exchange rate fluctuations on debt held	2.4	(0.2)
Effect of exchange rate fluctuations on net debt	1.8	(0.2)
Movements in net debt in the year	(13.3)	(22.3)
Net debt at 1 January	(50.4)	(28.1)
Net debt at 31 December	(63.7)	(50.4)
Cash and cash equivalents in the Balance Sheet	10.0	6.9
Bank overdrafts	(0.7)	(0.7)
Cash and cash equivalents in the Statement of Cash Flows	9.3	6.2
Interest-bearing loans and borrowings	(73.0)	(56.6)
Net debt at 31 December	(63.7)	(50.4)

 

END

 

 

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