REG - The Vitec Group PLC - Half Yearly Report

Wed Aug 22, 2012 2:00am EDT

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RNS Number : 5010K
The Vitec Group PLC
22 August 2012
 



                                                                                                                  

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.

 

22 August 2012

The Vitec Group plc

 

Half Year results to 30 June 2012

 

Continued growth in profit and margins

 

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 2012.

 

Results

H1 2012

H1 2011

% Change

% Change

Organic





CER**

Revenue

£176.5m

£171.8m

2.7%

 0.7%






Operating profit*

£18.9m

£15.6m

21.2%

9.3%

Profit before tax*

£17.5m

£15.2m

15.1%

6.8%

Adjusted earnings per share*

27.0p

23.6p

14.4%

5.7%






Operating profit

£17.2m

£13.3m

29.3%


Profit before tax

£15.8m

£12.9m

22.5%


Basic earnings per share

24.2p

19.7p

22.8%







Free cash flow +

(£2.6m)

(£0.3m)



Net debt

£70.0m

£40.5m








Interim dividend per share

8.5p

8.0p

6.3%












 

Key points

 

·      21.2% increase in operating profit* and 160 bps increase in margin to 10.7%

·      Sales into Broadcast & Video markets continue to grow

·      Photographic business makes further market share gains

·      MAG performing in-line with expectations; successful integration of Haigh-Farr

·      Acquisition of Camera Corps to complement our Broadcast activities

·      Disposal of the loss-making Staging business post half-year end

·      New five year £100 million revolving credit facility in place

·      Interim dividend increased 6.3% to 8.5 pence per share

 

*Before charges associated with acquired businesses: H1 2012 net charge of £1.7 million (H1 2011: £2.3 million) consisting of £1.6 million for the amortisation of acquired intangible assets (H1 2011: £2.0 million); £0.3 million of transaction costs relating to an acquisition (H1 2011: £0.3 million) and a £0.2 million credit for the reversal of contingent consideration on a previous acquisition (H1 2011: £nil).

** Organic CER: At Constant Exchange Rates on a comparative basis, excluding year on year effect of acquisitions.

+ Free cash flow: cash generated from operations after net capital expenditure, net interest and tax paid.

 

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

 

"Vitec has continued to perform well in the first half of the year with an increase in profitability and improvement in margins across all of our divisions."

 

"Our core Broadcast business achieved an encouraging sales performance across the product range. In the Photographic market, we had good growth in sales of our Manfrotto Powerbrand product range with independent research showing that our products are continuing to gain meaningful market share. Despite a strong comparative period, our combined MAG activities made progress in line with our expectations including a pleasing performance from Haigh-Farr."

 

"In line with the Group's strategy we are also pleased to have sold our loss-making Staging business since the half-year end which will enable us to focus on our core activities."

 

"Although the macroeconomic environment remains uncertain and our order book visibility is limited, the Board's expectations for the full year remain unchanged."

 

Enquiries:

The Vitec Group plc                                          

Stephen Bird, Group Chief Executive                                           Telephone: 020 8332 4600

Paul Hayes, Group Finance Director

           

FTI Consulting  

Nick Hasell / Susanne Yule                                                           Telephone: 020 7269 7291

 

Notes

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

 

2.   H1 2012 average exchange rates: £1 = $1.58, £1 = €1.21, €1 = $1.30

 

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

 

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, photographic and military, aerospace and government (MAG) markets. Listed on the London Stock Exchange with 2011 revenue of £351.0 million, Vitec is based on strong, well known, premium brands on which its customers worldwide rely. Vitec is organised in three divisions: Videocom, Imaging, and Services.

 

Videocom designs and distributes systems and products used in broadcasting and live entertainment, film and video production and MAG.

 

Imaging designs, manufactures and distributes equipment and accessories for photography and video.

 

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

 

Vitec delivered good profitable growth in the first half of 2012 with improved operating margins in each division leading to increased profitability and quality of earnings across the Group.

 

Reported revenue increased by 2.7% to £176.5 million (H1 2011: £171.8 million) with good initial contributions from the Haigh-Farr and Camera Corps acquisitions. There was growth in the Broadcast & Video and Photographic businesses which more than offset a poor performance from the Staging business and significantly lower Auction 66 sales to the MAG market.

 

Reported operating profit* increased by 21.2% to £18.9 million (H1 2011: £15.6 million), with organic growth of 9.3% at constant exchange rates. Expenses have been effectively controlled and the operating margin increased by 160 bps to 10.7% (H1 2011: 9.1%).

 

As anticipated, the net finance expense at £1.4 million was £1.0 million higher than last year reflecting the higher levels of net debt predominantly due to acquisitions that were funded using private placement debt facilities.

 

Reported PBT* increased by 15.1% to £17.5 million (H1 2011: £15.2 million), or 6.8% on an organic basis at constant exchange rates. Adjusted EPS* was up 14.4% at 27.0p (H1 2011: 23.6p); basic EPS was 22.8% higher at 24.2p (H1 2011: 19.7p).

 

Free cash outflow of £2.6 million (H1 2011: outflow of £0.3 million) reflects normal seasonal trends and higher levels of capital investment. We maintained a strong control on cashflow with investment in inventory to support business growth and seasonality in the Broadcast & Video and Photographic businesses. Higher trade receivables levels reflect sales activity partly offset by an improvement in ageing.

 

Cash flow was also reduced by: £9.0 million of acquisition-related payments; £2.2 million from net share purchases to meet share plan commitments and final dividend payments of £5.4 million.

 

Net debt at 30 June 2012 increased to £70.0 million (31 December 2011: £50.4 million; 30 June 2011: £40.5 million). The Group's balance sheet remains strong with net debt / EBITDA of 1.3 times (31 December 2011: 1.0 times; 30 June 2011: 0.9 times). Drawings under our committed banking facilities were £78.0 million (31 December 2011: £56.6 million; 30 June 2011: £53.3 million). Items affecting net debt over the second half of the year include: a net £2.1 million cash outflow on the disposal of the Staging business, approximately £4.0 million of own share purchases to meet employee benefit plan obligations and £1.8 million of payments relating to the Litepanels and Camera Corps acquisitions.

 

Subsequent to the period-end, a new five year £100 million Multi-currency Revolving Credit Facility was agreed with our relationship banks in July 2012. The Group also has $50 million drawn on a private placement facility with Pricoa Capital Group Limited which expires in May 2017. In total, the Group has £132.1 million of committed facilities at the half year-end and a further $25 million of undrawn shelf facility with Pricoa Capital Group Limited.

 

The Board has declared a 6.3% increase in the interim dividend to 8.5 pence per share, which equates to a dividend cover of 3.2 times on adjusted EPS*. The dividend will be paid on 26 October 2012 to shareholders on the register at the close of business on 28 September 2012.

 

* Before charges associated with acquired businesses as defined on page 1 of this announcement.

 

Board

 

John McDonough CBE joined the Board on 15 March 2012 and became Chairman on 1 June 2012 in succession to Michael Harper who retired from the Board at that date.

 

Strategy

 

Our strategy to focus on three markets with organic growth opportunities, supplemented where appropriate with selective acquisitions, remains unchanged. Our three markets are (i) Broadcast & Video (ii) Photographic and (iii) Military, Aerospace and Government (MAG).

 

The Broadcast & Video market is served by our 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. The acquisition of Camera Corps in April 2012 supplements these activities.

 

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 is supplied by our Imaging division. 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 Military, Aerospace and Government market is addressed through the IMT and Haigh-Farr businesses and is reported as part of our Videocom segment. We supply wireless communication products for surveillance and defence applications which is an attractive market with long-term growth potential.

 

Geographic Spread

 

Our growth strategy is supported by the broad geographical spread of the Group. In the first half of 2012, 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. We currently have a direct presence in 12 countries around the world: the UK, USA, Brazil, Costa Rica, France, Germany, Italy, Netherlands, Israel, Japan, China and Singapore.

 

Videocom

 

Markets

 

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

 

In the Broadcast market, demand in the first half of the year remained strong, particularly in Asia. The market continues to benefit from the increasing number of cameras being sold as a result of the more diverse use of video capture, investments by broadcasters and technological drivers including High Definition, LED lighting and robotics.

 

The broader MAG market remains challenging but there are good opportunities in the niche market of wireless transmission of real-time, high quality information. Our IMT business is a relatively new entrant to this market and is a technology leader for mission-critical visual communication and surveillance products for security and defence applications. Haigh-Farr is a world-leading designer and manufacturer of high quality application-specific antennas serving this market. The acquisition and integration of Haigh-Farr into the Group has enabled us to leverage our technical and commercial expertise across these businesses.

 


H1 2012

H1 2011

r %

Revenue

£74.0m

£65.9m

12.3%

Operating Profit*

£8.4m

£6.0m

40.0%

Operating Margin*

11.4%

9.1%


 

* Before charges associated with acquired businesses as defined on page 1 of this announcement.

 

Operations

 

Reported revenue in the period increased by 12.3% to £74.0 million. This includes the benefit from the acquisition of Haigh-Farr in December 2011 and a small contribution from Camera Corps that was acquired in April 2012. Significant sales in the prior year to the MAG market under Auction 66 have not been repeated. Organic sales growth at constant exchange rates increased by 2.9% in the first half of the year. Operating profit* increased by 40.0% to £8.4 million and increased by 9.4% in organic terms at constant exchange rates. Operating margin* increased by 230 bps to 11.4% and by 60 bps in organic terms at constant exchange rates.

 

The camera support brands (Vinten, Sachtler and OConnor) enjoyed good growth in both the studio and on-location production segments, particularly in Asia where we benefited from an increase in capital expenditure projects. This segment also benefited from sales growth of the Sachtler Ace.


Litepanels made further progress in the LED light market as customers move from conventional tungsten lights to new energy efficient and environmentally friendly LED lights, especially in the US. We are continuing to broaden our product ranges and remain the technology leader in this market.

 

Anton/Bauer continued to perform well in its traditional Broadcast and Film markets. It made good progress in the medical carts market where it grew sales of batteries and chargers.

 

We acquired Camera Corps, in the UK, in April 2012 for a net consideration of £8.0 million. Camera Corps is a world leading provider of speciality remote camera systems used by broadcasters for capturing innovative, high quality images, particularly at major sporting events. The business successfully supported the UEFA Euro 2012 football championships and will benefit in the second half of the year from the London 2012 Olympics where Camera Corps' technology was widely deployed.

 

IMT increased its sales of wireless products into the broadcast market in the first half of the year and made further sales to US state police forces for helicopter-borne microwave video transmitters and receivers. We still await news on the award of US Government contracts where we shipped $7.6 million of Auction 66 task orders to the US Department of Justice in the first half of 2011.IMT continued to grow its sales into the unmanned vehicle market, including products for the US Army.

 

Haigh-Farr, acquired in December 2011, performed well in the first half with year-to-date performance in-line with our pre-acquisition expectations. We successfully integrated the business into the Group and enter the second half of the year with a strong order-book. Haigh-Farr was the sole antenna provider for the Falcon-9 launch vehicle and Dragon spacecraft, the first commercial vehicle to dock with the International Space Station. It also provided antennas for the recent Curiosity Mars landing.

 

Imaging & Staging

 

The Imaging & Staging Division mainly serves the Photographic market.

 

Markets

 

The Photographic market has benefited from the launch of new generation Digital SLR cameras where there was an increase in shipments in the first half of the year. The steady migration from independent specialist retailers to consumer electronics channels also continued during the period.

 

The sale of new cameras is a key driver of our products' sales. The Camera and Imaging Products Association (CIPA) publishes manufacturers' shipment data of cameras which is a useful indicator of activity levels within the market. The CIPA shipment data over the first half of the year has improved after a slow-down in the latter part of 2011. We believe that this growth represents a recovery in shipments after the tsunami in Japan and floods in Thailand that impacted the production and availability of new products towards the end of last year.

 


H1 2012

H1 2011

r %

Revenue

£88.6m

£91.7m

(3.4)%

Operating Profit*

£10.4m

£9.6m

8.3%

Operating Margin*

11.7%

10.5%


 

* Before charges associated with acquired businesses as defined on page 1 of this announcement.

 

Operations

 

Revenue in the first half of the year fell by 3.4% to £88.6 million with a good performance by our photographic business partly offsetting a weak performance by our Staging business. Operating profit* increased by 8.3% to £10.4 million. The operating margin* increased by 120 bps to 11.7% or by 90 bps in organic terms at constant exchange rates.

 

After a slow start caused by the disruption of the supply of new cameras in the Far East, sales improved as we progressed through the period. Imaging sales have increased by 3.8% in organic terms at constant exchange rates. The Group has continued to gain market share in the US and Europe according to third party sales research data. Our sales are benefitting from new camera models becoming more widely available as well as from the launch of new products including our Manfrotto Sympla video rig range. We also ceased distribution of some non-core third-party branded products during the period. 

 

The Powerbrand initiative of Manfrotto-branded accessoriestargeting the non-professional user has grown sales to consumer electronic retail channels. This includes re-ordering by customers who were taking initial inventory at this time last year. The sales growth reflects higher levels of supports sales and Manfrotto-branded LED lights.

 

The Staging business experienced a challenging market particularly in Europe. The business made sales of £7.0 million in the first half of the year which was £3.2 million lower than the first half of last year when the business benefited from projects such as the 2011 Take That tour and the Cirque du Soleil Michael Jackson Immortal World Tour. The significant downturn in sales resulted in a loss of £0.5 million in the first half of this year despite a reduction in costs (H1 2011: £nil).

 

We are pleased to have sold the Staging business after the half-year end that was non-core to Vitec's strategy.

 

* Before charges associated with acquired businesses as defined on page 1 of this announcement.

 

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. The business can add most value by providing a high quality service to customers delivering demanding projects.

 


H1 2012

H1 2011

r %

Revenue

£13.9m

£14.2m

(2.1)%

Operating Profit

£0.1m

£nil

n/a

Operating Margin

0.7%

-%


 

Operations

 

Revenue in the period decreased by 2.1% to £13.9 million, and in organic terms at constant exchange rates it decreased by 4.1%. This reflected the focus on large, more value-adding projects and a continued rationalisation of the business structure. Operating profit increased to £0.1 million from a break-even performance in the first half of last year.

 

Services traded in line with our expectations and made good progress on its strategy of working closely with key customers and supporting projects where the business can add most value. The results in the second half of the year will benefit from the Division's involvement in the London 2012 Olympics.

 

Foreign Exchange

 

First half operating profit includes £0.7 million of transaction gains after hedging mainly from the strengthening of the US dollar.

 

Effective Tax rate

 

The effective tax rate before charges associated with acquired businesses, based on the forecast full year tax charge, was 33% (FY11: 33%) reflecting the mix of territories in which the profits arose. After charges associated with acquired businesses, the effective tax rate was also 33%.

 

Outlook

 

Although the macroeconomic environment remains uncertain and our order book visibility is limited, the Board's expectations for the full year remain unchanged.

 

Going Concern

 

The Directors have made appropriate enquiries and consider that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the financial statements.

 

John McDonough CBE                                                               Stephen Bird

Chairman                                                                                   Group Chief Executive

 

 

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

 

The principal risks and uncertainties which may affect our performance as at 29 February 2012 are as set out on pages 18 and 19 of the Annual Report & Accounts 2011. The Directors continue to regard these as the principal risks and uncertainties facing the Group. We have a well-established framework for reviewing and assessing these risks on a regular basis, and have put in place appropriate processes and procedures to mitigate against them. However, no system of control or mitigation can eliminate all risks. In summary, some of the principal risks facing the Group are around the:

 

-     Demand for our products

-     Major contract awards

-     New markets and channels of distribution

-     Acquisitions

-     Pricing pressure

-     Dependence on key suppliers

-     Employees

-     Laws and regulations

-     Our reputation

-     Exchange rates

 

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

 

21 August 2012

 

 

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 2012 which comprises the Condensed Consolidated Income Statement, the Condensed Consolidated Statement of Comprehensive Income, the Condensed Consolidated Balance Sheet, the Condensed Consolidated Statement of Changes in Equity, the 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 2012 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

21 August 2012

 

 

Condensed Consolidated Income Statement





For the half year ended 30 June 2012







Half year

to 30 June

Half year

 to 30 June

Year to 31

December


2012

2011

2011

Notes

   £m

   £m

    £m

Revenue

2

176.5

171.8

351.0

Cost of sales


(100.5)

(99.8)

(204.9)

Gross profit


76.0

72.0

146.1

Operating expenses


(58.8)

(58.7)

(120.8)

Operating profit


17.2

13.3

25.3

Comprising





 - Operating profit before charges associated with

   acquired businesses


18.9

15.6

34.5

 - Charges associated with acquired businesses

3

(1.7)

(2.3)

(9.2)



17.2

13.3

25.3

Finance income


1.2

1.6

3.1

Finance costs


(2.6)

(2.0)

(4.6)

Net finance expense

4

(1.4)

(0.4)

(1.5)

Profit before tax


15.8

12.9

23.8

Comprising





 - Profit before tax and charges associated with

   acquired businesses


17.5

15.2

33.0

 - Charges associated with acquired businesses

3

(1.7)

(2.3)

(9.2)



15.8

12.9

23.8

Taxation

7

(5.3)

(4.4)

(8.8)

Profit for the period attributable to owners of the parent


10.5

8.5

15.0






Earnings per share

5




Basic earnings per share


24.2p

19.7p

34.7p

Diluted earnings per share


23.5p

19.2p

33.9p






Average exchange rates





Euro


1.21

1.15

1.15

US Dollar


1.58

1.61

1.60

 

Condensed Consolidated Statement of Comprehensive Income



For the half year ended 30 June 2012





Half year

to 30 June

Half year

to 30 June

Year to 31

December


2012

2011

2011


£m

£m

£m

Profit for the period

10.5

8.5

15.0

Other comprehensive income:




Actuarial (loss)/gain on pension obligations, net of tax

(4.2)

0.1

0.4

Currency translation differences on foreign currency subsidiaries

(2.7)

(0.4)

0.1

Net gain/(loss) on designated effective net investment hedges

0.7

0.1

(0.2)

Amounts released to Income Statement in relation to cash flow hedges, net of tax

(0.3)

-

0.5

Effective portion of changes in fair value of cash flow hedges

0.8

0.9

(1.3)

Total comprehensive income for the period attributable to owners of the parent

4.8

9.2

14.5

 

Condensed Consolidated Balance Sheet




As at 30 June 2012





As at 30

As at 30

As at 31


June

June

December


2012

2011

   2011


£m

£m

 £m

Assets




Non-current assets




Intangible assets

81.8

56.7

Property, plant and equipment

51.6

51.5

Trade and other receivables

0.6

0.3

Deferred tax assets

16.9

21.4

15.8


150.9

129.9

141.3





Current assets



Inventories

72.5

66.4

Trade and other receivables

62.1

55.3

Derivative financial instruments

1.0

1.5

Current tax assets

0.1

0.2

Cash and cash equivalents

8.9

12.8

6.9


144.6

136.2

125.1

Total assets

295.5

266.1

266.4

Liabilities




Current liabilities



Bank overdrafts

0.9

-

Trade and other payables

59.9

57.1

Derivative financial instruments

1.6

0.2

Current tax liabilities

10.6

11.5

Provisions

3.2

3.4

4.1


76.2

72.2

72.1

Non-current liabilities




Interest bearing loans and borrowings

78.0

53.3

Other payables

1.4

1.2

Post-employment obligations

10.2

6.1

Derivative financial instruments

0.4

-

Provisions

1.3

1.4

Deferred tax liabilities

0.6

2.8

0.7


  91.9

64.8

65.0

Total liabilities

168.1

137.0

137.1





Net assets

127.4

129.1

129.3





Equity



Share capital

8.8

8.6

Share premium

10.1

9.6

Translation reserve

3.8

5.6

Capital redemption reserve

1.6

1.6

Cash flow hedging reserve

(0.4)

0.8

Retained earnings

103.5

102.9

104.3

Total equity

127.4

129.1

129.3

 

Balance Sheet exchange rates




Euro

1.25

1.13

1.17

US Dollar

  1.56

1.60

1.57

 

Condensed Consolidated Statement of Changes in Equity






For the half year ended 30 June 2012








 


Share capital

Share premium

Translation reserve

Capital redemption reserve

Cash flow hedging reserve

Retained earnings

Total equity

 


£m

£m

£m

 £m

 £m

 £m

   £m

 

Balance at 1 January 2012

8.7

9.8

5.8

1.6

(0.9)

104.3

129.3

 

Total comprehensive income for the period








 

Profit for the period

-

-

-

-

-

10.5

10.5

 

Other comprehensive income








 

Actuarial loss on pension obligations, net of tax

-

-

-

-

-

(4.2)

(4.2)

 

Currency translation differences on foreign currency subsidiaries

-

-

(2.7)

-

-

-

(2.7)

 

Net gain on designated effective net investment hedges

-

-

0.7

-

-

-

0.7

 

Amounts released to Income Statement in relation to cash flow hedges, net of tax

-

-

-

-

(0.3)

-

(0.3)

 

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

0.8

-

0.8

 

Contributions by and distributions to owners







 

Dividends paid

-

-

-

-

-

(5.4)

(5.4)

 

Own shares (Employee Benefit Trust) purchased

-

-

-

-

-

(2.6)

(2.6)

 

Share-based payment charge

-

-

-

-

-

0.9

0.9

 

New shares issued

0.1

0.3

-

-

-

-

0.4

 

Balance at 30 June 2012

8.8

10.1

3.8

1.6

(0.4)

103.5

127.4

 

 

 








 

Balance at 1 January 2011

8.6

9.6

5.9

1.6

(0.1)

98.7

124.3

 

Total comprehensive income for the period








 

Profit for the period

-

-

-

-

-

8.5

8.5

 

Other comprehensive income








 

Actuarial gain on pension obligations, net of tax

-

-

-

-

-

0.1

0.1

 

Currency translation differences on foreign currency subsidiaries

-

-

(0.4)

-

-

-

(0.4)

 

Net gain on designated effective net investment hedges

-

-

0.1

-

-

-

0.1

 

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

0.9

-

0.9

 

Contributions by and distributions to owners







 

Dividends paid

-

-

-

-

-

(4.8)

(4.8)

 

Share based payment charge

-

-

-

-

-

0.4

0.4

 

Balance at 30 June 2011

8.6

9.6

5.6

1.6

0.8

102.9

129.1

 

 

Condensed Consolidated Statement of Cash Flows





 

For the half year ended 30 June 2012





 



Half year

to 30 June

Half year

to 30 June

Year to 31 December

 



2012

2011

  2011

 


Notes

£m

£m

    £m

 

Cash flows from operating activities





 

Profit for the period


10.5

8.5

15.0

 

Adjustments for:





 

    Taxation


5.3

4.4

8.8

 

    Depreciation


6.1

6.7

13.2

 

    Amortisation of intangible assets


2.5

2.8

4.9

 

    Impairment of goodwill in the Staging business


-

-

5.2

 

    Net gain on disposal of property, plant and equipment and software


(0.4)

(0.6)

(2.6)

 

    Fair value losses/(gains) on derivative financial instruments


0.2

(0.2)

(0.1)

 

    Share based payment charge


0.9

0.4

1.2

 

    Fair value adjustment to contingent consideration on previous   

    acquisitions


(0.2)

-

-

 

    Transaction costs relating to acquisitions


0.3

0.3

0.8

 

    Finance income


(1.2)

(1.6)

(3.1)

 

    Finance expense


2.6

2.0

4.6

 

Operating profit before changes in working capital and provisions


26.6

22.7

47.9

 

(Increase)/decrease in inventories


(6.9)

(9.6)

(8.4)

 

(Increase)/decrease in receivables


(11.5)

(8.4)

(3.2)

 

Increase/(decrease) in payables


1.6

5.7

6.0

 

(Decrease)/increase in provisions


(0.9)

(2.5)

(2.4)

 

Cash generated from operating activities


8.9

7.9

39.9

 

Interest paid


(1.3)

(0.6)

(1.8)

 

Tax paid


(2.1)

(2.3)

(11.1)

 

Net cash from operating activities


5.5

5.0

27.0

 






 

Cash flows from investing activities





 

Proceeds from sale of property, plant and equipment and software


0.5

1.4

6.4

 

Purchase of property, plant and equipment


(7.7)

(5.0)

(13.7)

 

Capitalisation of software and development costs


(0.9)

(1.7)

(2.4)

 

Acquisition of businesses, net of cash acquired

8

(9.0)

(8.4)

(28.7)

 

Net cash used in investing activities


(17.1)

(13.7)

(38.4)

 






 

Cash flows from financing activities





 

Proceeds from the issue of shares


0.4

-

0.3

 

Purchase of own shares by Employee Benefit Trust


(2.6)

-

(2.8)

 

Proceeds from interest bearing loans and borrowings


22.1

18.6

21.6

 

Dividends paid


(5.4)

(4.8)

(8.2)

 

Net cash used in financing activities


14.5

13.8

10.9

 






 

Increase/(decrease) in cash and cash equivalents 

9

2.9

5.1

(0.5)

 

Cash and cash equivalents at the beginning of period


6.2

6.7

6.7

 

Effect of exchange rate fluctuations on cash held


(1.1)

1.0

-

 

Cash and cash equivalents at the end of period (1)


8.0

12.8

6.2

 

(1) Cash and cash equivalents include bank overdrafts in the balance sheet

 

 

1   Accounting policies

Reporting entity

The Vitec Group plc (the Company) is a company domiciled in the United Kingdom.  These condensed consolidated interim financial statements as at and for the six months ended 30 June 2012 comprise the Company and its subsidiaries (together referred to as the Group).

Basis of preparation and statement of compliance

These condensed consolidated interim financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union. The accounting policies applied in the preparation of this interim financial information are consistent with the policies applied by the Group in the consolidated financial statements as at and for the year ended 31 December 2011 which were prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. It does not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements of the Group as at and for the year ended 31 December 2011.

 

The comparative figures for the year ended 31 December 2011 do not constitute statutory accounts for the purpose of section 435 of the Companies Act 2006. The auditors have reported on the 2011 accounts, and these have been filed with the Registrar of Companies; their report was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis, and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

 

The preparation of interim financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense.  Actual results may differ from these estimates.

 

In preparing these condensed consolidated interim financial statements, the significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2011.

 

These condensed consolidated interim financial statements were approved by the Board of Directors on 21 August 2012.

Changes in Accounting Policies

A number of amendments to published standards and interpretations are effective for the Group for the half year ended 30 June 2012. The Group has reviewed the effect of these amendments and interpretations, and has concluded that they have no impact on these condensed consolidated interim financial statements.

 

 

2   Segment reporting


Reportable segments

For the half year ended 30 June 2012

 


Videocom

Imaging & Staging

Services

Corporate

And

Unallocated

Consolidated













2012

2011

2012

2011

2012

2011

2012

2011

2012

2011


   £m

  £m

   £m

  £m

 £m

  £m

   £m

  £m

£m

£m

Revenue from external customers :











    Sales

71.7

64.8

88.6

91.6

2.8

3.0

-

-

163.1

159.4

    Services

2.3

1.1

-

0.1

11.1

11.2

-

-

13.4

12.4

Total revenue from external customers

74.0

65.9

88.6

91.7

13.9

14.2

-

-

176.5

171.8

Inter-segment revenue (1)

1.3

1.2

0.1

0.4

0.1

0.1

(1.5)

(1.7)

-

-

Total revenue

75.3

67.1

88.7

92.1

14.0

14.3

(1.5)

(1.7)

176.5

171.8

Segment result

8.4

6.0

10.4

9.6

0.1

-

-

-

18.9

15.6

Fair value adjustment to contingent consideration on previous acquisitions

-

-

0.2

-

-

-

-

-

0.2

-

Transaction costs relating to acquisitions

(0.3)

-


(0.3)

-

-

-

-

(0.3)

(0.3)

Amortisation of acquired intangible assets

(1.4)

(1.5)

(0.2)

(0.5)

-

-

-

-

(1.6)

(2.0)

Operating profit after charges associated with acquired businesses

6.7

4.5

10.4

8.8

0.1

-

-

-

17.2

13.3

Net finance costs







(1.4)

(0.4)

(1.4)

(0.4)

Taxation







(5.3)

(4.4)

(5.3)

(4.4)

Profit for the period

6.7

4.5

10.4

8.8

0.1

-

(6.7)

(4.8)

10.5

8.5

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

 

Geographical segments

For the half year ended 30 June 2012

 


United Kingdom

The rest of Europe

The Americas

The rest of the World

Consolidated


2012

2011

2012

2011

2012

2011

2012

2011

2012

2011


  £m

  £m

   £m

  £m

   £m

   £m

   £m

  £m

   £m

   £m

Revenue from external customers :











   by location of customer

14.8

14.0

42.8

44.0

82.5

80.3

36.4

33.5

176.5

171.8

 

 

Charges associated with acquired businesses

 




 

Charges associated with acquired businesses are excluded from key performance measures in order to more accurately show the underlying current business performance of the Group in a consistent manner and reflect how the business is managed and measured on a day-to-day basis. Such costs include non-cash charges such as impairment of goodwill and amortisation of acquired intangible assets, and cash charges such as transaction costs and fair value adjustments to contingent consideration.

 

 

Charges associated with acquired businesses comprise the following:




 

 

Half year

to 30 June

Half year

to 30 June

Year to 31

December


2012

2011

2011


£m

£m

£m

 - Fair value adjustment to contingent consideration on previous

   acquisitions (1)

0.2

-

-

 - Transaction costs relating to acquisitions (2)

(0.3)

(0.3)

(0.8)

 - Impairment of goodwill in the Staging business

-

-

(5.2)

 - Amortisation of acquired intangible assets

(1.6)

(2.0)

(3.2)

Charges associated with acquired businesses before tax

(1.7)

(2.3)

(9.2)

Tax on charges associated with acquired businesses

0.5

0.6

2.0

Charges associated with acquired businesses, net of tax

(1.2)

(1.7)

(7.2)

 

(1)  A contingent consideration of £0.7 million had been provided for at 31 December 2011 in respect of a prior period acquisition (Manfrotto Lighting, previously Lastolite), of which £0.5 million was paid in the period to 30 June 2012. The remaining unrequired provision of £0.2 million was reversed to the Income Statement under IFRS 3 (Revised) Business Combinations and included within operating expenses as charges associated with acquired businesses.

 

 

 

4  Net finance expense





Half year

to 30 June

Half year

to 30 June

Year to 31

December


2012

2011

2011


£m

£m

£m

Finance income




Expected return on assets in the defined benefit pension scheme

1.1

1.4

2.8

Net currency translation gains

0.1

0.2

0.3


1.2

1.6

3.1

Finance expense




Interest payable on interest-bearing loans and borrowings

(1.4)

(0.7)

(1.9)

Interest charge on defined benefit pension scheme liabilities

(1.2)

(1.3)

(2.7)


(2.6)

(2.0)

(4.6)

Net finance expense

(1.4)

(0.4)

(1.5)

 

 

5  Earnings per ordinary share

Earnings per share ("EPS") is the amount of post-tax profit attributable to each share.      

Basic EPS is calculated on the profit for the period divided by the weighted average number of ordinary shares in issue during the period.

Diluted EPS is calculated on the profit for the period divided by the weighted average number of ordinary shares in issue during the period, but adjusted for the effects of dilutive share options.

The Adjusted EPS measure is used by management to assess the underlying performance of the ongoing businesses, therefore excludes charges associated with acquired businesses, net of tax.


The calculation of basic, diluted and adjusted EPS is set out below:


Half year to 30 June


2012

2011

Profit

£m

£m

Profit for the period

10.5

8.5

Add back: Charges associated with acquired businesses, net of tax

1.2

1.7

Earnings before charges associated with acquired businesses

11.7

10.2

 


Weighted average number of shares '000

Adjusted earnings per share

Earnings per share

 


Half year to 30 June

Half year to 30 June

Half year to 30 June

 


2012

2011

2012

2011

2012

2011

 


Number

Number

pence

pence

pence

pence

 

Basic

43,369

43,164

27.0

23.6

24.2

19.7

 

Dilutive potential ordinary shares:







 

   - Employee share options

1,229

1,083

(0.7)

(0.5)

(0.6)

(0.5)

 

   - Deferred bonus plan

115

57

(0.1)

-

(0.1)

-

 

Diluted

44,713

44,304

26.2

23.1

23.5

19.2

 









 

6  Interim dividend

 

After the balance sheet date, an interim dividend of 8.5 pence per share has been declared by the Directors, totaling £3.7 million (2011: 8.0 pence per share totaling £3.4 million). The dividend has not been provided for at half year and there are no tax consequences.

 

The dividend will be paid on Friday 26 October 2012 to shareholders on the register at the close of business on Friday 28 September 2012. 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 Monday 1 October 2012. Existing participants in the Plan will automatically have the interim dividend reinvested.  Details on the Plan can be obtained from Capita Registrars on 0871 664 0381 or at www.capitaregistrars.com. Calls cost 10p per minute plus network extras, lines are open 8.30am-5.30pm Monday to Friday.

 

 

7  Taxation





Half year to 30 June

Half year to 30 June

Year to 31 December


2012

2011

2011


£m

£m

£m

Before charges associated with acquired businesses




Current tax

6.4

5.2

8.7

Deferred tax

(0.6)

(0.2)

2.1


5.8

5.0

10.8

Charges associated with acquired businesses (1)




Current tax

(0.4)

(0.9)

(0.3)

Deferred tax

(0.1)

0.3

(1.7)


(0.5)

(0.6)

(2.0)

Summarised in the Income Statement as follows




Current tax

6.0

4.3

8.4

Deferred tax

(0.7)

0.1

0.4


5.3

4.4

8.8

 

The tax rate on profits before charges associated with acquired businesses for the half year to 30 June 2012 is estimated at 33% (2011 full year: 33%) on the basis of the anticipated tax rates which will apply for the full year.

The tax rate on profits after charges associated with acquired businesses for the half year to 30 June 2012 is estimated at 33% (2011 full year: 37%).  The 2011 full year effective tax rate was adversely impacted by the impairment of goodwill in the Staging business.  The effective tax rate for the half year to 30 June 2012 of 33% is higher than the UK tax rate in 2012 of 24.5% due in part to the impact of the higher statutory tax rates in Italy.

(1) The current and deferred tax credits totaling £0.5 million (2011: £0.6 million) for the half year to 30 June 2012 resulted from the impact of amortisation of intangibles. In the second half to 31 December 2011, an additional tax credit occurred due to the amortisation of the Italian portion of goodwill in the Staging business.

 

8  Acquisitions

Acquisition of Camera Corps

On 10 April 2012, the Group acquired the whole of the share capital of Camera Corps Ltd ("Camera Corps"). Based in the UK, Camera Corps is a world leading provider of specialty remote camera systems used by broadcasters for capturing high quality images. This includes the Q-Ball™ which provides high definition images from a small, highly flexible, and easy to operate camera system that is being increasingly used at everything from top sporting events including the Olympics to reality TV shows such as Big Brother.

 
The acquisition complements Vitec's existing range of broadcast equipment and its products are being marketed through Vitec's global distribution network. Vitec's Services Division is the existing US distributor of the Q-Ball™. Camera Corps operates within the Videocom Division.

 

The acquisition was funded from existing cash resources.

 

A summary of the effect of the acquisition of Camera Corps is detailed below:

 

 


Book value at acquisition

Provisional fair value adjustments

Fair value of net assets acquired


£m

£m

£m

Net Assets acquired




Intangible assets

-

3.1

3.1

Property, plant and equipment

1.1

(0.3)

0.8

Inventories

0.4

(0.1)

0.3

Trade and other receivables

0.8

-

0.8

Trade and other payables

(1.2)

(0.1)

(1.3)

Cash

0.7

-

0.7

Deferred tax

(0.1)

(0.6)

(0.7)


1.7

2.0

3.7

Goodwill (1)



5.0

Consideration



8.7

Satisfied by


 -          Cash consideration

8.3

 -          Deferred consideration

0.4


8.7

(1) The acquisition provides opportunities for further development of the Group's activities and creates enhanced returns. Such opportunities and the inherent workforce represent much of the assessed value of goodwill.

 

The value of the gross trade receivables at acquisition date amounted to £0.3 million reflecting management's estimate of the fair value to be attributed.

 

The results of Camera Corps have been included in the Videocom Division and comprise:


£m

Revenue

1.4

Operating profit (2)

0.3

Had the acquisition been made at the beginning of the year (i.e. 1 January 2012) it would have contributed £2.0 million to revenue and £0.3 million to the operating profit (2) of the Group.

(2) Operating profit is stated before amortisation of intangible assets.

Analysis of cash outflow in consolidated cash flow statement


£m

Net cash outflow in respect of acquisition of Camera Corps :


Total purchase consideration

8.7

Deferred consideration

(0.4)

Cash consideration

8.3

Transaction costs

0.3

Cash acquired

(0.7)

Net outflow of cash in respect of 2012 acquisition

7.9

Contingent consideration in relation to Manfrotto Lighting, acquired in March 2011

0.5

Net working capital adjustment in relation to Haigh-Farr, acquired in December 2011 (3)

0.6

Cash paid in 2012 in respect of prior year acquisitions

1.1

Net cash outflow in respect of acquisitions

9.0

(3) The Group paid £0.6 million in respect of a net working capital adjustment for a prior period acquisition (Haigh-Farr). This had been provided for in full at 31 December 2011.

 

9  Analysis of net debt


Half year

to 30 June

Half year

to 30 June

Year to 31

December


2012

2011

2011


£m

£m

£m

Cash flow movement




Increase/(decrease) in cash and cash equivalents

2.9

5.1

(0.5)

Proceeds from interest bearing loans and borrowings

(22.1)

(18.6)

(21.6)

Increase in net debt resulting from cash flows

(19.2)

(13.5)

(22.1)

Effect of exchange rate fluctuations on




Cash held

(1.1)

1.0

-

Debt held

0.7

0.1

(0.2)

Net debt

(0.4)

1.1

(0.2)





Movements in net debt in the period

(19.6)

(12.4)

(22.3)

Net debt at the beginning of period

(50.4)

(28.1)

(28.1)

Net debt at the end of period

(70.0)

(40.5)

(50.4)









Cash and cash equivalents in the Balance Sheet

8.9

12.8

6.9

Bank overdrafts

(0.9)

-

(0.7)

Cash and cash equivalents in the Statement of Cash Flows

8.0

12.8

6.2

Interest bearing loans and borrowings

(78.0)

(53.3)

(56.6)

Net debt at the end of period

(70.0)

(40.5)

(50.4)

 

10 Disposal of the Staging business

 

The Group has disposed of its Staging business post half year end which was included in the Imaging and Staging division. This will enable Management to focus upon Vitec's core markets.

 

The sale was completed as two separate transactions. On 1 July 2012 Prolyte Products UK Limited purchased Brilliant Stages Limited, which is based in the UK. On 13 August 2012, Milos S.R.O, based in the Czech Republic, purchased the remaining Staging business that consists of: Tomcat Global Corp, Tomcat USA Inc, Tomcat de Mexico SA de CV, Staging Systems Europe SpA and Staging SK S.R.O.  These companies are based in the USA, Mexico, Italy and Slovakia.


This information is provided by RNS
The company news service from the London Stock Exchange
 
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