Final Results

RNS Number : 4408Y

The Vitec Group PLC

01 March 2012

 



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.

1 March 2012

The Vitec Group plc

2011 Full Year Results

 

A year of profitable growth and successful delivery of our strategy

The Vitec Group plc ("Vitec"), the international provider of products and services for the broadcast, photographic, and MAG (military, aerospace and government) markets, announces its audited results for the year ended 31 December 2011.

Results	2011	2010	% Change	% Change
				Organic CER**
Revenue	£351.0m	£309.6m	13.4%	15.0%
Before significant items*
Operating profit	£34.5m	£27.7m	24.5%	18.0%
Profit before tax	£33.0m	£26.7m	23.6%	16.8%
Basic earnings per share	51.4p	41.9p	22.7%	15.9%
After significant items*
Operating profit	£25.3m	£22.6m	11.9%
Profit before tax	£23.8m	£21.7m	9.7%
Basic earnings per share	34.7p	42.8p	(18.9)%
Free cash flow+	£17.3m	£18.0m	(3.9)%
Net debt	£50.4m	£28.1m
Total dividend per share	20.5p	19.0p	7.9%

**Organic CER: At Constant Exchange Rates excluding year on year effect of acquisitions and disposals

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

Key points

·      Revenue growth of 13.4% and a 24.5% increase in operating profit*

·      Growth in Broadcast and Video markets

·      Manfrotto Powerbrand products selling ahead of Management's expectations

·      Acquisition and successful integration of the Lastolite lighting accessories business

·      Completion of Haigh-Farr acquisition to complement our MAG activities

·      Profit before tax* rose by 23.6% to £33.0 million

·      Recommended 9.6% increase in final dividend to 12.5 pence per share gives rise to a full year dividend of 20.5 pence per share

 * 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. 2011 Significant items in operating profit total a charge of £9.2 million (2010: £5.1 million) and comprise:

·      £3.2 million amortisation of acquired intangibles (2010: £7.6 million);

·      £5.2 million impairment charge in relation to the full impairment of goodwill in the Group's Staging businesses (2010: £nil);

·      £0.8 million of acquisition costs (2010: £nil); and

·      The 2010 results also included: £2.2 million profit on disposal of Clear-Com; £2.5 million curtailment gain on closure of the UK defined benefit pension scheme net of closure costs; £2.1 million exit costs on BAS relocation project and £0.1 million impairment loss on property, plant and equipment.

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

"I am very pleased with the results for 2011 where the execution of our strategy has resulted in continued profitable growth enhanced by strategic acquisitions.

In 2011 we achieved strong sales growth in the Broadcast market where Vitec has an extensive global presence with well-established market leading products. We have continued to invest in new product development and early sales of our Manfrotto Powerbrand have exceeded expectations. We have added market leading products and technologies through our Lastolite and Haigh-Farr acquisitions and made encouraging progress in the lumpy MAG market.

Although the macroeconomic environment is uncertain, Vitec is investing in three core markets that we believe have good underlying growth drivers. We therefore anticipate another year of progress in 2012."

Enquiries:

The Vitec Group plc                                          

Stephen Bird, Group Chief Executive                                        Telephone: [phone]

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 28 February 2012: £1 = $1.58, £1 = €1.18, €1 = $1.34.

3.   2011 average exchange rates: £1 = $1.60, £1 = €1.15, €1 = $1.39.

4.   2010 average exchange rates: £1 = $1.55, £1 = €1.17, €1 = $1.33.

5.   The Company's AGM will be held on Tuesday 8 May 2012. The Annual Report and Accounts and Notice of Annual General Meeting will be posted to shareholders and available on the Company's website from 3 April 2012.

Vitec is an international Group principally serving customers in the broadcast, photographic and military, aerospace and government (MAG) markets. Listed on the London Stock Exchange with 2011 revenue of £351.0 million, 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 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: www.vitecgroup.com.

Directors' responsibility statement

The financial information for the year ended 31 December 2011 contained in this announcement was approved by the Board on 29 February 2012. 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 2010 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 December 2011 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.

2011 Performance Overview

Vitec delivered strong profitable growth in 2011 as we continued to execute our three market strategy.

Reported revenue rose by 13.4%, to £351.0 million (2010: £309.6 million) including contributions for part of the year from Lastolite acquired in March 2011 and Haigh-Farr acquired in December 2011. Revenue was boosted by strong growth in our broadcast and photographic equipment markets and continued progress in a lumpy MAG market.

Reported operating profit* increased by 24.5% to £34.5 million (2010: £27.7 million), with organic growth of 18.0% at constant exchange rates. The operating margin increased to 9.8% (2010: 8.9%). Reported Group profit before tax* was 23.6% higher at £33.0 million or 16.8% on an organic basis at constant exchange rates. Underlying Group basic earnings per share* was up 22.7% at 51.4 pence per share (2010: 41.9 pence per share).

Cash generation was good and as planned, with free cash flow of £17.3 million (2010: £18.0 million) after increases in inventory and receivables to support sales growth and new product launches including Manfrotto Powerbrand. The working capital to sales ratio remained steady at 15.9% (31 December 2010: 15.8%).

Net debt at 31 December 2011 was £50.4 million (31 December 2010: £28.1 million) with the increase primarily reflecting £28.7 million of acquisitions made in the year. This was financed by £24.4 million of drawings under our £100 million revolving credit facility and $50 million (£32.2 million) drawn from a new $75 million Private Placement shelf facility that was put in place during the year. Vitec's balance sheet remains strong with a year-end net debt to EBITDA ratio of 1.0 times (31 December 2010: 0.7 times).

The Board has recommended a final dividend of 12.5 pence per share (2010: 11.4 pence per share) that will be subject to approval at the Company's Annual General Meeting to be held on Tuesday, 8 May 2012.  If approved, the final dividend will be paid on Friday, 11 May 2012 to shareholders on the register at the close of business on Friday, 20 April 2012.  The full year dividend of 20.5 pence per share (2010: 19.0 pence per share) equates to a dividend cover of 2.5 times (2010: 2.2 times) based on basic earnings per share before Significant items.  We will again be offering the Dividend Reinvestment Plan for the final dividend to enable shareholders to reinvest their dividend into Vitec shares should they wish.

* 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 (as defined on page 1 of this announcement).

International Profile

Vitec benefits significantly from the wide geographical spread of its business. In 2011, 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 7% of our revenue is derived from the UK. We currently have a direct presence in 14 countries around the world: the UK, USA, Mexico, Brazil, Costa Rica, France, Germany, Italy, Netherlands, Slovakia, Israel, Japan, China and Singapore.

Three Market Strategy Update

We continued to execute successfully our Three Market Strategy in 2011.

1 Broadcast and video

Vitec has leading brands in the broadcast and video market which comprises products and services aimed at television networks and studios (broadcast) and corporate, religious and educational entities (video).

In the broadcast sector we have continued to maintain our premium market position and believe that 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 launched a major new range of supports, the Sachtler Ace, designed for the needs of the independent cameraman.

2 Photographic

Vitec continued to supply its range of products (tripods, heads, bags and lighting supports and controls) to the professional photographic segment. We have also invested in and launched a new 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. In the consumer segment, we increased our penetration in consumer electronics stores and in mass merchandiser outlets as well as on-line.  Based on independent research data, we have increased our market share in the US and in Europe in tripods and bags.

3 Military, aerospace and government (MAG)

We continue to leverage our broadcast microwave technology into the MAG market. We have had success in winning significant orders particularly in the law enforcement segment and have begun to make inroads in the defence segment, especially for unmanned applications, though the precise timing of future orders remains uncertain.

Operational Review

Group highlights

Vitec's strong performance in 2011 was driven by sales of established products, the launch of new products including the Manfrotto Powerbrand and an earnings enhancing acquisition.

We continue to invest in new products and enhancements to our existing range and in our research, development and engineering capabilities. After adjusting for capitalised expenditure of £0.1 million (2010: £1.5 million) and amortisation of £0.5 million (2010: £0.2 million), research, development and engineering expenditure on a like-for-like basis was £11.8 million (2010: £10.6 million). This represents an investment equal to 4% of Group product sales (2010: 4%) after adjusting for £0.5 million of expenditure incurred in the Clear-Com business which was sold in 2010.

We acquired Lastolite in March 2011 for a total potential consideration of £9.8 million to augment our range of lighting accessories for the photographic market. Lastolite supplies a market-leading range of lighting controls such as reflectors and has been successfully integrated in our Imaging & Staging Division. 

As part of our growth into the MAG market, we acquired Haigh-Farr in mid-December 2011 for an initial cash consideration of $31.0 million (£20.0 million) subject to working capital adjustments. Haigh-Farr designs, develops and manufactures high performance antennae for defence, space and commercial applications and we are confident that it will enhance our penetration into these markets.   

We continue to invest in the development of our people as the capability and capacity of our organisation is a core component of our strategy.  In 2012 we will continue to focus on attracting and engaging the very best talent.

Videocom Division

Our Videocom Division 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. More recently our mission-critical wireless communication and surveillance products have successfully entered the military, aerospace and government (MAG) markets.

	2011	2010	r %
Revenue	£136.2m	£121.6m	12.0%
Operating Profit*	£12.7m	£8.4m	51.2%
Operating Margin*	9.3%	6.9%	2.4 pts

* Before Significant items as defined on page 1 of this announcement.

Markets

We estimate that the broadcast and video market for products and services supplied by Vitec was worth around £750 million in 2011. 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 and receivers and now antennae via Haigh-Farr, our most recent acquisition. We estimate this market to be worth around £400 million. Vitec serves law enforcement agencies, '3-letter agencies' such as the US Department of Justice, and defence customers.

The broadcast market is anticipated to benefit from continued changes in camera technology and has become less dependent on advertising revenue as subscription television gains in popularity. Whilst cost pressures in the MAG market continue and the timing of the awards of large contracts remains variable, we believe that we are well-placed given our focus on intelligence, surveillance and reconnaissance, especially on unmanned applications.

Operations

Videocom's revenue for 2011 was £136.2 million (2010: £121.6 million), an increase of 12.0% or 18.4% in organic constant currency. This is after adjusting for the acquisition of Haigh-Farr that was acquired only a few weeks before the year-end and the disposal of Clear-Com in the prior year. Operating profit* rose 51.2% to £12.7 million, an increase of 31.0% in organic constant currency terms.

Sales of our supports, prompters and bags products grew strongly. This included contracts to supply television studios notably in Turkmenistan, Kazakhstan and China. In addition, we received significant orders for the Sachtler Ace range of supports that was launched in September 2011 specifically for the business and industry user. These products have patented pan and tilt technology and was launched under our market-leading Sachtler brand.

Our Litepanels LED lighting business grew sales by approximately 20% benefiting from continued adoption of LED technology by major US, European and Asian broadcasters in both studio and news gathering applications. LED lighting can meet a broadcast studio's lighting requirements with the benefits of lower power consumption and less heat than traditional lighting technologies generating a compelling investment case. We continue to launch new products including updating our range of LED lights targeted at the business and industry segment.

Anton/Bauer, our mobile power business, grew strongly in 2011. Sales of batteries and chargers for broadcast and film users were helped by the introduction of new "film-style" cameras. It has also achieved initial success in a new market of supplying batteries and chargers to power carts in hospitals. These carts house medical devices or electronic equipment and are increasingly being used in US hospitals.    

IMT, our microwave systems business, has achieved sales growth in the MAG market where our products are used by law enforcement agencies and the armed forces. IMT also continued to win business in the broadcast market with noteworthy success in the US, Turkey, Russia and Brazil. In addition, we grew sales significantly in the sports and entertainment segment in the US where our equipment is used to interview teams and their fans.

Key achievements

·      Major project wins in Turkmenistan, Kazakhstan and China;

·      Strong sales by the Anton/Bauer mobile power business to broadcast and film users;

·      Continued strong growth of Litepanel's LED lighting as the product range is further developed;

·      Successful launch of the Sachtler Ace range of camera supports;

·      Vinten Radamec has won orders to supply studio equipment for Sky Sports' new Sky Deutschland 24 hour channel, with associated orders for Autoscript and Litepanels;

·      IMT received its first orders from the US Army for unmanned applications; and

·      Completion of the Haigh-Farr acquisition in December 2011.

 Imaging & Staging Division

Our Imaging & Staging Division provides premium photographic and videographic equipment to both professional and non-professional users and staging systems for live events. The photographic and videographic equipment consists primarily of camera supports, tripods, equipment bags, lighting supports, LED lights and lighting accessories. The staging systems business supplies standard aluminium trusses and custom stage sets.

	2011	2010	r %
Revenue	£183.2m	£153.7m	19.2%
Operating Profit*	£21.2m	£18.9m	12.2%
Operating Margin*	11.6%	12.3%	(0.7)pts

* Before Significant items as defined on page 1 of this announcement.

Markets

We estimate that the photographic market for product categories supplied or distributed by Vitec was worth around £830 million in 2011. Of this market, approximately half is purchased by professional photographers who we have supplied historically and whose business is taking images. The remainder are sold to consumers, that we are now actively serving, 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 customers as the number and type of image-taking devices increases and the distribution of images via social media becomes more popular.

Operations

Revenue for 2011 was £183.2 million, an increase of 19.2% or 16.9% in organic constant currency after adjusting for the acquisition of Lastolite. Operating profit* rose 12.2% to £21.2 million (an increase of 11.2% in organic constant currency terms).

Our Supports business reported good growth in revenue. Our camera supports grew in the professional segment, with strong sales in video in particular, and there was significant success with consumer electronic stores for our tripods, designed for the non-professional user, where we have invested in the Manfrotto Powerbrand initiative. Sales of our Powerband products were ahead of our initial expectations and profits from these sales have broadly covered the launch costs this year. Our lighting supports sales grew in line with growth in the professional imaging markets.

Our branded Bags business grew sales by approximately 40% with a multi-brand strategy of collections designed to match the needs of different customer segments. Manfrotto offers robust urban bags; Kata provides lightweight protective bags for the professional; and there is a range targeted at the outdoor adventurer, manufactured and distributed under licence from National Geographic.

Our Lighting business began to sell LED lights under the Manfrotto name. These improve the quality of an SLR camera's high definition video and provide warm "fill-in" lighting in photographs.  We believe there is a significant opportunity to use LEDs in place of traditional lighting technologies. Our lighting controls that include umbrellas and reflectors are mainly sold under the Lastolite brand which was acquired in March 2011. The acquisition contributed £5.7 million to our external revenue which was in line with our pre-acquisition plans.

Our Staging business grew sales in the year. Brilliant Stages supplied custom stages and engineered solutions for major tours including a large project for "Take That" in 2011. Litec and Tomcat, our brands that supply aluminium trusses for live events, also experienced increased business.

Key achievements

·      Powerbrand sales were ahead of our initial expectations;

·      Success in penetrating new consumer electronic stores in the US, Europe and Far East;

·      Acquisition and successful integration of Lastolite with its leading position in lighting accessories including umbrellas and reflectors;

·      Collaboration between Manfrotto and Litepanels to develop a new range of LED lights aimed at the photographic market; and

·      Seven "Red Dot" awards won in the year which recognise the leading design and innovation of our products.

Services Division

Our Services Division provides the highest quality broadcast equipment and engineering support for the most demanding broadcast and media productions. Its capabilities with broadcast, fibre optics, wireless audio and other technologies make it a complete one-stop solution for top producers globally, and provides insight into technological developments for the Group.

	2011	2010	r %
Revenue	£31.6m	£34.3m	(7.9)%
Operating Profit	£0.6m	£0.4m	50.0%
Operating Margin	1.9%	1.2%	0.7pts

Operations

Revenue for 2011 was £31.6 million, a decrease of 7.9% but an underlying constant currency increase of 12.5% after adjusting by £5.4 million for the Winter Olympics in 2010. Operating profit rose by £0.2 million to £0.6 million. This included higher asset sales including one-off revenue and profits from the sale of a large system to a major customer.

Our strategy is increasingly to focus on large events and solutions-based offerings so that producers can be assured that their mission-critical programmes, such as major sporting and entertainment events, will be broadcast flawlessly.  During 2011, we established a national sales team in the US to focus on key accounts as part of a re-organisation of the Division. This will allow us to consolidate our key resources to better serve our growing core of US and international clients. The re-organisation resulted in the closure of the Seattle branch office and the consolidation of engineering and logistics resources.

Key Achievements

·      Strengthened our relationship with ESPN, the USA's largest sports network by securing multi-year agreements for the US Open tennis and US college football events; and

·      Continued to rationalise our distribution structure.

Financial Review

Revenue

The Group's reported revenue increased by £41.4 million to £351.0 million which was a rise of 13.4% in the year. Acquisitions added £5.8 million and these were partly offset by the loss of £5.3 million of revenue from Clear-Com that was sold in the prior year. On an underlying basis, excluding the impact of £4.1 million of adverse changes in exchange rates and the net impact of acquisitions and disposals, revenue grew by £45.0 million or 15.0%.

Operating profit

Operating profit* rose by £6.8 million to £34.5 million with the Group's operating margin increasing by 90 basis points to 9.8%. The growth in operating profit consisted of a £5.0 million or 18.0% underlying increase, a £1.3 million net contribution from acquisitions/disposal and a £0.5 million benefit from favourable foreign exchange movements after a £1.8 million year-on-year benefit from hedging. There has been an increase in operating expenditure to support the launch of Manfrotto Powerbrand and the increase in sales volume across the Group. Management's estimate of these main drivers are summarised in the following table:

Operating profit before Significant items*
2010-11 Variance Analysis (£ million)
2010 Operating profit*		27.7
Gross margin effects:
- Volume, mix and efficiency	19.6
- Sales price less cost inflation	(0.3)
Operating expenses	(14.3)
		5.0
Acquisitions/disposal		1.3
Foreign exchange effects:
- Translation	(0.3)
- Transaction after hedging	0.8
		0.5
2011 Operating profit*		34.5

* Before Significant items as defined on page 1 of this announcement.

Net financial expense

Net financial expense before Significant items* totalled £1.5 million (2010: £1.0 million). Interest payable was £1.9 million (2010: £1.2 million) and was covered 26 times (2010: 36 times) by earnings before interest, tax, depreciation and amortisation. The higher finance costs reflect the level of debt and include the impact of a $50 million draw-down against the new $75 million Private Placement shelf facility which was put in place during the year.

Profit before tax

Profit before tax* increased by £6.3 million to £33.0 million (2010: £26.7 million). On an organic constant exchange rate basis this represents 16.8% growth. The reported profit before tax and after Significant items was up by 9.7% to £23.8 million.

Taxation

The effective taxation rate on operating profit after net finance expense but before Significant items* remained unchanged at 33% (2010: 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

Basic earnings per share* was 51.4 pence per share (2010: 41.9 pence per share) representing growth of 22.7%. This reflects 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 after Significant items was 34.7 pence per share (2010: 42.8 pence per share).

Significant items

The 2011 Significant items relate to the Group's acquisition activities and amortisation of previously acquired intangibles. The amortisation of acquired intangibles decreased to £3.2 million (2010: £7.6 million) mainly due to the intangibles acquired with IMT being fully amortised by the end of the first half of 2010.

There is a one-off £5.2 million goodwill impairment charge relating to the Group's full impairment of its investment in the Staging business (2010: £nil). While the business was trading in line with expectations in 2011, Management has reassessed its longer-term prospects and concluded that these do not support the carrying value of goodwill.

Other Significant items in operating profit are acquisition costs of £0.8 million relating to the acquisitions of Lastolite and Haigh-Farr. There was no other significant net income during 2011 (2010: £2.5 million gain relating predominantly to the UK pension scheme curtailment).

Finance income included in Significant items is £nil (2010: £0.1 million gain due to currency movements on loans not accounted for as net investment hedges).

There was a tax credit of £2.0 million on these Significant items (2010: £5.4 million).

Acquisitions

The Group made two acquisitions during the year. In March 2011, Vitec acquired Lastolite in the UK for an initial consideration of £8.8 million. It produces highly innovative products for amateur and professional photographers and also owns the Colorama brand of paper backgrounds. This business has been successfully integrated into the Imaging & Staging Division and is performing in line with pre-acquisition expectations. During December 2011, Vitec also completed the acquisition of Haigh-Farr for an initial cash consideration of $31.0 million (£20.0 million). Haigh-Farr is a world leader in the design, development and manufacture of flight-body antennae for simple and sophisticated communication applications and represents an excellent complement to our current MAG focussed activities.

Cash flow and net debt

Cash generated from operating activities was £39.9 million (2010: £34.6 million). The positive cash generation this year is despite the investment made in inventory and receivables in the last quarter as a result of higher revenue and inventory build-up to fulfil new product orders. Working capital management remains a key focus within the Group.

The Group uses the percentage of working capital to sales, inventory days, receivable days and payable days as key performance indicators of its control over working capital. For 2011 the ratios presented exclude Haigh-Farr as it was acquired in the last month of the year. The working capital to sales metric, which now excludes provisions and derivative instruments, has remained steady at 15.9% (31 December 2010: 15.8%).

Inventory rose £11.0 million to £66.4 million at the year-end, reflecting higher activity and holding levels and £2.8 million from acquired businesses. Inventory days increased to 109 (2010: 104 days). Trade receivables increased to £38.7 million (2010: £34.9 million), including £1.7 million from acquisitions, and trade receivable days improved to 38 (2010: 39 days). Trade payable days also improved to 49 (2010: 44 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.

Capital expenditure, including capitalised software and development costs, totalled £16.1 million (2010: £16.5 million), of which £6.4 million (2010: £3.8 million) related to rental assets, partly financed by the proceeds from rental asset disposals of £2.9 million (2010: £1.4 million). Overall capital expenditure was equivalent to 1.1 times depreciation (2010: 1.1 times).

Net tax paid in 2011 of £11.1 million was significantly higher than 2010 (£0.9 million), mainly due to tax refunds relating to Germany and the USA that were received in 2010 and higher payments in Italy and the UK in 2011.

Free cash flow at £17.3 million (2010: £18.0 million) reflects the investment in working capital and increased interest and tax payments.

£28.7 million was spent on acquisitions during the year. Dividends paid to shareholders totalled £8.2 million (2010: £7.9 million) and there was a net cash outflow in respect of shares purchased and issued of £2.5 million (2010: £0.5 million). The net cash outflow for the Group was £22.1 million (2010: £14.2 million inflow) which, after £0.2 million adverse exchange (2010: £1.7 million) increased the net debt to £50.4 million (2010: £28.1 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.

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 2011 set out below:

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 normal Group borrowings and in 2010 forward contracts were also used.

Currency hedging	December	Average rate	December	Average rate
	2011	2011	2010	2010
US Dollars sold for Euros
Forward contracts	$30.9m	1.38	$33.7m	1.37
US Dollars sold for Sterling
Forward contracts	$11.4m	1.58	$8.1m	1.54
Net asset investment hedge	-	-	$12.5m	1.55

Financing activities

The Group's principal financing facility is a five-year £100 million committed multicurrency revolving loan agreement involving five banks, expiring on 8 August 2013. At the end of December 2011 £24.4 million (2010: £34.8 million) of the facility was utilised.

Vitec expects to agree a new revolving credit facility by the end of 2012. Its cost of borrowing under this facility will reflect the prevailing lending rates at that time, an increase from the favourable rates available when the expiring facility was negotiated in August 2008.

During the year, a two year $75 million Private Placement shelf facility was put in place of which $50 million (£32.2 million) was drawn down in two tranches of $25 million each. The $50 million drawn down has a combined fixed interest rate of 4.77% and is due for repayment on 11 May 2017.

The average cost of borrowing for the year was 2.3% (2010: 1.3%). Net interest cost (consisting of net interest payable and commitment fees) was £1.9 million (2010: £1.2 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 2011.

Foreign Exchange

2011 operating profit* benefitted from a £0.5 million favourable foreign exchange effect. The average £/$ and Euro/$ exchange rates were unfavourable compared to 2010 but this was more than offset by favourable £/$ and Euro/$ hedging contracts, which gave rise to the net gain.

Dividend

The Directors have recommended a final dividend of 12.5 pence per share amounting to £5.4 million (2010: 11.4 pence per share, amounting to £4.9 million). The dividend, subject to shareholder approval at the Annual General Meeting, will be paid on 11 May 2012 to shareholders on the register at the close of business on 20 April 2012. This will bring the total dividend for the year to 20.5 pence per share (up 7.9%).

Cutting Clutter

In April 2011 the Financial Reporting Council ("FRC") published a discussion paper, "Cutting Clutter" which provides guidance on ways in which companies can reduce complexity in their annual reports and provide more focus on key information. In light of this publication, Vitec has incorporated a number of changes into its 2011 Annual Report and Accounts to improve its presentation, focus on key governance, and to introduce greater clarity concerning the key accounting policies and their application.

Principal risks and uncertainties

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 eliminate all risks. This is a summary of some of the principal risks facing the Group:

·      Demand for Vitec's products

Demand for Vitec's products may be adversely affected by many factors, including changes in customer and consumer preferences and the Group's ability to deliver appropriate products or to support changes in technology. In addition, demand may be impacted by competitor activity and demand in its target markets reflecting the broader economic environment.

Vitec values its relationships with its customers and closely monitors its target markets and user requirements. It makes appropriate investments in product development, and marketing activities to ensure that it remains competitive in these markets.

·      Major contract awards

Vitec's 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.

The Group attempts to gain a good understanding of likely demand through developing close relationships with its customers. It also has a broad range of contracts that reduces its dependence on any particular contract or customer. The Group actively reviews its orders and trading outlook and manages its resources in line with anticipated activity.

·      New markets and channels of distribution

As Vitec enters new markets and channels of distribution it 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 by the Group.

Vitec has a thorough process for assessing and planning the entry into new markets and related opportunities.  It continuously assesses its performance in these markets and the related opportunities and risks. The Group adapts its approach taking into account its actual and anticipated performance.

·         Acquisitions

Vitec continuously explores opportunities to enhance its business through development activities such as strategic acquisitions. 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.

·         Pricing pressure

Vitec might experience pricing pressure including challenges in raising prices 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 Vitec is unable to reduce its expenses, the Group’s results could be adversely affected.

·         Dependence on key suppliers

The Group sources material and components from many suppliers in various locations and in some instances is more dependent on a limited number of suppliers for particular items.

 

Management attempts to secure multiple sources of supply for all materials and components and develops strong relationships with its major suppliers. Management reviews the performance of strategically important suppliers globally on an on-going basis.

·         Employees

Vitec employs over 2,000 people and is exposed to a risk of being unable to retain or recruit suitable talent to support the business.

 

The Group recognises that it is important to motivate and retain capable people across its businesses to ensure that it is not exposed to risk of unplanned staff turnover. Vitec fairly rewards its employees and has appropriate staff recruitment, appraisal, talent management and succession planning strategies to ensure it recruits and retains good quality people across the business.

 

·         Laws and regulations

The Group is subject to a comprehensive range of legal obligations in all countries in which it operates. As a result, the Group is exposed to many forms of legal risk.

 

The Group has resources dedicated to legal and regulatory compliance supported by external advice where necessary. The Group enhances its 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.

 

·         Reputation of Vitec Group

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

 

The Group recognises the importance of its reputation and attempts to identify any potential issues quickly and address them appropriately. Vitec recognises the importance of providing high quality products, good customer service and managing its 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 regularly reviews and assesses its exposure to changes in exchange rates. The Group reduces the impact of sudden movements in exchange rates with the use of appropriate hedging activities on forecast foreign exchange net exposures. The Group does not hedge the translation effect of exchange rate movements on the Income Statement or Balance Sheet of overseas subsidiaries.

Summary and Outlook

In 2011 we achieved strong sales growth in the Broadcast market where Vitec has an extensive global presence with well-established market leading products. We have continued to invest in new product development and early sales of our Manfrotto Powerbrand have exceeded expectations. We have added market leading products and technologies through our Lastolite and Haigh-Farr acquisitions and made encouraging progress in the lumpy MAG market.

Although the macroeconomic environment is uncertain, Vitec is investing in three core markets that we believe have good underlying growth drivers. We therefore anticipate another year of progress in 2012.

Michael Harper                                                  Stephen Bird

Chairman                                                          Group Chief Executive

Consolidated Income Statement
For the year ended 31 December 2011
		2011													2010
		Before significant items				Significant items (1)					Total				Before significant items					Significant items (1)							Total
		£m				£m					£m				£m					£m							£m
Revenue		351.0				-					351.0				309.6					-							309.6
Cost of sales		(204.9)				-					(204.9)				(183.1)					(1.3)							(184.4)
Gross profit		146.1				-					146.1				126.5					(1.3)							125.2
Other operating income		-				-					-				-					5.2							5.2
Operating expenses		(111.6)				(9.2)					(120.8)				(98.8)					(9.0)							(107.8)
Operating profit/(loss)		34.5				(9.2)					25.3				27.7					(5.1)							22.6
Finance income		3.1				-					3.1				3.1					0.1							3.2
Finance costs		(4.6)				-					(4.6)				(4.1)					-							(4.1)
Net finance expense		(1.5)				-					(1.5)				(1.0)					0.1							(0.9)
Profit/(loss) before tax		33.0				(9.2)					23.8				26.7					(5.0)							21.7
Taxation		(10.8)				2.0					(8.8)				(8.8)					5.4							(3.4)
Profit/(loss) for the year attributable to owners of the parent		22.2				(7.2)					15.0				17.9					0.4							18.3
Earnings per share
Basic earnings per share			51.4p								34.7p				41.9p										42.8p
Diluted earnings per share     50.1p											33.9p				41.0p										41.9p
Dividends per ordinary share
Prior year final paid 11.4p											£4.8m
Current year interim paid 8.0p											£3.4m
Current year final proposed 12.5p											£5.4m
Average exchange rates
Euro											1.15																	1.17
US$											1.60																	1.55
(1) See Note 2 Significant items.

Consolidated Statement of Comprehensive Income
For the year ended 31 December 2011
	2011	2010
	£m	£m
Profit for the year	15.0	18.3
Other comprehensive income:
Actuarial gain on pension obligations, net of tax	0.4	2.5
Currency translation differences on foreign currency subsidiaries	0.1	1.5
Net loss on designated effective net investment hedges	(0.2)	(1.1)
Amounts released to Income Statement in relation to cash flow hedges, net of tax	0.5	(0.7)
Effective portion of changes in fair value of cash flow hedges	(1.3)	-
Total comprehensive income for the year attributable to owners of the parent	14.5	20.5

Consolidated Balance Sheet
As at 31 December 2011
											2011		2010
											£m		£m
Assets
Non-current assets
Intangible assets											75.0		51.8
Property, plant and equipment											50.1		53.4
Trade and other receivables											0.4		0.4
Deferred tax assets											15.8		22.6
											141.3		128.2
Current assets
Inventories											66.4		55.4
Trade and other receivables											50.7		45.4
Derivative financial instruments											0.3		0.9
Current tax assets											0.8		0.3
Cash and cash equivalents											6.9		7.7
											125.1		109.7
Total assets											266.4		237.9
Liabilities
Current liabilities
Bank overdrafts											0.7		1.0
Trade and other payables											58.3		49.7
Derivative financial instruments											1.6		1.0
Current tax liabilities											7.4		9.4
Provisions											4.1		4.6
											72.1		65.7
Non-current liabilities
Bank loans											56.6		34.8
Other payables											1.2		1.5
Post-employment obligations											4.9		7.0
Provisions											1.6		2.2
Deferred tax liabilities											0.7		2.4
											65.0		47.9
Total liabilities											137.1		113.6
Net assets											129.3		124.3
Equity
Share capital											8.7		8.6
Share premium											9.8		9.6
Translation reserve											5.8		5.9
Capital redemption reserve											1.6		1.6
Cash flow hedging reserve											(0.9)		(0.1)
Retained earnings											104.3		98.7
Total equity											129.3		124.3
Balance sheet exchange rates
Euro											1.20		1.17
US$											1.55		1.57
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 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 (Employee Benefit Trust) 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
		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 2010		8.6		9.0			5.5		1.6		0.6	85.9		111.2
Total comprehensive income for the year
Profit for the year		-		-			-		-		-	18.3		18.3
Other comprehensive income
Actuarial gain on pension obligations, net of tax		-		-			-		-		-	2.5		2.5
Currency translation differences on foreign currency subsidiaries		-		-			1.5		-		-	-		1.5
Net loss on designated effective net investment hedges		-		-			(1.1)		-		-	-		(1.1)
Amounts released to Income Statement in relation to cash flow hedges, net of tax		-		-			-		-		(0.7)	-		(0.7)
Contributions by and distributions to owners
Dividends paid		-		-			-		-		-	(7.9)		(7.9)
Own shares (Employee Benefit Trust) purchased		-		-			-		-		-	(1.1)		(1.1)
Share-based payment charge		-		-			-		-		-	1.0		1.0
New shares issued		-		0.6			-		-		-	-		0.6
Balance at 31 December 2010		8.6		9.6			5.9		1.6		(0.1)	98.7		124.3

Consolidated Statement of Cash Flows
For the year ended 31 December 2011
		2011	2010
		£m	£m
Cash flows from operating activities
Profit for the year		15.0	18.3
Adjustments for:
	Taxation	8.8	3.4
	Depreciation	13.2	13.6
	Amortisation of intangible assets	4.9	9.0
	Impairment losses	5.2	0.2
	Net gain on disposal of property, plant and equipment and software	(2.6)	(1.1)
	Fair value (gains)/losses on derivative financial instruments	(0.1)	0.3
	Share-based payment charge	1.2	1.0
	Transaction costs relating to acquisitions	0.8	-
	Profit on disposal of business	-	(2.2)
	Curtailment gain on UK defined benefit pension scheme	-	(3.0)
	Financial income	(3.1)	(3.2)
	Financial expense	4.6	4.1
Operating profit before changes in working capital and provisions		47.9	40.4
(Increase)/decrease in inventories		(8.4)	(6.9)
(Increase)/decrease in receivables		(3.2)	(2.6)
Increase/(decrease) in payables		6.0	7.7
(Decrease)/increase in provisions		(2.4)	(4.0)
Cash generated from operating activities		39.9	34.6
Interest paid		(1.8)	(1.2)
Tax paid		(11.1)	(0.9)
Net cash from operating activities		27.0	32.5
Cash flows from investing activities
Proceeds from sale of property, plant and equipment		6.4	2.0
Purchase of property, plant and equipment		(13.7)	(13.8)
Capitalisation of intangible assets		(2.4)	(2.7)
Contingent consideration on acquisition of subsidiaries		-	(2.5)
Acquisition of businesses, net of cash acquired		(28.7)	-
Proceeds from disposal of business		-	7.1
Net cash used in investing activities		(38.4)	(9.9)
Cash flows from financing activities
Proceeds from the issue of shares		0.3	0.6
Purchase of own shares by Employee Benefit Trust		(2.8)	(1.1)
Proceeds from/(repayment of) bank loans		21.6	(19.0)
Dividends paid		(8.2)	(7.9)
Net cash used in financing activities		10.9	(27.4)
Decrease in cash and cash equivalents		(0.5)	(4.8)
Cash and cash equivalents at 1 January		6.7	12.1
Effect of exchange rate fluctuations on cash held		-	(0.6)
Cash and cash equivalents at 31 December		6.2	6.7

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 & Staging				Services				Corporate and unallocated			Consolidated
	2011	2010	2011		2010		2011		2010		2011	2010		2011	2010
	£m	£m	£m		£m		£m		£m		£m	£m		£m	£m
Revenue from external customers:
Sales	134.0	119.4	183.2		153.7		7.5		7.2		-	-		324.7	280.3
Services	2.2	2.2	-		-		24.1		27.1		-	-		26.3	29.3
Total revenue from external customers	136.2	121.6	183.2		153.7		31.6		34.3		-	-		351.0	309.6
Inter-segment revenue (1)	2.3	2.9	0.6		0.4		0.1		0.2		(3.0)	(3.5)		-	-
Total revenue	138.5	124.5	183.8		154.1		31.7		34.5		(3.0)	(3.5)		351.0	309.6
Segment result	12.7	8.4	21.2		18.9		0.6		0.4		-	-		34.5	27.7
Transaction costs relating to acquisitions	(0.5)	-	(0.3)		-		-		-		-	-		(0.8)	-
Goodwill impairment	-	-	(5.2)		-		-		-		-	-		(5.2)	-
Amortisation of acquired intangible assets	(2.6)	(5.1)	(0.6)		(2.5)		-		-		-	-		(3.2)	(7.6)
Other Significant items	-	2.6	-		(0.1)		-		-		-	-		-	2.5
Operating profit after Significant items	9.6	5.9	15.1		16.3		0.6		0.4		-	-		25.3	22.6
Net finance costs														(1.5)	(0.9)
Taxation														(8.8)	(3.4)
Profit for the year														15.0	18.3
Segment assets	119.6	90.6	100.3		92.8		22.2		23.0		0.8	0.9		242.9	207.3
Unallocated assets
Cash and cash equivalents											6.9	7.7		6.9	7.7
Current tax assets											0.8	0.3		0.8	0.3
Deferred tax assets											15.8	22.6		15.8	22.6
Total assets														266.4	237.9
Segment liabilities	27.3	29.2	33.2		30.4		3.1		1.9		8.1	4.5		71.7	66.0
Unallocated liabilities
Bank overdrafts											0.7	1.0		0.7	1.0
Bank loans											56.6	34.8		56.6	34.8
Current tax liabilities											7.4	9.4		7.4	9.4
Deferred tax liabilities											0.7	2.4		0.7	2.4
Total liabilities														137.1	113.6
Average number of employees	834	798	1,020		895		178		198		20	16		2,052	1,907
Cash flows from operating activities	4.3	4.2	12.0		15.6		5.7		4.2		5.0	8.5		27.0	32.5
Cash flows from investing activities	(1.9)	-	(3.9)		(7.5)		(3.5)		(2.4)		(29.1)	-		(38.4)	(9.9)
Cash flows from financing activities	-	-	-		-		-		-		10.9	(27.4)		10.9	(27.4)
Capital expenditure
Property, plant and equipment	3.2	3.4	4.4		6.7		5.8		3.7		0.3	-		13.7	13.8
Intangible assets	0.7	1.5	1.2		1.1		0.5		0.1		-	-		2.4	2.7
(1) Inter-segment pricing is determined on an arm's length basis.

Geographical segments
	2011	2010
	£m	£m
Analysis of revenue from external customers, by location of customer
United Kingdom	26.0	22.8
The rest of Europe	89.3	72.8
The Americas	164.4	154.0
The rest of the World	71.3	60.0
Total revenue from external customers	351.0	309.6
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 2011. 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 2011, and have not been adopted early in preparing these consolidated financial statements. None of these are anticipated to have any material impact on these consolidated financial statements.
2. Significant items
Significant items 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. In Management's judgement, Significant items include non-cash charges such as impairment and amortisation, and non-operational items that are outside the ordinary course of trading activities.
		2011		2010
		£m		£m
Significant items comprise the following:
- Exit costs on Broadcast Auxiliary Services "BAS" relocation project		-		(1.3)
Cost of sales		-		(1.3)
- Profit on disposal of Clear-Com business		-		2.2
- Curtailment gain on UK defined benefit pension scheme		-		3.0
Other operating income		-		5.2
- Costs associated with UK defined benefit pension scheme		-		(0.5)
- Exit costs on BAS relocation project		-		(0.8)
- Impairment losses on property		-		(0.1)
- Transaction costs relating to acquisitions		(0.8)		-
- Impairment of goodwill in the Staging business		(5.2)		-
- Amortisation of acquired intangible assets		(3.2)		(7.6)
Operating expenses		(9.2)		(9.0)
Significant items included in Operating Profit		(9.2)		(5.1)
- Finance income (1)		-		0.1
Significant items included in Operating Profit before Tax		(9.2)		(5.0)
(1) In 2010, significant finance income of £0.1 million related to currency translation differences arising on certain intra-Group funding balances that did not meet the strict criteria for net investment hedging, but are very similar in nature.

3.  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 excludes Significant items.

The calculation of basic, diluted and adjusted EPS is set out below:
					2011	2010
Profit					£m	£m
Profit for the financial year					15.0	18.3
Add back: Significant items					7.2	(0.4)
Earnings before Significant items					22.2	17.9

	Weighted average number of shares '000		Adjusted earnings per share		Earnings per share
	2011	2010	2011	2010	2011	2010
	Number	Number	pence	pence	pence		pence
Basic	43,197	42,755	51.4	41.9	34.7		42.8
Dilutive potential ordinary shares:
- Employee share options	975	917	(1.2)	(0.9)	(0.7)		(0.9)
- Deferred bonus plan	102	50	(0.1)	-	(0.1)		-
Diluted	44,274	43,722	50.1	41.0	33.9		41.9

4.    Dividend

After the balance sheet date the following dividend was recommended by the Directors. The dividend has not been provided for at the year-end and there are no tax consequences.
			2011	2010
			£m	£m
12.5 pence per ordinary share (2010: 11.4 pence per ordinary share)			5.4	4.9

5.    Acquisition of Lastolite

On 4 March 2011, the Group acquired the whole of the share capital of Henry (Holdings) Ltd (Lastolite), a private company domiciled in the UK and the owner of Lastolite Ltd and the Colorama brand. Lastolite is the world's leading manufacturer of backgrounds and lighting control systems which complement the existing range of Manfrotto lighting supports, LED lights and lighting control accessories, and operates within the Imaging & Staging Division. Lastolite Limited was renamed Manfrotto Lighting Limited on 3 January 2012.
The acquisition was funded from existing cash resources.
A summary of the effect of the acquisition of Lastolite 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	0.2		-	0.2
Inventories	1.2		0.1	1.3
Trade and other receivables	1.3		-	1.3
Trade and other payables	(0.8)		(0.4)	(1.2)
Cash	0.7		-	0.7
Deferred tax	-		(0.8)	(0.8)
Current tax	(0.1)		-	(0.1)
	2.5		2.0	4.5
Goodwill				5.0
Consideration				9.5
Satisfied by:
-          Cash consideration				8.8
-          Deferred consideration				0.7
				9.5
The deferred consideration is payable dependent upon the results of Lastolite for the year ending 31 December 2011. For the purpose of the provisional allocation the Group has assumed that £0.7 million of the total maximum of £1.0 million shall be paid.  This reflects Management's assessment at acquisition date of the likely future profitability of Lastolite.
The value of the gross trade receivables at acquisition date amounted to £1.2 million reflecting Management's estimate of the fair value to be attributed.
				£m
Net outflow of cash in respect of acquisition
Total purchase consideration				9.5
Deferred consideration				(0.7)
Cash consideration				8.8
Transaction costs				0.3
Cash acquired				(0.7)
Net cash outflow in respect of acquisition				8.4
The results of Lastolite have been included in the Imaging & Staging Division and comprise:
				2011
				£m
Revenue				5.7
Operating profit (1)				0.9
(1) Cost of sales include an amount of £0.1 million, which is the adjustment to fair value of inventories to reflect the gross margin inherent in the finished goods and work in progress. The operating profit of Lastolite is reduced by this amount, as it flows to the Group's Income Statement post acquisition in accordance with IFRS3.
Operating profit is stated before amortisation of intangible assets.
Had the acquisition been made at the beginning of the year (i.e.1 January 2011) it would have contributed £7.1 million to revenue and £1.2 million to the operating profit of the Group.

6.   Acquisition of Haigh-Farr
On 15 December 2011, the Group acquired the whole of the share capital of Haigh-Farr Inc (Haigh-Farr), a private company based in Bedford, New Hampshire, USA.
Haigh-Farr is a world leader in the design and manufacture of antennae for microwave communication systems which transmit and receive video and data in airborne military, commercial and law enforcement applications. This acquisition is another step in the execution of Vitec's strategy to grow in the military, aerospace and government (MAG) market and will enable the Group to penetrate new markets, both internationally and domestically. Haigh-Farr operates within the Videocom Division.
The acquisition was funded from existing cash resources.
A summary of the effect of the acquisition of Haigh-Farr 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		-			10.4	10.4
Inventories		1.0			-	1.0
Trade and other receivables		0.8			-	0.8
Trade and other payables		(1.2)			-	(1.2)
Cash		0.2			-	0.2
Deferred tax		-			(3.9)	(3.9)
		0.8			6.5	7.3
Goodwill						13.3
Consideration						20.6
Satisfied by:
-          Cash consideration						20.0
-          Deferred consideration						0.6
						20.6
The deferred consideration of £0.6 million reflects Management's estimate of the amount payable in relation to the net working capital adjustment.
Up to a further US$5.0 million (£3.2 million) is payable (US$2.5 million in 2013 and US$2.5 million in 2014) conditional upon the vendors remaining employed with the business and achievement of performance targets for the years ending 31 December 2012 and 2013. This will be charged to the Income Statement as and when incurred.
The value of the gross trade receivables at acquisition date amounted to £0.8 million reflecting Management's estimate of the fair value to be attributed.
						£m
Net outflow of cash in respect of acquisition
Total purchase consideration						20.6
Deferred consideration						(0.6)
Cash consideration						20.0
Transaction costs						0.5
Cash acquired						(0.2)
Net cash outflow in respect of acquisition						20.3
The results of Haigh-Farr have been included in the Videocom Division and comprise:
						2011
						£m
Revenue						0.1
Operating profit (1)						-
(1) Operating profit is stated before amortisation of intangible assets.
Had the acquisition been made at the beginning of the year (i.e.1 January 2011) it would have contributed £6.0 million to revenue and £2.0 million to the operating profit of the Group.

7.   Analysis of net debt
The table below analyses the Group's components of net debt and their movements in the year.
		2011	2010
		£m	£m
Decrease in cash and cash equivalents		(0.5)	(4.8)
(Proceeds from)/repayment of bank loans		(21.6)	19.0
(Increase)/decrease in net debt resulting from cash flows		(22.1)	14.2
Effect of exchange rate fluctuations on cash held		-	(0.6)
Effect of exchange rate fluctuations on debt held		(0.2)	(1.1)
Effect of exchange rate fluctuations on net debt		(0.2)	(1.7)
Movements in net debt in the year		(22.3)	12.5
Net debt at 1 January		(28.1)	(40.6)
Net debt at 31 December		(50.4)	(28.1)
Cash and cash equivalents in the Balance Sheet		6.9	7.7
Bank overdrafts		(0.7)	(1.0)
Cash and cash equivalents in the Statement of Cash Flows		6.2	6.7
Bank loans		(56.6)	(34.8)
Net debt at 31 December		(50.4)	(28.1)

 

END

 

 

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