Pebble Beach Regulatory News (PEB)

18 Mar 2008 07:02

Vislink PLC18 March 2008 Vislink plc Preliminary results for the year ended 31 December 2007 Vislink plc ("The Group"), a leading supplier of microwave radio and satellitetransmission products for the broadcast and security markets and of CCTV systemsfor the marine safety market has today announced its preliminary results for theyear ended 31 December 2007. Financial highlights ---------------------------- -------- ----------- --------- 2007 2006 Change Unaudited Audited % £'000 £'000 ---------------------------- --------- ----------- ---------Revenue* 98,580 100,498 -1.9%Operating profit 14,216 12,939 +9.9%Adjusted** operating profit 15,678 14,303 +9.6%Adjusted** operating margin 15.9% 14.2% +1.7%Profit before taxation 13,956 12,675 +10.1%Cash generated from operating activities 9,253 8,372 +10.5%Earnings per share - basic 6.47p 5.65p +14.5%Adjusted** earnings per share - basic 7.21p 6.35p +13.5%Proposed dividend per share 1.25p 1.00p +25.0%---------------------------- --------- ----------- --------- *Revenue increased by 7.4% excluding the effects of foreign exchange rates andrevenue associated with the completed legacy Venezuelan contract**Adjusted operating profit is operating profit before the amortisation ofacquired intangibles. Adjusted earnings per share are calculated on the samebasis 2007 Operational highlights: • Key financial performance metrics of underlying revenue, margin, earnings per share and cash generated from operating activities have all shown year on year growth • Dividend increased by 25% to 1.25p • Strong growth at Hernis • Good progress made with the strategic development of core operations • Acquisition of WTS in July establishes US services business • Establishment of international DLES presence • Revenue growth in European and Asian markets 2008 Outlook: • As a result of the worsening US outlook, the Board's expectation for 2008 for MRC, the US RF business, is now reduced which, combined with slower progress in the DLES market for both MRC and Advent, will impact Group performance in 2008 • Acceleration of 2GHz re-channelisation programme will bring forward revenues into 2008 • Hernis continues to perform strongly • Current cash, net of bank borrowings, of £8.3 million Tim Trotter, Chairman of Vislink said:""In 2007, we delivered growth in a number of key financial performance metricswith underlying revenue, margin, earnings per share and cash generated fromoperating activities all showing year on year growth. In particular, I ampleased to report that the Group has achieved a 13.5% increase in adjustedearnings per share. Looking forward, we are conscious that the US economic outlook has worsenedsince the start of the year and we have become more cautious in the outlook forMRC, our US radio frequency business. We also expect revenues from the Defence Law Enforcement and Security ("DLES")market for both MRC and Advent to be lower than expected by the Board in 2008while we wait for delayed US programmes to be initiated. These two factors willimpact group performance in 2008. On the positive side the FCC has now ruled that the 2GHz re-channelisationprogramme has to be completed by March 5 2009, which will bring forward revenuesinto 2008. Hernis continues to perform strongly. The Group, with its strong product range, remains cash generative and currentlyhas cash, net of bank borrowings, of £8.3 million." - ends - For further information on 18 March 2008, please contact: Ian Scott-Gall, Chief Executive 01488 685500James Trumper, Group Finance Director 01488 685500 Andrew Hayes / James White 0207 796 4133Hudson Sandler CHAIRMAN'S INTRODUCTION Results for year ended 31 December 2007 IntroductionIn 2007, we delivered year on year growth in a number of key financialperformance metrics with underlying revenue, margin, earnings per share and cashgenerated from operating activities all showing year on year growth. We alsosuccessfully completed the acquisition of Western Technical Services which is inline with our strategic growth plan to build our US service and integrationrevenues in the broadcast, law enforcement and security markets. Financial resultsIn 2007 the adjusted operating margin has improved to 15.9% of revenue (2006 -14.2%) generating a 13.5% increase in adjusted earnings per share.Revenue for the year grew by 7.4%, excluding the effects of exchange ontranslation of £4.9 million and reduced sales on the completed legacy Venezuelancontract of £4.1 million. Headline revenues were £98.6 million (2006 - £100.5million). The Group has been able to continue to improve its operating profit andoperating margins. The adjusted operating profit, being operating profit fromcontinuing operations before the amortisation of acquired intangibles, increasedby 9.6% to £15.7 million (2006 - £14.3 million). This increase is after anadverse impact from foreign exchange on translation of £0.8 million. Operatingprofit from continuing operations was up by 9.9% to £14.2 million (2006 - £12.9million). Profit before tax was up by 10.1% to £14.0 million (2006 - £12.7million). The Group net cash inflow generated from operating activities was £9.3 million(2006 - £8.4 million). After increased capital expenditure and acquisition coststhe Group held net funds of £3.5 million at 31 December 2007 (31 December 2006 -£3.9 million). Dividend and shareholder returnsThe basic undiluted earnings per share for the year was 6.47 pence (2006 - 5.65pence). After adjusting for the amortisation of acquired intangibles, theadjusted earnings per share increased 13.5% to 7.21 pence (2006 - 6.35 pence).As a result of this strong performance, the Board is proposing a 25% increase inthe full-year dividend to 1.25 pence per share (2006 - 1.00 pence). Board and management changesIan Scott-Gall, our Chief Executive, has announced that he will be retiring atthe end of this financial year. On behalf of the Board, and our employees Iwould like to thank Ian for his substantial contribution to the Group over thelast nine years, during which time the Group has been transformed throughacquisitions and strong organic growth into a group of highly profitabletechnology businesses. The search for a new Chief Executive is now underway. Tony Finizio has been promoted to Chief Operating Officer of our US operations.At the same time we strengthened the US management team by appointing MorganKurk as President of MRC. Morgan was previously Vice President and GeneralManager of the Andrew Corporation Wireless Solutions Group. Executive remunerationWe have addressed the issues that were raised by the shareholders at the 2007Annual General Meeting of the Company in respect of certain elements ofexecutive remuneration. A circular was sent to all shareholders on 21 February2008 containing the details of the changes proposed. These were subsequentlyapproved at an Extraordinary General Meeting on 7 March 2008. Current trading and outlookOur progress in the defence satcom market has been hampered by the delay in theinitiation of certain US programmes. Whilst these are starting to be announced,actual purchase orders have yet to be released and as a result revenues from theDefence Law Enforcement and Security ("DLES") market for both MRC and Adventwill be lower than expected in 2008. Our RF businesses were expected to benefit from the introduction of new productsfor the growth opportunities created by the move from Standard Definition (SD)to High Definition (HD) within the professional broadcast market. However the USeconomic outlook has worsened and will have an impact on the level of broadcastorders to be received this year by MRC. On the positive side, the FCC has now ruled that the 2GHz re-channelisationprogramme has to be completed by March 5, 2009. This will result in increaseddeliveries of equipment in 2008 and opportunities for WTS, our recentacquisition, to increase revenue through the provision of further integrationservices to the programme. We are continuing to invest into the DLES markets, both in personnel and newproducts. Our plans for geographic expansion will continue and we have nowopened a sales office in Dubai to enable the RF businesses to develop thecustomer base in this important region. Demand for Hernis' systems from the marine and offshore markets continues to bestrong as growth in LNG marine transportation continues and as oil and gasexploration and extraction from harsher environments has been made economicallyviable by the higher oil prices. Hernis is expected to continue to performstrongly. The Group has invested in seeking out growth from entry into the adjacentsectors of the broadcast market by way of a significant acquisition using debtfinance, but given our caution over the current economic outlook we have decidednot to proceed further with this acquisition. We will continue to consideracquisition opportunities within our current markets. In summary, we achieved a 13.5% increase in adjusted earnings per share in 2007,however adverse trading conditions in the US in both our broadcast and DLESmarkets are expected to reduce our 2008 results below the Board's previousexpectations. The Group, with its strong product range, remains cash generativeand currently has net cash balances of £8.3 million. Tim TrotterChairman18 March 2008 CHIEF EXECUTIVE'S STRATEGY REVIEW IntroductionWe remain committed to our strategy through organic growth and acquisitions. Thestrategy will be delivered through our focus on our strategic objectives, whichare to: 1. Maintain market leadership in the television broadcast contribution technology segment2. Establish a global presence by providing high quality wireless transmission systems for defence, law enforcement and security markets3. Remain the world leader for the provision of intrinsically safe marine CCTV systems4. Evolve our products to meet the specific needs of new growth markets5. Seek out earnings enhancing acquisitions. Our Strategy in ActionBroadcast market leadershipBroadcast sales represent 73% of Group revenue. In the US we have maintained amarket share in excess of 60% in the RF broadcast contribution market. Over thelast three years this sector of the market has been dominated by the 2GHz BASrelocation programme. The FCC has now agreed to extend the programme to 5 March2009. The programme, which has expanded in total value, will provide asignificant contribution to 2008 revenues. The programme has to move rapidlyinto the implementation phase to meet this deadline and this creates furtheropportunities for us to grow revenues in our US technical services business. Outside of the US we are seeking to increase our international presence bydeveloping sales channels to growing Middle and Far Eastern markets throughregional sales offices. We already have offices in Singapore and Hong Kong andin February 2008 we opened a regional office in Dubai. We expect to increase ourmarket share by capitalising on the potential for equipment upgrades to highdefinition (HD) and high data rate IP systems through strong local partnerships. Developing the DLES marketsDLES sales currently represent 10% of Group revenue. We will grow our DLESmarkets through increased investment in our products and sales channels. During2007 a dedicated international DLES team was established and the existing USteam was strengthened. Our product development programme included new satellite products to meet thespecific needs of the market that will enter production in the first quarter of2008. The development of this market has been slower than we had wished andsales opportunities will start to flow in the second half of the year. In the US we have a good track record in the LES market with steadily increasingsales. We have strong relationships with city and state police forces as well aswith the National Guard. We are succeeding in developing the growing airbornedigital video surveillance market; MRC secured milestone helicopter videodownlink and receive systems orders from several large US municipalities andinternational security agencies. In addition a US network of specialist defencevalue added resellers has been set-up. Intrinsically safe marine CCTV systems market leadershipSales into the marine safety market through our Norwegian business, Hernis,represent 17% of Group revenue. The strategy for Hernis is to maintain its closerelationship with the oil and gas companies, ship owners and ship buildersaround the world. With regional offices in Brazil, Houston and Singapore, Hernisis well positioned to service its global customers and maintain its marketleadership through product innovation and highly effective channel management.The current strong oil price will continue to sustain high levels of investmentinto offshore exploration and marine transportation and related loadingfacilities. This will sustain growth in the offshore and marine markets forHernis. We will continue to invest in the facilities in Norway to meet the growth in thebusiness. Our investment in Wireless Power and Communications A/S (WPC) (anassociate company) is providing Hernis with new products based on theapplication of induction charging and data transfer technology for the marinesafety market. The first products will enter production in the first half of2008. Evolving our products and service capabilityWe have continued our investment in the development of HD encoding and advancedhigh data rate modulation systems to maintain our market leading technology andmarket share. We will continue to invest in the application of new technologies,with increasing use of software-driven products, to meet our customers'requirements for more automation and integrated field upgradable systems. Inorder to support our products we have established service centres in Hong Kongand South America for the RF businesses and in Brazil and Singapore for Hernis. We have implemented a unified corporate level product strategy across therelated RF businesses of Advent, Link and MRC under the guidance of the ChiefTechnology Officer. We have also formed a strategic Technology Committee withsenior management from each business to maintain a focus on our strategicdevelopment direction and to review competing and complementary technologies. Earnings enhancing strategic acquisitionsPart of the Group strategy is to create incremental long-term recurring revenueopportunities by building a US Technical Services business through organic andacquisition led growth. The acquisition of Western Technical Services ("WTS") inJuly 2007 is enhancing service revenues from the 2GHz re-channelisationprogramme and the DLES markets, as well as providing the prospect of recurringrevenues as the broadcast customers move towards contracted out fee services.This provides the Group with a stepping-stone towards being able to provide full"turnkey" project management and integration services in the US, utilising thestrength of our market leading products. SummaryIn 2007 we acquired WTS to establish a Technical Services business in the USmarket that will be supplemented with organic growth. We have increased ourinvestment in new products and channels to market in order to deliver our growthstrategy across our target markets. The Group is looking forward to meeting itsstrategic objectives. Ian Scott-GallChief Executive 18 March 2008 OPERATING AND FINANCIAL REVIEW FOR THE YEAR ENDED 31 DECEMBER 2007 2007 highlights and key performance indicators Good progress was made in 2007. The highlights in the year were: • Revenues increased by 7.4% (at constant exchange rates and excluding the Venezuelan contract sales) • Adjusted(1) operating profit increased by 9.6% to £15.7 million (2006 - £14.3 million) • Adjusted(2) operating margin increased to 15.9% (2006 - 14.2%) • Acquisition of Western Technical Services • Growth from law enforcement and security markets in the US • Continued growth from Hernis • Growth in Asian and European markets • Establishment of an International DLES presence. The table below sets out the trend in the key indicators that are used tomeasure the Group's performance. The 2007 results show further improvement inall these metrics. Whilst the headline sales are 1.9% lower our underlying salesgrew 7.4% before foreign exchange adjustment of £4.9 million and excluding salesfrom the completed legacy broadcast contract in Venezuela. ----------------------------- -------- -------- --------Year ended 31 December 2007 2006 2005 Unaudited Audited Audited ----------------------------- -------- -------- --------Orders received (£'000) 101,374 97,540 95,503Revenue (£'000) 98,580 100,498 85,072Underlying revenue(1) 101,354 94,398 n/aAdjusted operating profit (£'000) 15,678 14,303 8,348Adjusted profit as a percentage of sales 15.9% 14.2% 9.8%Adjusted earnings per share (pence) 7.21 6.35 3.30Net cash generation from operating activities(£'000) 9,253 8,372 6,461Return on capital employed(1) (ROCE) 32.9% 36.6% 21.0%----------------------------- -------- -------- -------- Review of operations in 2007 Our Markets The Group has a global spread of revenues. In 2007, 58% of the Group's saleswere in North America, 21% in the UK and Europe, 11% in Asia and 10% in the restof the world. The operating businesses sell into three distinct global markets;broadcast, defence, law enforcement and security (DLES), and marine safety.Broadcast sales represent 73% of Group revenues, DLES 10% and marine safety 17%. Group sales in the broadcast market were lower in 2007 at £72.8 million (2006 -£77.6 million) primarily due to lower sales in South America of £4.1 millionfollowing the completion of the VTV contract. Revenues from North Americaincreased, despite the impact of foreign exchange, as we continue to benefitfrom the 2 GHz re-channelisation programme. Internationally the demand for HDTV,news and sports programming and the proliferation of TV channels is drivinginfrastructure spend by the broadcasters. In the broadcast market each of our brands, Advent, Link and MRC, are recognisedwithin the broadcast industry as market leaders with specialist knowledge. Eachhas well-established routes to market. In the Americas we are utilising MRC'sestablished market strength to distribute all three brands through a combinationof directs sales, value added resellers and distributors. The acquisition of WTShas given the Group another route to market, and the ability to sell turnkeysolutions alongside integrated products and systems. In international marketseach business manages its sales through a combination of direct sales fromregional offices, sales agents and distributors. As part of our strategy todevelop our sales channels we have opened a regional office in Dubai in January2008. Sales in the DLES markets were £9.5 million. We have had success in the US indeveloping our law enforcement and security channels to market and increasedsales. Advent has also had sales success in Asia. Our defence sales,particularly US satcoms, were below our expectations as several major spendingprogrammes have been delayed. We remain convinced of the long-term potential ofthis market. Sales into the marine safety market have increased 27% to £16.2 million. Themarket is sub divided into onshore and offshore oil and gas and marine(including high risk vessels such as tankers and cargo ships as well as cruiseand naval vessels). The growth in the year has come from offshore and marinemarkets. With the oil and gas companies continuing to invest in exploration ofincreasingly harsh environments and the strong build programme for new LiquidNatural Gas (LNG) vessels we expect Hernis to continue to see an increase indemand. Operational review Operational review - UK RF business --------- -------- -------- 2007 2006 Change Unaudited Audited £'000 £'000 --------- -------- --------Revenue 35,821 37,393 -4.2%(Including inter segmental)Adjusted operating profit 6,612 4,095 +61.5%(Excluding amortisation of acquired intangibles) Adjusted operating margin 18.5% 11.0% +7.5%------------------------ --------- -------- -------- The UK business consists of three activities, the satellite communicationsbusiness of Advent, the wireless camera business of Link and the legacy CMLinternational projects business. Following the completion of the VTV contractCML project sales decreased by £4.1 million, in line with expectations. Sales inthe core UK RF businesses of Advent and Link were up 7.6% to £33.7 million. The adjusted operating profit from the core businesses of Link and Advent was upby 29% (£1.5 million), with both businesses contributing higher returns.Operating profits in 2006 had been depressed by a final charge in respect of theVTV contract of £1.0 million, which was completed in the first quarter of 2007. Advent has experienced sustained demand for its satellite technology, withparticular success in the European and Asian markets. Advent's strength is itsstrong brand awareness, class-leading products in terms of performance and areputation for reliability. Significant broadcast contract wins included a £1.0million contract to supply transmission products to a West African statebroadcaster and a £4.3 million order from a European broadband satelliteservices provider for a large fixed earth station project. In addition, Adventis building momentum in the DLES market having won a £1.2 million order from agovernment customer in Central Asia, supplied twelve mobile satellite uplinks toINDRA, a major European defence integrator, and is also supplying twenty mobilesystems to a government integrator in China. Advent has two key product launches in the first quarter of 2008. The Summitflyaway system, a joint programme with MRC, is the first dedicated ruggedisedsatellite terminal to be launched by the Group. This is an auto acquisitionterminal designed to fully provide a fully integrated solution for rapiddeployment and secure satellite communications. In addition Advent areintroducing a fully motorised auto acquisition version of the popular 1.9m and2.4 m Mantis products to meet the need for deskilled operation in global defenceand security markets. Link has seen sales growth internationally. Link continues to benefit from thesale of High Definition (HD) products in both Europe and Asia as well as fromboth standard and HD sales in the US via MRC. As a tribute to its growingInternational presence Link has received the Queen's Award for InternationalTrade in 2007, adding to their success in 2004 when they won the Queen's Awardfor Enterprise: Innovation. Link's latest ultra low delay HD products arecreating demand and the roll out of their new wireless camera radios is wellunderway. In particular Link have secured several orders for the supply of HDsystems for the Beijing Olympics. Link products have been used in a number ofhigh profile events during the year including the 2007 US PGA tour, the RugbyWorld Cup and the onboard radio cameras used to record and transmit live therecord breaking TGV train travelling at 360mph. Link expects to build on their success in 2008. Link are partnering with Adventin the creation of the Dubai regional sales office and the International DLESsales effort with new product developments. Link has attended the InternationalDLES exhibitions alongside Advent and MRC to demonstrate its expertise. Therehas been particular interest in the application of Links city centre cellulardiversity networks that are already in place in the UK and Europe, to the lawenforcement security market. Operational review - US RF business --------- -------- -------- 2007 2006 Change Unaudited Audited £'000 £'000 --------- -------- -------- Revenue 59,299 60,762 -2.4%(Including inter segmental) --------- -------- --------Adjusted operating profit 9,535 11,241 -15.2%(Excluding amortisation of acquired intangibles) --------- -------- --------Adjusted operating margin 16.1% 18.5% -2.4%------------------------ --------- -------- -------- MRC has an estimated 60% market share of the North American electronicnewsgathering (ENG) market, and a strong customer base in the Americas and Asia/Pacific regions. During the year WTS was acquired to create incrementallong-term recurring revenue opportunities by building a US Technical Servicesbusiness. This provides the US business with a stepping-stone towards being ableto provide full "turnkey" project management and integration services. MRC sales revenues increased 4.3% in local currency to $116.9 million (2006 -$112.0). WTS contributed additional sales of $1.6 million. Reported sales, afterthe effect of adverse foreign exchange translation, were 2.4% lower at £59.3million. Operating profits at MRC were down 7.6% in local currency million as aresult increased material costs. MRC purchases approximately 35% of its materialfrom Link and Advent in sterling and suffered increased costs as a result of theweakness of the US dollar. WTS broke even in the period post acquisition. Theforeign exchange translation impact on the US business was to reduce like forlike profit by £0.8 million.The US domestic broadcast market continues to be driven by the 2Ghzre-channelisation programme for which MRC launched two new key products at theNAB exhibition in April. The acquisition of WTS will enhance service revenuesfrom the 2GHz programme and provide both MRC and WTS with opportunities to crosssell their products and services. Outside of the re-channelisation programme theUS domestic broadcast market has remained flat. However, the programme providesonly for the replacement of analogue products with SD digital products. Thereare opportunities beyond the programme to upgrade the new digital platforms thatare being installed to HD. With shorter life cycles for digital products weexpect the underlying broadcast market in the US to start to grow on a regionalbasis once the re-channelisation programme has been completed. The addition ofWTS provides the prospect of recurring revenues as the broadcast customers movetowards contracted out services for maintenance of their RF networks. Progress continues to be made in developing the US defence and law enforcementmarkets. DLES sales increased 38.3%. During the year MRC supplied $6.6 millionof the Advent Mantis satellite antennas, as part of a system to support voice,video and data transport for a US Government user. MRC are also successfullydeveloping the US law enforcement and security market, and in particular theairborne digital video surveillance market. MRC's multi-band video microwaveequipment was chosen by the New Jersey State Police (NJSP) for their state-widevideo and communications upgrade for homeland security, law enforcement andemergency response. MRC have continued to invest in product development. During the year MRCintroduced new radio platforms that give the ability to support both SD and HDutilising the Link IPR and a new expandable central receive diversity systemthat supports single or multi-site architectures for SD and HD ENG and outsidebroadcast applications. All the new products represent significant enhancementsto existing market leading news gathering capabilities, providing amongst themost efficient workflow solutions in the industry. The microwave transmissionproducts enable editors and engineers to extend their newsrooms into the fieldthrough wireless IP enabled network extension with remote control capabilities.Further developments and enhancements will be launched in 2008. Operational Review - Norway ------------------------ --------- -------- --------Year ended 31 December 2007 2006 Change Unaudited Audited £'000 £'000 --------- -------- -------- Revenue 16,843 13,094 +28.6%Operating profit 1,741 1,318 +32.1%Operating margin 10.3% 10.1% +0.2%------------------------ --------- -------- -------- Hernis, our Norwegian business, has had a record year for both sales andoperating profits. Hernis has improved its margins despite the currencypressures of selling into international markets (35% of sales are denominated inUS$). Hernis have pioneered the integration of intrinsically safe marine CCTV withother systems including process control, fire, gas and intruder alarms. Hernissells into the global marine safety market and service centres. Hernis has beenvery successful in developing its markets and customer relationships through anetwork of business partners and creating regional sales and technical supportcentres in Singapore, Houston and Brazil. Within the industry Hernis hasachieved class type approval for their explosion proof camera housings thatdifferentiates them by providing quality assurance for their products andsystems. Growth for Hernis has come from strong marine and offshore oil and gas markets.Hernis have a market leading position for the supply of systems for the newLiquid Natural Gas (LNG) vessels. The increasing level of investment in offshoreoil and gas rigs by the major oil companies has led to an increase in demand forproducts and systems for floating rigs and drill ships. Hernis have alsobenefited from increased demand for offshore oil and gas installations such asjetties and terminals. The domestic Norwegian offshore market for Hernis hasbeen particularly strong, contributing to a 31% increase in European sales. TheSingapore operation has also seen growth in both business and personnel. As aresult Asian market sales were up 48% and now represent 35% of revenue.During 2007 Hernis became the first Group company to have its environmentalassurance system to be certified according to ISO14001. Environmental measureshave been integrated into the day-to-day operations and awareness has beenincreased amongst the staff as a result. Research and developmentWe are committed to investment in research and new product development in orderto maintain and enhance our market share and competitive advantage. Expenditure in 2007 was £5.8 million representing 5.9% of revenues (2006 - £5.4million, 5.4%). In addition the Group has capitalised development costs in theyear of £2.8 million (2006 - £1.8 million). The amortisation of developmentcosts of £1.1 million (2006 - £1.0 million) is included in the reportedexpenditure. Financial ReviewThe Group's results are summarised as follows: --------------------------------- --------- -------- --------Year ended 31 December 2007 2006 2005 Unaudited Audited Audited £'000 £'000 £'000--------------------------------- --------- -------- -------- Revenue 98,580 100,498 85,072 --------- -------- -------- Adjusted operating profit 15,678 14,303 8,348 Amortisation of acquired intangibles (1,462) (1,364) (1,207) --------- -------- --------Reported operating profit 14,216 12,939 7,141 Net finance costs (245) (264) (776) Share of loss in associate (15) - - --------- -------- --------Profit before tax 13,956 12,675 6,365 Taxation (5,026) (4,968) (2,883) --------- -------- --------Profit after tax 8,930 7,707 3,482 --------- -------- --------Effective tax rate 36.0% 39.2% 45.3% Basic earnings per share 6.47p 5.65p 2.66p Adjusted earnings per share 7.21p 6.35p 3.30p--------------------------------- --------- -------- -------- Finance costsThe net interest charge for the year was £0.24 million (2006 - £0.26 million).Included within the interest charge is £0.19 million (2006 - £0.22 million) inrespect of the unwinding of the discounting of the deferred considerationassociated with the acquisition of Link Research Limited and Western TechnicalServices to their present value. Net interest paid in the year was £nil million(2006 - £0.07 million). TaxationThe tax charge for the year was £5.03 million (2006 - £4.97 million). The UKcurrent tax charge was £1.20 million (2006 - £0.35 million) and the overseascurrent taxation in the year was £3.63 million (2006 - £5.12 million). Overseastaxation represents Norwegian corporation tax on the taxable profits of Hernisand state and federal taxes in respect of the US business. There was a deferredtax charge of £0.19 million (2006 - credit of £0.50 million). The effective tax rate for the year was 36.0% (2006 - 39.2%) compared with thestandard UK corporation tax rate applicable during the year of 30%, whichreflects the higher tax rate (40%) that is attributable to the proportion of theGroup's taxable profits generated in the US. The prior year Group tax chargeincluded an overseas tax prior year adjustment of £0.39 million in respect of anIRS audit, against which the Company is appealing. Excluding this one-off chargethe prior year effective tax rate was 36.1%. Current tax payable at December 31, 2007 was £0.78 million (2006 - £1.17million). Tax paid in the year was £5.20 million (2006 - £5.12 million). Cash flowsGroup cash and cash equivalents was £7.00 million at December 31, 2007 (2006 -£8.16 million). The Group generated net cash from operating activities of £9.25 million in theyear (2006 - £8.37 million) after a net absorption of working capital of £3.80million (2006 - £3.23 million) primarily as a result of an increase in tradedebtors due to a higher level of sales in December. A further £0.08 million wasgenerated from the proceeds of the issue of new ordinary shares (2006 - £0.58million). Investing activities absorbed £6.09 million of cash (2006 - £3.68 million),comprising £1.29 million for the acquisition of WTS, £2.84 million forcapitalised development costs and a net £1.96 million for property, plant,equipment and investments. The acquisition consideration of WTS included adeferred element of £1.50 million ($3.0 million) that can be earned over theperiod 2008 to 2010, depending on the performance of the business. Dividend payments in the year amounted to £1.38 million (2006 - £0.68 million). Net debt repayments during the year were £3.26 million (2006 - £2.70 million),including the payment of £1.75 million of deferred consideration associated withthe acquisition of Link (2006 - £1.5 million). Group debt at December 31, 2007comprised secured bank loans of £1.00 million (2006 - £2.50 million) andunsecured loan notes of £2.50 million (2006 - £1.75 million) in respect of theLink deferred consideration earned. The unsecured loan notes will be settled onMarch 25, 2008. At December 31, 2007 the Group had net funds of £3.50 million (2006 - £3.91million). Returns to shareholdersIt is the Group's stated strategy to only recommend a final dividend. The Boardis committed to a dividend policy in line with the Group's performance and thisis reflected in the increase in the 25% increase in the recommended dividend to1.25 pence per share (2006 - 1.00 pence). The payment of the dividend willabsorb approximately £1.7 million of cash. Subject to the approval ofshareholders, the dividend will be paid on July 18, 2008, to those on theregister at June 27, 2008. Foreign currency riskThe largest exchange risk to the Group in terms of its reported results lies inthe translation of the results of the US business from US dollars to sterling atthe average rate ruling for the year. To a lesser extent the Group's results arealso affected by the translation of the results of Hernis, our Norwegianbusiness. In the year to 31 December 2007 the adverse translation impact onrevenue was £4.9 million and on operating profits the adverse impact was £0.8million, relative to the rates used in 2006. The principal exchange rates usedby the Group in translating overseas profits and net assets into sterling areset out in the table below. Rate compared to Average rate, Average rate, Year end rate, Year end rate,£ sterling 2006 2007 2006 2007US dollar 2.00 1.84 1.99 1.96Norwegiankrone 11.71 11.81 10.80 12.19 Ian Scott-Gall, Chief ExecutiveJames Trumper, Group Finance Director 18 March 2008 CONSOLIDATED GROUP INCOME STATEMENT for the year ended 31 December 2007 2007 2006 Unaudited Audited Notes £'000 £'000 Revenue* 2 98,580 100,498Cost of sales (58,848) (63,053) ---------- ----------Gross profit 39,732 37,445Sales and marketing expenses (9,570) (10,060)Research and development costs (5,835) (5,398)Administrative costs (9,951) (8,757)Other expenses (160) (291) ---------- ----------Operating profit 2 14,216 12,939----------------------------- ------- ---------- ---------- Operating profit is analysed as:Operating profit before amortisation of acquiredintangibles 5 15,678 14,303Amortisation of acquired intangibles (1,462) (1,364)----------------------------- ------- ---------- ----------Finance costs 3 (437) (505)Investment income 3 192 241Share of loss in associate (15) - ---------- ----------Profit before taxation 13,956 12,675Tax on profit 4 (5,026) (4,968) ---------- ----------Profit for the year being profit attributable toequity shareholders 8,930 7,707 ---------- ---------- ---------- ----------Earnings per share (pence per share): 5 6.47p 5.65p- basic 5 6.44p 5.56p- diluted ---------- ---------- *Revenue from acquisition in the year was £0.83 million (2006 - £nil). CONSOLIDATED STATEMENT OF CHANGES IN EQUITYfor the year ended 31 December 2007 2007 2006 Unaudited Audited £'000 £'000 Opening shareholders' equity 42,963 37,815 ----------- ----------- Profit for the financial period 8,930 7,707Share options - value of employee services 119 122Dividends (1,381) (681) ----------- -----------Movements in the profit and loss account 7,668 7,148Translation difference on foreign currency netinvestments 627 (2,578)Shares issued 56 518Disposal of investment in own shares 19 60Acquisition of own shares (169) - ----------- -----------Total movement in shareholders' equity 8,201 5,148 ----------- -----------Closing shareholders' equity 51,164 42,963 ----------- ----------- CONSOLIDATED GROUP BALANCE SHEETas at 31 December 2007 2007 2006 Unaudited Audited Notes £'000 £'000 Assets Non-current assets Goodwill 24,370 22,737Intangible assets 7,283 6,177Property, plant and equipment 5,220 4,689Investment in associates 191 182Deferred tax assets 630 991 ----------- ----------- 37,694 34,776 ----------- -----------Current assets Inventories 15,847 14,466Trade and other receivables 23,682 18,463Derivative financial instruments 25 - Cash and cash equivalents 8 7,004 8,159 ----------- ----------- 46,558 41,088 ----------- -----------Liabilities Current liabilitiesFinancial liabilities - borrowings 8 2,522 1,750Trade and other payables 24,040 24,240Current tax liabilities 779 1,172Derivative financial instruments 11 -Provisions 902 668 ----------- ----------- 28,254 27,830 ----------- ----------- ----------- -----------Net current assets 18,304 13,258 ----------- ----------- Non-current liabilities Financial liabilities - borrowings 8 1,000 2,500Deferred tax liabilities 2,226 2,275Other non-current liabilities 1,332 -Provisions 276 296 ----------- ----------- 4,834 5,071 ----------- ----------- ----------- ----------- 51,164 42,963 ----------- -----------Capital and reservesOrdinary shares 3,463 3,460Share premium account 4,885 4,832Merger reserve 30,565 30,565Translation reserve (3,239) (3,866)Retained earnings 15,490 7,972 ----------- -----------Total shareholders' equity 2 51,164 42,963 ----------- ----------- CONSOLIDATED GROUP CASH FLOW STATEMENTfor the year ended 31 December 2007 2007 2006 Unaudited Audited Notes £'000 £'000Cash flow from operating activitiesCash generated from operations 7 14,451 13,558Investment income 192 241 Finance costs (192) (309) Taxation paid (5,198) (5,118) ----------- -----------Net cash generated from operating activities 9,253 8,372 ----------- ----------- Cash flows from investing activities Acquisition of subsidiary (net of cash acquired) (1,291) - Acquisition of own shares (169) - Proceeds from sale of property, plant and 1 12equipmentPurchase of property, plant and equipment (1,790) (1,747)Expenditure on capitalised development costs (2,839) (1,810)Investment in associates - (139) ----------- -----------Net cash (absorbed by) investing activities (6,088) (3,684) ----------- ----------- Cash flows from financing activities Net proceeds from issue of ordinary share 56 518capitalNet proceeds from sale of own shares 19 60Repayment of borrowings - finance leases (9) -Repayment of borrowings - secured (2,500) (3,362)Repayment of borrowings - unsecured (1,750) (1,836)Net proceeds from issue of new bank loan 1,000 2,500Dividend paid to shareholders (1,382) (681) ----------- -----------Net cash (absorbed by) financing activities (4,566) (2,801) ----------- -----------Net (decrease)/increase in cash and cash (1,401) 1,887equivalentsEffect of foreign exchange rate changes 246 (850) Cash and cash equivalents at 1 January 8,159 7,122 ----------- -----------Cash and cash equivalents at 31 December 8 7,004 8,159 ----------- ----------- NOTES TO THE ACCOUNTSfor the year ended 31 December 2007 1. BASIS OF PREPARATION These results have been prepared in accordance with all International FinancialReporting Standards (IFRS) as adopted by the European Union (EU), IFRICinterpretations and with those parts of the Companies Act, 1985 applicable tocompanies reporting under IFRS. There have been no changes in accountingpolicies during the year. The Group has adopted IFRS7 "Financial InstrumentsDisclosures" for the first time this year. The prior year numbers have beentaken from the audited accounts. The current year numbers are unaudited. 2. SEGMENTAL ANALYSIS The Group is organised geographically by the location of its operations, whereits products are produced and its service delivery activities are based. Theinternal management reporting within the Group also follows these lines.Therefore for the purposes of primary segmental reporting it is appropriate tosplit the results between the UK, the US and Norwegian businesses. Revenue Operating Profit Net Assets 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000 Unaudited Audited Unaudited Audited Unaudited Audited-------------------- -------- ------- ------- ------- ------- -------By businesslocation:UK 35,821 37,393 6,612 4,095 30,016 15,595US 59,299 60,762 9,535 11,241 21,734 18,413Norway 16,843 13,094 1,741 1,318 7,027 5,107Inter-segmental transactions (13,383) (10,751) (25) (221) - -Central - - (2,185) (2,130) (7,613) 3,848 -------- ------- ------- ------- ------- ------- 98,580 100,498 15,678 14,303 51,164 42,963Amortisationof acquiredintellectualproperty andcustomerrelationships - - (1,462) (1,364) - --------------------- -------- ------- ------- ------- ------- ------- Total 98,580 100,498 14,216 12,939 51,164 42,963-------------------- -------- ------- ------- ------- ------- -------Amortisation of acquired intellectual property and customer relationships relateto the UK business and WTS. The table below shows the analysis of Group revenue, by the geographic market ofits customers, excluding inter-segmental sales. UK US Norway Total 2007 2006 2007 2006 2007 2006 2007 2006 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Unaudited Audited Unaudited Audited Unaudited Audited Unaudited Audited----------- ------- ------- ------- ------- ------- ------- -------- -------By customergeographicmarket:UK & 3,869 5,421 233 - 1,612 853 5,714 6,274Ireland Rest of 7,662 6,104 767 431 6,867 5,221 15,296 11,756EuropeNorth 221 767 55,099 53,240 1,441 567 56,761 54,574AmericaSouth 2,400 6,501 2,078 2,038 328 326 4,806 8,865AmericaMiddle 2,351 4,693 7 - 480 1,946 2,838 6,639EastAsia 4,351 2,604 871 3,984 5,941 4,004 11,163 10,592Africa 1,423 515 115 53 112 74 1,650 642Other 216 415 74 638 62 103 352 1,156----------- ------- ------- ------- ------- ------- ------- -------- ------- Total 22,493 27,020 59,244 60,384 16,843 13,094 98,580 100,498----------- ------- ------- ------- ------- ------- ------- -------- ------- The tables below analyse revenue by product categories and by category of enduser. 2007 2006 £'000 £'000 Unaudited Audited -------- --------Analysis of revenue by product categoryMicrowave radio and wireless camera products 59,896 61,995Satellite products 18,859 19,309Services 839 -Broadcast projects 2,143 6,100Marine CCTV products 16,843 13,094 -------- -------- 98,580 100,498 ----------------------------------------- -------- -------- Analysis of revenue by end user categoryBroadcasters 72,824 77,570Defence, law enforcement and security 9,542 10,016Marine, oil and gas 16,214 12,773Utility - 139 -------- -------- 98,580 100,498 ----------------------------------------- -------- -------- 3. FINANCE COSTS - NET 2007 2006 £'000 £'000 Unaudited Audited --------- -------- Interest payable on bank borrowing (174) (236)Interest payable on other loans (78) (46)Unwinding of interest associated with the discounting ofdeferred consideration (185) (223) --------- --------Interest and similar charges payable (437) (505) Investment income 192 241 --------- --------Finance costs - net (245) (264) --------- -------- 4. TAXATION The tax charge for the year comprises: 2007 2006 £'000 £'000 Unaudited Audited --------- --------Current taxUK corporation tax 1,202 351Foreign tax 3,633 5,118 --------- --------Total current tax 4,835 5,469 --------- -------- Deferred taxUK corporation tax (166) (264)Foreign tax 357 (237) --------- --------Total deferred tax 191 (501) --------- --------Taxation charge 5,026 4,968 --------- -------- UK Corporation tax is calculated at 30 per cent (2006 - 30 per cent) of theestimated assessable profit for the year. Foreign corporation taxes arecalculated at the rates prevailing in the respective jurisdictions. 5. EARNINGS PER ORDINARY SHARE Earnings per share is calculated by reference to a weighted average of137,955,000 ordinary shares in issue during the period, excluding shares held bythe Employees' Share Ownership Plan (2006 - 136,495,000). The diluted earnings per share is after taking account of a further 810,000shares (2006 - 2,094,000) being the dilutive effect of share options. Adjusted earningsVislink believes that adjusted operating profit, adjusted earnings and adjustedearnings per share provide additional useful information to shareholders. Thesemeasures are used by Vislink for internal performance analysis and incentivecompensation arrangements. The term "adjusted" is not a defined term under IFRSand may not therefore be comparable with similarly titled profit measurementsreported by other companies. The principle adjustment is made in respect of theamortisation of acquired intangibles. The reconciliation between reported andunderlying earnings and basic earnings per share is shown below: 2007 2006 Earnings Basic EPS Earnings Basic EPS £'000 pence £'000 pence Unaudited Unaudited Audited Audited --------- --------- -------- --------- Reported earnings 8,930 6.47p 7,707 5.65pAmortisation of acquiredintangibles after tax 1,023 0.74p 955 0.70p --------- --------- -------- ---------Adjusted earnings 9,953 7.21p 8,662 6.35p --------- --------- -------- --------- 6. DIVIDENDS The directors are proposing a final dividend in respect of the financial yearending 31 December 2007 of 1.25 pence per share, which will absorb an estimated£1,732,000 of shareholders' funds. It will be paid on 18 July 2008 toshareholders who are on the register of members on 27 June 2008. 7. NOTES TO THE CASH FLOW STATEMENT Reconciliation of profit attributable to shareholders to net cash flows fromoperating activities: 2007 2006 £'000 £'000 Unaudited Audited ---------- ---------- Profit attributable to shareholders 8,930 7,707Taxation 5,026 4,968Depreciation 1,485 1,321Loss on disposal of property, plant and equipment - 41Amortisation of development costs 1,072 997Amortisation of acquired intangibles 1,462 1,364Share options - value of employee services 119 122Investment income (192) (241)Finance costs 437 505Derivative financial instruments (14) -Share of loss of associate 15 -(Increase) in inventories (1,062) (2,110)(Increase) in trade and other receivables (4,714) (2,706)Increase in payables 1,666 1,457Increase in provisions 221 133 ---------- ----------Net cash inflow from operating activities 14,451 13,558 ---------- ---------- 8. NET FUNDS The movements in cash and cash equivalents and borrowings in the period are asfollows:---------------------- --------- --------- --------- --------- Cash and cash Short term Other Total net funds equivalents borrowings borrowings £'000 £'000 £'000 £'000---------------------- --------- --------- --------- ---------At 1 January2007 (audited) 8,159 (1,750) (2,500) 3,909Cash flow forthe period (1,402) - - (1,402)Net repaymentof borrowings - 1,750 1,500 3,250New unsecuredloan notes - (2,500) - (2,500)New financeleases - (22) - (22)Exchange rateadjustments 247 - - 247 ---------------------- --------- --------- --------- ---------At 31 December2007(unaudited) 7,004 (2,522) (1,000) 3,482---------------------- --------- --------- --------- --------- Unsecured loan notes issued in the year of £2.5 million are in respect of thedeferred consideration for the acquisition of Link Research Limited earned bythe vendors. 9. DIRECTORS RESPONSIBILITIESThe announcement represents non-statutory accounts within the meaning of section240 of the Companies Act 1985. A committee of the Board of Directors approvedthis report on 18 March 2008. 10. REPORT AND ACCOUNTS Copies of the audited Report and Accounts will be sent to shareholders in duecourse and will then be available from the registered office at MarlboroughHouse, Charnham Lane, Hungerford, Berkshire, RG17 0EY. --------------------------(1) Defined as operating profit before the amortisation of acquired intangibles(2) Defined as operating profit margin before the amortisation of acquiredintangibles This information is provided by RNS The company news service from the London Stock Exchange