VTC.L Regulatory News (VTC)

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN WHOLE OR IN PART IN, INTO OR FROM ANY JURISDICTION WHERE TO DO THE SAME WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OF SUCH JURISDICTION.

16 August 2011

The Vitec Group plc

Half Year results to 30 June 2011

Continued growth in Broadcast and Photographic markets

The Vitec Group plc ("Vitec" or "the Group"), the international provider of products and services for the Broadcast and Video, Photographic, and MAG (Military, Aerospace and Government) markets, announces its results for the six months ended 30 June 2011.

Key points

·; Revenue up 12.7%; Operating profit* up 18.2% to £15.6 million

·; Broadcast sales continue to grow

- Strong performance from the supports business

- Good sales growth in Litepanels

·; Photographic market expansion

- Manfrotto Powerbrand range well received in consumer channels

- Lastolite acquisition trading above expectations

·; MAG strategy is on track

- Auction 66 contract task orders 1 and 2 fully delivered

·; Interim dividend increased 5.3% to 8.0 pence per share

*Significant items are those items of financial performance that the Directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group. H1 2011 significant items in operating profit are a net charge of £2.3 million being the amortisation of acquired intangible assets of £2.0 million and £0.3 million of transaction costs relating to an acquisition (H1 2010: £3.7 million of amortisation of acquired intangible assets offset by £1.8 million of profits on the disposal of Clear-Com).

**Basic earnings per share are calculated on profit after tax of £8.5 million for H1 2011 (2010: £12.0 million) and on the weighted number of shares in issue - see note 5 of the condensed consolidated statements. The taxation charge was £4.4 million for H1 2011 compared to a £1.1 million income for H1 2010 after significant items.

***CER: Constant Exchange Rates

Commenting on the results, Stephen Bird, Group Chief Executive, said:

"These results confirm that our strategy and its execution in 2011 are on track, which together with continued strengthening of our businesses in the Broadcast and Video and Photographic markets, have enabled us to grow the revenue and operating profits strongly in the first half."

"Our core Broadcast business has achieved an encouraging sales performance particularly into Russia, the Middle East and Asia. In the Photographic market, the response from customers to our new range of supports, bags and LED lighting products confirms the market potential for the Manfrotto brand. Our recent acquisition, Lastolite, has performed above expectations in its first four months in the Group. The completion of the Auction 66 contract task orders 1 and 2 for the US Department of Justice was a significant achievement for Vitec, and reflects the expertise we are building in the MAG market."

"Whilst the business environment remains uncertain and our order book visibility is limited, we continue to make good strategic progress and to benefit from stronger demand across our operations. Vitec's achievements to date in all three of its core strategic markets of Broadcast and Video, Photographic and MAG, give the Board confidence in the prospects for future growth."

Enquiries:

The Vitec Group plc

Stephen Bird, Group Chief Executive

Paul Hayes, Group Finance Director

Telephone: 020 8939 4650

Financial Dynamics

Nick Hasell / Sophie Moate

Telephone: 020 7269 7291

Notes

1. This statement is based on information sourced from management estimates.

2. H1 2011 average market exchange rates: £1 = $1.61, £1 = €1.15, €1 = $1.40

3. H1 2010 average market exchange rates: £1 = $1.53, £1 = €1.15, €1 = $1.33

4. Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect Vitec's current expectations concerning future events and actual results may differ materially from current expectations or historical results.

Vitec is an international Group principally serving customers in the Broadcast and Video, Photographic and Military, Aerospace and Government (MAG) markets. Listed on the London Stock Exchange with 2010 revenue of £310 million, Vitec is based on strong, well known, premium brands on which its customers worldwide rely.

Vitec is currently organised into three divisions: Videocom, Imaging & Staging, and Services.

Videocom designs and distributes systems and products used in broadcasting and live entertainment, film and video production and MAG. Imaging & Staging designs, manufactures and distributes equipment and accessories for photography, video and events. Services provides equipment rental, workflow design and technical support for camera, video, audio, fibre optic and wireless technology used by TV production teams and film crews.

More information can be found at: www.vitecgroup.com.

Half Year Management Review

The first half of 2011 was a period of good operational and strategic progress for the Group against a backdrop of improving Broadcast and Video and Photographic markets.

Reported revenue increased by 12.7% to £171.8 million (H1 2010: £152.5 million) and increased by 18.4% on an organic basis which is at constant exchange rates and excludes the Clear-Com business that was disposed of in April 2010 and Lastolite, acquired in March 2011. There was good growth in the Broadcast and Video, and Photographic markets and encouraging progress in new product sales.

Reported operating profit* increased by 18.2% to £15.6 million (H1 2010: £13.2 million), with organic growth of 19.5% at constant exchange rates. The operating margin increased to 9.1% (H1 2010: 8.7%). Net finance expense* at £0.4 million was £0.2 million lower than last year. Reported Group PBT* increased by 20.6% to £15.2 million (H1 2010: £12.6 million), or 22.0% on an organic basis at constant exchange rates. Operating expenses increased to support higher trading volumes and incremental investment in sales and marketing to launch the Manfrotto Powerbrand. Underlying Group basic EPS* was up 21.0% at 23.6p (H1 2010: 19.5p); Group basic EPS after significant items was 19.7p (H1 2010: 28.2p), with the reduction reflecting certain tax refunds in the first half of 2010 that were not repeated in 2011.

Free cash outflow of £0.3 million (H1 2010: inflow of £9.7 million) reflects the investment in working capital to support sales growth, normal seasonal trends and increased net tax payments. Working capital investment in the Broadcast and Video and Photographic businesses as a result of increased activity levels resulted in a rise in the working capital to sales percentage to 18.2% (June 2010: 17.7%**). Cash flow was also reduced by the acquisition of Lastolite for a net investment of £8.4 million and final dividend payments of £4.8 million.

Net debt at 30 June 2011 increased to £40.5 million (31 December 2010: £28.1 million; 30 June 2010: £35.3 million). The Group's balance sheet remains strong with net debt / EBITDA of 0.9 times (31 December 2010: 0.7 times; 30 June 2010: 0.8 times). Drawings under our committed banking facilities were £53.3 million, (31 December 2010: £34.8 million; 30 June 2010: £35.3 million).

The Revolving Credit Facility, which expires in August 2013, was reduced to £100 million from £125 million when the Group put in place a new Private Placement shelf facility of $75 million with Pricoa Capital Group Limited, of which $25 million was drawn on 11 May 2011 for a fixed six-year term. The Group had £115.7 million of committed facilities at the half year-end and a further $50 million of undrawn shelf facility.

The Board has declared an interim dividend of 8.0 pence per share (H1 2010: 7.6 pence), which equates to a dividend cover of 3.0 times (based on basic earnings per share before significant items*). The dividend will be paid on 28 October 2011 to shareholders on the register at the close of business on 30 September 2011.

* Before significant items. Significant items are those items of financial performance that the Directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see note 3 of the condensed consolidated financial statements).

** The working capital to sales percentage has been calculated to include Inventory, Receivables and Payables for both periods. Management believes that this is a good measure of working capital performance. The calculation had previously included provisions and derivative instruments.

Three Market Strategy

Our strategy remains to focus on the three markets that will provide us with growth from the organic development of our existing capabilities and strengths, supplemented where appropriate with selective acquisitions. The three markets are (a) Broadcast and Video (b) Photographic and (c) Military, Aerospace and Government (MAG).

The Broadcast and Video market includes the Videocom businesses together with the Services business. Our strategy is to maintain our premium product offerings and market share with traditional broadcast customers whilst developing specific products and new channels focused on the needs of the cameraman in the video segment.

Our Videocom businesses specialise in the design and distribution of high-quality equipment principally for professionals engaged in producing and transporting video content for the global media industries - broadcast, film, live events and education.

Our Services business provides rental equipment and technical support for the most demanding broadcast production. It also provides comprehensive maintenance services, fibre optic systems design and installation services and the resale of used broadcast hardware.

The Photographic market includes the Imaging and Staging businesses supplemented with the recent acquisition of Lastolite. Our strategy is to maintain our premium market position and share among professional and serious amateur photographers whilst leveraging the Manfrotto brand to enter new faster-growing segments among non-professional users.

The Imaging and Staging businesses have a strong reputation with two main groups of creative professionals: photographers and videographers, whether they are shooting commercially, independently or for pleasure; and live and corporate event production and touring bands that need versatile staging sets.

The Military, Aerospace and Government market is addressed through the IMT business which is currently included in the Videocom segment. This is being developed to leverage our proven microwave technology for broadcast market applications. The MAG market is attractive given its size, forecast growth and technology fit but we should expect order intake to be lumpy.

Geographic Spread

Our growth strategy is supported by the broad geographical spread of the Group. In the first half of 2011, just under 45% of our revenues by destination came from North America, with the remainder split between Europe (33%), Asia-Pacific (17%) and Rest of World (5%). Only 8% of revenue is derived from the UK. Over the last year, Vitec has increased sales into the APAC region by three percentage points. We currently have a direct presence in 14 countries around the world, including the UK, USA, Costa Rica, France, Germany, Italy, Israel, Brazil, Japan and China.

Videocom

Markets

The Videocom Division mainly serves the Broadcast and Video and MAG markets.

In the Broadcast market, demand continued to grow in the first half reflecting the continued improved outlook for advertising revenues and the technological drivers of High Definition, LED lighting and robotics. The volume of enquiries we received at NAB 2011 in April, the leading international exhibition for broadcasters, reflected this increased level of activity.

Broadcast markets saw growth, particularly in Russia, the Middle East and Asia. The US broadcast sales and rental marketplace was held back by uncertainties over the economy, although interest in robotics products has increased. The video market also remained buoyant.

Interest in intelligent wireless video links for law enforcement and military applications continued despite Government cuts elsewhere. Our IMT business is a relatively new entrant to this market and is increasingly recognised as a technology leader in this space where our mission-critical visual communication and surveillance products are enjoying an increased level of enquiries. The surveillance market presents a growth opportunity for the business and we have had some initial success with Task orders 1 and 2. We continue to await follow on orders. The medium term results will reflect our success in securing additional contracts and the timing of large tenders.

*Before significant items. Significant items are the amortisation of acquired intangibles of £1.5 million (H1 2010: £3.4 million), and profit on disposal of business of £nil (H1 2010: £1.8 million).

Operations

Reported revenue in the period increased by 8.7% to £65.9 million. After adjusting for the disposal of the Clear-Com business in April 2010, which contributed £5.3 million of revenue, organic sales growth at constant exchange rates increased by 22.8%, with double digit sales growth in all business units in the division. Operating profit increased by 62.2% to £6.0 million and increased by 42.5% in organic terms at constant exchange rates. Operating margin increased by 300 basis points to 9.1% and increased by 120 basis points in organic terms at constant exchange rates.

The camera support brands (Vinten, Sachtler and O'Connor) enjoyed good growth in both the studio and on-location production segments, particularly stimulated by capital expenditure projects in the Middle East and Asia.

Robotics continues to bring important strategic wins. Sky Sports News will become the first channel to transmit from Sky's new Harlequin building using Vinten Radamec Robotics. This expansion with Sky looks set to continue as they move into new operations in Germany, Turkey and Abu Dhabi. In addition, the installation of a further five sites at the France 3 network is nearing completion.

Manufacturing capacity in Costa Rica and Bury St Edmunds has been increased by additional shifts to meet demand.

Litepanels continued its strong growth, with an increasing number of customers changing from conventional tungsten lights to new energy and environmentally efficient LED lights especially in the US. With the launch of its new SOLA range of LED Fresnel style lights, Litepanels continues to be the technology leader with these innovative high intensity, high quality lights for studio and news journalists.

Anton/Bauer has seen steady growth in its traditional Broadcast and in particular Film markets especially in EMEA. It is making good progress in identifying and addressing opportunities for the supply of batteries and chargers in the medical market.

IMT has completed its first major orders in the MAG market under the US Department of Justice Auction 66 contract and a number of State police contracts for helicopter-borne microwave video transmitters and receivers.

Key achievements

·; New Sky orders from Germany and Abu Dhabi

·; Large camera supports and accessory orders from Turkmenistan, Oman and China

·; Increased volumes of Litepanels SOLA 6 series shipped in H1

·; Anton/Bauer major order from Tampa Bay Hospital Group

·; Delivery of task orders 1 and 2 of the Auction 66 contract worth $10.8 million

·; IMT broadcast orders from Turkey, Russia and Brazil

·; First ever order for an unmanned aerial vehicle (UAV) application

* Before significant items. Significant items are those items of financial performance that the Directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see Segment reporting).

Imaging and Staging

The Imaging and Staging Division mainly serves the Photographic market.

Markets

The Photographic market has continued to see new generation Digital SLR cameras driving an increased demand for camera bags and tripods. Lighting and video support products have also enjoyed more resilient market conditions and our market position was strengthened by the acquisition of Lastolite. There has been a continued steady migration from independent specialist retailers to consumer electronics channels.

.

*Before significant items. Significant items are the amortisation of acquired intangibles of £0.5 million (H1 2010: £0.3 million), together with £0.3 million of costs relating to the acquisition of Lastolite.

Operations

Revenue in the period increased by 24.8% to £91.7 million and in organic terms at constant exchange rates it increased by 24.4%. Operating profit increased by 3.2% to £9.6 million and increased by 12.1% in organic terms at constant exchange rates despite a significant investment in sales and marketing activity to support the Manfrotto Powerbrand. As expected, operating margin decreased by 220 basis points to 10.5% and by 120 basis points in organic terms at constant exchange rates. 2011 results include 4 months of operations from the Lastolite business with sales to external customers of £2.3 million.

Imaging sales strengthened in the first half especially in the US, Germany, Italy and France. Our Italian manufacturing and outsourced Chinese suppliers have increased output to satisfy demand.

The launch of the Powerbrand strategy, with its integrated range of Manfrotto-branded accessoriestargeting the non-professional market has enjoyed a good level of support from consumer electronic retail channels. We have invested in sales and marketing resources and inventory to deliver this strategy and will continue this investment into next year. While early signs are encouraging, the sales outlook for the remainder of the year will reflect the in-store demand for these products that are now stocked in major stores and are available on-line.

In addition, Lastolite, the lighting backgrounds and control systems business acquired on 4 March 2011, has traded above expectations and integration of the business has progressed as planned.

Staging secured high profile projects including part of the staging for the Take That tour and the Cirque du Soleil Michael Jackson Memorial World Tour.

Key achievements

·; Positive reaction from trade and press for the new expanded Manfrotto range with products now in stores such as: B&H, Best Buy and Sam's Club in the US; Jacobs and Jessops in the UK; Mediamarkt and FNAC in Continental Europe and online through Amazon

·; Global trade awareness events in support of the Manfrotto Powerbrand including a major launch event in New York in May 

·; Robust growth of Manfrotto lighting and video supports revenue

·; Acquisition of Lastolite for initial net consideration of £8.4 million and up to £1.0 million earnout of which £0.7 million has been recognised at acquisition and would be payable in 2012

·; Encouraging initial performances from the new Manfrotto distribution businesses in Hong Kong and Shanghai

* Before significant items. Significant items are those items of financial performance that the Directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see Segment reporting).

Services

Markets 

Our Services Division provides equipment and support for broadcast and media productions and has continued its strategy of focusing on larger live events and more mobile and compact reality / documentary market segments. Customers are demanding more of a one-stop service and we are well placed to support them.

*Before significant items. There were no significant items (H1 2010: £nil).

Operations

Revenue in the period decreased by 22.8% to £14.2 million, and in organic terms at constant exchange rates it decreased by 19.3%. Operating profit decreased by £0.2 million to break-even.

The Services business traded in line with our expectations, with new projects for leading producers including Endemol, Fremantle and ESPN partially offsetting the absence of an Olympic event which benefited H1 2010.

Key Achievements

·; Secured new project from ESPN for a six-month temporary control room. This exemplifies the one-stop customer demand and underlines the capabilities of Bexel

·; Secured multiyear deal with ESPN for US Open tennis and College football

·; Bexel secured contracts in the US for Hell's Kitchen, Extreme Home Makeover and The Apprentice

·; Continued to rationalise our distribution strategy with the closure of Seattle

·; TV Technology Star Award from NAB 2011 for technical excellence

·; Ambassador events to promote Group products from the Videocom and Imaging Divisions to broadcast customers now well-established

* Before significant items. Significant items are those items of financial performance that the Directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group (see Segment reporting).

Foreign Exchange

First half operating profit includes £1.0 million of negative impact from movements in foreign exchange rates. This is due to first half average £/$ exchange rates at £/$1.61, vs. £/$1.53 in H1 2010, generating a £0.3 million adverse foreign exchange translation loss and transaction losses after hedging of £0.7 million.

Effective Tax rate

The effective tax rate before significant items, based on the forecast full year tax charge, was 33% (FY10 33%) reflecting the mix of territories in which the profits arose. After significant items, the effective tax rate was 34% as a result of the tax effect of the amortisation of intangible assets in lower tax territories. Last year's full year rate of 16% benefitted from tax refunds in the US and Germany and the Clear-Com disposal.

Outlook

Whilst the business environment remains uncertain and our order book visibility is limited, we continue to make good strategic progress and to benefit from stronger demand across our operations. Vitec's achievements to date in all three of its core strategic markets of Broadcast and Video, Photographic and MAG, give the Board confidence in the prospects for future growth.

Michael Harper

Chairman

Stephen Bird

Group Chief Executive

Dividend Reinvestment Plan

The Company has a Dividend Reinvestment Plan that allows shareholders to reinvest dividends to purchase additional shares in the Company. For shareholders to apply the proceeds of this and future dividends to the plan, application forms must be received by the Company's Registrars by no later than 3 October 2011. Existing participants in the Plan will automatically have the interim dividend reinvested. Details of the Plan can be obtained from Capita Registrars at www.capitaregistrars.com.

Cautionary Statement

Statements made in this announcement that look forward in time or that express management's beliefs, expectations or estimates regarding future occurrences are "forward-looking statements" within the meaning of the United States federal securities laws. These forward-looking statements reflect Vitec's current expectations concerning future events and actual results may differ materially from current expectations or historical results.

Principal Risks and Uncertainties

Details of the principal risks and uncertainties that the Group is exposed to are as set out on page 15 of the Annual Report & Accounts 2010.

Responsibility statement of the Directors in respect of the Half Year Results

We confirm that to the best of our knowledge:

·; the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU

The Half Year Results announcement report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year 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 year; and

(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Group during that period; and any changes in the related party transactions described in the last annual report that could do so.

For and on behalf of the Board

Paul Hayes

Group Finance Director

15 August 2011

Independent review report to The Vitec Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the Half Year Results announcement for the six months ended 30 June 2011 which comprises Condensed Consolidated Income Statement, Condensed Consolidated Statement of Comprehensive Income, Condensed Consolidated Balance Sheet, Condensed Consolidated Statement of Changes in Equity, Condensed Consolidated Statement of Cash Flows and the related explanatory notes. We have read the other information contained in the Half Year Results announcement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK's Financial Services Authority ("the UK FSA"). Our review has been undertaken so that we might state to the company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusions we have reached.

Directors' responsibilities

The Half Year Results announcement is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the Half Year Results announcement in accordance with the DTR of the UK FSA.

As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this Half Year Results announcement has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the Half Year Results announcement based on our review.

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 UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the Half Year Results announcement for the six months ended 30 June 2011 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

Robert Brent

for and on behalf of KPMG Audit Plc

Chartered Accountants

15 Canada Square

London, E14 5GL

15 August 2011

(1) Cash and cash equivalents include bank overdrafts in the Balance Sheet

2. Segment reporting

Reportable Segments

For the half year ended 30 June 2011

(1) Inter-segment pricing is determined on an arm's length basis.

Geographical segmentsFor the half year ended 30 June 2011