Last checked at 26 Aug 2009 07:00
Vislink plc
Interim results for the six months ended 30 June 2009
Vislink plc ("The Group"), the global technology business specialising in secure communications for the news & entertainment, law enforcement & public safety, marine & energy and the related services markets, has today announced its Interim results for the six months ended 30 June 2009.
Financial Headlines
| 2009 £'000 | 2008 £'000 | Change | |
| Revenue | 45,902 | 46,607 | -1.5% |
| Operating profit | 732 | 2,359 | |
| Adjusted* operating profit | 2,750 | 4,256 | -35.4% |
| Adjusted* operating margin | 6.0% | 9.1% | |
| Profit before taxation | 480 | 2,287 | |
| Net cash generated from operating activities | 4,589 | 5,833 | |
| Earnings per share: basic | 0.14p | 1.04p | |
| Adjusted* earnings per share: basic | 1.23p | 2.04p | -39.7% |
*Adjusted operating profit is operating profit before the amortisation and impairment of goodwill and acquired intangibles, share based payments and other exceptional costs. Adjusted operating margin and earnings per share are calculated on the same basis.
Underlying revenue** increased 11.6%, to £38.5m (2008: £34.5m)
Order backlog at 30 June 2009 was £31.4m (31 December 2008: £34.1m)
Adjusted operating profit was £2.8m (2008: £4.3m)
Generated £4.6m of net operating cash; closed the period with £3.1m of net cash (31 December 2008: £1.2m)
Operational Highlights:
Group successfully reorganised into four international business units in January
Maintained investment in technology and expanded international sales presence
Significant increase in the launch of new products
Streamlining operations is well underway; significant reductions in the cost-base achieved in the period
**Underlying revenue is revenue at constant current period exchange rates and excluding revenue associated with 2GHz US spectrum relocation programme
Tim Trotter, Chairman of Vislink said:
"2009 is a year of transition for the Group as the new business units implement their forward strategies in an exceptional economic environment. Customers in our News & Entertainment market are suffering from lower revenues in the current economic climate and are reducing their expenditure on our traditional products, although our recent investments in new products will protect our customer base and open new markets. Nevertheless, ordering patterns are less predictable than in the past. In Law Enforcement & Public Safety, we have a strong pipeline for recently developed products but the timing of orders depends upon political decision-making. We have on the other hand, built strong order backlogs in our Marine & Energy and Services divisions which are encouraging for the rest of the year and so far are remaining resilient to the economic climate.
"The first half has seen significant progress in the implementation of our strategy and the trading results have met our expectations. As we have previously indicated, the outcome for the year continues to be dependent on trading in the second half of the financial year and in particular the conversion of the prospects in our News & Entertainment and Law Enforcement & Public Safety business units. The company will continue to invest in sales and product development, and in systems to reduce cost and improve service. The goal remains to leave 2009 with a reduced cost base and accelerating growth in our chosen sectors as we focus our resources more effectively. The Board is confident about the prospects for the Group."
- ends -
For further information on 26 August, 2009, please contact:
Duncan Lewis, Chief Executive +44 (0)1488 685500
James Trumper, Group Finance Director +44 (0)1488 685500
Andrew Hayes / Hugo Jenkins +44 (0)207 796 4133
Hudson Sandler
About Vislink plc
Vislink plc is a global business with annual revenues of £100 million. The Group is strategically focussed on providing secure communication technologies to customers in its chosen markets. We specialise in wireless, video and IP technologies together with the supporting management systems. Our products include the design and manufacture of microwave radio, satellite transmission, wireless camera and marine CCTV systems; our manufacturing operations are in the UK, Norway and the USA. We have four international business units organised to serve its customers in News & Entertainment, Law Enforcement & Public Safety, Marine & Energy and the related Services markets. With offices in the UK, USA, Norway, Dubai, South Africa and Singapore we employ over 450 people worldwide and have net assets in excess of £50 million.
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's Statement
For the six months to 30 June 2009
Introduction
The Group has traded in line with our expectations in the first half of 2009. This is a creditable performance in the current economic downturn. It is all the more creditable given the changes that the Group has undergone since the announcement made on 19 January 2009 to reorganise the Group into four international business units focussed on our customers and their markets, supported by operational divisions providing technology and logistics.
We are making good progress implementing the strategy we announced in January. We have appointed a new executive management team to lead our business units using the skills and experience that already existed in the Group. We are focused on expanding our market penetration. We have therefore further invested in our customer facing activities to sell the technologies and products of the whole Group by opening new sales and service centres in Dubai and South Africa, and expanding our centre in Singapore. We have also maintained our investment in technology. We have launched a steady flow of new products, including nine major new products for the News & Entertainment and Law Enforcement &Public Safety markets.
At the same time, the process of streamlining our operations is well underway. We have halved our space in North America, and we shall be consolidating on to one site in the UK by year-end. We continue to reduce our cost base and improve our efficiency. We reduced headcount by 15 per cent at the beginning of the year and this together with Group-wide consolidated purchasing, has led to improved gross margins. We have contracted to implement Microsoft's AX2009 throughout the Group, which will provide a common CRM/ERP platform; the pilot has been successfully completed. This will lead to improved customer service, lower costs and improved cash management in 2010. We have introduced performance-based pay throughout the Group which we believe is a significant development in aligning the results with performance.
Financial results
Group revenue for the period was £45.9 million (2008: £46.6 million). Underlying revenue increased 11.6%, being revenue at constant current period exchange rates and excluding revenue associated with the 2GHz US spectrum relocation programme, to £38.5 million (2008: £34.5 million).
Orders received for the period were £40.2 million (2008: £44.7 million) with, as predicted, orders from the 2GHz US programme reducing by 70.0%. Underlying orders received, being orders at constant exchange rates and excluding those associated with the 2GHz programme, declined 9.6% to £37.8 million (2008: £41.8 million). Our mix of orders is changing in line with our plans. Broadcasters are cutting capital expenditure budgets and therefore we have seen a decline in orders for our News &Entertainment business relative to last year. We have, as anticipated, seen growth in our Marine & Energy, Law Enforcement & Public Safety and Services businesses. Our order backlog at 30 June 2009 was £31.4 million (31 December 2008: £34.1 million).
The Group's adjusted operating profit was lower than the previous half year at £2.8 million (2008: £4.3 million) due to the anticipated decline in operating margins in our News & Entertainment business as the 2GHz programme comes to an end in the US. This has been mitigated in part by improved operating margins in our other business units.
The reported operating profit was £0.7 million (2008: £2.4 million) after charging £1.5 million in respect of the amortisation of acquired intangibles (2008: £0.8 million), £0.3 million in respect of non-recurring costs1 (2008: £1.0 million) and the effect of share-based payments. Profit before tax was £0.5 million (2008: £2.3 million).
The Group's cash generation remains strong. The net cash inflow generated from operating activities in the period was £4.6 million (2008: £5.8 million) and the net cash balance was £3.1 million at 30 June 2009 (31 December 2008: £1.2 million).
Earnings Per Share
The reported basic undiluted earnings per share for the period were 0.14 pence (2008: 1.04 pence). After adjusting for the amortisation of acquired intangibles, non-recurring costs and the effect of share-based payments, the Group's adjusted earnings per share were 1.23 pence (2008: 2.04 pence).
Dividends
The final dividend of 1.25 pence per share in respect of 2008 was paid to shareholders on 17 July 2009. As in previous years, the Board is not recommending an interim dividend.
Business Review
News & Entertainment
Vislink News & Entertainment sells the products of Vislink's three established broadcast businesses of satellite uplink manufacturer Advent Communications, wireless camera manufacturer Link Research and Microwave Radio Communications, which manufactures fixed and mobile microwave links. It has offices in the UK, USA, Dubai and Singapore.
Our News & Entertainment business has, as predicted, been affected by the completion of the 2GHz spectrum relocation programme in the USA. It is also feeling the impact of the current economic environment as US and European broadcasters have seen falling advertising revenues and therefore reduced capital expenditure. Historically, the Group has focused on these regions.
As a result, overall revenue in the period declined 31.2% to £22.3 million (2008: £32.5 million); core revenue declined 11.3% to £14.9 million (2008: £16.8 million) whilst revenue from the 2GHz US spectrum relocation programme in the US declined 52.8% to £7.4 million (2008: £15.7 million) as expected. As a result of the reduction in revenue the operating profit declined to 19.5% of sales at £4.4 million (2008: 30.5% and £9.9 million respectively).
Looking forward, opportunities for growth exist in the Middle East, African and Asia/Pacific regions for satellite and electronic newsgathering equipment. We have therefore increased our investment in local sales and customer support staff to address these opportunities. We have launched new products suited to these markets as well as new products for our traditional ones. We are seeing early results from this investment in resources.
We have also recently seen an increase in quoting activity for the UK and Europe following a slow start to the year. In the US, we are seeing opportunities to work with Public Broadcasters who require upgrades to their aging infrastructure, backed by government stimulus funds, although the commercial broadcast sector remains depressed.
Law Enforcement & Public Safety
Vislink Law Enforcement & Public Safety provides secure, wireless, video and data communications systems, for worldwide law enforcement and public safety operations. It sells the products of Advent, Link, MRC and PMR (which was acquired last year). It has locations in the US, both East and West coast, the UK, Dubai and Singapore.
Revenue for the period increased 45.3% to £3.9 million (2008: £2.7 million) with an operating profit of £0.9 million (2008: operating loss of £0.1 million) as the new PMR product portfolio is brought to market. Our deliberate focus on this market rather than the defence market, which is because of the lower barriers to entry, shorter lead times and the number of reference clients, is already delivering results. The business unit has had significant successes with contract wins in Australia, South Africa, South America and North America. This included an order for a distributed multi-agency video communications network that will help support the build out of an entire command and control network located in southern California. The network is a multi-site, multi-agency system which links the local, state and federal communications systems. The multiple agencies involved include Police Departments and Fire Departments as well as the Sheriff's Office infrastructure. This demonstrates the Group's capability in this field and is representative of other opportunities we are now addressing.
The business unit is focussed on developing a stronger presence worldwide with appointments of new sales personnel in Dubai, Singapore and in the USA. The business of PMR, acquired in August 2008, has been successfully integrated into the Group. In the US, funding by the Department of Homeland Security for multi agency initiatives provides further opportunities.
The challenge for the business remains one of the timely conversion of opportunities into orders; government funded projects are, generally, dependent on political decision-making cycles. However, we are continuing to grow the pipeline of new business, thereby creating a more predictable flow of business.
Marine & Energy
Vislink Marine & Energy, based in Norway, is a market leader in the supply of explosion proof marine CCTV systems for the offshore/onshore oil and gas industry as well as for the marine, cruise and naval markets. Under the Hernis brand, Vislink Marine & Energy is the world leader in intrinsically safe marine CCTV systems. The current product range includes explosion proof camera stations, thermal camera stations for ice detection as well as crane and submersible solutions. Vislink Marine & Energy has sales and technical support centres in Singapore, Brazil and the US.
Vislink Marine & Energy has increased revenue by 42.8% to £15.1 million (2008: £10.6 million) and its operating profit to £4.8 million (2008: £2.3 million). The long lead times for offshore and marine projects mean that we have yet to see the effects of the current economic climate in current trading. Whilst orders from the offshore and marine markets are marginally down on the same period last year we have had considerable success with onshore projects. We have therefore seen an 18.7% increase in order intake in the period. The second half has started well with a record order intake for July. With a strong order backlog, the prospects for the remainder of the year are encouraging.
Services
Vislink Services provides the professional services and technical expertise to design, project manage, integrate and maintain the products provided by the Vislink businesses. Vislink Services is also a solutions integrator for agnostic wired and wireless communications infrastructures outside of the Vislink business units. Vislink Services has locations in California, Florida, and Massachusetts within the US, and an international operation based in the UK.
Vislink Services has increased revenue by 450% to £4.5 million (2008: £0.8 million) and its operating profit to £2.1 million (2008: £0.2 million). A significant percentage of this growth came from the US, including the 2GHz US spectrum relocation installation programme.
The outlook for the business is that growth will come from broadcast, law enforcement and cross-industry communication infrastructure build-out opportunities. The business has hired several key people during the first half to expand its reach both geographically and across new industries. Services have appointed a sales manager in South Africa to cover sub-Saharan Africa for all of Vislink businesses and high level sales and technical staff in the US to meet the ever increasing voice, data, video and monitor and control communications infrastructure needs of various industries. Services have already had success in education, entertainment, various government agencies, mining, law enforcement and public safety; we are well positioned to be a player in high growth horizontal markets. Services have a strong order backlog going into the second half so the prospects for the remainder of the year remain encouraging.
Principal risks and uncertainties
The Group's risk management process remains unchanged from 31 December 2008 and is described in detail in the 2008 Annual Report. The principal exchange rates used in the preparation of this condensed consolidated interim financial information are provided in note 15.
The Group's exposure to market risk, liquidity risk, credit risk and cashflow interest rate risk remains largely unchanged from the position at 31 December 2008.
The Group's principal risks and uncertainties for the remainder of the year include the impact of foreign exchange rates on margins for non-domestic sales in each of our business units. The Group mitigates this risk as far as possible through the policies described in the 2008 Annual Report.
The Group expected to gain synergies from the integration of the business of Marcom and PMR that were acquired in the second half of 2008. The impact of Marcom has already benefitted the performance of the Vislink Services. PMR has a number of opportunities in its markets that will enable the Group to establish a stronger law enforcement and public safety presence worldwide. Whilst some of these have come to fruition there are a number of significant US based projects where the timing of prospective orders remains unpredictable.
The global broadcast market has been depressed in the first half of the year as a result of the impact of market conditions on advertising revenues. With approximately 50% of Group revenue derived from the broadcast market the Group has a significant exposure to the financial strength of the underlying customer base and their confidence to make capital investments. As a result there is a greater risk of loss associated with our customers' ability to meet their financial obligations. This risk has been mitigated through the on-going monitoring of customer credit limits and careful management of amount of credit given to those customers who pose a greater risk of default.
Related parties
Related-party disclosures are given in note 16.
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.
Summary
Overall, our strategy of exploiting our engineering investments in secure technologies across selected markets is showing early signs of bringing about a positive change in our mix of business, and reducing our dependency upon the broadcast sector.
2009 is a year of transition for the Group as the new business units implement their forward strategies in an exceptional economic environment. Customers in our News & Entertainment market are suffering from lower revenues in the current economic climate and are reducing their expenditure on our traditional products, although our recent investments in new products will protect our customer base and open new markets. Nevertheless, ordering patterns are less predictable than in the past. In Law Enforcement & Public Safety, we have a strong pipeline for recently developed products but the timing of orders depends upon political decision-making. We have on the other hand, built strong order backlogs in our Marine & Energy and Services divisions which are encouraging for the rest of the year and so far are remaining resilient to the economic climate.
The first half has seen significant progress in the implementation of our strategy and the trading results have met our expectations. As we have previously indicated, the outcome for the year continues to be dependent on trading in the second half of the financial year and in particular the conversion of the prospects in our News & Entertainment and Law Enforcement & Public Safety business units. The company will continue to invest in sales and product development, and in systems to reduce cost and improve service. The goal remains to leave 2009 with a reduced cost base and accelerating growth in our chosen sectors as we focus our resources more effectively. The Board is confident about the prospects for the Group.
Tim Trotter, Chairman
August 26, 2009
CONSOLIDATED GROUP INCOME STATEMENT
for the six months ended 30 June 2009
| Six months to 30 June 2009 (Unaudited) | Six months to 30 June 2008 (Unaudited) | Year ended 31 December 2008 (Audited) | ||
| Notes | £'000 | £'000 | £'000 | |
| Continuing operations | ||||
| Revenue | 4 | 45,902 | 46,607 | 101,025 |
| Cost of sales | (27,111) | (28,864) | (62,573) | |
| Gross profit | 18,791 | 17,743 | 38,452 | |
| Sales and marketing expenses | (6,559) | (5,387) | (12,107) | |
| Research and development costs | (4,254) | (3,838) | (7,901) | |
| Administrative costs | (6,763) | (5,060) | (11,353) | |
| Other expenses | (483) | (1,099) | (6,226) | |
| Operating profit | 4,5 | 732 | 2,359 | 865 |
| Operating profit is analysed as: | ||||
| Adjusted operating profit | 2.750 | 4,256 | 9,052 | |
| Amortisation of acquired intangibles | (1,535) | (798) | (1,961) | |
| Goodwill impairment | - | - | (5,000) | |
| Share based payments | (176) | (128) | (249) | |
| Non-recurring costs | 5 | (307) | (971) | (977) |
| Finance costs | 6 | (299) | (98) | (494) |
| Investment income Share of loss in associate | 6 | 57 (10) | 51 (25) | 215 (1) |
| Profit before taxation | 480 | 2,287 | 585 | |
| Taxation | 7 | (293) | (852) | (2,097) |
| Profit/(loss) for the period being profit attributable to equity shareholders | 187 | 1,435 | (1,512) | |
| Earnings per share expressed in pence per share: - basic - diluted | 9 9 | 0.14p 0.14p | 1.04p 1.04p | (1.10)p (1.10)p |
Dividends
No dividends have been declared and approved in respect of the six-month periods ending 30 June 2009 and 30 June 2008 (see note 8).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2009
| Six months to 30 June 2009 (Unaudited) | Six months to 30 June 2008 (Unaudited) | Year ended 31 December 2008 (Audited) | ||
| £'000 | £'000 | £'000 | ||
| Profit/(loss) for the financial period | 187 | 1,435 | (1,512) | |
| Translation difference on foreign currency net investments | (4,119) | 422 | 9,082 | |
| Total comprehensive income for the period | (3,932) | 1,857 | 7,570 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2009
| Six months to 30 June 2009 (Unaudited) | Six months to 30 June 2008 (Unaudited) | Year ended 31 December 2008 (Audited) | ||
| Notes | £'000 | £'000 | £'000 | |
| Opening shareholders' equity | 57,274 | 51,164 | 51,164 | |
| Profit/(loss) for the financial period | 187 | 1,435 | (1,512) | |
| Translation difference on foreign currency net investments | (4,119) | 422 | 9,082 | |
| Total comprehensive (deficit)/income for the period | (3,932) | 1,857 | 7,570 | |
| Share options - value of employee services | 176 | 128 | 249 | |
| Dividends | 8 | (1,720) | (1,726) | (1,726) |
| Proceeds from shares issued | 11 | - | 17 | 17 |
| Total movements in shareholders' equity | (5,476) | 276 | 6,110 | |
| Closing shareholders' equity | 51,798 | 51,440 | 57,274 |
CONSOLIDATED GROUP BALANCE SHEET
as at 30 June 2009
| 30 June 2009 (Unaudited) | 30 June 2008 (Unaudited) | 31 December 2008 (Audited) | ||
| Notes | £'000 | £'000 | £'000 | |
| Assets | ||||
| Non-current assets | ||||
| Goodwill | 24,603 | 24,370 | 26,293 | |
| Intangible assets | 10 | 12,587 | 7,523 | 14,981 |
| Property, plant and equipment | 10 | 5,915 | 5,505 | 6,972 |
| Investment in associates | 184 | 179 | 204 | |
| Deferred tax assets | 782 | 662 | 770 | |
| 44,071 | 38,239 | 49,220 | ||
| Current assets | ||||
| Inventories | 18,604 | 18,747 | 19,468 | |
| Trade and other receivables Derivative financial instruments | 15,159 90 | 17,188 24 | 23,087 - | |
| Net cash and cash equivalents | 12 | 9,975 | 7,543 | 9,032 |
| 43,828 | 43,502 | 51,587 | ||
| Liabilities | ||||
| Current liabilities | ||||
| Financial liabilities: borrowings | 12 | - | 13 | 3 |
| Trade and other payables | 21,650 | 23,849 | 24,188 | |
| Current tax liabilities Derivative financial instruments | 1,005 - | 1,105 28 | 1,818 257 | |
| Provisions for other liabilities and charges | 13 | 545 | 694 | 771 |
| 23,200 | 25,689 | 27,037 | ||
| Net current assets | 20,628 | 17,813 | 24,550 | |
| Non-current liabilities | ||||
| Financial liabilities: borrowings | 12 | 6,867 | 1,000 | 7,864 |
| Deferred tax liabilities | 1,664 | 2,001 | 2,016 | |
| Other non-current liabilities | 3,820 | 1,077 | 6,026 | |
| Provisions for other liabilities and charges | 13 | 550 | 534 | 590 |
| 12,901 | 4,612 | 16,496 | ||
| Net assets | 51,798 | 51,440 | 57,274 | |
| 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 | 1,724 | (2,817) | 5,843 | |
| Retained earnings | 11,144 | 15,327 | 12,501 | |
| Total shareholders' equity | 51,798 | 51,440 | 57,274 |
CONSOLIDATED GROUP CASH FLOW STATEMENT
for the six months ended 30 June 2009
| Six months to 30 June 2009 (Unaudited) | Six months to 30 June 2008 (Unaudited) | Year ended 31 December 2008 (Audited) | |||
| Notes | £'000 | £'000 | £'000 | ||
| Cash flow from operating activities | |||||
| Cash generated from operations | 14 | 5,942 | 6,730 | 10,426 | |
| Interest received | 57 | 51 | 215 | ||
| Interest paid | (95) | (133) | (446) | ||
| Taxation paid | (1,315) | (815) | (1,567) | ||
| Net cash generated from operating activities | 4,589 | 5,833 | 8,628 | ||
| Cash flows from investing activities | |||||
| Acquisition of subsidiary (net of cash acquired) Proceeds from sale of property, plant and equipment | - 15 | - - | (6,318) 8 | ||
| Deferred consideration in respect of acquisitions | (519) | - | - | ||
| Purchase of property, plant and equipment | 10 | (509) | (1,039) | (2,348) | |
| Expenditure on capitalised development costs | 10 | (1,529) | (1,840) | (2,947) | |
| Net cash (absorbed by) investing activities | (2,542) | (2,879) | (11,605) | ||
| Cash flows from financing activities | |||||
| Net proceeds from issue of ordinary share capital | - | 17 | 17 | ||
| Repayment of borrowings: finance leases | 12 | (3) | (9) | (19) | |
| Repayment of borrowings: secured | - | - | (1,000) | ||
| Repayment of borrowings: unsecured | 12 | - | (2,500) | (2,500) | |
| Net proceeds from new bank loan | - | - | 7,864 | ||
| Dividend paid to shareholders | - | - | (1,726) | ||
| Net cash (absorbed by) financing activities | (3) | (2,492) | 2,636 | ||
| Net increase/(decrease) in cash and cash equivalents | 2,044 | 462 | (341) | ||
| Cash and cash equivalents at beginning of period | 9,032 | 7,004 | 7,004 | ||
| Effect of foreign exchange rate changes | 12 | (1,101) | 77 | 2,369 | |
| Cash and cash equivalents at end of period | 12 | 9,975 | 7,543 | 9,032 | |
NOTES TO THE INTERIM ACCOUNTS
for the six months ended 30 June 2009
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 450 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. 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 balance sheets as of 30 June 2009 and 30 June 2008 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 240 of the Companies Act 1985 (section 434 of the Companies Act 2006). Statutory accounts for the year ended 31 December 2008 were approved by the Board of directors on 25 March 2009 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 237 of the Companies Act 1985 (section 498 of the Companies Act 2006)
This condensed consolidated interim financial information has been subject to a review in accordance with IRSE (UK and Ireland) 2410 by our auditors but has not been subject to an audit.
This interim report was approved for issue on 26 August 2009.
2. BASIS OF PREPARATION
This condensed consolidated interim financial information for the six months ended 30 June 2009 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 2008, 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 2008, 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 2009.
IAS 1 (amendment), 'Presentation of financial statements', effective for annual periods beginning on or after 1 January 2009. This interim statement has been prepared under the revised disclosure requirements.
IFRS8, 'Operating segments'. IFRS 8 replaces IAS 14, 'Segment reporting', and requires a 'management approach' under which segment information is presented on the same basis as that used for internal reporting purposes. This has coincided with the reorganisation of the Vislink Group into four international business units that are focussed on the customer markets that the Group serves.
Therefore the primary segmental reporting of operating profits has been aligned to the business units, which is consistent with the presentation of internal reporting provided to the Executive Management Board and the Board of Directors of Vislink plc. Comparatives have been restated.
Balance sheet reporting will continue to be disclosed by geographic location of the assets and liabilities as again this is consistent with the presentation of internal reporting provided to the Executive Management Board and the Board of Directors of Vislink plc.
IAS 23 (amendment), 'Borrowing costs', effective for annual periods beginning on or after 1 January 2009. This amendment has no impact on this interim report.
The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2009, but are not currently considered to be relevant to the Group.
IFRIC 13, 'Customer loyalty programmes'.
IFRIC 15, 'Agreements for construction of real estate'.
IFRIC 16, 'Hedges of a net investment in a foreign operation'
IAS39 (amendment), 'Financial instruments: Recognition and measurement'.
The following new standards, amendments to standards and interpretations have been issued, but are not effective for the financial year beginning 1 January 2009 and have not been early adopted:
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 July 1, 2009. Management is assessing the impact of the new requirements regarding acquisition accounting, consolidation and associates on the Group. The Group does not have any joint ventures.
IFRIC 17, 'Distributions of non-cash assets to owners', effective for annual periods beginning on or after July 1, 2009. This is not relevant to the Group, as the Group has not made any non-cash distributions.
IFRIC 18, 'Transfer of assets from customers', effective for transfer of assets on or after July 1, 2009. This is not relevant to the Group, as the Group has not received any assets from customers.
4. SEGMENTAL ANALYSIS
On 19 January 2009, the Group announced a reorganisation into four international business units that were focussed on providing secure communications to the customers that the Group served. As a result the Group's internal organisational and management structure has been reorganised to reflect the new structure, and an Executive Management Board has been created 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 Profit | ||||||
| Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | ||
| By market | |||||||
| News & Entertainment | 22,347 | 32,485 | 70,198 | 4,355 | 9,920 | 20,392 | |
| Law Enforcement & Public Safety | 3,929 | 2,704 | 5,544 | 935 | (51) | 343 | |
| Marine & Energy | 15,143 | 10,603 | 22,355 | 4,832 | 2,319 | 4,579 | |
| Services | 4,483 | 815 | 2,928 | 2,110 | 168 | 1,031 | |
| Technology costs | - | - | - | (4,254) | (3,838) | (7,901) | |
| Administration | - | - | - | (5,228) | (4,262) | (9,392) | |
| Amortisation of acquired intangibles and goodwill impairment | - | - | - | (1,535) | (798) | (6,961) | |
| Share based payments | - | - | - | (176) | (128) | (249) | |
| Non-recurring costs | - | - | - | (307) | (971) | (977) | |
| Group total | 45,902 | 46,607 | 101,025 | 732 | 2,359 | 865 | |
Notes:
Operating profit by market is after charging for cost of goods sold and direct sales and marketing costs associated with that market.
Technology represents the Group investment in research and development and product engineering.
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 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | |
| By market: | |||
| UK and Ireland | 2,344 | 3,341 | 5,928 |
| Rest of Europe | 9,806 | 9,491 | 18,372 |
| North America | 23,862 | 24,198 | 55,471 |
| South America | 325 | 1,660 | 4,013 |
| Middle East | 1,652 | 1,234 | 3,312 |
| Asia | 7,089 | 6,157 | 12,097 |
| Africa | 376 | 181 | 770 |
| Other | 448 | 345 | 1,062 |
| 45,902 | 46,607 | 101,025 | |
| Analysis of revenue by product category | |||
| Microwave radio and wireless camera products | 22,084 | 27,109 | 58,966 |
| Satellite products Technical services | 4,458 4,217 | 8,080 815 | 16,776 2,928 |
| Broadcast projects | - | - | - |
| Marine CCTV products | 15,143 | 10,603 | 22,355 |
| 45,902 | 46,607 | 101,025 |
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 2009 (Unaudited) £'000 | 30 June 2008 (Unaudited) £'000 | 31 December 2008 (Audited) £'000 | |
| By market: | |||
| UK | 19,314 | 19,483 | 19,865 |
| North America | 22,791 | 24,215 | 28,275 |
| Norway | 9,693 | 7,742 | 9,134 |
| 51,798 | 51,440 | 57,274 |
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 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | |
| Rationalisation and redundancy costs | 307 | - | - |
| Aborted acquisition costs | - | 646 | 646 |
| Compensation for loss of office | - | 325 | 331 |
| Total non-recurring costs | 307 | 971 | 977 |
Following the reorganisation of the Group's operations into four international business units as described in note 4 above the Group has incurred rationalisation and redundancy costs of £307,000 in the period.
6. FINANCE COSTS - NET
| Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | |
| Interest payable on bank borrowing | (178) | (32) | (300) |
| Interest payable on other loans | - | (28) | (38) |
| Unwinding of interest associated with the discounting of deferred consideration | (121) | (38) | (156) |
| Interest and similar charges payable | (299) | (98) | (494) |
| Investment income | 57 | 51 | 215 |
| Finance costs - net | (242) | (47) | (279) |
7. TAX ON PROFIT ON ORDINARY ACTIVITIES
| Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | |
| The tax charge for the period comprises: UK corporation tax | (602) | 172 | 1,333 |
| Foreign tax | 982 | 938 | 1,317 |
| Foreign tax prior year adjustment | 154 | - | - |
| Total current tax | 534 | 1,110 | 2,650 |
| Deferred tax: UK corporation tax | (99) | (222) | (998) |
| Foreign tax | (142) | (36) | 445 |
| Total deferred tax | (241) | (258) | (553) |
| Total taxation | 293 | 852 | 2,097 |
The tax charge for the six months ended 30 June 2009 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 2008 there was no interim dividend and the final dividend of 1.25 pence per share was approved at the Annual General Meeting on 20 May 2009 and paid on 17 July 2009.
9. EARNINGS PER ORDINARY SHARE
Earnings per share is calculated by reference to a weighted average of 137,694,000 ordinary shares in issue during the period, excluding shares held by the Employees' Share Ownership Plan (30 June 2008: 137,709,000 and 31 December 2008: 137,740,000).
The diluted earnings per share is after taking account of a further nil shares (30 June 2008: 23,000; 31 December 2008: 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 and share based payments. In the period to 30 June 2009 the non-recurring rationalisation costs have also been included in the adjustment.
The reconciliation between reported and adjusted earnings and basic earnings per share is shown below:
| Six months to 30 June 2009 | Six months to 30 June 2008 | Year ended 31 December 2008 | ||||
| Earnings £'000 | Basic EPS pence | Earnings £'000 | Basic EPS pence | Earnings £'000 | Basic EPS Pence | |
| Reported earnings | 187 | 0.14p | 1,435 | 1.04p | (1,512) | (1.10)p |
| Amortisation of acquired intangibles after tax | 1,105 | 0.80p | 559 | 0.41p | 1,373 | 1.00p |
| Impairment of goodwill | - | - | - | - | 5,000 | 3.63p |
| Share based payments | 176 | 0.13p | 128 | 0.09p | 249 | 0.18p |
| Non-recurring costs after tax | 221 | 0.16p | 683 | 0.50p | 882 | 0.64p |
| Adjusted earnings | 1,689 | 1.23p | 2,805 | 2.04p | 5,992 | 4.35p |
10. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
| Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | |
| Property, plant and equipment | |||
| Opening net book value as at 1 January | 6,972 | 5,220 | 5,220 |
| Additions | 509 | 1,039 | 2,348 |
| Additions through business combinations | - | - | 264 |
| Disposals | (17) | (1) | (8) |
| Depreciation | (1,089) | (836) | (1,807) |
| Exchange adjustment | (460) | 83 | 955 |
| Closing net book value | 5,915 | 5,505 | 6,972 |
| Intangible assets Intangible development costs | |||
| Opening net book value as at 1 January | 5,707 | 3,692 | 3,692 |
| Additions | 1,529 | 1,840 | 2,947 |
| Additions through business combinations | - | - | - |
| Disposals | - | - | - |
| Depreciation | (1,058) | (808) | (1,749) |
| Exchange adjustment | (425) | 6 | 817 |
| Development costs closing net book value | 5,753 | 4,730 | 5,707 |
| Acquired Intangible assets | |||
| Opening net book value as at 1 January | 9,274 | 3,591 | 3,591 |
| Additions | - | - | - |
| Additions through business combinations | - | - | 5,908 |
| Disposals | - | - | - |
| Depreciation | (1,535) | (798) | (1,961) |
| Exchange adjustment | (905) | - | 1,736 |
| Acquired intangibles closing net book value | 6,834 | 2,793 | 9,274 |
| Total closing net book value of intangible assets | 12,587 | 7,523 | 14,981 |
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 2009 | 138,594 | 3,465 | 4,900 | 8,365 |
Employee share option scheme: options exercised during the period to 30 June 2009 resulted in nil shares being issued (30 June 2008: 60,000 shares), with exercise proceeds of £nil (30 June 2008 - £17,000). The related weighted average price at the time of exercise was nil pence (30 June 2008: 26.5 pence) per share.
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 | Loan notes £'000 | Other borrowings £'000 | Total net cash £'000 | |
| Six months ended 30 June 2008 | ||||
| At 1 January 2008 | 7,004 | (2,500) | (1,022) | 3,482 |
| Repayment of borrowings | (9) | - | 9 | - |
| Payment of loan notes | (2,500) | 2,500 | - | - |
| Other cash movements in the period | 2,971 | - | - | 2,971 |
| Exchange rate adjustments | 77 | - | - | 77 |
| At 30 June 2008 | 7,543 | - | (1,013) | 6,530 |
| Six months ended 30 June 2009 | ||||
| At 1 January 2009 | 9,032 | - | (7,867) | 1,165 |
| Repayment of borrowings | (3) | - | 3 | - |
| Payment of loan notes | - | - | - | - |
| 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 |
The Board consider that the Group has sufficient headroom to enable it to conform to covenants on its existing borrowings. The Group has sufficient working capital and undrawn financing facilities to service its operating activities.
The Group has the following undrawn borrowing facilities:
| 30 June 2009 £'000 | 30 June 2008 £'000 | 31 December 2008 £'000 | |
| Floating rate: - expiring within one year - expiring beyond one year | 7,109 6,663 | 4,042 19,000 | 8,500 5,636 |
The Group's facilities comprise a bank overdraft facility of £2.5 million, a short term revolving credit facility of £2.5 million and a medium term multi-currency revolving credit facility of £17.0 million. The facilities expiring within one year comprise the Group overdraft facility and the short term revolving credit facility that are subject to review during 2010 in the normal course of business. The Board do not anticipate any issues to arise from the review process. The medium term revolving credit facility has been provided for the Group to make acquisitions. The facility reduces to £13.5 million on 19 December 2009, to £10.0 million on 19 December 2010 and to zero on 19 December 2011. Interest on the overdraft facility is charged at 2.25% over base rate; interest on the medium term revolving credit facility is charged at 1.75% over LIBOR; interest on the short term revolving credit facility is charged at 1.00% over sterling or the relevant currency 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
| £'000 | |
| Six months ended 30 June 2009 | |
| Warranty provision at 1 January 2009 | 1,361 |
| Charged in period Released in the period | 127 (62) |
| Utilised in period | (232) |
| Foreign Exchange | (99) |
| At 30 June 2009 | 1,095 |
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 $1,143,000 (£694,000) all provisions are denominated in sterling.
14. NOTES TO THE CASH FLOW STATEMENT
Net cash flow from operating activities comprises:
| Six months to 30 June 2009 (Unaudited) £'000 | Six months to 30 June 2008 (Unaudited) £'000 | Year ended 31 December 2008 (Audited) £'000 | |
| Profit/(loss) attributable to shareholders | 187 | 1,435 | (1,512) |
| Taxation | 293 | 852 | 2,097 |
| Depreciation | 1,089 | 836 | 1,807 |
| Impairment of goodwill | - | - | 5,000 |
| Loss on disposal of property, plant and equipment | - | 1 | - |
| Amortisation of development costs | 1,058 | 808 | 1,749 |
| Amortisation of acquired intangibles | 1,535 | 798 | 1,961 |
| Share options - value of employee services | 176 | 128 | 249 |
| Investment income | (57) | (51) | (215) |
| Finance costs Derivative financial instruments Share of loss associate | 299 (90) 10 | 98 18 25 | 494 271 1 |
| (Increase) in inventories | (719) | (2,736) | (185) |
| Decrease in trade and other receivables | 5,912 | 6,793 | 5,822 |
| (Decrease) in payables | (3,584) | (2,327) | (7,074) |
| (Decrease)/increase in provisions | (167) | 52 | (39) |
| Cash flow from operating activities | 5,942 | 6,730 | 10,426 |
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 2009 | 30 June 2008 | 31 December 2008 |
| Average rates | |||
| US dollar | 1.49 | 1.98 | 1.85 |
| Norwegian Krone | 9.97 | 10.26 | 10.33 |
| Period end rate | |||
| US dollar | 1.65 | 1.99 | 1.44 |
| Norwegian Krone | 10.60 | 10.15 | 10.08 |
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 own 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.
The Group has had a contract with h2glenfern Limited for the supply of IR services. The annual fee was £30,000. Mr THS Trotter is Chairman of h2glenfern Limited. The contract was terminated on 28 February 2009.
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 2008.
By order of the Board
Duncan Lewis
Chief Executive
James Trumper
Finance Director
26 August 2009
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 2009, which comprises the consolidated group income statement, consolidated statement comprehensive income, consolidated statement of changes in equity, consolidated group balance sheet, consolidated 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 2009 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
26 August 2009
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.