Vislink plc

Results for the year ended 31 December 2015

Vislink plc (the "Group"), the global software and technology business specialising in solutions for the live collection, delivery and playout automation of high quality video 'from scene to screen' for the broadcast and surveillance and public safety markets, today announces its final results for the year ended 31 December 2015.

Financial Headlines

*Adjusted operating profit is operating profit from continuing operations before the amortisation and impairment of goodwill and acquired intangibles, and other non-recurring items (see note 4). Adjusted earnings per share is calculated on the same basis after taking account of related tax effects.

** Adjusted earnings per share normalised for tax effective rate of 20 per cent.

Highlights

·     Continued transition to software and services supported by a strong performance of Pebble Beach Systems, particularly in North America, driven both operationally and through the Harmonic partnership

·     Pebble Beach Systems has almost doubled revenue in the first 2 years of ownership and is expected to grow in the coming years

·     Pebble Beach Systems represented over 50% of the operating profit of the trading businesses of the Group

·   Vislink Communication Systems' planned efficiencies resulted in a 26% reduction in workforce from 250 employees to 185 employees whilst gaining market share in broadcast markets.

·     Reduction in revenue and the resulting profit reduction came from a reduced surveillance order intake with a non-repeat of the very large Home Office contract which was successfully completed in the first half of 2015

·    As a result of investment in IP and new products in both divisions the year end order book was up to £11.0 million compared to £8.8 million at the end of 2014

John Hawkins, Executive Chairman of Vislink said:

"We continue to transition to a software and services business represented by the evolving profit mix within the business. Pebble Beach Systems has had a strong financial performance in 2015 as it continues to expand its sales activities through its key partnerships and increasing geographic presence.

In its core broadcast markets Vislink Communication Systems found market conditions in 2015 challenging and they are expected to remain variable in 2016. However, the significant restructuring of Vislink Communication Systems, coupled with the investment and launch of new products and an increasing order pipeline, provides an encouraging platform for improved results from Vislink Communication Systems.

Both the Harmonic and GoPro strategic relationships continue to progress and we are pleased with the progress made.

The Group is confident of its strategy, with the development of its IP based solutions and the growth of software and services, which will benefit the Group as a whole in 2016 and beyond."

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About Vislink plc

Vislink plc is a leading global technology business specialising in the collection, delivery and management of high quality live video 'from scene to screen'.

For the broadcast markets, Vislink provides wireless communication solutions for the collection of live news, sport and entertainment as well as software solutions for channel playout automation, channel-in-a-box and video content management.  Vislink also provides secure video communications for surveillance and public safety applications such as law enforcement and homeland security.

The Group employs over 250 people worldwide with offices in the UK, USA, UAE and Singapore and manufacturing operations in the UK and the USA. Vislink has net assets of over £54 million and continuously invests in innovation.

The Company is listed on the AIM market of the London Stock Exchange (AIM:VLK).  For further information, visit www.vislink.com.

Forward-looking statements

Certain statements in this announcement 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 be 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. Nothing in this announcement should be construed as a profit forecast.

Introduction

The Group generated revenue of £57.8 million in a variable marketplace.  2015 was a year of continuing growth for Pebble Beach Systems, achieving revenue of £10.9 million and contributing £3.3 million of adjusted operating profit. In challenging market conditions, Vislink Communication Systems achieved revenues of £46.9 million and contributed adjusted operating profit of £2.8 million. Our two divisions have continued to develop and provide best in class solutions to three core markets; the broadcast software market, the broadcast communications market for the collection of live news, sport and live entertainment events, and the surveillance and public safety market.  

Platform for profit growth

The Group operates as two divisions: Pebble Beach Systems, which includes the Group's automation and playout software products, and Vislink Communication Systems, which is a consolidation of the Group's hardware businesses. Both divisions benefit from channel and market synergies. We continue to see a strengthening of our capabilities, expertise and ability to execute against our "Scene to Screen" strategy and this is accelerated by the development of key partnerships and the launch of new products.

Pebble Beach Systems

Pebble Beach Systems is a world leader in the provision of software for automation, Channel in a Box and content management solutions for TV broadcasters, cable and satellite operators. Its leading next generation products and software technology within the broadcasting sector are best reflected by its global customer base. Furthermore, this customer base continues to be fast growing. The business has high margins, excellent growth prospects and solid cash generation.

Pebble Beach Systems has almost doubled in revenue in the first 2 years of ownership.

Pebble Beach Systems has benefitted from being part of the Group, allowing expansion globally and a strategic partnership with Harmonic, which continues to strengthen. In 2015, Pebble Beach Systems announced a major order of approximately US$2.0 million with Scripps Group, a leading US developer of high-profile content for lifestyle media platforms including television, digital, mobile and publishing, as well as its first order for Orca, an IP-enabled software-defined integrated channel, which runs on a virtualised platform. In the period Pebble Beach Systems invested in identifying and scoping new organic products and solutions, which they believe will deliver significant opportunities in future years.

Pebble Beach Systems had a successful year, achieving revenue of £10.9 million (2014: £8.3 million). Pebble Beach Systems has benefitted from a strengthening relationship and access to the North American market. Pebble Beach Systems contributed £3.3 million of adjusted operating profit in 2015 (2014: £3.3 million) which reflects investment in software development and expansion of sales capability to underpin the future growth of the division.

We believe that the acquisition and its subsequent successful organic growth has transitioned Vislink into a market leading, video capture and playout provider to the broadcast industry. Pebble Beach Systems demonstrates that the Group's software strategy is on track, with the software business providing good growth prospects, better operating margins and the benefit of improved visibility of earnings.

Vislink Communication Systems

Vislink Communication Systems found market conditions variable in 2015. Its broadcast business achieved a 4% growth in sales and a significant growth in order intake. It saw a significant reduction in its surveillance order intake and revenue, with a non-repeat of the large Home Office surveillance contract awarded in 2014, which was successfully completed in the first half of 2015.

There has been a significant change in both the broadcast marketplace and the media technology used to meet its needs. Vislink Communication Systems has completed the planned restructuring of the business during FY15, which is intended to make it a more flexible business for the changing markets. The restructuring substantially reduced costs and streamlined its manufacturing base through consolidation of manufacturing operations and outsourcing the manufacture of established products to third parties. This brings the benefit of both a lower fixed cost base and flexibility to expand production as market needs generate demand.

It has successfully developed a number of new products incorporating IP technology. These products, which were introduced during Q4 of FY15, have been very well received and the timings of these launches will benefit Vislink Communication Systems in FY16, with further product launches planned during the year. Vislink Communication Systems is positioning itself to be the technology leader in those markets which offer better growth through exploiting technology shift opportunities. In the last three months of trading new product introductions accounted for significant order intake for the division; a good forward indicator of the demand and success of these new IP products.

Financial results

Group revenue for the year to 31 December 2015 was £57.8 million (2014: £61.9 million). Orders received in the period were £59.9 million (2014: £61.4 million). The order book at 31 December 2015 was £11.0 million (31 December 2014: £8.8 million).

Overheads remained in line with expectations with the total overheads increasing to £21.3 million (2014: £21.2 million). Vislink Communication Systems' overhead reduced from £15.0 million to £13.7 million reflecting the benefits of the restructuring process in the division. Pebble Beach Systems' overheads increased from £3.4 million to £5.6 million reflecting a full year, along with an increased headcount to underpin future growth.

The adjusted operating profit was £4.7 million (2014: £7.2 million) before charging £2.4 million in respect of the amortisation of acquired intangibles (2014: £2.6 million) and £3.1 million of non-recurring items (2014: a credit of £0.9 million).

The reported loss before tax was £1.0 million (2014: a profit of £5.4 million). The reported loss has arisen primarily due to the non-recurring costs of £3.1 million. On a comparative basis, 2014 benefited from a £0.9 million credit in respect of non-recurring costs as a result of the release of £2.0 million of deferred consideration in respect of the acquisition of Amplifier Technology in 2013.

Net finance costs increased in 2015 reflecting a full year's interest on the Group's Revolving Credit Facility ("RCF") which was utilised in part to finance the acquisition of Pebble Beach Systems. In 2015 the Group restructured its existing debt facilities and replaced the original £7.0 million RCF facility and £3.0 million term loan with a £10.0 million RCF facility. This was increased later in the year to a £15.0 million RCF facility, to provide greater flexibility.

As at 31 December 2015 the Group held inventory of £12.7 million which is down 1.5 per cent on the prior year (31 December 2014: £12.9 million); trade and other receivables of £18.8 million, up 17.5 per cent on the prior year (31 December 2014: £16.0 million); and trade and other payables of £13.6 million, down 14.3 per cent on the prior year (31 December 2014: £15.8 million).

The Group continues to view investment in the development of new products and services as key to future growth. The cash outflow from investing activities amounted to £3.8 million (31 December 2014: £11.5 million) which comprised net capital expenditure and the capitalisation of development costs. In 2014 investing activities included a £7.0 million net outflow in respect of the acquisition of Pebble Beach Systems.

Earnings per share

The reported basic undiluted loss per share for the year was 0.7 pence (2014: earnings of 3.2 pence).

After adjusting for amortisation and impairment of goodwill and acquired intangibles and other non-recurring items the Group's adjusted earnings per share was 3.0 pence (2014: adjusted earnings per share of 4.1 pence).

The adjusted earnings per share normalised for an effective tax rate of 20 per cent for the year was 2.9 pence (2014: 4.6 pence).

Dividends

We propose a full year dividend of 1.5 pence per share (2014: 1.5 pence per share). We have not increased the dividend from the prior year as we intend to preserve cash for future software investments.

The Board, management and employees

We continue to see a strengthening of our capabilities and expertise as we continue to optimise parts of our business operations and invest in new products and markets.

On behalf of the Board I would like to thank all our people who have got behind our vision for the Group and all who have contributed to our achievements in 2015.

Current outlook trading

Our markets continue to be variable. The Group enters 2016 having repositioned its capabilities and invested in new products, both in software and hardware. The Group can with confidence exploit the technology shift in the market in 2016.

We are transforming the Group. As our software group grows we aim to enhance earnings, margins and cash generation and remain completely aligned to our shareholders' objectives of delivering long term profitable growth.

John Hawkins

EXECUTIVE CHAIRMAN

Executive Chairman's Statement

For the year ended 31 December 2015

DIVISIONS AND MARKETS

For the year ended 31 December 2015

Divisional Operations

Vislink Communication Systems has seen an overall decline in revenues of 12.6 per cent in 2015, with a reduction in surveillance revenues and an increase in broadcast revenues. The UK, Europe, North America and Asia/Pacific regions finished below 2014 levels. However, there has been significant growth in the Latin America and Middle East and Africa regions.

Pebble Beach Systems has contributed £10.9 million of revenues and £3.3 million of adjusted operating profit in 2015, with strong performance in North America as a result of a $2.0 million order from Scripps.  Pebble Beach Systems has invested and continues to invest in the recruitment of additional employees to support growth.

Revenue by Region

Technology and Innovation

The Group has continued to invest in delivering innovative products and solutions that add value for our customers. The investment in the development of market leading solutions and the expansion of available markets is a key part of the organic growth strategy.

The business has invested £3.6 million in capitalised development costs in the year (2014: £3.6 million) and amortised £3.2 million (2014: £2.1 million). The amortisation is included in the reported Research and Development expenses in the consolidated Group income statement. For 2015, these Research and Development expenses were £5.8 million (2014: £5.6 million) representing 10.0 per cent of revenues (2014: 9.0 per cent). The cost increase is mainly due to 2015 including a full year of Pebble Beach Systems' results.

Vislink Communication Systems has successfully developed a number of products incorporating IP technology which have been introduced during Q4 2015 and have been very well received.

FINANCIAL REVIEW

The Group's reported trading performance is summarised as follows:

¹   Adjusted EPS is calculated on operating profit before the amortisation and impairment of goodwill and acquired intangibles, and other non-recurring costs after taking account of related tax effects.

²      Adjusted earnings per share normalised for a tax rate of 20 per cent.

Goodwill impairment

In accordance with the requirements of IAS 36 'Impairment of assets', goodwill is required to be tested for impairment on an annual basis, with reference to the value of the cash-generating units ("CGU") in question. The goodwill relating to the surveillance and public safety market was fully written down in 2010.  The Group acquired Amplifier Technology in 2013 which is a separate CGU and Pebble Beach Systems in 2014 which is a separate CGU therefore impairment reviews have been undertaken in respect of the broadcast market, Amplifier Technology and Pebble Beach Systems.  The carrying value of goodwill at 31 December 2015 is £25.0 million (2014: £24.6 million) consisting of £20.6 million for the Broadcast market (2014: £20.3 million), £1.1 million for Amplifier Technology (2014: £1.1 million) and £3.3 million for Pebble Beach Systems (2014: £3.2 million).

Our review of the CGU calculations indicated there was no impairment in the year (2014: £0.5 million).

Non-recurring items

The Group charged £3.1 million (2014: £0.9 million credit) of non-recurring costs to the consolidated income statement. The charge comprised:

·      £2.5 million charge in respect of rationalisation and redundancy costs

·      £0.4 million charge in respect of onerous property commitments

·      £0.2 million charge in respect of acquisition related costs

Working capital

Our key metrics for managing working capital are day's sales outstanding for trade receivables and net inventory days. To reflect the seasonality of the business, particularly at year end, the Group has used a roll-back method for both trade receivables and inventory. The table below shows that trade receivables have decreased to 51 days and inventory days have decreased to 153 days. The higher trade receivables balance at 31 December 2015 reflects a stronger fourth quarter trading period when compared with December 2014.

¹Trade receivables at the end of the financial year analysed using a monthly revenue countback method

²Net inventory at the end of the financial year analysed using a monthly material costs of sales countback method

Cash flows

The Group held cash and cash equivalents of £3.3 million at 31 December 2015 (2014: £8.4 million). The table below summarises the cash flows for the year.

Returns to shareholders were in the form of a dividend payment of £1.8 million (2014: £1.5 million).

Returns to shareholders

It is the Group's stated strategy to only recommend a final dividend. The Board is recommending that the dividend be maintained at 1.5 pence per share (2014: 1.5 pence). The payment of the dividend will absorb approximately £1.8 million of cash. Subject to the approval of shareholders, the dividend will be paid on 18 July 2016 to those shareholders on the register at 24 June 2016. 

Foreign exchange

In 2015 foreign exchange gains of £0.6 million were credited to the income statement (2014: a credit of £0.5 million) as a result of the strengthening of the US dollar against sterling.

The principal exchange rates used by the Group in translating overseas profits and net assets into sterling are set out in the table below.

If the results for the year to 31 December 2014 had been translated at the 2015 average rate then the translation impact would be to increase prior year revenue by £1.6 million and decrease the profit before tax by
£0.1 million.

Risk management

The Board regularly reviews the full range of business risks facing the Group. The approach adopted is to identify, evaluate and manage the likely impact of risk on the Group's business objectives. Where the risks are unavoidable they are managed through business controls and where appropriate through insurance and treasury activities.

The Group has a programme of regular risk assessment, which incorporates internal control reviews of both a financial and non-financial nature. A process of continuous review has been in place throughout the year at an operating company level to consider the risk environment and the effectiveness of controls. The results of reviews, initiatives and progress on implementing control improvements are regularly reported to the Board.

John Hawkins, Executive Chairman

Ian Davies, Group Finance Director

21 March 2016

​

CONSOLIDATED GROUP INCOME STATEMENT

for the year ended 31 December 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2015

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

for the year ended 31 December 2015

CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION

as at 31 December 2015

CONSOLIDATED GROUP STATEMENT OF CASH FLOWS

for the year ended 31 December 2015

NOTES TO THE FINANCIAL STATEMENTS

for the year ended 31 December 2015

1.   GENERAL INFORMATION

Vislink plc ("the Company") and its subsidiaries (together the "Group"), is a global software and technology business specialising in solutions for the live collection, delivery and playout automation of high quality video 'from scene to screen' for the broadcast and surveillance and public safety markets.

Vislink provides solutions to the broadcast market for the collection of live news, sport and live entertainment events, and secure video communications to the public safety and surveillance market including military, law enforcement and public safety. With offices in the UK, USA, UAE and Singapore and manufacturing operations in the UK and the USA we employ over 250 people worldwide and have net assets of £54.5 million. Our hardware and software products offer a complete wireless solution from scene (video contribution) to screen (video playout and automation). Our solutions deploy IP, cellular and more traditional microwave radio and satellite transmission and our studio software solutions deploy the latest software innovations. 

The Company is a public limited company, and is quoted on the Alternative Investment Market (AIM) of the London stock exchange. The Company is incorporated and domiciled in the UK. The address of its registered office is Marlborough House, Charnham Lane, Hungerford, Berkshire, RG17 0EY.

The registered number of the Company is 4082188.

This final results announcement was approved for issue on 21 March 2016.

2.   BASIS OF PREPARATION

The Group financial statements have been prepared on a going concern basis in accordance with International Financial reporting Standards as adopted by the European Union (IFRS), IFRIC interpretations and the Company Act 2006 applicable to companies reporting under IFRS.

The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates.  It also requires management to exercise judgment in the process of applying the Group's accounting policies.  The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the Group financial statements are disclosed in note 4 of the Group financial statements.   

During the current reporting period there were no new standards or amendments which had a material impact on the net assets of the Group. In addition, standards or amendments issued but not yet effective are not expected to have a material impact on the net assets of the Group.

3.   SEGMENTAL REPORTING

The Group's internal organisational and management structure and its system of internal financial reporting to the Board of Directors are based on the product offerings of each of its businesses, which comprise the two divisions, Vislink Communication Systems and Pebble Beach Systems. Each division has its own managing director and finance director who work with the Group Finance Director, under the chairmanship of the Executive Chairman to oversee the running of the Group.

The chief operating decision-maker has been identified as the Board. The Board reviews the Group's internal financial reporting in order to assess performance and allocate resources. Management have therefore determined that the operating segments for the Group will be based on these reports.

The Vislink Communication Systems division is responsible for the sales and marketing of all Group hardware products and services. It is also the product centre for the satcom communication products, wireless camera systems and the associated microwave and amplifier products. The Pebble Beach Systems division is responsible for the sales and marketing of software products and services. It is also the product centre for the Pebble Beach Systems product brands.

The table below shows the analysis of Group external revenue and operating profit from continuing operations by business segment.

​

Geographic external revenue analysis

Group management is focused on developing global revenue growth from the two main markets that the Group serves, broadcast and surveillance and public safety. Segmental reporting is therefore also provided by reference to revenue by market by geographic region.

The revenue analysis in the table below is based on the geographical location of the customer for each market.

Net assets

The table below summarises the net assets of the Group by division. Balance sheet reporting is disclosed by the divisional assets and liabilities of the Group as this is consistent with the presentation of internal information provided to the Executive Management Board and the Board of Directors.

4.   OPERATING (LOSS) / PROFIT

The following items have been included in arriving at the operating (loss) / profit for the continuing business:

The Group has incurred rationalisation and redundancy costs of £2,531,000 in the year (2014: £722,000).

During 2015 the Group incurred £341,000 of costs in relation to onerous property commitments as part of the restructuring of Vislink Communication Systems.

The Group incurred £199,000 of acquisition related costs.

5.   FINANCE INCOME - NET

Finance income is derived from cash held on deposit.

6.   INCOME TAX EXPENSE

From 1st April 2015 the corporation tax rate was 20 per cent, from 1 April 2017 will be 19 per cent and from 1 April 2020 will be 18 per cent. The 2017 and 2020 rates were substantively enacted on 26 October 2015 and hence deferred tax assets and liabilities are calculated at 18 per cent.

Deferred tax has been provided for at the rate of 18 per cent (2014: 20 per cent).

There is no tax impact for the Group associated with the dividend proposed (note 7).

7.   DIVIDENDS

The directors are proposing a final dividend in respect of the financial year ending 31 December 2015 of 1.5 pence per share, which will absorb an estimated £1.8 million of shareholders' funds. It will be paid on 18 July 2016 to shareholders who are on the register of members on 24 June 2016.

8.   EARNINGS PER ORDINARY SHARE

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding those held in the employee share trust which are treated as cancelled. Earnings per share is calculated by reference to a weighted average of 121,910,000 ordinary shares in issue during the year (31 December 2014: 117,797,000).

For diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. The dilutive shares are those share options granted to employees where the exercise price is less than the average market price of the company's ordinary shares during the year.

Adjusted earnings

The directors believe that the adjusted operating profit, adjusted profit before tax, adjusted earnings and adjusted earnings per share provide additional useful information on underlying trends to shareholders. These measures are used by management for internal performance analysis and incentive compensation arrangements. The term "adjusted" is not a defined term used under IFRS and may not therefore be comparable with similarly titled profit measurements reported by other companies. The principal adjustments are made in respect of the amortisation of acquired intangibles, impairment of goodwill and non-recurring items and their related tax effects.

The reconciliation between reported and underlying earnings and basic earnings per share is shown below:

9.   CASH FLOW FROM OPERATING ACTIVITIES

Net cash flow from operating activities comprises:

10.  CALLED UP SHARE CAPITAL, SHARE PREMIUM AND CAPITAL REDEMPTION RESERVE

11.  NET FUNDS

The movements in cash and cash equivalents and borrowings in the year are as follows:

Ends.