Interim Results

RNS Number : 1704Z

Vislink PLC

16 September 2015

 

Vislink plc

(the "Company" or the "Group")

Half year results for the six months ended 30 June 2015

Vislink plc, the global technology business specialising in solutions for the capture, management and delivery of high quality video for the broadcast and surveillance and public safety markets, today announces its half year results for the six months ended 30 June 2015.

Results for the six months ended 30 June 2015	2015	2014
	£m	£m
Order intake	28.2	33.3
Revenue	26.6	27.1
Adjusted operating profit1	2.2	1.7
Adjusted operating margin1	8.1%	6.3%
Adjusted earnings per share1	1.6p	1.2p
Adjusted earnings per share normalised for tax effects2	1.3p	0.8p
Reported operating (loss)/profit	(0.9)	2.0
Basic earnings per share	(0.4)p	1.7p
Net debt	(1.2)	(0.3)

¹ Adjusted to exclude restructuring and rationalisation, amortisation and impairment of goodwill and acquired intangibles, and other non-recurring costs (note 5).

² Adjusted earnings per share normalised for tax effective rate of 20 per cent.

Key points

·	Adjusted operating profit up 25.9% to £2.2 million (H1 2014: £1.7 million)
·	Orders received during the period of £28.2 million (H1 2014: £33.3 million which included the benefit of a significant order)
·	Gross margin strengthened to 51.2% (H1 2014 42.8%) reflecting improved operational efficiency and increased proportion of software revenue
·	Continued strong performance of Pebble Beach Systems
·	Vislink Communication Systems' Broadcast order intake up 18.1% to £22.1 million
·	Successful completion of the Home Office surveillance contract by Vislink Communication Systems
·	Vislink Communication Systems' successful restructuring is largely complete with significant cost savings, reflected in the improved adjusted operating margin
·	Use of the world's first live wireless 4K cameras, provided by Vislink at the UK Moto GP
·	Harmonic and GoPro strategic relationships continue to progress, evidenced by the successful launch with GoPro in April of HEROCastTM

John Hawkins, Executive Chairman of the Group, said:

"We continue to transition to a software and services business represented by the evolving profit mix and strengthened margins within the business. Pebble Beach Systems has had a strong financial performance in this half year with better operating margins, and it continues to expand its sales activities through its key partnerships.

The strategy is working, evidenced by an improvement in gross margin and overall profit margin from 6.3 per cent to 8.1 per cent at the half year comparison. Group revenue decreased by £0.5 million (1.8 per cent) compared to the prior year. The reduction in revenue was driven by Vislink Communication Systems, and amounted to £2.9 million (12.0 per cent) however this was partially offset by Pebble Beach Systems which contributed for a full 6 months (£5.5 million of revenue) against 3.5 months (£3.1 million of revenue) in the previous half year.

In its core markets, Vislink Communication Systems found market conditions challenging and continued to witness longer decision making cycles. A significant restructuring of our hardware division, coupled with investment in new products and an increasing order pipeline, provides an encouraging platform for improved results from Vislink Communication Systems.

Both the Harmonic and GoPro strategic relationships continue to progress.

The Group is confident of its strategy and transition to software and services, which will benefit the Group as a whole in 2015 and beyond."

-     ends  -

A copy of the half yearly report will be available from the Group's website www.vislink.com

Enquiries:
Vislink plc: John Hawkins, Executive Chairman	[phone]
Vislink plc: Ian Davies, Finance Director N+1 Singer: Shaun Dobson / Alex Wright	[phone] [phone]
Hudson Sandler: Charlie Jack / Katie Matthews	[phone]

About Vislink plc

Vislink plc is a leading global technology business specialising in the collection, delivery and management of high quality live video 'from scene to screen'.

For the broadcast markets, Vislink provides wireless communication solutions for the collection of live news, sport and entertainment as well as software solutions for channel playout automation, channel-in-a-box and video content management.  Vislink also provides secure video communications for surveillance and public safety applications such as law enforcement and homeland security.

Vislink employs over 250 people worldwide with offices in the UK, USA, UAE and Singapore and manufacturing operations in the UK and the USA. Vislink has net assets of over £54 million and continues to invest in innovation.

The Company is listed on the AIM market of the London Stock Exchange (AIM: VLK).  For further information, visit www.vislink.com.

The Company is listed on the AIM Market of the London Stock Exchange.  For further information, visit www.vislink.com.

Forward-looking statements

Certain statements in this 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 be 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. Nothing in this announcement should be construed as a profit forecast.

 

Executive Chairman's Statement

For the six months to 30 June 2015

Introduction

The first half of the year saw a further improvement in profitability for the Group, with adjusted operating profit growing 25.9 per cent to £2.2 million. This has been achieved through our two divisions which have continued to provide best in class solutions to our three core markets; the broadcast software market, the broadcast communications market for the collection of live news, sport and live entertainment events, and the surveillance and public safety market.

The Group achieved an order intake of £28.2 million for the six months ended 30 June 2015 (H1 2014: £33.3 million which benefited from the significant Home Office contract). During this period order intake strengthened in Broadcast, leading to an order book of £7.1 million at the end of the period. Vislink Communication Systems' Broadcast overall order intake was up 18.1 per cent in H1 2014 to £22.1 million. Revenue in the first half was £26.6 million, which on a constant currency basis was marginally down on the same period last year, which included revenue from the aforementioned Home Office contract.

Adjusted operating profit was up 25.9 per cent to £2.2 million, with an improvement in adjusted operating margin for the period to 8.1 per cent (H1 2014 6.3 per cent).

Platform for profit growth

We continue to see a strengthening of our capabilities, expertise and ability to execute against our "Scene to Screen" strategy and this is accelerated by the development of key partnerships.

The Group is operating as two divisions; Pebble Beach Systems, which includes the Group's software businesses, and Vislink Communication Systems, which is a consolidation of the Group's hardware businesses. Both divisions benefit from channel and market synergies.

Pebble Beach Systems provides state of the art products in automation, channel in a box and integrated channel technology, with scalable products designed for multichannel transmission, news, sports and interactive television and has grown into a market leader in Europe and the Middle East.

Pebble Beach Systems' strong financial performance has continued in 2015, as the business continued to gain traction in new markets, launch new products and strengthen its industry partnerships.

In March, Pebble Beach Systems was awarded a landmark project with Al Jazeera Media Network supplying a system to unify the playout infrastructure, replacing the legacy solution and delivering advanced functionality. In May, German national public television broadcaster ZDF (Zweites Deutsches Fernsehen) completed the transfer of all of ZDF's ingest and playout across its five channels to Marina, Pebble Beach Systems' flagship automation solution.

In 2014, the Group announced a partnership with Harmonic Inc (Nasdaq: HLIT) ("Harmonic") to enable Harmonic to work with Pebble Beach Systems to sell packages to the international broadcast market, supported by Harmonic's channels to market. This partnership is making strong progress and, reflecting the anticipated sales cycle lead time, we are now seeing momentum in project wins.

Encouraging progress has been made by Pebble Beach Systems in North America where the focused sales activities, leveraging both the Harmonic partnership and wider Vislink organisations in this market, are delivering key opportunities.

Pebble Beach Systems demonstrates that the Group's Software strategy is on track, giving good growth prospects, better operating margins and the benefit of improved visibility of earnings.   

Vislink Communication Systems ("VCS") has continued to make strong progress both in terms of margin improvement, restructuring the organisation and evolving stronger industry partnerships. This has been achieved against a background of challenging conditions in its core markets, which also continued to witness longer decision making cycles. There is considerable on-going evolution within the broadcast hardware technology industry with the increase in market appetite for increased flexible live "Points of View", greater use of IP solutions and the ever increasing demands for video content.

Early in 2014, VCS won a multimillion pound contract in public safety for the Home Office in the UK, which contributed significantly to order intake in H1 2014 and to revenue and operating profit in 2014. The project was successfully completed in H1 2015 and provides an active demonstration of the capabilities of the core product portfolio for the surveillance and public safety market.

VCS has been able to reduce costs in its manufacturing base by both consolidation of manufacturing operations and outsourcing the manufacture of established products to third parties. This brings the benefit of both a lower fixed cost base and flexibility to expand production as market needs generate demand. VCS has continued to build value around its core products by investing in new products which have been launched into the marketplace.

In April 2015, in conjunction with GoPro, we announced the launch of HEROCast^TM  at NAB (National Association of Broadcasters) show 2015, the major broadcast trade show. HEROCast^TM is a miniature transmitter that allows GoPro HERO3+Black^TM and HERO4^TM cameras to broadcast live, HD wireless video for the first time. It is Vislink's smallest, lightest, and most energy-efficient HD wireless transmitter and is expected to transform the broadcasting of live sports and other broadcasts and the HEROCast^TM has already been successfully used to broadcast NHL (National Hockey League) games.

There has been an acceleration of interest in the launch of new 4K Ultra HD channels and services, which in turn is creating demand for the technology to support this exciting new video media. In August 2015 Dorna Sports, in collaboration with BT Sport, produced live coverage of the MotoGP™ Octo British Grand Prix at Silverstone in 4K Ultra HD. This is the first time a MotoGP™ World Championship event has been covered live in 4K Ultra HD and included the use of the world's first live wireless 4K Ultra HD cameras, provided by Vislink.

Financial Results

Group revenue for the six months to 30 June 2015 was £26.6 million (H1 2014: £27.1 million). Orders received in the period were £28.2 million (H1 2014: £33.3 million). The order book at 30 June 2015 was £7.1 million (31 December 2014: £5.0 million).

The Group's gross margin improved by 8.4 percentage points to 51.2 per cent (H1 2014: 42.8 per cent).  Vislink Communication Systems saw a significant improvement in gross margin, benefiting from the restructuring of its manufacturing capability, and Group's gross margin benefitted from the increasing contribution of software revenues from Pebble Beach Systems.

Overheads remained in line with expectations with the total overheads increasing to £11.5 million (H1 2014: £9.9 million) due to H1 2015 containing a full six months of Pebble Beach Systems' overheads, compared with three and a half months in the same period last year. R&D expenditure increased reflecting both the Group's investments in products and the full six months of costs in Pebble Beach Systems.

The adjusted operating profit was £2.2 million (H1 2014: £1.7 million) before charging £1.2 million in respect of the amortisation of acquired intangibles (H1 2014: £0.9 million) and £1.7 million of non-recurring items (H1 2014: a credit of £1.3 million).

The reported loss before tax was £0.9 million (H1 2014: profit £2.0 million). The reported loss has arisen due to non-recurring restructuring costs in the Hardware division of £1.7 million in the period. On a comparative basis, H1 2014 benefited from a non-recurring £2.0m release of deferred consideration in respect of the acquisition of Amplifier Technology in 2013.

Net finance costs have increased this year reflecting a full 6 months of interest on the Group's £7.0 million Revolving Credit Facility ("RCF") and £3.0 million term loan facility which were utilised in part to finance the acquisition of Pebble Beach Systems.

At the half year, the Group held inventory of £14.1 million, up 17.0 per cent on the same period in the prior year (H1 2014: £12.1 million), trade and other receivables of £12.0 million, up 2.5 per cent on the same period in the prior year (H1 2014: £11.7 million) and trade and other payables of £12.9 million, down 20.7 per cent on the same period in the prior year (H1 2014: £16.3 million).

The Group held cash of £6.2 million at 30 June 2015 and taken together with the outstanding debt of £7.4 million, there was a net debt position of £1.2 million (H1 2014: £0.3 million). The cash inflow from operating activities in the period was £0.1 million (H1 2014: £5.5 million) reflecting an investment in working capital to underpin future growth.

The Group continues to view investment in the development of new products and services as key to future growth. The cash outflow from investing activities amounted to £1.6 million (H1 2014: £9.4 million) which comprised net capital expenditure and the capitalisation of development costs. In H1 2014 investing activities included a £7.0 million net outflow in respect of the acquisition of Pebble Beach Systems.

On 30 June 2015, the Group restructured its existing debt facilities and replaced the original £7.0 million RCF facility and £3.0 million term loan with a £10.0 million RCF facility, to provide greater flexibility.

Earnings per Share

The adjusted earnings per share for the period was 1.6p (H1 2014: 1.2p). After charging non-recurring costs and the amortisation of acquired intangibles, the reported earnings/(loss) per share from continuing operations was (0.4)p (H1 2014: 1.7p).

Dividends

As part of the Group's progressive dividend policy, the Board proposed that the full year dividend in respect of the year ended 31 December 2014 increase by 20 per cent to 1.50 pence per share (2014: 1.25 pence per share). This was approved at the Group's Annual General Meeting and the final dividend was paid to shareholders on 17 July 2015. As in previous years, the Board is not declaring an interim dividend.

Business Performance

The table below sets out the key performance indicators that are used by management to measure the performance in the business.

Performance for the six months ended 30 June	2015	2014	Change	FY 2014
Continuing business:
Orders received (£m)	28.2	33.3	(15.2)%	61.4
Revenue (£m)	26.6	27.1	(1.8)%	61.9
Book to bill ratio	106.0%	122.8%	(13.7)%	99.1%
Gross margin	51.2%	42.8%	+19.4%	45.9%
Total operating costs (£m)1	13.4	13.2	+1.0%	27.5
Adjusted operating profit (£m)2	2.2	1.7	+25.9%	7.2
Adjusted earnings per share 2	1.6p	1.2p	+33.3%	4.1p

¹ Operating costs comprise sales and marketing expenses, administrative expenses, the costs associated with logistics (presented within Cost of sales) and R&D and excludes amortisation of acquired intangibles and non-recurring items.

² Defined as operating profit/(loss) before the amortisation of acquired intangibles and other non-recurring costs. Adjusted EPS is calculated on the same basis after taking account of related tax effects.

Our Markets

Orders received from our broadcast market were up 19.1 per cent to £25.6 million (H1 2014: £21.5 million). In the Group's Hardware division, Broadcast order intake was up 18.1 per cent to £22.1 million. Hardware surveillance orders were down 78.0 per cent to £2.6 million (H1 2014: £11.8 million). This reduction reflects the strong comparatives in 2014, which included the Home Office contract order.

Group Broadcast revenues increased 5.9 per cent to £22.3 million (H1 2014: £21.1 million). The software revenue was ahead of expectations in the period, moving 17.0 per cent ahead of budget, supported by our partnership with Harmonic. Group Surveillance revenue decreased by 28.3 per cent to £4.3 million (H1 2014: £6.0 million). 

Revenue by market	H1 2015	H1 2014	Change	FY 2014
	£m	£m	%	£m
Broadcast:
UK & Europe	6.3	8.3	(23.7)%	15.5
Americas	10.8	7.4	45.9%	17.9
Middle East and Africa	3.3	2.7	23.2%	5.4
Asia/Pacific	1.9	2.7	(30.1)%	7.2
Broadcast	22.3	21.1	5.9%	46.0
Surveillance	4.3	6.0	(28.7)%	15.9
Total	26.6	27.1	(1.8)%	61.9
Divisional operations	H1 2015	H1 2014	Change	FY 2014
	£m	£m	%	£m
Revenues
Vislink Communication Systems	21.2	24.0	(12.0)%	53.6
Pebble Beach Systems	5.4	3.1	78.2%	8.3
Total revenue	26.6	27.1	(1.8)%	61.9
Adjusted operating profit
Vislink Communication Systems	1.9	1.8	5.4%	5.9
Pebble Beach Systems	1.8	1.1	60.5%	3.3
Central costs	(1.5)	(1.2)	29.0%	(2.0)
Total adjusted operating profit	2.2	1.7	25.9%	7.2

Principal risks and uncertainties

The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 41 of the 2014 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 main risks and uncertainties facing the business for the remaining six months of the financial year. The Group notes that this is not an exhaustive list. The Group's risk management process remains unchanged from 31 December 2014 and is described in detail in the 2014 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 half year financial information are provided in note 13.

Strategy and Outlook

Our strategy to continue to develop our core competence in high quality video Scene to Screen solutions while seeking to generate an increased proportion of our revenues from higher margin software business is progressing well.

We remain committed to our customer centric, solution-led and best-in-class products which enable the Group to successfully capture new business and deliver through key partnerships.

The Board believes that the Group is well placed to benefit from macro drivers in the sectors in which it operates. These include the increased demand for the higher image qualities of HD and Ultra HD video, the increasing opportunities for live Points of View and the acceleration of End to End IP technologies. 

A key focus of the Group is to expand its software offerings, which will enhance its solutions and grow its recurring revenues. The partnership with Harmonic is providing additional sales channels in key geographic markets.

We have an improved product range for the hardware market and have seen an increase in underlying broadcast orders. Vislink Communication Systems now has a significantly reduced cost base and is more efficient in accessing new product opportunities, and this is expected to contribute towards improved trading in the second half of 2015. Our improving order pipeline underpins this outlook.    

We continue to transform the Group. As our software offering grows we will enhance visibility of earnings and margins, and remain completely aligned to our shareholders' objectives of delivering long term profitable growth.

The Group enters the second half of 2015 with renewed confidence with the expansion of our ever increasing software portfolio and a more efficient integrated communication division.  

John Hawkins
Executive Chairman

CONSOLIDATED GROUP INCOME STATEMENT

For the six months ended 30 June 2015

		Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
		(Unaudited)	(Unaudited)	(Audited)
	Notes	£000	£000	£000
Continuing operations
Revenue	4	26,631	27,111	61,931
Cost of sales		(13,009)	(15,503)	(33,519)
Gross profit		13,622	11,608	28,412
Sales and marketing expenses		(4,511)	(4,300)	(8,817)
Research and development costs		(2,811)	(2,198)	(5,558)
Administrative costs		(4,136)	(3,391)	(6,833)
Other (expenses)/income		(2,942)	355	(1,692)
Operating (loss)/profit	4	(778)	2,074	5,512
Operating (loss)/profit is analysed as:
Adjusted operating profit		2,164	1,719	7,204
Amortisation of acquired intangibles		(1,209)	(906)	(2,630)
Non-recurring items	5	(1,733)	1,261	938
Finance costs - net		(103)	(51)	(145)
(Loss)/profit before taxation		(881)	2,023	5,367
Taxation	6	422	(13)	(1,623)
(Loss)/profit for the period attributable to equity shareholders		(459)	2,010	3,744
Basic earnings per share	8	(0.4)p	1.7p	3.2p

Diluted earnings per share

There is no difference between basic and diluted earnings per share (note 8).

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the six months ended 30 June 2015

	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
(Loss)/profit for the period	(459)	2,010	3,744
Items that may subsequently be reclassified to profit or loss:
Exchange difference on translation of foreign currency net investments	(17)	(333)	483
Total comprehensive (expense)/income for the period	(476)	1,677	4,227

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

For the six months ended 30 June 2015

	Share Capital	Share premium account	Capital redemption reserve	Merger reserve	Translation reserve	Retained earnings	Total
	£000	£000	£000	£000	£000	£000	£000
Balance at 1 January 2015	3,066	6,800	617	32,448	4,437	9,459	56,827
Purchase of own shares	-	-	-	-	-	(5)	(5)
Share based payments: value of employee services	-	-	-	-	-	287	287
Dividends payable	-	-	-	-	-	(1,830)	(1,830)
Transactions with owners	-	-	-	-	-	(1,548)	(1,548)
Retained loss for the period	-	-	-	-	-	(459)	(459)
Exchange difference on translation of foreign currency net investments	-	-	-	-	(17)	-	(17)
Total comprehensive expenditure for the period	-	-	-	-	(17)	(459)	(476)
Balance at 30 June 2015	3,066	6,800	617	32,448	4,420	7,452	54,803
Balance at 1 January 2014	2,848	4,900	617	30,565	3,954	6,718	49,602
Issue of share capital	117	-	-	1,883	-	-	2,000
Share based payments: value of employee services	-	-	-	-	-	198	198
Dividends payable	-	-	-	-	-	(1,471)	(1,471)
Transactions with owners	117	-	-	1,883	-	(1,273)	727
Retained profit for the period	-	-	-	-	-	2,010	2,010
Exchange differences on translation of foreign currency net investments	-	-	-	-	(333)	-	(333)
Total comprehensive income for the period	-	-	-	-	(333)	2,010	1,677
Balance at 30 June 2014	2,965	4,900	617	32,448	3,621	7,455	52,006
Balance at 1 January 2014	2,848	4,900	617	30,565	3,954	6,718	49,602
Issue of share capital	218	1,900	-	1,883	-	-	4,001
Adjustment in respect of Employee Share Ownership Plan	-	-	-	-	-	(30)	(30)
Share based payments: value of employee services	-	-	-	-	-	500	500
Dividends payable	-	-	-	-	-	(1,473)	(1,473)
Transactions with owners	218	1,900	-	1,883	-	(1,003)	(2,998)
Retained profit for the year	-	-	-	-	-	3,744	3,744
Exchange differences on translation of overseas operations	-	-	-	-	483	-	483
Total comprehensive income for the period	-	-	-	-	483	3,744	4,227
Balance at 31 December 2014	3,066	6,800	617	32,448	4,437	9,459	56,827

 

CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION

As at 30 June 2015

	Notes	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
		(Unaudited)	(Unaudited)	(Audited)
		£000	£000	£000
Assets
Non-current assets
Intangible assets	9	42,648	43,885	43,683
Property, plant and equipment	9	2,268	2,579	2,665
Deferred tax assets		3,786	2,746	3,712
		48,702	49,210	50,060
Current assets
Inventories		14,107	12,061	12,884
Trade and other receivables		11,958	11,670	15,956
Current tax assets		66	-	-
Cash and cash equivalents	10	6,180	7,749	8,380
		32,311	31,480	37,220
Liabilities
Current liabilities
Financial liabilities-borrowings	10	7,400	5,000	5,600
Trade and other payables		12,938	16,322	15,810
Current tax liabilities		-	184	747
Provisions for other liabilities and charges	11	733	846	280
		21,071	22,352	22,437
Net current assets		11,240	9,128	14,783
Non-current liabilities
Financial liabilities-borrowings	10	-	3,000	2,400
Deferred tax liabilities		5,139	3,268	5,338
Provisions for other liabilities and charges	11	-	64	278
		5,139	6,332	8,016
Net assets		54,803	52,006	56,827
Shareholders' equity
Ordinary shares		3,066	2,965	3,066
Share premium account		6,800	4,900	6,800
Capital redemption reserve		617	617	617
Merger reserve		32,448	32,448	32,448
Translation reserve		4,420	3,621	4,437
Retained earnings		7,452	7,455	9,459
Total shareholders' equity		54,803	52,006	56,827

Approved by the Board on 16 September 2015 and signed on its behalf by:

John Hawkins

Executive Chairman

Ian Davies

Group Finance Director

CONSOLIDATED GROUP CASH FLOW STATEMENT

For the six months ended 30 June 2015

	Notes	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
		(Unaudited)	(Unaudited)	(Audited)
		£000	£000	£000
Cash flows from operating activities
Cash generated from operations	12	829	5,610	7,999
Interest paid		(107)	(69)	(169)
Taxation paid		(641)	(81)	(102)
Net cash generated from operating activities		81	5,460	7,728
Cash flows from investing activities
Interest received		4	14	24
Acquisition of subsidiary (net of cash acquired)		-	(7,004)	(7,003)
Proceeds from sale of property, plant and equipment		458	-	1
Purchase of property, plant and equipment	9	(359)	(440)	(919)
Expenditure on capitalised development costs	9	(1,737)	(1,999)	(3,647)
Net cash used in investing activities		(1,634)	(9,429)	(11,544)
Cash flows from financing activities
Net proceeds from new bank loans	10	-	8,000	8,000
Repayment of bank loans	10	(600)	-	-
Dividend paid to shareholders		-	-	(1,473)
Proceeds on (purchase)/issue of shares		(5)	-	2,000
Net cash (used)/generated in financing activities		(605)	8,000	(8,527)
Net (decrease)/increase in cash and cash equivalents		(2,158)	4,031	4,711
Cash and cash equivalents at beginning of period		8,380	3,705	3,705
Effect of foreign exchange rate changes	10	(42)	13	(36)
Cash and cash equivalents at end of period	10	6,180	7,749	8,380

 

NOTES TO THE HALF YEAR FINANCIAL INFORMATION

For the six months ended 30 June 2015

1.   GENERAL INFORMATION

Vislink plc ("the Company") and its subsidiaries (together "the Group") is a global technology business specialising in the collection, delivery and management of high quality live video 'from scene to screen'.

For the broadcast markets, Vislink provides wireless communication solutions for the collection of live news, sport and entertainment as well as software solutions for channel playout automation, channel-in-a-box and video content management.  Vislink also provides secure video communications for surveillance and public safety applications such as law enforcement and homeland security.

Vislink employs over 250 people worldwide with offices in the UK, USA, UAE and Singapore and manufacturing operations in the UK and the USA. Vislink has net assets of over £54 million and continues to invest in innovation.

The Company is a public limited company, which is listed on the AIM Market of the London Stock Exchange and incorporated and domiciled in the UK. The address of its registered office is Marlborough House, Charnham Lane, Hungerford, Berkshire, RG17 0EY.  The registered number of the Company is 4082188.

This condensed consolidated half year 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 2014 were approved by the Board of Directors on 24 March 2015 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 half year 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 half year results announcement was approved for issue by the Board of Directors on 16 September 2015.

 

2.   BASIS OF PREPARATION

This condensed consolidated half year financial information for the six months ended 30 June 2015 has been prepared in accordance with the AIM Rules for Companies and with IAS 34, 'Half year financial reporting' as adopted by the European Union. The condensed consolidated half year financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2014, 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

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2014, as described in those annual financial statements.

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 half year periods are accrued using the tax rate that would be applicable to expected total annual earnings on a country by country basis.

4.   SEGMENTAL ANALYSIS

The two markets in each of the divisions are Broadcast and Surveillance and public safety.  As the divisions manage and control the markets directly, costs are shared across markets in certain divisions which means that any allocation of costs to markets would be arbitrary.  The focus of management is to ensure that the appropriate material margins are being achieved in each market as a sub analysis of the divisional performance.

The segment information provided to the Executive Management Board for the reportable continuing segments for the period ended 30 June 2015 is as follows:

	Vislink Communication Systems				Pebble Beach Systems				TOTAL CONTINUING OPERATIONS
	H1 2015	H1 2014	FY 2014		H1 2015	H1 2014	FY 2014		H1 2015	H1 2014	FY 2014
	£m	£m	£m		£m	£m	£m		£m	£m	£m
Revenue	21,171	24,047	53,639		5,460	3,064	8,292		26,631	27,111	61,931
Operating profit:
Adjusted operating profit	1,851	1,757	5,938		1,847	1,151	3,298		3,698	2,908	9,236
Central costs									(1,534)	(1,189)	(2,032)
Group adjusted operating profit									2,164	1,719	7,204
Amortisation of acquired intangibles	(506)	(502)	(2,630)		(703)	(404)	-		(1,209)	(906)	(2,630)
Non-recurring items	(1,717)	(443)	(889)		-	-	-		(1,717)	(443)	(889)
Central non-recurring items	-	-	-		-	-	-		(16)	1,704	1,827
Group total operating (loss)/profit	(372)	812	2,419		1,144	747	3,298		(778)	2,074	5,512
Finance income/(costs) - net	(4)	(42)	(432)		3	10	19		(1)	(32)	(413)
Central finance income/(costs) - net	-	-	-		-	-	-		(102)	(19)	268
(Loss)/profit before tax	(376)	770	1,987		1,147	757	3,317		(881)	2,023	5,367

GEOGRAPHIC REVENUE ANALYSIS BY DESTINATION	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
	(Unaudited) £'000	(Unaudited) £'000	(Audited) £'000
UK & Europe	8,967	12,773	27,468
Americas	12,340	8,687	21,518
Middle East and Africa	3,288	2,716	5,500
Asia/Pacific	2,036	2,935	7,445
	26,631	27,111	61,931

The amounts reported to the Executive Chairman with respect to total net assets are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and the physical location of the asset.

NET ASSETS	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
	(Unaudited) £'000	(Unaudited) £'000	(Audited) £'000
Vislink Communication Systems	50,913	48,253	50,129
Pebble Beach Systems	11,307	13,656	13,726
Segment net assets	62,220	61,909	63,855
Group net assets	(7,417)	(9,903)	(7,028)
	54,803	52,006	56,827

5.   NON-RECURRING ITEMS

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 2015	Six months to 30 June 2014	Year ended 31 December 2014
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Rationalisation and redundancy costs	1,717	443	722
Provision release against contractual issues	-	-	(2)
Costs associated with the transfer to the AIM market	-	-	72
Acquisition related costs	16	296	270
Deferred consideration release	-	(2,000)	(2,000)
Total non-recurring items	1,733	(1,261)	(938)

The rationalisation and redundancy costs reflect the non-recurring costs of the restructure in Vislink Communication Systems, this is now largely complete.

 

6.   TAX ON PROFIT ON ORDINARY ACTIVITIES

	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Current tax:
UK corporation tax	(178)	76	585
Foreign tax	-	5	74
Total current tax	(178)	81	659
Deferred tax:
UK corporation tax	(180)	(148)	112
Foreign tax	(64)	80	837
Adjustments in respect of prior years	-	-	15
Total deferred tax	(244)	(68)	964
Total taxation charge	(422)	13	1,623

The tax charge for the six months ended 30 June 2015 is based on the full year estimated effective tax rate of 7.8 per cent which is significantly lower than the standard rate principally due to the utilisation of tax losses. Deferred tax is calculated in full on temporary differences under the liability method using a tax rate appropriate to the country in which the deferred tax liability or asset has arisen.  Deferred tax assets have been recognised in respect of all tax losses and other temporary differences to the extent that they are regarded as recoverable against future profits.

7.   DIVIDENDS

No interim dividend is proposed for the period.  In respect of 2014 there was no interim dividend and the final dividend of 1.5 pence per share was approved at the Group's Annual General Meeting on 20 May 2015 and paid on 17 July 2015. The total cash cost of the dividend was £1.8 million.

8.   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 period, 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 121,844,000 ordinary shares in issue during the period (30 June 2014: 115,803,000 and 31 December 2014: 117,797,000).

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 period.  At 30 June 2015 there were 2,756,000 dilutive share options (30 June 2014: 170,000 and 31 December 2014: 2,453,000). The effect of dilutive shares was not material 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			Six months to			Year ended
	30-Jun-15			30-Jun-14			31-Dec-14
		Pence per share			Pence per share			Pence per share
	£000			£000			£000
Reported earnings per share	(459)	(0.4)		2,010	1.7		3,744	3.2
Amortisation of acquired intangibles after tax	1,020	0.8		758	0.7		2,209	1.9
Non-recurring costs after tax	1,382	1.2		(1,420)	(1.2)		(1,093)	(1.0)
Adjusted earnings per share	1,943	1.6		1,348	1.2		4,860	4.1

9.   PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Property, plant and equipment
Opening net book value as at 1 January	2,665	2,430	2,430
Additions	359	440	919
Acquisitions through business combinations	-	162	162
Disposals	(341)	-	(1)
Depreciation	(421)	(431)	(886)
Exchange adjustment	6	(22)	41
Closing net book value	2,268	2,579	2,665
Intangible assets
Capitalised development costs
Opening net book value as at 1 January	9,441	7,569	7,569
Additions	1,737	1,999	3,647
Amortisation	(1,411)	(800)	(2,092)
Exchange adjustment	(37)	(161)	317
Capitalised development costs closing net book value	9,730	8,607	9,441
Goodwill and acquired intangible assets
Opening net book value as at 1 January	34,242	25,464	25,464
Additions	-	7,844	7,986
Additions through business combinations	-	3,076	3,076
Disposals	(66)	-	-
Amortisation	(1,210)	(906)	(2,130)
Impairment charge	-	-	(500)
Exchange adjustment	(48)	(200)	346
Goodwill and acquired intangible assets closing net book value	32,918	35,278	34,242
Total closing net book value of intangible assets	42,648	43,885	43,683

10.  CASH, BORROWINGS AND LOANS

The movements in cash and cash equivalents (net of overdrafts), borrowings and loans in the period were as follows:

		Net cash and cash equivalents	Other borrowings	Total net cash
		£000	£000	£000
Six months ended 30 June 2015
At 1 January 2015		8,380	(8,000)	380
Cash flow for the period before financing		(1,558)	-	(1,558)
Movement in borrowings in the period		(600)	600	-
Exchange rate adjustments		(42)	-	(42)
At 30 June 2015		6,180	(7,400)	(1,220)
Six months ended 30 June 2014
At 1 January 2014		3,705	-	3,705
Cash flow for the period before financing and acquisition of subsidiary		3,035	-	3,035
Purchase of subsidiary		(13,093)	-	(13,093)
Cash acquired with subsidiary		6,089	-	6,089
Movement in borrowings in the period		8,000	(8,000)	-
Exchange rate adjustments		13	-	13
At 30 June 2014		7,749	(8,000)	(251)
Year ended 31 December 2014
At 1 January 2014		3,705	-	3,705
Cash flow for the period before financing and acquisition of subsidiary		3,188	-	3,188
Purchase of subsidiary		(13,093)	-	(13,093)
Cash acquired with subsidiary		6,089	-	6,089
Repayment of borrowings		8,000	(8,000)	-
Dividend paid to shareholders		(1,473)	-	(1,473)
Proceeds on issues of shares		2,000	-	2,000
Exchange rate adjustments		(36)	-	(36)
At 31 December 2014		8,380	(8,000)	380

The Group held cash of £6.2 million at the period-end and taken together with the outstanding debt of £7.4 million, there was a net debt position of £1.2 million.  

 

11.  PROVISIONS FOR OTHER LIABILITIES AND CHARGES

	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
Warranty provision	269	340	270
Property provision	171	323	288
Rationalisation provision	293	247	-
	733	910	558
Amounts due within one year	733	846	280
Amounts due after one year	-	64	278
	733	910	558

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.

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

Rationalisation provisions are in respect of future liabilities for committed reorganisation costs at the statement of financial position dates.

 

12.  NOTES TO THE CASH FLOW STATEMENT

 

Net cash flow from operating activities comprises:

	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
	(Unaudited)	(Unaudited)	(Audited)
	£000	£000	£000
(Loss)/profit before tax	(881)	2,023	5,367
Depreciation	421	431	886
(Profit)/loss on disposal of property, plant and equipment	(50)	-	-
Acquisition related costs	-	227	224
Release of deferred consideration no longer payable	-	(2,000)	(2,000)
Amortisation and impairment of development costs	1,411	800	2,092
Amortisation of acquired intangibles	1,209	906	2,630
Share based payment expenses	287	198	500
Finance income from continuing operations	(4)	-	(24)
Finance costs from continuing operations	107	-	169
Increase in inventories	(1,258)	(1,092)	(1,268)
Decrease/(increase) in trade and other receivables	712	1,563	(2,233)
(Decrease)/increase in payables	(1,301)	2,344	1,807
(Decrease)/increase in provisions	176	210	(151)
Net cash inflow from operating activities	829	5,610	7,999

13.  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.

	Six months to 30 June 2015	Six months to 30 June 2014	Year ended 31 December 2014
	(Unaudited)	(Unaudited)	(Audited)
Average rate for the period
US dollar	1.5151	1.6690	1.648
Period end rate
US dollar	1.5729	1.7097	1.561

 

Independent review report to Vislink plc

Introduction

We have been engaged by the company to review the condensed consolidated half-year financial information in the half-yearly financial report for the six months ended 30 June 2015, 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 half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.

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 set of financial statements included in this half-yearly financial report 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 set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies 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 condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2015 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.

PricewaterhouseCoopers LLP
Chartered Accountants
16 September 2015

Bristol

Notes:

(a)  The maintenance and integrity of the Vislink plc website 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 financial statements since they were initially presented on the website.

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

 

END

 

 

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