Last checked at 25 Aug 2010 07:00
Vislink plc
Interim results for the six months ended 30 June 2010
Vislink plc ("The Group"), the global technology business specialising in secure communications and services for the news & entertainment, law enforcement & public safety and marine & energy markets, has today announced its Interim results for the six months ended 30 June 2010.
Financial Headlines
| Six months to 30 June
| 2010 £'000 | 2009 £'000 |
| Revenue | 34,211 | 45,902 |
| Underlying revenue** | 34,211 | 39,382 |
| Operating (loss) profit | (4,336) | 732 |
| Adjusted* operating (loss) profit | (2,233) | 2,750 |
| Adjusted* operating margin | - 6.6% | 6.0% |
| (Loss) profit before taxation | (4,523) | 480 |
| Net cash generated from operating activities | 433 | 4,589 |
| (Loss) earnings per share: basic | (2.39)p | 0.14p |
| Adjusted* (loss) earnings per share: basic | (1.15)p | 1.23p |
| Net (debt) cash (2009: 31 December) | (3,426) | 611 |
*Adjusted operating (loss) profit is operating (loss) profit before the amortisation and impairment of goodwill and acquired intangibles, share based payments and other non-recurring costs. Adjusted (loss) earnings per share is calculated on the same basis taking account of related tax effects.
**Underlying revenue is revenue at constant current period exchange rates and excluding revenue from product shipments under the 2GHz US spectrum relocation programme.
·; Expectation that revenues will gradually improve in the second half
·; Maintained investment in technology and new products
·; Significant reductions in the operational cost-base achieved in the period
·; Move to product sourcing in Asia accelerating.
Tim Trotter, Chairman of Vislink said:
"The Board is very disappointed with the results of the first half which continued the weak trading trend of the second half of 2009. However, we are cautiously optimistic that the first half of 2010 has marked the end of the slowdown in our markets which began during 2009 and that we may finally be seeing a gradual return to more normal trading. Broadcasters in the USA and Europe are reporting improved advertising revenues and we are seeing the consequential pick-up in demand for our News & Entertainment (N&E) equipment. Law Enforcement and Public Safety (LEPS) customers are beginning to ring-fence their budgets and we are similarly seeing higher enquiry rates, though the complexity of public procurement processes makes for unpredictable order conversion. Demand in the offshore oil-rig market is increasing and this is a leading indicator for the recovery of the Marine & Energy markets. Our investment in new products designed for modular manufacturing and the planned withdrawal of products which have reached the end of their lives mean we will accelerate the development of full manufacturing capability in Singapore.
As we said in our trading update on 8 July, the reorganisation of the Group last year into four customer-facing business units has provided the Group with a sounder base on which to operate. As part of the next stage in the Group's development, the Board has asked the Chief Executive to review the future composition of the Group, the results of which will be available before the end of the year".
- ends -
For further information on 25 August, 2010, please contact:
| Duncan Lewis, Chief Executive | +44 (0)1488 685500 |
| James Trumper, Group Finance Director
| +44 (0)1488 685500 |
| Andrew Hayes / Charlie Jack Hudson Sandler | +44 (0)207 796 4133 |
About Vislink plc
Vislink plc is a global technology business specialising in secure communications and services for the news & entertainment, law enforcement & public safety and marine & energy markets. The Company has four international business units serving these markets with manufacturing operations in the UK, Norway and the USA.
The Company's strategic focus is the design, manufacture, sale, installation and maintenance of wireless, video and IP technologies together with the supporting management systems. Vislink products include microwave radio, satellite transmission, wireless camera and marine CCTV systems.
Headquartered in the UK with operations in the USA, Norway, Dubai, South Africa and Singapore the Company employs over 420 people worldwide and has net assets of £49 million. The Company is fully listed on the London Stock Exchange (LSE:VLK).
For further information, please visit www.vislink.com.
Forward looking statements
Certain statements in this interim report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. Because these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. The Group undertakes no obligation to update any forward-looking statements whether as a result of new information, future events or otherwise
Chairman & Chief Executive's Statement
For the six months to 30 June 2010
Trading for the period was disappointing and continues the trend described in the announcement of our 2009 full year results and in our subsequent trading updates. Group revenue for the first six months to 30 June 2010 was £34.2 million (2009: £45.9 million). Underlying revenue, being revenue at constant currency exchange rates and which excludes revenue from product shipments under the US 2GHz relocation programme that was completed in 2009 was 13 per cent down at £34.2 million (2009: £39.4 million). Underlying order intake for the period was down 21 per cent at £30.6 million (2009: £38.8 million).
Direct manufacturing labour and overhead costs were reduced by 19 per cent to £5.9 million (2009: £7.3 million); direct costs have now been reduced by £6.6 million since the reorganisation of the Group in January 2009, and this will further accelerate as the Group moves manufacturing to Asia. Overheads were 8 per cent lower at £14.7 million (2009: £16.0 million). The cost reductions will not affect the Group's ability to take advantage of an economic recovery. We have maintained our investment in sales and marketing which includes selective recruitment, and in new product development. We increasingly see the benefits of our new business model which now spreads our investment in technology across multiple markets, accelerates our time to market and reduces production costs.
As a result of the slow order in-take in the first half and the consequential revenue decline of 25 per cent, the Group reported an adjusted operating loss for the period of £2.2 million (2009: profit of £2.8 million) despite the cost reductions achieved.
The reported operating loss was £4.3 million (2009: profit of £0.7 million) after charging £1.1 million in respect of the amortisation of acquired intangibles (2009: £1.5 million), £0.9 million in respect of non-recurring costs(2009: £0.3 million) and the effect of share-based payments. Non-recurring costs include £0.6 million in respect of an aborted acquisition. The Group explored the possibility of acquiring a business in Asia to which it would have transferred much of its manufacturing and which would have provided a base for further expansion into the region. We aborted the transaction in the light of discoveries at the end of the due diligence process. The Group is now building its own sourcing and test capability in Singapore on the back of its current operations, which will lead to improvements in product margins in the second half of 2010. Our investment in new products designed for modular manufacturing and the planned withdrawal of products which have reached the end of their lives mean we will accelerate the development of full manufacturing capability in Singapore.
After net finance costs of £0.2 million (2009: £0.2 million) the loss before tax was £4.5 million (2009: profit of £0.5 million).
The Group ended the period with net debt of £3.4 million (31 December 2009: net cash of £0.6 million). The net cash inflow generated from operating activities in the period was £0.4 million (2009: £4.6 million) including the cash outflow associated with non-recurring costs. After capital expenditure and deferred consideration payments there was a net cash outflow of £3.6 million (2009: inflow of £2.0 million). Cash flow in the second half is expected to be broadly neutral.
The Group changed its principal bankers to Santander on 27 May 2010 and agreed a new four year term loan facility for the Group's principal debt, a medium term loan of US$11.0 million (£7.3 million). The Group also agreed a £5.0 million overdraft facility and ancillary trade finance facilities. The first repayment on the medium term loan is in August 2011.
Earnings Per Share
The reported basic undiluted loss per share for the period was 2.39 pence (2009: earnings of 0.14 pence). After adjusting for the amortisation of acquired intangibles, non-recurring costs and the effect of share-based payments, the Group's adjusted loss per share was 1.15 pence (2009: earnings of 1.23 pence).
Dividends
The final dividend of 1.25 pence per share in respect of 2009 was paid to shareholders on 16 July 2010. As in previous years, the Board is not declaring an interim dividend.
Business Unit Performance
News & Entertainment has continued to feel the impact of the current economic environment as broadcasters around the world have deferred capital expenditure. Headline revenue declined 40 per cent to £13.3 million (2009: £22.3 million); underlying revenue declined 11 per cent whenrevenue from the 2GHz US spectrum relocation programme in the US of £7.4 million is deducted from the prior year comparative. However, we have seen an increase in activity and pipeline growth at the end of the second quarter, although the timing of conversion of opportunities to customer orders remains unpredictable. The improvement can be seen in the underlying order intake for the period which was up 22 per cent at £14.3 million (2009: £11.6 million excluding prior year 2GHz orders of £2.4 million); the headline order intake was up 1 per cent.
The challenge for our Law Enforcement & Public Safety business unit remains the timely conversion of opportunities into orders. Government funded projects are, generally, dependent on political decision-making cycles, particularly in the US market from where we expect to derive significant growth. We have seen increasing activity and pipeline growth but we have yet to achieve critical mass to have a more predictable flow of business. The order intake for the period was down 29 per cent at £2.9 million (2009: £4.1 million) and as a consequence revenue fell by 33 per cent to £2.6 million (2009: £3.9 million). We saw a distinct increase in activity at the end of the second quarter which has continued into the second half.
In our results statement for 2009, we noted that the market for our Marine & Energy (M&E) business was slowing in both its offshore and marine segments, and this has continued into the first half of 2010. Order intake fell by 33.9 per cent to £10.4 million (2009: £15.7 million). The impact on revenue has been less severe because the business had a strong order book; revenue was down 8 per cent to £14.0 million (2009: £15.1 million). We expect order intake to recover in the second half as our core offshore and marine markets start to invest again. We have seen an increase in demand for equipment for oil-rigs as they are brought back into service, which are leading indicators for M&E.
The Vislink Services business is in transition from being a broadcast based business to developing alternative sources of revenue building on our established experience in designing and installing fixed earth stations and the growth in broadband infrastructure build out. Whilst progress has been made in developing opportunities particularly in the mining, public safety and education sectors the growth in these areas has not yet made up for the decline in revenues and orders following the 2GHz installation programme that is now largely complete. Although orders for Services were down 52 per cent at £3.1m (2009: £6.3 million), revenue was only down 2 per cent at £4.4 million (2009 £4.5 million) as we managed the order book to balance revenue through utilising our existing resources efficiently.
Principal risks and uncertainties
The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 22 to 23 of the Annual Report 2009, a copy of which is available on the Group website at www.vislink.com. The Board considers that these remain a current reflection of the risks and uncertainties facing the business for the remaining six months of the financial year. The Group's risk management process remains unchanged from 31 December 2009 and is described in detail in the 2009 Annual Report. The principal exchange rates used in the preparation of this condensed consolidated interim financial information are provided in note 15.
The Board and Management
Tim Trotter, Chairman, announced at the Annual General Meeting on 3 June 2010 that as this was his ninth year as a director of the Company he was no longer considered to be independent under the UK Corporate Governance Code. At the request of the Board he had agreed to remain Chairman for a further year to ensure continuity as the Group completes its re-organisation during the current economic downturn. The Company has initiated a search for a new Chairman and Mr Trotter is expected to step down from the Board at the next Annual General Meeting.
Mr Stephen Bellamy joined the Board as a non-executive director, and member of the Audit, Remuneration and Nomination Committees on 23 June 2010.
Outlook
We now see some signs of recovery across the Group. Our sales pipeline (being the total value of qualified opportunities) continues to grow but visibility as to when opportunities will be converted into orders is still difficult to predict. We will continue to reduce our fixed cost base. Total operating costs are expected to be £3.5 million lower for the full year than in 2009 at constant exchange rates. At the same time material costs are being reduced through more effective purchasing; product costs will be reduced as we increase sourcing from Asia and accelerate the move to a full manufacturing capability in Singapore by the end of 2010. The resultant improvement in margins is expected to be realised in the second half and to improve gross material margins by more than 2 per cent in a full year.
We are cautiously optimistic that the first half of 2010 has marked the end of the slowdown in our markets which began during 2009 and that we may finally be seeing a gradual return to more normal trading. Broadcasters in the USA and Europe are reporting improved advertising revenues and we are seeing the consequential pick-up in demand for our News & Entertainment equipment. Law Enforcement and Public Safety customers are beginning to ring-fence their budgets and we are similarly seeing higher enquiry rates, though the complexity of public procurement processes makes for unpredictable order conversion. Demand in the offshore oil-rig market is increasing and this is a leading indicator for the recovery of the Marine & Energy markets.
The business continues to maintain its investment in engineering. At the International Broadcasters Convention show in September we will be launching a number of new products. These include a small camera back transmitter based on the Kamelyon product that was developed for the Law Enforcement and Public Safety market, and is aimed at both the traditional news and sports broadcasters and also the corporate and conference venue markets. This illustrates the benefits of our new modular approach to product development. In addition, we will be launching a new rugged and highly portable satcom terminal for use by news organisations, broadcasters and production companies. We will also be showing technology for a camera gateway which will take advantage of cellular 3G/4G/WiMax coverage.
We are in advanced discussions with one of our partners in Asia to enter into a Joint Venture to create an exclusive distribution arrangement for the Vislink product range into the People's Republic of China.
As we said in our trading update on 8 July, the reorganisation of the Group last year into four customer-facing business units has provided the Group with a sounder base on which to operate. As part of the next stage in the Group's development, the Board has asked the Chief Executive to review the future composition of the Group, the results of which will be available before the end of the year.
The Board remains confident about the prospects for the Group despite the poor performance in the first half.
Tim Trotter, Chairman
Duncan Lewis, Chief Executive
August 25, 2010
CONSOLIDATED GROUP INCOME STATEMENT
for the six months ended 30 June 2010
|
|
| Six months to 30 June 2010 (Unaudited)
| Six months to 30 June 2009 (Unaudited)
| Year ended 31 December 2009 (Audited)
|
| Notes | £'000 | £'000 | £'000 | |
| Continuing operations | ||||
| Revenue | 4 | 34,211 | 45,902 | 94,677 |
| Cost of sales | (21,786) | (27,111) | (56,933) | |
| Gross profit | 12,425 | 18,791 | 37,744 | |
| Sales and marketing expenses | (6,451) | (6,559) | (14,038) | |
| Research and development costs | (3,916) | (4,254) | (8,304) | |
| Administrative costs | (4,291) | (5,228) | (10,186) | |
| Other expenses | (2,103) | (2,018) | (4,694) | |
Operating (loss)/profit | 4,5 | (4,336) | 732 | 522 |
| Operating (loss)/profit is analysed as: | ||||
| Adjusted operating (loss)/profit | (2,233) | 2,750 | 5,216 | |
| Amortisation of acquired intangibles | (1,140) | (1,535) | (3,406) | |
| Share based payments | (85) | (176) | (346) | |
| Non-recurring costs | 5 | (878) | (307) | (942) |
| Finance costs | 6 | (189) | (299) | (517) |
| Investment income Share of (loss)/profit in associate | 6 | 20 (18) | 57 (10) | 50 2 |
| (Loss)/profit before taxation | (4,523) | 480 | 57 | |
| Taxation | 7 | 1,234 | (293) | (884) |
(Loss)/profit for the period being profit attributable to equity shareholders | (3,289) | 187 | (827) | |
|
|
|
|
|
|
| (Loss)/earnings per share expressed in pence per share: - basic - diluted |
9 9 |
(2.39p) (2.39p) |
0.14p 0.14p |
(0.60)p (0.60)p |
Dividends
No dividends have been declared and approved in respect of the six-month periods ending 30 June 2010 and 30 June 2009 (see note 8).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2010
|
|
| Six months to 30 June 2010 (Unaudited)
| Six months to 30 June 2009 (Unaudited)
| Year ended 31 December 2009 (Audited)
|
| £'000 | £'000 | £'000 | ||
| (Loss)/profit for the financial period | (3,289) | 187 | (827) | |
| Translation difference on foreign currency net investments |
1,173 |
(4,119) |
(2,313) | |
| Total comprehensive loss for the period | (2,116) | (3,932) | (3,140) |
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
for the six months ended 30 June 2010
|
|
| Six months to 30 June 2010 (Unaudited)
| Six months to 30 June 2009 (Unaudited)
| Year ended 31 December 2009 (Audited)
|
| Notes | £'000 | £'000 | £'000 | |
| Opening shareholders' equity | 52,760 | 57,274 | 57,274 | |
| (Loss)/profit for the financial period | (3,289) | 187 | (827) | |
| Translation difference on foreign currency net investments |
1,173 |
(4,119) |
(2,313) | |
| Total comprehensive loss for the period | (2,116) | (3,932) | (3,140) | |
| Share options - value of employee services | 85 | 176 | 346 | |
| Dividends | 8 | (1,720) | (1,720) | (1,720) |
| Total movements in shareholders' equity | (3,751) | (5,476) | (4,514) | |
| Closing shareholders' equity | 49,009 | 51,798 | 52,760 |
CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION
as at 30 June 2010
|
|
| 30 June 2010 (Unaudited) | 30 June 2009 (Unaudited) | 31 December 2009 (Audited) |
| | Notes | £'000 | £'000 | £'000 |
Assets | ||||
Non-current assets | ||||
| Goodwill | 24,742 | 24,603 | 24,832 | |
| Intangible assets | 10 | 12,195 | 12,587 | 12,192 |
| Property, plant and equipment | 10 | 5,609 | 5,915 | 5,756 |
| Investment in associates | 196 | 184 | 224 | |
| Deferred tax assets | 1,684 | 782 | 958 | |
| 44,426 | 44,071 | 43,962 | ||
Current assets | ||||
| Inventories | 15,402 | 18,604 | 15,655 | |
| Trade and other receivables | 15,638 | 15,159 | 23,738 | |
Non-current assets held for sale | - | - | 461 | |
| Current tax assets | - | - | 179 | |
| Derivative financial instruments | 402 | 90 | - | |
Cash and cash equivalents | 12 | 3,907 | 9,975 | 7,423 |
| | 35,349 | 43,828 | 47,456 | |
Liabilities | ||||
| Current liabilities | ||||
| Trade and other payables | 18,569 | 21,650 | 22,677 | |
| Current tax liabilities | 213 | 1,005 | 1,173 | |
| Provisions for other liabilities and charges | 13 | 942 | 545 | 1,093 |
| 19,724 | 23,200 | 24,943 | ||
Net current assets | 15,625 | 20,628 | 22,513 | |
Non-current liabilities | ||||
| Financial liabilities: borrowings | 12 | 7,333 | 6,867 | 6,812 |
| Deferred tax liabilities | 1,182 | 1,664 | 2,380 | |
| Other non-current liabilities | 2,194 | 3,820 | 4,143 | |
| Provisions for other liabilities and charges | 13 | 333 | 550 | 380 |
| 11,042 | 12,901 | 13,715 | ||
| Net assets | 49,009 | 51,798 | 52,760 | |
|
Shareholders' equity | ||||
| Ordinary shares | 11 | 3,465 | 3,465 | 3,465 |
| Share premium account | 11 | 4,900 | 4,900 | 4,900 |
| Merger reserve | 30,565 | 30,565 | 30,565 | |
| Translation reserve | 4,701 | 1,724 | 3,530 | |
| Retained earnings | 5,378 | 11,144 | 10,300 | |
Total shareholders' equity | 49,009 | 51,798 | 52,760 |
CONSOLIDATED GROUP CASH FLOW STATEMENT
for the six months ended 30 June 2010
|
|
| Six months to 30 June 2010 (Unaudited) | Six months to 30 June 2009 (Unaudited) | Year ended 31 December 2009 (Audited) |
|
| Notes | £'000 | £'000 | £'000 |
| Cash flow from operating activities | ||||
| Cash generated from operations | 14 | 1,480 | 5,942 | 7,333 |
Interest received | 20 | 57 | 50 | |
Interest paid | (83) | (95) | (289) | |
Taxation paid | (984) | (1,315) | (2,041) | |
Net cash generated from operating activities | 433 | 4,589 | 5,053 | |
Cash flows from investing activities | ||||
| Proceeds from sale of property, plant and equipment | 31 | 15 | 1,828 | |
| Deferred consideration in respect of acquisitions | (1,319) | (519) | (484) | |
| Purchase of property, plant and equipment | 10 | (893) | (509) | (2,662) |
| Expenditure on capitalised development costs | 10 | (1,812) | (1,529) | (3,197) |
Net cash (absorbed by) investing activities | (3,993) | (2,542) | (4,515) | |
Cash flows from financing activities | ||||
| Repayment of borrowings: finance leases | 12 | - | (3) | (199) |
| Dividend paid to shareholders | - | - | (1,720) | |
| Net cash (absorbed by) financing activities | - | (3) | (1,919) | |
| Net (decrease)/increase in cash and cash equivalents |
(3,560) |
2,044 |
(1,381) | |
| Cash and cash equivalents at beginning of period |
| 7,423 | 9,032 | 9,032 |
Effect of foreign exchange rate changes | 12 | 44 | (1,101) | (228) |
Cash and cash equivalents at end of period | 12 | 3,907 | 9,975 | 7,423 |
NOTES TO THE INTERIM ACCOUNTS
for the six months ended 30 June 2010
1. GENERAL INFORMATION
Vislink plc ("the Company") and its subsidiaries (together "the Group") is a global technology business specialising in the provision of secure communications for the News & Entertainment, Law Enforcement & Public Safety, Marine & Energy and related technical Services markets. The Group has offices in the UK, USA, Norway, Dubai and Singapore and employs over 420 people worldwide. The Group specialises in the design and manufacture of microwave radio, satellite transmission, wireless camera and marine CCTV systems. The Group has manufacturing subsidiaries in the UK, Norway and the USA.
The Company is a public limited company that is listed on the London Stock Exchange (LSE:VLK). The Company is registered and domiciled in the UK and its registered office is Marlborough House, Charnham Lane, Hungerford, Berkshire. The registered number of the Company is 4082188.
This condensed consolidated interim financial information comprises the consolidated interim statement of financial position as of 30 June 2010 and 30 June 2009 and related consolidated interim statements of income and cash flows for the six months then ended. This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2009 were approved by the Board of directors on 16 April 2010 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
This condensed consolidated interim financial information has been subject to a review in accordance with ISRE (UK and Ireland) 2410 by our auditors but has not been subject to an audit.
This interim report was approved for issue by the Board of Directors on 25 August 2010.
2. BASIS OF PREPARATION
This condensed consolidated interim financial information for the six months ended 30 June 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, 'Interim financial reporting' as adopted by the European Union. The condensed consolidated interim financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2009, which have been prepared in accordance with IFRS as adopted by the European Union.
The preparation of the financial information requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from these estimates.
3. ACCOUNTING POLICIES
Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2009, as described in those annual financial statements.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2010.
·; IFRS 3 (amendment), 'Business combinations' and consequential amendments to IAS 27, 'Consolidated and separate financial statements', IAS 28, 'Investments in associates' and IAS 31, 'Interests in joint ventures', effective prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 July 2009. There is no impact of these changes on any historic acquisitions made by the Group.
The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2010, but are not currently considered to be relevant to the Group.
·; IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods beginning on or after 1 July 2009. This is not currently applicable to the Group, as it has not made any non-cash distributions.
·; IFRIC 18, 'Transfers of assets from customers', effective for transfer of assets received on or after 1 July 2009. This is not relevant to the Group, as it has not received any assets from customers.
·; 'Additional exemptions for first-time adopters' (Amendment to IFRS 1) was issued in July 2009. The amendments are required to be applied for annual periods beginning on or after 1 January 2010. This is not relevant to the Group, as it is an existing IFRS preparer.
·; Improvements to International Financial Reporting Standards 2009 were issued in April 2009. The effective dates vary standard by standard but most are effective 1 January 2010.
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2010 and have not been early adopted:
·; IFRS 9, 'Financial instruments', issued in December 2009. This addresses the classification and measurement of financial assets and may affect the Group's accounting for its financial assets. The standard is not applicable until 1 January 2013 but is available for early adoption. The Group is yet to assess IFRS 9's full impact.
·; Revised IAS 24, 'Related party disclosures', issued in November 2009. It supersedes IAS 24, 'Related party disclosures', issued in 2003. The revised IAS 24 is required to be applied from 1 January 2011.
·; 'Classification of rights issues' (Amendment to IAS 32), issued in October 2009. The amendment should be applied for annual periods beginning on or after 1 February 2010 but is not considered relevant to the Group.
·; 'Prepayments of a minimum funding requirement' (Amendments to IFRIC 14), issued in November 2009. The amendments are effective for annual periods beginning 1 January 2011. This is not considered relevant to the Group as it has no defined benefit pension schemes.
·; IFRIC 19, 'Extinguishing financial liabilities with equity instruments'. This clarifies the requirements of IFRSs when an entity renegotiates the terms of a financial liability with its creditor and the creditor agrees to accept the entity's shares or other equity instruments to settle the financial liability fully or partially. The interpretation is effective for annual periods beginning on or after 1 July 2010 but is not considered relevant to the Group.
·; Improvements to International Financial Reporting Standards 2010 were issued in May 2010. The effective dates vary standard by standard but most are effective 1 January 2011.
4. SEGMENTAL ANALYSIS
The Group's internal organisational and management structure comprises an Executive Management Board under the chairmanship of the Chief Executive to oversee the running of the Group. Each business unit has its own managing director who sits on the Executive Management Board together with the managing directors of logistics and technology and the directors of HR and IT.
The chief operating decision-maker has been identified as the Executive Management Board. This Board reviews the Group's internal financial reporting in order to assess performance and allocate resources. The same information is provided to the Board of Directors of Vislink plc. Management has therefore determined that the operating segments for the Group will be based on these reports.
The table below shows the analysis of Group external revenue and operating profit by business unit.
|
| Revenue |
| Operating (loss) profit | ||||
|
| Six months to 30 June 2010 (Unaudited) £'000 | Six months to 30 June 2009 (Unaudited) £'000 | Year ended 31 December 2009 (Audited) £'000 |
| Six months to 30 June 2010 (Unaudited) £'000 | Six months to 30 June 2009 (Unaudited) £'000 | Year ended 31 December 2009 (Audited) £'000 |
| By business unit | |||||||
| News & Entertainment | 13,288 | 22,347 | 42,050 | 1,106 | 4,355 | 8,685 | |
| Law Enforcement & Public Safety | 2,558 | 3,929 | 9,918 | (302) | 935 | 1,757 | |
| Marine & Energy | 13,960 | 15,143 | 31,758 | 4,202 | 4,832 | 8,948 | |
| Services | 4,405 | 4,483 | 10,951 | 968 | 2,110 | 4,316 | |
| Research and development | - | - | - | (3,916) | (4,254) | (8,304) | |
| Administration | - | - | - | (4,291) | (5,228) | (10,186) | |
| (2,223) | 2,750 | 5,216 | |||||
| Amortisation of acquired intangibles |
- |
- |
- |
(1,140) |
(1,535) |
(3,406) | |
| Share based payments | - | - | - | (85) | (176) | (346) | |
| Non-recurring costs | - | - | - | (878) | (307) | (942) | |
Group total | 34,211 | 45,902 | 94,677 | (4,336) | 732 | 522 | |
Notes:
a) Operating profit by market is after charging for cost of goods sold and direct sales and marketing costs associated with that market.
b) Research and development represents the Group investment in research and development and product engineering.
c) Administration costs are net of the impact of the favourable revaluation of financial derivatives of £402,000 (30 June 2009: £90,000 favourable; 31 December 2009: nil).
The secondary sales analysis in the tables below is based on the geographical location of the customer and the category of product sold.
Geographic revenue analysis
|
| Six months to 30 June 2010 (Unaudited) £'000 | Six months to 30 June 2009 (Unaudited) £'000 | Year ended 31 December 2009 (Audited) £'000 |
| By market: | |||
UK and Ireland | 2,171 | 2,344 | 8,288 |
| Rest of Europe | 10,093 | 9,806 | 20,507 |
| USA & Canada | 12,246 | 23,862 | 41,135 |
| South America | 1,674 | 325 | 2,818 |
| Middle East | 1,880 | 1,652 | 6,145 |
| Asia | 5,178 | 7,089 | 10,649 |
| Africa | 552 | 376 | 2,742 |
| Other | 417 | 448 | 2,393 |
| 34,211 | 45,902 | 94,677 | |
|
Analysis of revenue by product category |
|
|
|
| Microwave radio and wireless camera products | 12,198 | 22,084 | 40,185 |
| Satellite products Technical services | 4,471 3,582 | 4,458 4,217 | 13,497 9,237 |
| Marine CCTV products | 13,960 | 15,143 | 31,758 |
| 34,211 | 45,902 | 94,677 |
Total assets
The table below summarises the net assets of the Group by their geographic location. Balance sheet reporting will continue to be disclosed by the geographic location of the assets and liabilities of the Group as this is consistent with the presentation of internal reporting provided to the Executive Management Board and the Board of Directors of Vislink plc.
|
| 30 June 2010 (Unaudited) £'000 | 30 June 2009 (Unaudited) £'000 | 31 December 2009 (Audited) £'000 |
| By market: |
|
|
|
UK | 13,724 | 19,314 | 18,657 |
| North America | 22,965 | 22,791 | 21,898 |
| Norway | 12,320 | 9,693 | 12,205 |
| 49,009 | 51,798 | 52,760 |
5. OPERATING PROFIT
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 2010 (Unaudited) £'000 | Six months to 30 June 2009 (Unaudited) £'000 | Year ended 31 December 2009 (Audited) £'000 |
|
(Profit) from disposal of freehold property |
(28) |
- |
(699) |
| Rationalisation and redundancy costs | 303 | 307 | 1,219 |
| Aborted acquisition costs | 603 | - | - |
| Onerous property commitments | - | - | 422 |
| Total non-recurring costs | 878 | 307 | 942 |
The Group explored the possibility of acquiring a business in Asia to which it would have transferred much of its manufacturing and which would have provided a base for further expansion into the region. The transaction was aborted in the light of discoveries at the end of due diligence. The costs incurred represent professional fees incurred up to the date of the process being aborted.
The Group has incurred rationalisation and redundancy costs of £303,000 in the period (2009: £307,000).
6. FINANCE COSTS - NET
|
| Six months to 30 June 2010 (Unaudited) £'000 | Six months to 30 June 2009 (Unaudited) £'000 | Year ended 31 December 2009 (Audited) £'000 |
|
Interest payable on bank borrowing |
(102) |
(178) |
(288) |
| Unwinding of interest associated with the discounting of deferred consideration |
(87) |
(121) |
(229) |
| Interest and similar charges payable | (189) | (299) | (517) |
| Investment income | 20 | 57 | 50 |
| Finance costs - net | (169) | (242) | (467) |
7. TAX ON PROFIT ON ORDINARY ACTIVITIES
|
| Six months to 30 June 2010 (Unaudited) £'000 | Six months to 30 June 2009 (Unaudited) £'000 | Year ended 31 December 2009 (Audited) £'000 |
| The tax charge for the period comprises: UK corporation tax |
- |
(602) |
(199) |
Foreign tax | 803 | 982 | 262 |
Foreign tax prior year adjustment | - | 154 | 557 |
Total current tax | 803 | 534 | 620 |
Deferred tax:UK corporation tax |
(685) |
(99) |
(586) |
Foreign tax | (1,352) | (142) | 850 |
Total deferred tax | (2,037) | (241) | 264 |
Total taxation | (1,234) | 293 | 884 |
The tax charge for the six months ended 30 June 2010 is based on the effective tax rate that is estimated to apply to earnings for the full year.
8. DIVIDENDS
No interim dividend is proposed for the period. In respect of 2009 there was no interim dividend and the final dividend of 1.25 pence per share was approved at the Annual General Meeting on 3 June 2010 and paid on 16 July 2010.
9. EARNINGS PER ORDINARY SHARE
Earnings per share is calculated by reference to a weighted average of 137,754,000 ordinary shares in issue during the period, excluding shares held by the Employees' Share Ownership Plan (30 June 2009 and 31 December 2009: 137,754,000).
The diluted earnings per share is after taking account of a further nil shares (30 June 2009 and 31 December 2009: nil) being the dilutive effect of share options.
Adjusted earnings
Vislink believes that adjusted operating profit, adjusted profit before tax, adjusted earnings and adjusted earnings per share provide additional useful information on trends to shareholders. Vislink uses these measures for internal performance analysis and incentive compensation arrangements. The principal adjustments are in respect of the amortisation and impairment of acquired intangibles and goodwill, share based payments and non-recurring costs.
The reconciliation between reported and adjusted earnings and basic earnings per share is shown below:
|
| Six months to 30 June 2010 | Six months to 30 June 2009 | Year ended 31 December 2009 | |||
|
| Earnings £'000 | Basic EPS pence | Earnings £'000 | Basic EPS pence | Earnings £'000 | Basic EPS Pence
|
| Reported (loss)/earnings | (3,289) | (2.39)p | 187 | 0.14p | (827) | (0.60)p |
| Amortisation of acquired intangibles after tax |
821 |
0.60p |
1,105 |
0.80p |
2,452 |
1.78p |
| Share based payments | 85 | 0.06p | 176 | 0.13p | 346 | 0.25p |
| Non-recurring costs after tax |
801 |
0.58p |
221 |
0.16p |
678 |
0.49p |
| Tax adjustment in respect of prior years |
- |
- |
- |
- |
557 |
0.41p |
| Adjusted (loss)/earnings | (1,582) | (1.15)p | 1,689 | 1.23p | 3,206 | 2.33p |
10. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
|
| Six months to 30 June 2010 (Unaudited) £'000 | Six months to 30 June 2009 (Unaudited) £'000 | Year ended 31 December 2009 (Audited) £'000 |
| Property, plant and equipment | |||
| Opening net book value as at 1 January | 5,756 | 6,972 | 6,972 |
| Additions | 893 | 509 | 2,662 |
| Transfer to non-current assets held for sale | - | - | (699) |
| Disposals | (57) | (17) | (846) |
| Depreciation | (1,079) | (1,089) | (2,127) |
| Exchange adjustment | 96 | (460) | (206) |
| Closing net book value | 5,609 | 5,915 | 5,756 |
|
|
|
|
|
| Intangible assets Intangible development costs |
|
|
|
| Opening net book value as at 1 January | 6,568 | 5,707 | 5,707 |
| Additions | 1,812 | 1,529 | 3,197 |
| Amortisation | (1,358) | (1,058) | (1,981) |
| Exchange adjustment | 287 | (425) | (355) |
| Development costs closing net book value | 7,309 | 5,753 | 6,568 |
|
|
|
|
|
| Acquired Intangible assets | |||
| Opening net book value as at 1 January | 5,624 | 9,274 | 9,274 |
| Additions | - | - | 542 |
| Amortisation | (1,140) | (1,535) | (3,406) |
| Exchange adjustment | 402 | (905) | (786) |
| Acquired intangibles closing net book value | 4,886 | 6,834 | 5,624 |
| Total closing net book value of intangible assets | 12,195 | 12,587 | 12,192 |
The Group has capital commitments contracted but not provided for of £0.3 million (31 December 2009:£nil).
11. CALLED UP SHARE CAPITAL AND SHARE PREMIUM
|
| Number of shares '000 | Share Capital
£'000 | Share Premium £'000 | Total
£'000 |
| | ||||
At 1 January and 30 June 2010 | 138,594 | 3,465 | 4,900 | 8,365 |
There were no share options exercised in the period to 30 June 2010 under any of the existing Employee share option schemes (2009: nil).
12. CASH, BORROWINGS AND LOANS
The movements in cash and cash equivalents, borrowings and loans in the period were as follows:
|
| Net cash and cash equivalents £'000 | Other borrowings
£'000 | Total net cash/(debt)
£'000 |
| Six months ended 30 June 2009 | |||
| At 1 January 2009 | 9,032 | (7,867) | 1,165 |
| Repayment of borrowings | (3) | 3 | - |
| Other cash movements in the period | 2,047 | - | 2,047 |
| Exchange rate adjustments | (1,101) | 997 | (104) |
At 30 June 2009 | 9,975 | (6,867) | 3,108 |
|
| |||
| Six months ended 30 June 2010 | |||
| At 1 January 2010 | 7,423 | (6,812) | 611 |
| Repayment of borrowings | - | - | - |
| Other cash movements in the period | (3,560) | - | (3,560) |
| Exchange rate adjustments | 44 | (521) | (477) |
At 30 June 2010 | 3,907 | (7,333) | (3,426) |
The Group has the following undrawn borrowing facilities:
|
| 30 June 2010 £'000 | 30 June 2009 £'000 | 31 December 2009 £'000 |
| Floating rate: - expiring within one year - expiring beyond one year |
3,560 - |
7,109 6,663 |
8,500 3,188 |
The Group changed its principal bankers to Santander on 27 May 2010 and agreed a new four year term loan facility for the Group's principal debt, a medium term loan of US$11.0 million (£7.3 million). The Group also agreed a £5.0 million overdraft facility and ancillary trade finance facilities.
The facilities expiring within one year comprise the Group overdraft facility that is subject to review during 2011 in the normal course of business. The Board do not anticipate any issues to arise from the review process. The medium term loan facility expires on 31 May 2014. There are quarterly repayments of US$917,000 (£611,000) that commence on 31 August 2011. The facilities have financial covenants attached to them comprising interest cover, debt service cover and a net debt to EBITDA cover. The Board consider that the Group has sufficient headroom to enable it to conform to covenants on its existing borrowings when they begin to be tested from September 2010.
Interest on the overdraft facility is charged at 2.25 per cent over base rate; interest on the medium term loan is charged at 2.25 per cent over LIBOR. The bank loans and overdrafts are secured by fixed and floating charges over the Group's assets and by cross-guarantees between the Company and certain UK and US subsidiaries.
13. PROVISIONS FOR LIABILITIES AND CHARGES
|
| Warranty Provision £'000 | Property Provision £'000 | Rationalisation Provision £'000 | Total £'000 |
| Six months ended 30 June 2010 | ||||
| Warranty provision at 1 January 2010 | 979 | 403 | 91 | 1,473 |
| Charged in period | 234 | - | - | 234 |
| Utilised in period | (248) | (138) | (91) | (477) |
| Foreign Exchange | 45 | - | - | 45 |
At 30 June 2010 | 1,010 | 265 | - | 1,275 |
Warranty provisions are made in respect of the expected future warranty costs in certain businesses based on historic actual costs. Warranty periods on products are generally between one and two years. Other than a warranty provision of $953,000 (£635,000) all provisions are denominated in sterling. The property provision is in respect of a vacated leasehold property and represents the future liabilities associated with the property to the end of the lease.
14. NOTES TO THE CASH FLOW STATEMENT
Net cash flow from operating activities comprises:
|
| Six months to 30 June 2010 (Unaudited) £'000 | Six months to 30 June 2009 (Unaudited) £'000 | Year ended 31 December 2009 (Audited) £'000 |
| (Loss)/profit attributable to shareholders | (3,289) | 187 | (827) |
| Taxation | (1,234) | 293 | 884 |
| Depreciation | 1,079 | 1,089 | 2,127 |
| Loss/(gain) on disposal of property, plant and equipment | 30 | - | (745) |
| Amortisation of development costs | 1,358 | 1,058 | 1,981 |
| Amortisation of acquired intangibles | 1,140 | 1,535 | 3,406 |
| Share options - value of employee services | 85 | 176 | 346 |
| Investment income | (20) | (57) | (50) |
| Finance costs Derivative financial instruments Share of loss/(profit) associate | 189 (402) 18 | 299 (90) 10 | 517 (257) (2) |
| Decrease/(increase) in inventories | 639 | (719) | 3,090 |
| Decrease/(increase) in assets held for sale | 461 | - | (461) |
| Decrease in trade and other receivables | 8,155 | 5,912 | 437 |
| (Decrease) in payables | (6,486) | (3,584) | (3,305) |
| (Decrease)/increase in provisions | (243) | (167) | 192 |
| Cash flow from operating activities | 1,480 | 5,942 | 7,333 |
15. FOREIGN EXCHANGE RATES
The principal exchange rates used by the Group in translating overseas profits and net assets into GBP are set out in the table below.
| Rate compared to GBP: Period ended
|
30 June 2010 |
30 June 2009 |
31 December 2009 |
| Average rates | |||
| US dollar | 1.53 | 1.49 | 1.56 |
| Norwegian Krone | 9.21 | 9.97 | 9.78 |
|
Period end rate | |||
| US dollar | 1.50 | 1.65 | 1.62 |
| Norwegian Krone | 9.73 | 10.60 | 9.33 |
16. RELATED PARTY TRANSACTIONS
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note.
Hernis Scan Systems AS, a wholly owned subsidiary of the Company, has entered into a license, production and sales agreement with its associate, Wireless Power and Communications AS ("WPC"), in respect of certain products to which WPC owns the commercial rights and that Hernis Scan Systems AS will manufacture and sell in exchange for a royalty payment to WPC at specified amounts per item sold.
Other than the transactions set out above the Group has not entered into any transactions with any related parties who are not members of the Group. .
Statement of directors' responsibilities
The directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:
·; an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
·; material related-party transactions in the first six months and any material changes in the related-party transactions described in the last annual report.
The directors of Vislink plc are listed in the Vislink plc Annual Report for 31 December 2009.
By order of the Board
Duncan Lewis
Chief Executive
James Trumper
Finance Director
25 August 2010
Independent review report to Vislink Plc
Introduction
We have been engaged by the company to review the condensed consolidated interim financial information in the interim report for the six months ended 30 June 2010, which comprises the consolidated Group Income Statement, consolidated Statement of Comprehensive Income, consolidated Statement of Changes in Equity, consolidated Group Statement of Financial Position, consolidated Group Cash Flow Statement and related notes. We have read the other information contained in the interim 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 interim report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRS 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 consolidated interim financial information in the interim report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the consolidated interim financial information in the interim report for the six months ended 30 June 2010 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
PRICEWATERHOUSECOOPERS LLP
Chartered Accountants
Bristol
25 August 2010
Notes: (a) The maintenance and integrity of the Vislink web site is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the interim report since it was initially presented on the web site.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial information may differ from legislation in other jurisdictions.