Half Yearly Report

RNS Number : 2657N

Vislink PLC

31 August 2011

 



Vislink plc

Interim results for the six months ended 30 June 2011

Vislink plc ("The Group"), the global technology business specialising in secure communications and services for the news & entertainment and law enforcement & public safety markets, has today announced its Interim results for the six months ended 30 June 2011.

Financial Headlines

	2011 £'000	2010 £'000
Revenue - continuing operations	20,028	20,251
Operating loss	(3,690)	(7,164)
Adjusted* operating loss - continuing operations	(1,946)	(5,146)
Adjusted* loss per share - continuing operations	(1.0)p	(2.7)p
Profit from discontinued activities	257	2,163
(Loss) attributable to shareholders	(2,290)	(3,289)
Basic (loss) per share	(1.8)p	(2.4)p

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

·     Underlying orders received in the period** grew 19% to £23.7m (2010: £19.9m)

·     Underlying revenue** was 6% lower at £19.1m (2010: £20.3m)

·     Total underlying operating costs** reduced by 19% to £12.0m (2010: £14.8m)

·     Adjusted operating loss for the continuing operations reduced to £1.9m (2010: £5.1m)

·     Non-recurring charges relating to corporate restructuring of £1.2m (2010: £0.9m)

·     Tender offer returned £5.0m of cash to shareholders in April

·     Acquisition of Gigawave completed in June for a total consideration of £3.75m

·     Net cash at 30 June 2011 of £9.2m (31 December 2010: £22.2m).

** Underlying orders received, revenue and operating costs are reported orders received, revenue and operating costs from continuing operations excluding the contribution from Gigawave Limited.

Operational Highlights:

·     John Hawkins appointed as CEO from 1 April

·     Review of the business strategy ongoing with strategy update to be announced in October

·     Management structure simplified

·     Overhead cost base reduced in May by a further £2.0m on an annualised basis

·     Integration of Gigawave on track with synergies being exploited

·     Improved procurement processes have helped achieve higher gross margins.

John Hawkins, Chairman and Chief Executive of Vislink said:

"We are cautiously optimistic that the second half of 2011 will show further improvement in trading.  We have a strong order book which underpins our third quarter revenue. Our key performance metrics are continuing to move in a positive direction. We see good potential for revenue growth from distributing the Gigawave products to Vislink news & entertainment customers and from our existing markets, particularly the Middle East, Asia and South America.  The Group has net cash. The Board therefore remains confident about the future prospects for the Group."

- ends -

For further information on 31 August 2011, please contact:

John Hawkins, Chairman and Chief Executive	[phone]
James Trumper, Finance Director	[phone]
Andrew Hayes / Charlie Jack Hudson Sandler	[phone]

About Vislink plc

Vislink plc is a global technology business specialising in secure communications and services for the news & entertainment and law enforcement & public safety markets. The Group has manufacturing operations in the UK and the USA.

The Group's strategic focus is the design, manufacture, sale, installation and maintenance of wireless, video and IP technologies together with the supporting management systems. Vislink products include microwave radio, satellite transmission and wireless camera systems.

Headquartered in the UK with operations in the USA, Dubai, and Singapore, the Group employs over 300 people worldwide and has net assets of £47 million. Vislink is listed on the London Stock Exchange (LSE:VLK).

For further information, please visit www.vislink.com.

Forward looking statements

Certain statements in this interim results announcement are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise

Chairman & Chief Executive's Statement

For the six months to 30 June 2011

The Group traded in line with expectations for the six months ended 30 June 2011. We have seen underlying orders received in the period increase by 19% compared to the first half of 2010; this has been led by increased demand for our broadcast products in the Middle East, Asia and South America, which remain important strategic markets for the Group.  The previously announced cost reduction programme has assisted in reducing underlying operating costs for the business by 19% year on year. Additionally our material margins have increased through improved procurement.

During this period we have simplified our management structure which in turn will reduce our cost base further in the second half of 2011 by £2.0million on an annualised basis. We have acquired Gigawave Limited ("Gigawave"), a leading designer, manufacturer and supplier of wireless camera, microwave and antenna products for the broadcast market. Gigawave will complement and broaden the Group's capabilities in terms of engineering, product portfolio and geographic reach and will strengthen the Group's position in the news and entertainment market as well as providing incremental revenues into the law enforcement and public safety markets.  The Group has also returned £5.0 million of cash to shareholders through a Tender Offer in April 2011.  

The Group is no longer planning to sell the US services business of Western Technical Services ("WTS"). WTS is to be integrated into our business based in Billerica, Massachusetts as we see strategic value in our capability to provide full integration services to both our news and entertainment and law enforcement and public safety markets. We have therefore restated the prior year results to reflect WTS as part of the continuing business.

Financial Results

Group revenue for the six months to 30 June 2011 was £20.0 million (2010: £20.3 million). Underlying revenue, being revenue excluding revenue from Gigawave, was 6 per cent lower at £19.1 million (2010: £20.3 million). However underlying orders received in the period were up 19 per cent to £23.7 million (2010: £19.9 million). With the improved level of orders received  the Group enters the second half in a stronger position with an order book of £15.4 million compared with £6.6 million at 31 December 2010. The underlying order book, excluding Gigawave, at 30 June was £10.8 million.

The Group's material margin, defined as total revenue less direct material costs of sale, has improved by 4.9 points to 52.7 per cent (2010: 47.8 per cent) as the Group has benefitted from sourcing from Asia and improved procurement locally. Total underlying operating costs which comprise direct manufacturing labour and overhead costs plus SG&A reduced by 19 per cent to £12.0 million (2010: £14.8 million) as a direct result of our cost reduction programme initiated in January.

With improved material margins and lower total operating costs we have seen the adjusted operating loss for the period fall to £1.9 million (2010: loss of £5.1 million) despite the marginally lower revenue.

The reported operating loss was £3.7 million (2010: loss of £7.2 million) after charging £0.6 million in respect of the amortisation of acquired intangibles (2010: £1.1 million) and £1.2 million in respect of non-recurring costs (2010: £0.9 million). Non-recurring costs include £0.2 million in respect of the acquisition costs associated with Gigawave and £1.0 million of rationalisation and redundancy costs. The loss before tax was £3.7 million (2010: loss of £7.4 million) after net finance costs of £nil (2010: £0.2 million).

The Group held net cash of £9.2 million at 30 June 2011 (31 December 2010: net cash of £22.2 million). There was a net cash outflow from operating activities in the period of £3.2 million (2010: inflow of £0.4 million) including the cash outflow associated with non-recurring costs. The cash outflow from investing activities amounted to £3.6 million (2010: £4.0 million) which comprised £2.3 million from the acquisition of Gigawave; £0.8 million inflow being the final net proceeds for the sale of HERNIS; £0.9m of deferred consideration paid in respect of previous acquisitions (2010: £1.3 million) and £1.2 million in respect of capital expenditure and the capitalisation of development costs (2010: £2.7 million). The cash outflow from financing activities was from the return of £5.0 million of cash to shareholders through the Tender Offer (a total outflow of £5.2 million including costs). The Group also acquired £0.9 million of debt with Gigawave.

The cash flow in the second half is expected to be broadly neutral.

Earnings Per Share

The reported basic undiluted loss per share for the period was 1.8 pence (2010: loss of 2.4 pence). After adjusting for non-recurring costs and the amortisation and impairment of goodwill and acquired intangibles, the Group's adjusted loss per share was 1.0 pence (2010: loss of 2.7 pence).

Dividends

The final dividend of 1.25 pence per share in respect of 2010 was paid to shareholders on 16 July 2011. As in previous years, the Board is not declaring an interim dividend.

Business Performance

The table below sets out the key indicators that are used to measure the performance in the continuing business; this shows the progression of the business over the last three six month periods. Our key metrics of orders received and material margin have improved over the previous periods and at the same time we have reduced our cost base. Revenue would normally follow order receipt with a lag of up to three months. Orders received in the second quarter of 2011 were particularly strong, the benefits of which will be seen in the third quarter. Whilst the Group reported an adjusted operating loss in the period we are seeing the losses reduce quarter by quarter, with the loss in the second quarter being significantly lower than in the first. We expect to make an adjusted operating profit in the third quarter.

Six months to Continuing business:	30 June 2011	31 December  2010 (restated) 1	30 June 2010 (restated) 1	Change on prior year
Orders received (£'000)	24,943	22,317	19,882	+25%
Underlying orders received (£'000)2	23,666	22,317	19,882	+19%
Revenue (£'000)	20,028	22,873	20,251	-1%
Underlying revenue (£'000)3	19,099	22,873	20,251	-6%
Material cost margin (£'000)4	10,559	10,951	9,689
Material margin as a percentage of sales	52.7%	47.9%	47.8%	+4.9pts
Total operating costs (£'000)5	12,505	14,166	14,835	-16%
Total underlying operating costs (£'000)5	11,996	14,166	14,835	-19%
Adjusted operating (loss) (£'000)6	(1,946)	(3,215)	(5,146)
Adjusted (loss) per share (pence)6	(1.0)p	(2.9)p	(2.7)p
Net cash (absorbed by)/generated from operating activities (£'000)	(3,244)	2,754	433

Notes

¹ Following the disposal of HERNIS in December 2010, the 30 June 2010 numbers have been restated to reclassify the results of HERNIS as a discontinued business. Following the Board's decision to retain WTS, the results to 31 December 2010 have been restated to incorporate WTS as part of the continuing business.

² Underlying orders received are defined as orders received excluding orders from Gigawave.

³Underlying revenue is defined as revenue excluding revenue from Gigawave.

⁴ Defined as revenue less material costs in cost of sales.

⁵Operating costs comprise sales and marketing expenses, administration expenses, and the costs associated with the logistics and R&D. Underlying costs exclude the costs associated with Gigawave.

⁶ Defined as operating loss before the amortisation and impairment of goodwill and acquired intangibles, and other non-recurring costs. Adjusted EPS is calculated on the same basis after taking account of related tax effects.

We have seen a slow recovery in our news & entertainment market. Reported revenue increased 11 per cent to £15.8 million (2010: £14.2 million); underlying revenue increased 5 per cent when revenue from Gigawave of £0.9 million is excluded. We have seen an increase in activity in South America, Asia and the Middle East that is being driven by current and upcoming political and sporting events, although the North American market remains challenging. The improvement can be seen in the underlying orders received in the period which were up 24 per cent at £19.3 million (2010: £15.6 million) excluding £1.3 million of orders won by Gigawave post acquisition.

The challenge in our law enforcement and public safety market remains the timely conversion of opportunities into orders. Government funded projects are, generally, dependent on political decision-making cycles, particularly in the US market from where we still expect to derive significant growth. We have seen increasing activity and pipeline growth but we have yet to achieve critical mass to have a more predictable flow of business. Underlying revenue in the period was 8 per cent lower at £2.4 million (2010: £2.6 million) due to lower sales outside of the Americas. Orders received for the period were down 10 per cent at £2.6 million (2010: £2.9 million).

The Vislink Services business (WTS), based in California, is in transition from being a broadcast based business to developing alternative sources of revenue building on our established experience in designing and installing broadcast infrastructure. Whilst progress has been made in developing opportunities, particularly in the mining and public safety sectors, the growth in these areas has not yet made up for the decline in revenues and orders following the 2GHz installation programme that was completed in the first half of 2010. As a consequence revenue was down 49 per cent at £1.8 million (2010: £3.5 million). Orders received were £1.8 million (2010: £1.4 million). However, as we see strategic value in our capability to provide full integration services to both our news and entertainment and law enforcement and public safety markets we are integrating WTS into our US management structure. In doing so we will extract revenue synergies and reduce the overall US cost base.

Acquisitions

On 2 June 2011 we acquired the entire issued share capital of Gigawave Limited ("Gigawave") for cash consideration of £3.75 million. Based in Colchester, Essex, Gigawave is a leading designer, manufacturer and supplier of wireless camera, microwave and antenna products for the broadcast market and employs 87 people. Gigawave has a particular strength in "on-board" applications for motorsport events around the world.  Gigawave will complement and broaden the Group's capabilities in terms of engineering, product portfolio and geographic reach and will strengthen the Group's position in the broadcast market. Gigawave will be integrated into the Group's UK operations so as to realise the benefits expected from improved global distribution of all the Vislink brands and operational efficiencies.

Under the terms of the acquisition agreement, an initial consideration of £1.75 million was paid on completion on 2 June 2011. The Group also repaid shareholder loans of £0.4 million on completion. Deferred consideration of £1.0 million is payable on each of the first and second anniversary of completion. The initial consideration was paid in cash, financed out of the Group's existing cash balances. Deferred consideration will also be paid in cash. Gigawave contributed revenues of £0.9 million and an operating profit of £0.1 million to the results of the Group for the six months to 30 June 2011.

Principal risks and uncertainties

The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 14 to 16 of the 2010 Annual Report, a copy of which is available on the Group website at www.vislink.com. The Board considers that these remain a current reflection of the risks and uncertainties facing the business for the remaining six months of the financial year. The Group's risk management process remains unchanged from 31 December 2010 and is described in detail in the 2010 Annual Report. The principal risks considered by the Board relate to global economic conditions and those associated with the Group's markets, reputation, overseas operations, customer defaults, senior management and foreign exchange. The principal exchange rates used in the preparation of this condensed consolidated interim financial information are provided in note 16.

The Board and Management

Duncan Lewis retired as Chief Executive on 31 March 2011 and was succeeded by John Hawkins who was Chairman Elect. Tim Trotter retired as Chairman at the Annual General Meeting on 18 May 2011 and was succeeded by John Hawkins. It is the Board's intention that John Hawkins will remain Chairman and Chief Executive for at least eighteen months from this date whilst the strategy for the Group is further developed and implemented. In order to retain the appropriate level of independence on the Board, it has initiated a search for a further independent non-executive director and anticipates making an appointment in the second half of 2011.

After twelve years with the Company serving as Finance Director and Company Secretary, James Trumper has decided to step down from the Board to seek a fresh challenge. At the Board's request James will remain Finance Director and Company Secretary until 30 April 2012 to ensure continuity and allow the Board to recruit a suitable replacement. On behalf of the Board and the whole Group I would like to thank James for his significant contribution and for his continued support during this important period of transition.

Strategy and Outlook

The Board, under the guidance of the Chief Executive, is undertaking a full review of the business that is focused on returning the Group to profitable growth by the end of 2011.  This review will include an assessment of growth opportunities, both organic and through acquisition, and the technology drivers that underpin the market opportunity for Vislink. The review also recognises the need to build sustainable recurring revenue opportunities, hence the decision to integrate WTS fully into the US business. The results of the review will be announced in October.    

We are cautiously optimistic that the second half of 2011 will show further improvement in trading.  We have a strong order book which underpins our third quarter revenue. Our key performance metrics are continuing to move in a positive direction. We see good potential for revenue growth from distributing the Gigawave products to existing Vislink news & entertainment customers and from our existing markets, particularly the Middle East, Asia and South America.  The Group has net cash. The Board therefore remains confident about the future prospects for the Group.

John Hawkins, Chairman and Chief Executive

31 August 2011

 

 

CONSOLIDATED GROUP INCOME STATEMENT

for the six months ended 30 June 2011

		Six months to 30 June 2011 (Unaudited)	Six months to 30 June 2010 (Unaudited, restated)	Year ended 31 December 2010 (Audited, restated)
	Notes	£'000	£'000	£'000
Continuing operations
Revenue	4	20,028	20,251	43,124
Cost of sales		(12,214)	(13,158)	(28,019)
Gross profit		7,814	7,093	15,105
Sales and marketing expenses		(4,505)	(5,301)	(10,563)
Research and development costs		(2,286)	(2,992)	(5,712)
Administrative costs		(2,969)	(3,946)	(7,191)
Other expenses		(1,744)	(2,018)	(12,823)
Operating (loss)	4,5	(3,690)	(7,164)	(21,184)
Operating (loss) is analysed as:
Adjusted operating (loss)		(1,946)	(5,146)	(8,361)
Amortisation of acquired intangibles		(557)	(1,140)	(2,028)
Goodwill impairment		-	-	(5,362)
Non-recurring costs	5	(1,187)	(878)	(5,433)
Finance costs	6	(2)	(209)	(487)
Finance income	6	19	-	17
(Loss) before taxation		(3,673)	(7,373)	(21,654)
Taxation	7	1,126	1,921	2,175
(Loss) after taxation		(2,547)	(5,452)	(19,479)
Profit for the period from discontinued activities	8	257	2,163	23,468
(Loss)/profit for the period being profit attributable to equity shareholders		(2,290)	(3,289)	3,989
Basic (loss)/earnings per share:
From continuing operations	10	(2.0)p	(4.0)p	(14.1)p
From discontinued operations		0.2 p	1.6 p	17.0 p
Total		(1.8)p	(2.4)p	2.9 p

Diluted (loss)/earnings per share

There is no difference between basic and diluted earnings per share (note 10).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the six months ended 30 June 2011

		Six months to 30 June 2011 (Unaudited)	Six months to 30 June 2010 (Unaudited)	Year ended 31 December 2010 (Audited)
		£'000	£'000	£'000
(Loss)/profit for the period		(2,290)	(3,289)	3,989
Translation difference on foreign currency net investments		(437)	1,173	1,062
Total comprehensive (loss)/income for the period		(2,727)	(2,116)	5,051

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the six months ended 30 June 2011

	Share Capital £000	Share premium account £000	Capital redemption reserve £'000	Merger reserve £000	Translation reserve £000	Retained earnings £000	Total £000
At January 1, 2011	3,465	4,900	-	30,565	4,592	12,751	56,273
Retained (loss) for the year	-	-	-	-	-	(2,290)	(2,290)
Exchange differences on translation of overseas operations	-	-	-	-	(437)	-	(437)
Share based payments: value of employee services	-	-	-	-	-	43	43
Dividends payable	-	-	-	-	-	(1,413)	(1,413)
Repurchase of own shares (note 12)	(617)	-	617	-	-	(5,200)	(5,200)
At June 30, 2011	2,848	4,900	617	30,565	4,155	3,891	46,976
At January 1, 2010	3,465	4,900	-	30,565	3,530	10,300	52,760
Retained loss for the year	-	-	-	-	-	(3,289)	(3,289)
Exchange differences on translation of overseas operations	-	-	-	-	1,173	-	1,173
Share based payments: value of employee services	-	-	-	-	-	85	85
Dividends payable	-	-	-	-	-	(1,720)	(1,720)
At June 30, 2010	3,465	4,900	-	30,565	4,703	5,376	49,009
At January 1, 2010	3,465	4,900	-	30,565	3,530	10,300	52,760
Retained profit for the year	-	-	-	-	-	3,989	3,989
Exchange differences on translation of overseas operations	-	-	-	-	1,062	-	1,062
Share based payments: value of employee services	-	-	-	-	-	182	182
Dividends paid	-	-	-	-	-	(1,720)	(1,720)
At December 31, 2010	3,465	4,900	-	30,565	4,592	12,751	56,273

CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION

as at 30 June 2011

		30 June 2011 (Unaudited)	30 June 2010 (Unaudited)	31 December 2010 (Audited, restated)
	Notes	£'000	£'000	£'000
Assets
Non-current assets
Goodwill		19,453	24,742	17,206
Intangible assets	11	11,131	12,195	9,182
Property, plant and equipment	11	4,041	5,609	3,223
Investment in associates		-	196	-
Deferred tax assets		1,536	1,684	408
		36,161	44,426	30,019
Current assets
Inventories		10,274	15,402	7,515
Trade and other receivables		10,762	15,638	11,719
Current tax assets		730	-	764
Derivative financial instruments		-	402	-
Cash and cash equivalents	13	10,358	3,907	22,230
		32,124	35,349	42,228
Liabilities
Current liabilities
Trade and other payables		16,334	18,569	13,888
Current tax liabilities		-	213	-
Financial liabilities: borrowings	13	1,134	-	-
Provisions for other liabilities and charges	14	944	942	514
		18,412	19,724	14,402
Net current assets		13,712	15,625	27,826
Non-current liabilities
Financial liabilities: borrowings	13	-	7,333	-
Deferred tax liabilities		770	1,182	96
Other non-current liabilities		1,587	2,194	1,177
Provisions for other liabilities and charges	14	540	333	299
		2,897	11,042	1,572
Net assets		46,976	49,009	56,273
Shareholders' equity
Ordinary shares	12	2,848	3,465	3,465
Share premium account	12	4,900	4,900	4,900
Capital redemption reserve	12	617	-	-
Merger reserve		30,565	30,565	30,565
Translation reserve		4,155	4,703	4,592
Retained earnings		3,891	5,376	12,751
Total shareholders' equity		46,976	49,009	56,273

CONSOLIDATED GROUP CASH FLOW STATEMENT

for the six months ended 30 June 2011

		Six months to 30 June 2011 (Unaudited)	Six months to 30 June 2010 (Unaudited)	Year ended 31 December 2010 (Audited)
	Notes	£'000	£'000	£'000
Cash flow from operating activities
Cash (absorbed by)/generated from operations	15	(3,281)	1,480	3,998
Interest received		19	20	1
Interest (paid)		(13)	(83)	(187)
Taxation received/(paid)		31	(984)	(625)
Net cash (absorbed by)/generated from operating activities		(3,244)	433	3,187
Cash flows from investing activities
Acquisition of subsidiary (net of cash acquired)		(2,304)	-	-
Proceeds from sale of subsidiary		757	-	26,943
Proceeds from sale of property, plant and equipment		17	31	304
Deferred consideration in respect of previous acquisitions		(875)	(1,319)	(1,629)
Purchase of property, plant and equipment	11	(359)	(893)	(2,519)
Expenditure on capitalised development costs	11	(859)	(1,812)	(2,980)
Net cash (absorbed by)/generated from investing activities		(3,623)	(3,993)	20,119
Cash flows from financing activities
New borrowings	13	216	-	-
Repayment of borrowings	13	(14)	-	(7,162)
Dividend paid to shareholders		-	-	(1,720)
Repurchase of own shares		(5,200)	-	-
Net cash (absorbed by) financing activities		(4,998)	-	(8,882)
Net (decrease)/increase in cash and cash equivalents		(11,865)	(3,560)	14,424
Cash and cash equivalents at beginning of period		22,230	7,423	7,423
Effect of foreign exchange rate changes	13	(7)	44	383
Cash and cash equivalents at end of period	13	10,358	3,907	22,230
Net cash/(debt) comprises:
Cash and cash equivalents		10,358	3,907	22,230
Borrowings		(1,134)	(7,333)	-
Net cash/(debt) at end of period		9,224	(3,426)	22,230

NOTES TO THE INTERIM FINANCIAL INFORMATION

for the six months ended 30 June 2011

1.   GENERAL INFORMATION

Vislink plc ("the Company") and its subsidiaries (together "the Group") is a global technology business specialising in the provision of secure communications for the News & Entertainment and Law Enforcement & Public Safety and related technical Services markets. The Group has offices in the UK, USA, Dubai and Singapore and employs over 300 people worldwide. The Group specialises in the design and manufacture of microwave radio, satellite transmission and wireless camera systems. The Group has manufacturing subsidiaries in the UK and the USA.

The Company is a public limited company that is listed on the London Stock Exchange (LSE: VLK). The Company is registered and domiciled in the UK and its registered office is Marlborough House, Charnham Lane, Hungerford, Berkshire. The registered number of the Company is 4082188.

This condensed consolidated interim financial information comprises the consolidated Group statement of financial position as of 30 June 2011 and 30 June 2010 and related consolidated Group income statement and consolidated Group statement of cash flows for the six months then ended. This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2010 were approved by the Board of Directors on 23 March 2011 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.

This condensed consolidated interim financial information has been subject to a review in accordance with ISRE (UK and Ireland) 2410 by our auditors but has not been subject to an audit.

This interim results announcement was approved for issue by the Board of Directors on 31 August 2011.

 

2.   BASIS OF PREPARATION

This condensed consolidated interim financial information for the six months ended 30 June 2011 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2010, which have been prepared in accordance with IFRSs as adopted by the European Union.

The preparation of the financial information requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from these estimates.

3.   ACCOUNTING POLICIES

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2010, as described in those annual financial statements.

The Board has reconsidered the services strategy and decided that WTS will be fully integrated into the US business. WTS was treated as a discontinued activity in the 2010 annual report; the prior year numbers have been restated to include the financial results of WTS in continuing activities.

Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings on a country by country basis.

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

New accounting standards and interpretations have been issued during the year. The Group's approach to these is as follows.

(a)        Standards, amendments and interpretations effective in 2011

The following standards, amendments and interpretations to published standards are mandatory for accounting periods beginning on or after January 1, 2011.

·      IAS 24 revised, 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. The revised IAS 24 has been applied from 1 January 2011 with no impact on the consolidated interim financial information.

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2011, but are not currently considered to be relevant to the Group (although they may affect the accounting for future transactions and events).

·      'Classification of rights issues' (Amendment to IAS 32), issued in October 2009. The amendment should be applied for annual periods beginning on or after 1 February 2010.

·      'Prepayments of a minimum funding requirement' (Amendments to IFRIC 14), issued in November 2009. The amendments are effective for annual periods beginning 1 January 2011. This is not considered relevant to the Group as it has no defined benefit pension schemes.

·      IFRIC 19, 'Extinguishing financial liabilities with equity instruments'. This clarifies the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially. The interpretation is effective for annual periods beginning on or after 1 July 2010.

(b)        Standards, amendments and interpretations to existing standards that are not yet effective and have not been adopted early by the Group    

The following standards, amendments and interpretations have been issued, but are not effective for the financial year beginning 1 January 2011 and have not been early adopted:

·      Amendment to IAS 1, Presentation of financial statements, on other comprehensive income (OCI)

·      'Amendment to IAS 12,'Income taxes' on deferred tax

·      IAS 19, (revised 2011), Employee benefits

·      IAS 27 (Revised 2011), Separate financial statements

·      Amendments to IFRS 1,'First time adoption', on hyperinflation and fixed dates

·      IAS 28 (Revised 2011), Associates and joint ventures.

·      Amendment to IFRS 7, Financial instruments: Disclosures on derecognition

·      IFRS 9, Financial instruments

·      IFRS 10, Consolidated financial statements

·      IFRS 11, Joint arrangements

·      IFRS 12, Disclosures of interests in other entities

·      IFRS 13, Fair value measurement.

The Directors anticipate that the adoption of these standards and interpretations will have no material impact on the net assets or results of the Group.

 

4.   SEGMENTAL ANALYSIS

The Group's internal organisational and management structure and its system of internal financial reporting to the Board of Directors are based on the geographical location of its businesses. These comprise two regions, the UK, and the United States of America (US). Each business location has its own managing director who sits on the Executive Management Board under the chairmanship of the Chief Executive to oversee the running of the Group. The chief operating decision-maker has been identified as the Executive Management Board.

The Management Board reviews the Group's internal financial reporting in order to assess performance and allocate resources. The same information is provided to the Board of Directors of Vislink plc. Management has therefore determined that the operating segments for the Group will be based on these reports. The UK business is responsible for the sales and marketing of all Group products and services outside of the Americas. It is also the product centre for the Advent satellite communication products and the Link wireless camera systems. Gigawave, acquired in June 2011, will be integrated into the UK business but, for the purposes of these financial statements, is disclosed as a separate segment.

The US business is responsible for the sales and marketing of all Group products and services in North and South America and Canada. It is also the product centre for the MRC and PMR microwave product brands and the services business of WTS.

In addition the Group management is focussed on developing revenue growth from the three main markets that it serves, News and Entertainment, Law Enforcement and Public Safety and related services markets. Therefore the Group also internally reports revenues and gross material margins at these levels.

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

	UK	US	Gigawave	Inter segmental	Central	Total
Six months to 30 June 2011
News & Entertainment	8,545	6,374	894	-	-	15,813
Law Enforcement & Public Safety	289	2,077	35	-	-	2,401
Services	-	1,814	-	-	-	1,814
External revenue	8,834	10,265	929	-	-	20,028
Inter-segmental	1,577	202	-	(1,779)	-	-
Total revenue	10,411	10,467	929	(1,779)	-	20,028
Adjusted operating profit/(loss)	519	(1,601)	94	-	(958)	(1,946)
Amortisation of acquired intangibles	-	(530)	(27)	-	-	(557)
Non-recurring costs	(574)	(219)	-	-	(394)	(1,187)
Group total operating (loss)/profit	(55)	(2,350)	67	-	(1,352)	(3,690)
Six months to 30 June 2010 (restated)
News & Entertainment	6,558	7,629	-	-	-	14,187
Law Enforcement & Public Safety	399	2,159	-	-	-	2,558
Services	-	3,506	-	-	-	3,506
External revenue	6,957	13,294	-	-	-	20,251
Inter-segmental	1,348	724	-	(2,072)	-	-
Total revenue	8,305	14,018	-	(2,072)	-	20,251
Adjusted operating (loss)	(2,017)	(1,871)	-	-	(1,258)	(5,146)
Amortisation of acquired intangibles	(153)	(987)	-	-	-	(1,140)
Non-recurring costs	(14)	(262)	-	-	(602)	(878)
Group total operating (loss)	(2,184)	(3,120)	-	-	(1,860)	(7,164)
Year to 31 December 2010 (restated)
News & Entertainment	17,696	13,933	-	-	-	31,629
Law Enforcement & Public Safety	772	5,775	-	-	-	6,547
Services	-	4,948	-	-	-	4,948
External revenue	18,468	24,656	-	-	-	43,124
Inter-segmental	3,030	1,579	-	(4,609)	-	-
Total revenue	21,498	26,235	-	(4,609)	-	43,124
Adjusted operating (loss)	(1,117)	(4,945)	-	-	(2,299)	(8,361)
Amortisation of acquired intangibles	(153)	(1,875)	-	-	-	(2,028)
Goodwill impairment	(1,952)	(3,410)	-	-	-	(5,362)
Non-recurring costs	(1,046)	(3,786)	-	-	(601)	(5,433)
Group total operating (loss)	(4,268)	(14,016)	-	-	(2,900)	(21,184)

The secondary sales analysis in the table below is based on the geographical location of the customer.

Geographic revenue analysis

	Six months to 30 June 2011 (Unaudited) £'000	Six months to 30 June 2010 (Unaudited, restated) £'000	Year ended 31 December 2010 (Audited, restated) £'000
By market:
UK and Ireland	897	1,129	2,892
Rest of Europe	2,802	2,972	6,233
USA & Canada	7,838	11,301	19,806
South America	3,159	1,631	4,082
Middle East	2,763	968	3,691
Asia	2,286	1,791	5,933
Africa	283	459	487
	20,028	20,251	43,124

 

Net assets

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

 

	30 June 2011 (Unaudited) £'000	30 June 2010 (Unaudited) £'000	31 December 2010 (Audited) £'000
By market:
UK	26,243	13,724	37,032
North America	20,733	22,965	19,241
Norway	-	12,320	-
	46,976	49,009	56,273

5.   NON-RECURRING COSTS

The following items of unusual nature, size or incidence have been charged to operating profit during the period and are described as non-recurring.

	Six months to 30 June 2011 (Unaudited) £'000	Six months to 30 June 2010 (Unaudited) £'000	Year ended 31 December 2010 (Audited) £'000
Rationalisation and redundancy costs	962	303	399
Costs associated with the acquisition of Gigawave	225	-	-
Costs associated with the withdrawal from the Military Satcoms market	-	-	1,176
Impairment of development costs capitalised associated with accelerated end of life	-	-	880
Inventory write down associated with accelerated end of life	-	-	2,511
Aborted acquisition costs	-	603	601
Onerous property commitments	-	(28)	(134)
Total non-recurring costs	1,187	878	5,433

The Group has incurred rationalisation and redundancy costs of £962,000 in the period (2010: £303,000).

The Group acquired Gigawave Limited on 2 June 2011. The costs associated with the acquisition of £225,000 have been charged directly to the income statement.

6.   FINANCE INCOME/(COST) - NET

	Six months to 30 June 2011 (Unaudited) £'000	Six months to 30 June 2010 (Unaudited) £'000	Year ended 31 December 2010 (Audited) £'000
Interest payable on bank and other borrowing	(2)	(102)	(316)
Unwinding of discount associated with the discounting of deferred consideration	-	(107)	(171)
Finance cost	(2)	(209)	(487)
Finance income	19	-	17
Finance income/(cost) - net	17	(209)	(470)

 

7.   TAX ON PROFIT ON ORDINARY ACTIVITIES

	Six months to 30 June 2011 (Unaudited) £'000	Six months to 30 June 2010 (Unaudited) £'000	Year ended 31 December 2010 (Audited) £'000
The tax (credit)/charge for the period comprises: UK corporation tax	-	-	(21)
Foreign tax	-	116	(1,084)
Foreign tax prior year adjustment	-	-	390
Total current tax	-	116	(715)
Deferred tax: UK corporation tax	(7)	(685)	(88)
Foreign tax	(1,119)	(1,352)	(1,372)
Total deferred tax	(1,126)	(2,037)	(1,460)
Total taxation	(1,126)	(1,921)	(2,175)

The tax charge for the six months ended 30 June 2011 is based on the effective tax rate that is estimated to apply to earnings for the full year on a country by country basis.

8.   DISCONTINUED OPERATIONS

On 29 December 2010 shareholders approved the disposal of the entire issued share capital of HERNIS Scan Systems AS ("HERNIS") to Cooper Industries for £32.5 million. The disposal was completed on 30 December 2010. The results of HERNIS have been treated as a discontinued activity and the 30 June 2010 comparatives have been restated accordingly.

On 19 November 2010 the Group announced it was proposing to dispose of the Services business, Western Technical Services ("WTS"). Subsequently the Board has reconsidered the services strategy and decided that WTS will be fully integrated into the US business. WTS had been treated as a discontinued activity in the 2010 annual report; the 31 December 2010 numbers have therefore been restated to include WTS in continuing activities.

The analysis of the results of the discontinued business is as follows:

	Six months to 30 June 2011 (Unaudited)	Six months to 30 June 2010 (Unaudited)	Year ended 31 December 2010 (Reported)	Restate WTS trade to continuing operations	Year ended 31 December 2010 (Restated)
	£'000	£'000	£'000	£'000	£'000
Revenue	-	13,960	29,944	(4,948)	24,996
Expenses	-	(11,150)	(27,070)	5,488	(21,582)
Amortisation of acquired intangibles	-	-	(908)	908	-
Goodwill impairment	-	-	(805)	805	-
Finance income (net)	-	40	124	(16)	108
Profit before tax of discontinued operations	-	2,850	1,285	2,237	3,522
Tax	-	(687)	(904)	38	(866)
Profit after tax of discontinued operations	-	2,163	381	2,275	2,656
Pre tax gain recognised on the sale of Hernis	257	-	20,812	-	20,812
Tax on gain	-	-	-	-	-
After tax gain recognised on the sale of Hernis	257	-	20,812	-	20,812
Profit for the period from discontinued operations	257	2,163	21,193	2,275	23,468

 

9.   DIVIDENDS

No interim dividend is proposed for the period.  In respect of 2010 there was no interim dividend and the final dividend of 1.25 pence per share was approved at the Annual General Meeting on 18 May 2011 and paid on 15 July 2011. The total cash cost of the dividend was £1.4 million.

10.  EARNINGS PER ORDINARY SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding those held in the employee share trust which are treated as cancelled. Earnings per share is calculated by reference to a weighted average of 127,620,000 ordinary shares in issue during the period (30 June and 31 December 2010: 137,754,000).

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive shares are those share options granted to employees where the exercise price is less than the average market price of the company's ordinary shares during the year.  At 30 June 2011 there were no dilutive share options (30 June and 31 December 2010: nil) and therefore there is no difference between basic earnings per share and diluted earnings per share.

Adjusted earnings

The directors believe that the adjusted operating profit, adjusted profit before tax, adjusted earnings and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These measures are used by management for internal performance analysis and incentive compensation arrangements. The term "adjusted" is not a defined term used under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. The principal adjustments are made in respect of the amortisation of acquired intangibles, impairment of goodwill and non-recurring costs and their related tax effects.

The reconciliation between reported and adjusted earnings and basic earnings per share for the continuing business is shown below:

	Six months to 30 June 2011		Six months to 30 June 2010 (restated)		Year ended 31 December 2010 (restated)
	Earnings £'000	Basic EPS pence	Earnings £'000	Basic EPS pence	Earnings £'000	Basic EPS Pence
Reported (loss)	(2,547)	(2.0)p	(5,452)	(4.0)p	(19,479)	(14.1)p
Amortisation of acquired intangibles after tax	401	0.3p	821	0.6p	1,460	1.0p
Impairment of goodwill	-	-	-	-	5,362	3.9p
Non-recurring costs after tax	823	0.7p	886	0.7p	4,921	3.6p
Adjusted (loss)/earnings	(1,323)	(1.0)p	(3,745)	(2.7)p	(7,736)	(5.6)p

 

11.  PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

	Six months to 30 June 2011 (Unaudited) £'000	Six months to 30 June 2010 (Unaudited, restated) £'000	Year ended 31 December 2010 (Audited, restated) £'000
Property, plant and equipment
Opening net book value as at 1 January	3,223	5,756	5,756
Additions	359	893	2,519
Acquisition of subsidiary	1,115	-	-
Disposals	(49)	(57)	(306)
Disposal - discontinued business	-	-	(2,662)
Depreciation - continuing business	(564)	(958)	(1,685)
Depreciation - discontinued business	-	(121)	(555)
Exchange adjustment	(43)	96	156
Closing net book value	4,041	5,609	3,223
Intangible assets Intangible development costs
Opening net book value as at 1 January	5,406	6,568	6,568
Additions	859	1,812	2,980
Acquisition of subsidiary	195	-	-
Disposal - discontinued business	-	-	(211)
Amortisation - continuing business	(944)	(1,333)	(2,592)
Amortisation - discontinued business	-	(25)	(37)
Impairment charge	-	-	(1,415)
Exchange adjustment	(99)	287	113
Development costs closing net book value	5,417	7,309	5,406
Acquired Intangible assets
Opening net book value as at 1 January	3,776	5,624	5,624
Additions	2,591	-	-
Amortisation - continuing business	(557)	(1,140)	(2,028)
Amortisation - discontinued business	-	-	-
Exchange adjustment	(96)	402	180
Acquired intangibles closing net book value	5,714	4,886	3,776
Total closing net book value of intangible assets	11,131	12,195	9,182

The Group has capital commitments contracted but not provided for of £0.1 million (30 June and 31 December 2010: £nil).

12.  CALLED UP SHARE CAPITAL, SHARE PREMIUM AND CAPITAL REDEMPTION RESERVE

	Number of shares '000	Share Capital £'000	Share Premium £'000	Capital redemption reserve £'000	Total £'000
At 30 June and 31 December 2010	138,594	3,465	4,900	-	8,365
Repurchase of own shares	(24,692)	(617)	-	617	-
At 30 June 2011	113,902	2,848	4,900	617	8,365

Following consultation with major shareholders, the directors proposed to return up to £5.0 million of the proceeds from the sale of HERNIS to shareholders by way of an on-market tender offer. A circular was sent to shareholders on 23 March 2011 explaining the proposal, which was approved at a General Meeting on 8 April 2011. The tender offer was oversubscribed.  Therefore the maximum number of shares available under the terms of the tender offer (after the scaling down of tenders), was 24,691,358 shares at 20.25 pence per tendered share, for a total consideration of £5.0 million. The tender offer and repurchase was completed on 13 April 2011 and the shares purchased under the tender offer were cancelled. Consequently, the issued share capital of the Company is now 113,902,230 shares all with equal voting rights.

Costs associated with the tender offer were £0.2m; therefore the total cash outflow associated with the tender offer was £5.2 million.

There were no share options exercised in the period to 30 June 2011 under any of the existing employee share option schemes (2010: nil).

13.  CASH, BORROWINGS AND LOANS

The movements in cash and cash equivalents, borrowings and loans in the period were as follows:

	Net cash and cash equivalents £'000	Other borrowings £'000	Total net cash/(debt) £'000
Six months ended 30 June 2011
At 1 January 2011	22,230	-	22,230
Cash flow for the period before financing and acquisition of subsidiary	(4,563)	-	(4,563)
Cash and borrowings acquired with subsidiary	71	(932)	(861)
Purchase of subsidiary	(2,375)	-	(2,375)
Repurchase of own shares	(5,200)	-	(5,200)
Movement in borrowings in the period	202	(202)	-
Exchange rate adjustments	(7)	-	(7)
At 30 June 2011	10,358	(1,134)	(9,224)
Six months ended 30 June 2010
At 1 January 2010	7,423	(6,812)	611
Cash flow for the period before financing	(3,560)	-	(3,560)
Exchange rate adjustments	44	(521)	(477)
At 30 June 2010	3,907	(7,333)	(3,426)
Year ended 31 December 2010
At 1 January 2010	7,423	(6,812)	611
Cash flow for the period before financing	22,956	-	22,956
Net repayment of borrowings	(7,162)	7,162	-
Dividend paid to shareholders	(1,720)	-	(1,720)
Exchange rate adjustments	733	(350)	383
At 31 December 2010	22,230	-	22,230

Cash of £4.9 million (31 December 2010: £4.9 million; 30 June 2010: £nil) is held in an escrow account. The cash is held in escrow to be able to satisfy any potential claims by the buyer of HERNIS Scan Systems AS under the terms of the sale and purchase agreement for breaches of warranties and indemnities. The cash will be released from this account on 30 June 2012.

The facilities expiring within one year comprise the Group overdraft, bonding and ancillary facilities that are subject to review during 2012 in the normal course of business.                                                                 

The Group's facilities include a gross bank overdraft facility of £1.5 million, net limit of £nil. Interest on the overdraft facility is charged at 2.25 per cent over base rate.

The borrowing facilities acquired with Gigawave are secured on the assets of Gigawave Limited.

14.  PROVISIONS FOR LIABILITIES AND CHARGES

	Six months to 30 June 2011 £'000	Six months to 30 June 2010 £'000	Year ended 31 December 2010 £'000
Warranty provision	784	1,010	768
Property Provision	476	265	45
Rationalisation provision	224	-	-
	1,484	1,275	813
Amounts due within one year	944	942	514
Amounts due after one year	540	333	299
	1,484	1,275	813

Warranty provisions are made in respect of the expected future warranty costs in certain businesses based on historic actual costs. Warranty periods on products are generally between one and two years. Other than a warranty provision of $0.5 million (£0.3 million) all provisions are denominated in sterling.

The property provision is in respect of a vacated leasehold property acquired as part of the Gigawave acquisition and represents the estimated future liabilities associated with the property.

The provision for rationalisation costs reflects future commitments in respect of redundancy payments that have been announced prior to 30 June 2011.

15.  NOTES TO THE CASH FLOW STATEMENT

 

Net cash flow from operating activities comprises:

	Six months to 30 June 2011 (Unaudited) £'000	Six months to 30 June 2010 (Unaudited) £'000	Year ended 31 December 2010 (Audited) £'000
(Loss)/profit attributable to shareholders	(2,290)	(3,289)	3,989
Taxation credit on loss from continuing activities	(1,126)	(1,921)	(2,175)
Taxation on profit from discontinued activities	-	687	865
Depreciation	564	1,079	2,240
Loss on disposal of property, plant and equipment	32	30	2
(Gain) on disposal of subsidiary	(257)	-	(20,812)
Acquisition related costs	225	-	-
Impairment of goodwill	-	-	5,362
Amortisation and impairment of development costs	944	1,358	4,044
Amortisation of acquired intangibles	557	1,140	2,028
Share options - value of employee services	43	85	182
Finance income from continuing operations	(19)	-	(1)
Finance costs from continuing operations	2	209	487
Net finance income from discontinued activities	-	(40)	(124)
Movement in fair value of derivative financial instruments	-	(402)	-
Share of loss of associate	-	18	12
(Increase)/decrease in inventories	(937)	639	3,999
Decrease in assets held for sale	-	461	-
(Increase)/decrease in trade and other receivables	(49)	8,155	11,079
(Decrease) in payables	(984)	(6,486)	(6,503)
Increase/(decrease) in provisions	14	(243)	(676)
Net cash (outflow)/inflow from operating activities	(3,281)	1,480	3,998

16.  FOREIGN EXCHANGE RATES

 

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

Rate compared to GBP:  Period ended	30 June    2011	30 June    2010	31 December 2010
Average rates for the period
US dollar	1.62	1.53	1.55
Norwegian Krone	n/a	9.21	9.34
Period end rate
US dollar	1.61	1.50	1.57
Norwegian Krone	n/a	9.73	9.10

17.  BUSINESS COMBINATIONS

On 2 June 2011 the Group acquired the entire issued share capital of Gigawave Limited ("Gigawave") for cash consideration of £3.75 million. Based in Colchester, Essex, Gigawave was privately owned by a number of individual shareholders and employs 87 people. Gigawave is a leading designer, manufacturer and supplier of wireless camera, microwave and antenna products for the broadcast market. Gigawave has a particular strength in "on-board" applications for motorsport events around the world. Gigawave will complement and broaden the Group's capabilities in terms of engineering, product portfolio and geographic reach and will therefore strengthen the Group's position in its broadcast market.

Under the terms of the acquisition agreement, an initial consideration of £1.75 million was paid on completion on 2 June 2011. The Group also repaid shareholder loans of £0.4 million on completion. Deferred consideration of £1.0 million is payable on each of the first and second anniversary of completion. The initial consideration was paid in cash. Deferred consideration will also be paid in cash.

Gigawave will be integrated into the Group's UK operations so as to realise the benefits expected from improved global distribution of all the Vislink brands and operational efficiencies. The goodwill of £2.7 million arises from these factors. None of the goodwill is expected to be deductable for tax purposes.

The following table summarises the consideration paid for Gigawave and a preliminary valuation of the amounts of the assets acquired and liabilities assumed recognised at the acquisition date

	Provisional fair value
	£'000
Recognised amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	71
Property, plant and equipment	1,115
Capitalised development costs	195
Acquired intangibles - brand	1,019
Acquired intangibles - customer relationships	1,500
Inventories	1,947
Trade and other receivables	1,658
Trade and other payables	(3,771)
Current tax asset	16
Provisions for liabilities and charges	(668)
Financial liabilities - secured borrowings	(932)
Deferred tax liabilities	(687)
Total identifiable net assets	1,463
Goodwill	2,687
Total consideration	4,150

	£'000
Consideration:
Cash - initial consideration	1,750
Cash - repayment of shareholder loans	400
Total cash	2,150
Deferred consideration	2,000
Total consideration	4,150

Deferred tax of £0.6 million has been provided in respect of the fair value of acquired identifiable intangible assets of £2.5m.

Acquisition-related costs of £0.2 million are included in other expenses in the income statement and are considered to be non-recurring (note 5). Thus the total initial cash out flow associated with the acquisition was £2.4 million

Gigawave contributed £0.9 million to Group revenue and £0.1 million to Group operating profit in the period. If the acquisition of Gigawave had been completed on the first day of the financial year, Group revenues for the year would have increased by £4.3 million and Group profit attributable to equity holders of the parent would remain unchanged.

18.  RELATED PARTY TRANSACTIONS

Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.

The Group has not entered into any transactions with any related parties who are not members of the Group.                                                                                                .

Statement of directors' responsibilities

The directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

·      an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·      material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.

The directors of Vislink plc are listed in the Vislink plc Annual Report for 31 December 2010, with the only subsequent change being the resignation of Duncan Lewis on 31 March 2011.

By order of the Board

John Hawkins

Chairman and Chief Executive

James Trumper

Finance Director

31 August 2011

Independent review report to Vislink Plc

Introduction

We have been engaged by the company to review the condensed consolidated interim financial information in the interim results announcement for the six months ended 30 June 2011, which comprises the Consolidated Group Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Shareholders Equity, Consolidated Group Statement of Financial Position, Consolidated Group Cash Flow Statement and related notes. We have read the other information contained in the interim results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed consolidated interim financial information.

Directors' responsibilities

The interim results announcement is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim results announcement in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed consolidated interim financial information included in this interim results announcement has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed consolidated interim financial information in the interim results announcement based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial information in the interim results announcement for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PRICEWATERHOUSECOOPERS LLP

Chartered Accountants

Bristol

31 August 2011

Notes:
(a) The maintenance and integrity of the Vislink web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim results announcement since it was initially presented on the web site.

(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.

 

END

 

 

IR EAKPEDEAFEFF