REG - Vislink PLC - Interim Results <Origin Href="QuoteRef">VLK.L</Origin> - Part 1

Pebble Beach SystemsAnnouncement

29/10/2014 07:21

RNS Number : 5662Q
Vislink PLC
02 September 2014
Vislink plc
(the "Company" or "the Group")
Half year results for the six months ended 30 June 2014
Vislink plc, the global technology business specialising in the collection and delivery of high quality video and associated data from the field to the point of usage, today announces its half year results for the six months ended 30 June 2014.
Results for the six months ended 30 June 2014
2014
2013
m
m
Order intake
33.3
33.6
Revenue 
27.1
28.0
Adjusted operating profit1
1.7
2.0
Adjusted operating margin1
6.3%
7.2%
Adjusted profit before tax1
1.7
2.0
Reported operating profit and profit before tax 
2.0
1.4



Adjusted earnings per share1
1.2p
1.8p
Reported earnings per share 
1.7p
1.3p



Cash generated from operating activities
5.5
1.6
Net (debt)/cash
(0.3)
7.2
1 Adjusted to exclude the amortisation and impairment of goodwill and acquired intangibles, and other non-recurring costs (note 6). 
Key points 
 Adjusted operating profit of 1.7m (H1 2013: 2.0m). On a constant currency basis, adjusted operating profit up 3.4%
 Cash generation from operations of 5.5m (H1 2013: 1.6m)
 Orders received during the period of 33.3m
 Continued strong performance of the software division expected in the second half. Our software division will represent a significant proportion of operating profits in FY14 
 Software division trading ahead of expectations
 Uncertain broadcast market and delayed surveillance contracts impacting hardware division 
 Order book has strengthened significantly in Q2, closing at 13.2m
 Hardware division restructured with significant cost savings in FY14 
 Achieved Wideband Global SATCOM ("WGS") certification, enabling the Group to benefit from recovering US security markets
 The Group continues to trade in line with market expectations for the year as a whole
Post period end 
The Group will announce separately today:
 An OEM agreement with Harmonic Inc (Nasdaq: HLIT), a worldwide leader in video delivery infrastructure for emerging television and video services. The partnership will enable Harmonic Inc to sell packages, integrated with Pebble Beach Systems' software, to the international broadcast market
 The partnership will result in Harmonic Inc placing an initial order valued at 2.0m in 2014 and sees Harmonic Inc subscribing for 4,000,000 new ordinary shares in the Group priced at 50p per new share by way of a direct subscription
John Hawkins, Executive Chairman of the Group, said:
"Whilst the broadcast market has been challenging for our hardware business, overall, we are encouraged with these results. We have taken timely action to reduce costs in our Hardware Division and we have seen an improved trading trend, the order book strengthened in Q2 and the orders to sales ratio is better than 1. 
We are delivering on our software strategy with Pebble Beach Systems performing ahead of expectations. The Group's revenue has benefitted from the change in revenue balance, with software providing longer term visibility. The partnership with Harmonic Inc, which is being announced later today, represents further excellent opportunities for the Group.
2014 represents a transitional and transformational year for the Group and with the increasing focus on our software division, we believe that this will enhance the Group's overall quality of earnings in 2014 and beyond. 
The Group continues to trade in line with market expectations and the Board remains confident for the future prospects for the Group."
A copy of the half yearly report will be available from the Group's website www.vislink.com. 
- ends -
Enquiries:

Vislink plc: John Hawkins, Executive Chairman
+44 (0)1488 685500
Vislink plc: Ian Davies, Finance Director
N+1 Singer: Shaun Dobson
+44 (0)1488 685500
+44 (0)20 7496 3000
Hudson Sandler: Charlie Jack/Katie Matthews
+44 (0)207 796 4133
About Vislink plc
The Vislink Group is a global technology business specialising in the collection and delivery of high quality video and associated data from the field to the point of usage. Vislink provides solutions to the broadcast market for the collection of live news, sport and entertainment events and to the surveillance market including defence, 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 300 people worldwide and have net assets of 52.0m. 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 listed on the AIM Market of the London Stock Exchange. 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.
 


Executive Chairman's Statement 
For the six months to 30 June 2014
The Group achieved an order intake of 33.3m for the six months ended 30 June 2014, with order intake strengthening in Q2 leading to an order book of 13.2m at the end of the period. 
Revenue in the first half was 27.1m, which on a constant currency basis was in line with the same period last year. 
Adjusted operating profit was up 3.4% on a constant currency basis. 
In our core markets of the US, the UK and Europe, our hardware business found market conditions challenging and we continued to witness longer decision making cycles. 
Against the backdrop of a low opening order book and a relatively low order intake in Q1, hardware revenue improved towards the end of the first half. Nevertheless, we took decisive action to reduce costs in the hardware division and the benefits of this are expected to be seen in the second half. 
We have retained our strong engineering base and channels to market, which are also being strengthened by our strategic partnerships.
Our hardware surveillance business continues to see good opportunities. 
Early in 2014 we won a multimillion pound contract in public safety in the UK which will significantly contribute to our operating profit for the full year. 
The aforementioned longer decision making cycles have resulted in some key surveillance hardware opportunities moving into the second half. We have already begun to see some of these key orders convert post the period end. 
Amplifier Technology performed in line with management expectations for the first half of the financial year. The earn out required targets to be achieved which included six months in 2013, two months of which were prior to acquisition. The targets were not achieved and therefore the deferred consideration of 2.0m was not payable. However, the Group sees good opportunities for Amplifier Technology which added RF jamming technologies to the Group's portfolio. 
Our Mobile Satellite ("MSAT") satellite communications system has achieved WGS certification. This provides significantly improved opportunities for revenues in the defence and security markets and effectively doubles the size of the available market that is now open to this product as a result of this approval. 
The first half saw continued development of our cellular and IP solutions and the launch of new additions to the successful MSAT range of satellite communications solutions. 
We were also pleased to announce during the period a key strategic partnership with TVU Networks. This partnership gives us the unique ability to combine best-in-class cellular, satellite, microwave, mesh and Ethernet transmission solutions with a powerful back end distribution, delivering equally powerful end to end video solutions.
In March 2014 we were delighted to announce the acquisition of Pebble Beach Systems. The acquisition transitioned the Group into a market leading full service video capture and playout provider for the broadcast industry. 
Since acquisition, Pebble Beach Systems has performed ahead of expectations, achieving revenue of 3.1m and adjusted operating profit of 1.1m in the three and a half months to 30 June 2014. 
Our software strategy is on track, providing the Group with improved margins, cash generation and visibility of earnings. 
We are also pleased that the Group will be announcing later today the launch of a new strategic partnership with Harmonic Inc, which will provide significant new channels to market for our software solutions. As part of the deal, Harmonic Inc will place an initial order for software licences of 2.0m, receivable in 2014, to secure Pebble Beach Systems' products for onward sale in its integrated package. The agreement should contribute to improved profitability and penetration of Pebble Beach Systems software globally in the second half. 
Financial Results
Group revenue for the six months to 30 June 2014 was 27.1m (H1 2013: 28.0m). Orders received in the period were 33.3m (H1 2013: 33.6m) with improved order intake in Q2. 
The order book at 30 June 2014 was 13.2m (31 December 2013: 5.6m) which includes orders and deferred revenue for Pebble Beach Systems. 
The Group's gross margin improved by 1.2 percentage points to 42.8% (H1 2013: 41.6%) as we see the benefit of the introduction of software products in Q2. 
Overheads remain in line with expectations. Total overheads increased slightly to 9.9m (H1 2013: 9.6m), being 36% of sales compared with 34% in the first half of 2013. R&D overheads show a small increase whilst sales expenses decreased by 0.7m. Administrative expenses increased reflecting the negative impact of movements on translation. The total overheads include those of Pebble Beach Systems. 
The adjusted operating profit was 1.7m (H1 2013: 2.0m) before charging 0.9m in respect of the amortisation of acquired intangibles (H1 2013: 0.7m) and crediting 1.3m of non-recurring items (H1 2013: nil). The profit before tax was 2.0m (H1 2013: 1.4m). Net finance costs were not material. 
At the half year, the Group held inventory of 12.1m down 8% on the same period in the prior year (H1 2013: 13.2m). 
The Group held cash of 7.7m at 30 June 2014 and taken together with the outstanding debt of 8.0m, there was a small net debt position of 0.3m (31 December 2013: net cash of 3.7m). There was a net cash inflow from operating activities in the period of 5.5m (H1 2013: 1.6m). 
The Group continues to view investments in the development of new products as key to future growth. The cash outflow from investing activities amounted to 9.4m (H1 2013: 2.6m) which comprised 7.0m (net of cash acquired) for the acquisition of Pebble Beach Systems Limited , net of 6.1m cash acquired with the business and 2.4m in respect of net capital expenditure and the capitalisation of development costs (H1 2013: 2.2m).
Earnings per Share
The adjusted earnings per share for the period was 1.2p (H1 2013: 1.8p). After charging non-recurring costs and the amortisation of acquired intangibles, the reported earnings per share from continuing operations was 1.7p (H1 2013: 1.3p). 
Dividends
The final dividend of 1.25 pence per share in respect of the year ended 31 December 2013 was paid to shareholders on 18 July 2014. As in previous years, the Board is not declaring an interim dividend. 
Business Performance 
The table below sets out the key performance indicators that are used by management to measure the performance in the business. 
Performance for the six months ended 30 June
2014
2013
Change
FY 2013




Continuing business:




Orders received (m)
33.3
33.6
(0.9%)
60.2
Revenue (m)
27.1
28.0
(3.2%)
59.9
Book to bill ratio
122.9%
120.0%
(2.9 pts)
100.5%
Gross margin
42.8%
41.6%
1.2 pts
40.7%
Total operating costs (m)1
13.2
13.0
1.5%
26.7
Adjusted operating profit (m)2
1.7
2.0
(15.0%)
4.3
Adjusted earnings per share 2
1.2p
1.8p

4.2p 
Net cash generated from operating activities (m)
5.5
1.6
243.8%
4.2
1 Operating costs comprise sales and marketing expenses, administrative expenses, the costs associated with logistics (presented within Cost of sales) and R&D and excludes amortisation of acquired intangibles and non-recurring items. 
2 Defined as operating profit/(loss) before the amortisation of acquired intangibles and other non-recurring costs. Adjusted EPS is calculated on the same basis after taking account of related tax effects.
Our Markets 
Orders received from our broadcast market were down 22.9% to 21.5m (H1 2013: 27.9m). Surveillance orders were up 107% to 11.8m (H1 2013: 5.7m). 
Broadcast revenues declined by 10.2% to 21.1m (H1 2013: 23.5m). The hardware revenue performance was disappointing, but was against the backdrop of a low opening order book brought forward from 2013, offset by satisfactory performance in challenging economic environments throughout Western Europe and the US, and supported by the start of the UK Government contract. The software revenue was ahead of expectations in the period. Surveillance revenue increased by 33.3% to 6.0m (H1 2013: 4.5m). 





Revenue by market
H1 2014
H1 2013
Change
FY 2013
m
m
%
m
Broadcast:




UK & Europe
8.3
5.9
40.7
11.6
Americas
7.4
9.1
(18.7)
18.3
Middle East and Africa
2.7
6.4
(57.8)
12.1
Asia/Pacific
2.7
2.1
28.6
6.1
Broadcast 
21.1
23.5
(10.2)
48.1
Surveillance 
6.0
4.5
33.3
11.8
Total
27.1
28.0
(3.2)
59.9





Regional operations
H1 2014
H1 2013
Change
FY 2013
m
m
% 
m
Revenues 




UK business
21.7
19.1
13.6
42.3
US business
8.8
11.8
(25.4)
24.6
Inter-segmental
(3.4)
(2.9)
17.2
(7.0)
Total revenue
27.1
28.0
(3.2)
59.9
Adjusted operating profit




UK business
3.3
3.1
6.5
6.4
US business
(0.4)
(0.3)
(33.3)
0.4
Central income/(costs)
(1.2)
(0.8)
(50.0)
(2.5)
Total adjusted operating profit 
1.7
2.0
(15.0)
4.3





Principal risks and uncertainties 
The principal risks and uncertainties affecting the business activities of the Group remain those detailed on pages 37 of the 2013 Annual Report, a copy of which is available on the Group website at www.vislink.com. The Board considers that these remain a current reflection of the main risks and uncertainties facing the business for the remaining six months of the financial year. The Group notes that this is not an exhaustive list. The Group's risk management process remains unchanged from 31 December 2013 and is described in detail in the 2013 Annual Report. The principal risks considered by the Board relate to global economic conditions and those associated with the Group's markets, reputation, overseas operations, customer defaults, senior management and foreign exchange. The principal exchange rates used in the preparation of this condensed consolidated half year financial information are provided in note 14. 
Strategy and Outlook
Our strategy is to continue to develop our core competence and to provide solutions for the broadcast and surveillance markets with new markets in broadcast cellular and playout automation.
We remain committed to our customer centric, solution-led and best-in-class products which enable the Group to successfully capture new expanding markets.
The Board believes that the Group is well placed to benefit from macro drivers, spectrum change, switch to HD and acceleration of IP technologies, although it believes broadcasters will want flexibility, hence our commitment to hybrid products. 
Our software business is developing very quickly and continues to trade ahead of our expectations at the time of acquisition. The partnership with Harmonic Inc, which will be announced later today, will add new routes to our expanded market with leading players. 
We have an improved outlook for the broadcast market, with anticipated contract recovery in surveillance. These factors, combined with a significantly reduced overhead cost in our hardware division, will contribute towards improved trading in the second half. 
Our strong order book underpins this outlook. 
Our move to AIM, announced in January 2014, has simplified and reduced the financial burden of making acquisitions, giving us continued benefits for bolt-on acquisitions.
2014 is a transitional and transformational year for the Vislink Group with the acquisition of our software division and the announcement of the strategic agreement with Harmonic Inc.
As the proportion of our business coming from higher margin software becomes more significant, the target revenue needed to generate our long stated operating profit target will change. The Company remains committed to its target operating profit of 8.0m through both organic growth and bolt-on acquisitions.
The Board remains confident of continuing to trade in line with market expectations and the future prospects for the Group.
John Hawkins
Executive Chairman 
CONSOLIDATED GROUP INCOME STATEMENT 
For the six months ended 30 June 2014







Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
(Unaudited)
(Audited)
Notes
000
000
000
Continuing operations




Revenue
5
27,111
28,028
59,879
Cost of sales

(15,503)
(16,360)
(35,537)
Gross profit

11,608
11,668
24,342
Sales and marketing expenses

(4,300)
(5,036)
(10,273)
Research and development costs

(2,198)
(2,145)
(3,942)
Administrative costs

(3,391)
(2,458)
(5,791)
Other income/(expenses)

355
(622)
(1,258)
Operating profit
5
2,074
1,407
3,078
Operating profit is analysed as:




Adjusted operating profit

1,719
2,029
4,336
Amortisation of acquired intangibles

(906)
(656)
(1,420)
Non-recurring items
6
1,261
34
162
Finance income/(costs) - net

(51)
12
15
Profit before taxation

2,023
1,419
3,093
Taxation
7
(13)
73
384
Profit for the period being profit attributable to equity shareholders

2,010
1,492
3,477
Basic earnings per share
9
1.7p
1.3p
3.1p
Diluted earnings per share
There is no difference between basic and diluted earnings per share (note 9).
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2014





Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31December 2013
(Unaudited)
(Unaudited)
(Audited) 
000
000
000




Profit for the period
2,010
1,492
3,477
Items that may subsequently be reclassified to profit or loss:



Exchange difference on translation of foreign currency net investments
(333)
800
(200)




Total comprehensive income for the period 
1,677
2,292
3,277


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the six months ended 30 June 2014

Share Capital
Share premium account
Capital redemption reserve
Merger reserve
Translation reserve
Retained earnings
Total 
000
000
000
000
000
000
000
Balance at 1 January 2014
2,848
4,900
617
30,565
3,954
6,718
49,602
Issue of share capital
117
-
-
1,883
-
-
2,000
Share based payments: value of employee services
-
-
-
-
-
198
198
Dividends payable
-
-
-
-
-
(1,471)
(1,471)
Transactions with owners
117
-
-
1,883
-
(1,273)
727
Retained profit for the period
-
-
-
-
-
2,010
2,010
Exchange difference on translation of foreign currency net investments
-
-
-
-
(333)
-
(333)
Total comprehensive income for the period 
-
-
-
-
(333)
2,010
1,677
Balance at 30 June 2014
2,965
4,900
617
32,448
3,621
7,455
52,006








Balance at 1 January 2013
2,848
4,900
617
30,565
4,154
4,293
47,377
Share based payments: value of employee services
-
-
-
-
-
125
125
Dividends payable
-
-
-
-
-
(1,413)
(1,413)
Transactions with owners
-
-
-
-
-
(1,288)
(1,288)
Retained profit for the period
-
-
-
-
-
1,492
1,492
Exchange differences on translation of overseas operations
-
-
-
-
800
-
800
Total comprehensive income for the period 
-
-
-
-
800
1,492
2,292
Balance at 30 June 2013
2,848
4,900
617
30,565
4,954
4,497
48,381








Balance at 1 January 2013
2,848
4,900
617
30,565
4,154
4,293
47,377
Share based payments: value of employee services
-
-
-
-
-
361
361
Dividends paid
-
-
-
-
-
(1,413)
(1,413)
Transactions with owners
-
-
-
-
-
(1,052)
(1,052)
Retained profit for the year
-
-
-
-
-
3,477
3,477
Exchange differences on translation of overseas operations
-
-
-
-
(200)
-
(200)
Total comprehensive income for the period 
-
-
-
-
(200)
3,477
3,277
Balance at 31 December 2013
2,848
4,900
617
30,565
3,954
6,718
49,602


CONSOLIDATED GROUP STATEMENT OF FINANCIAL POSITION
As at 30 June 2014

Notes
Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
(Unaudited)
(Audited) 
000
000
000
Assets




Non-current assets




Intangible assets
10
43,885
29,561
33,033
Property, plant and equipment
10
2,579
2,467
2,430
Deferred tax assets

2,746
1,211
4,150


49,210
33,239
39,613
Current assets




Inventories

12,061
13,158
11,094
Trade and other receivables

11,670
13,302
11,907
Cash and cash equivalents
11
7,749
7,243
3,705


31,480
33,703
26,706
Liabilities




Current liabilities




Financial liabilities-borrowings
11
5,000
-
-
Trade and other payables

16,322
16,694
12,848
Current tax liabilities

184
129
12
Provisions for other liabilities and charges
12
846
1,040
638


22,352
17,863
13,498





Net current assets

9,128
15,840
13,208





Non-current liabilities




Financial liabilities-borrowings
11
3,000
-
-
Deferred tax liabilities

3,268
593
3,153
Provisions for other liabilities and charges 
12
64
105
66


6,332
698
3,219





Net assets

52,006
48,381
49,602





Shareholders' equity




Ordinary shares

2,965
2,848
2,848
Share premium account

4,900
4,900
4,900
Capital redemption reserve

617
617
617
Merger reserve

32,448
30,565
30,565
Translation reserve

3,621
4,954
3,954
Retained earnings

7,455
4,497
6,718
Total shareholders' equity

52,006
48,381
49,602
Approved by the Board on 2 September 2014 and signed on its behalf by:
John Hawkins
Executive Chairman 
Ian Davies
Group Finance Director 
CONSOLIDATED GROUP CASH FLOW STATEMENT 
For the six months ended 30 June 2014

Notes
Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
(Unaudited)
(Audited)
000
000
000
Cash flows from operating activities




Cash generated from/(absorbed by) operations
13
5,610
1,619
4,352
Interest (paid)

(69)
-
(2)
Taxation (paid)/received

(81)
(39)
(114)
Net cash generated from operating activities

5,460
1,580
4,236





Cash flows from investing activities




Interest received

14
12
19
Acquisition of subsidiary (net of cash acquired)
4
(7,004)
-
(2,031)
Deferred consideration in respect of previous acquisitions

-
(433)
(405)
Proceeds from sale of property, plant and equipment

-
29
64
Purchase of property, plant and equipment
10
(440)
(170)
(473)
Expenditure on capitalised development costs
10
(1,999)
(2,010)
(4,453)
Net cash used in investing activities

(9,429)
(2,572)
(7,279)





Cash flows from financing activities




Net proceeds from new bank loans
11
8,000
-
-
Dividend paid to shareholders

-
-
(1,413)
Net cash generated/(used) in financing activities

8,000
-
(1,413)
Net increase/(decrease) in cash and cash equivalents

4,031
(992)
(4,456)
Cash and cash equivalents at beginning of period

3,705
8,131
8,131
Effect of foreign exchange rate changes
11
13
104
30
Cash and cash equivalents at end of period 
11
7,749
7,243
3,705


NOTES TO THE HALF YEAR FINANCIAL INFORMATION
For the six months ended 30 June 2014
1. GENERAL INFORMATION
Vislink plc ("the Company") and its subsidiaries (together "the Group") is a global technology business specialising in the collection and delivery of high quality video and associated data from the field to the point of usage. Vislink provides solutions to the broadcast market for the collection of live news, sport and entertainment events and to the surveillance market including defence, 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 300 people worldwide and have net assets of 52.0m. 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, which is listed on the AIM Market of the London Stock Exchange and 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 condensed consolidated half year financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2013 were approved by the Board of Directors on 26 March 2014 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 498 of the Companies Act 2006.
This condensed consolidated half year financial information has been subject to a review in accordance with ISRE (UK and Ireland) 2410 by our auditors but has not been subject to an audit.
This half year results announcement was approved for issue by the Board of Directors on 02 September 2014.
2. BASIS OF PREPARATION
This condensed consolidated half year financial information for the six months ended 30 June 2014 has been prepared in accordance with the AIM Rules for Companies and with IAS 34, 'Half year financial reporting' as adopted by the European Union. The condensed consolidated half year financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2013, which have been prepared in accordance with IFRSs as adopted by the European Union.

The preparation of the financial information requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reporting period. Although these estimates are based on management's best knowledge of the amount, event or actions, actual results ultimately may differ from these estimates.
3. ACCOUNTING POLICIES

The accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2013, as described in those annual financial statements.
Exceptional items are disclosed and described separately in the financial statements where it is necessary to do so to provide further understanding of the financial performance of the Group. They are material items of income or expense that have been shown separately due to the significance of their nature or amount.
Taxes on income in the half year periods are accrued using the tax rate that would be applicable to expected total annual earnings on a country by country basis.
4. BUSINESS COMBINATIONS
On 18 March 2014, the Group acquired 100 per cent of the issued share capital and voting rights of Pebble Beach Systems Ltd, a company based in the United Kingdom that operates within the Broadcast segment providing software solutions for playout with advanced software technology.
The acquisition of Pebble Beach Systems will move Vislink into the provision of software solutions for playout with advanced software technology. The Company's existing capabilities of offering broadcasters wireless communication systems for the capture of live TV coverage of news, entertainment and sports events will now be complemented with world class television automation and media management services for broadcast studios. 
The goodwill arising on the acquisition reflects the expected integration benefits and the market-leading product offering. Furthermore Pebble Beach Systems will gain from access to significantly increased sales channels through the global network of over 900 broadcasters that Vislink works with as well as its international network of offices. Along with its existing hardware product portfolio, Vislink will now be able to offer broadcasters a complete 'scene to screen' solution. 
BUSINESS COMBINATION 
Fair value
000
Recognised amounts of identifiable assets acquired and liabilities assumed:

Cash and cash equivalents
6,089
Property, plant and equipment
162
Acquired intangibles - intellectual property
3,350
Acquired intangibles - customer relationships and brands
4,494
Inventories
84
Trade and other receivables
1,509
Trade and other payables
(2,304)
Net deferred tax liability
(1,591)
Total identifiable net assets
11,793
Goodwill
3,076
Total consideration
14,869


Consideration transferred settled in cash 
12,869
Equity shares issued
2,000
Total consideration
14,869
Pebble Beach Systems has contributed 3.1m of revenue and an operating profit of 1.1m since acquisition. If the acquisition was applicable from 1 January 2014 the Group would have reported revenue of 28.7m and operating profit of 2.4m. 
Acquisition-related costs of 0.3m are included in other expenses in the income statement and are considered to be non-recurring (note 6). The total initial cash outflow associated with the acquisition, net of cash acquired, was 7.0m. 0.9m of the cash consideration disclosed above was paid after the period end.

5. SEGMENTAL ANALYSIS
The two markets in each of the UK and US regions are Broadcast and Surveillance. As the regions manage and control the markets directly, costs are shared across markets in certain regions which means that any allocation of costs to markets would be arbitrary. The focus of management is to ensure that the appropriate material margins are being achieved in each market as a sub analysis of the regional performance.
The segment information provided to the Executive Management Board for the reportable continuing segments for the period ended 30 June 2014 is as follows:

UK

US

TOTAL CONTINUING OPERATIONS
H1 2014
H1 2013
FY 2013

H1 2014
H1 2013
FY 2013

H1 2014
H1 2013
FY 2013
m
m
m

m
m
m

m
m
m
Revenue:











Broadcast 
14,170
15,129
30,931

6,953
8,439
17,188

21,123
23,568
48,119
Surveillance 
4,729
1,401
5,241

1,259
3,059
6,519

5,988
4,460
11,760
External revenue
18,899
16,530
36,172

8,212
11,498
23,707

27,111
28,028
59,879
Inter-segmental
2,815
2,542
6,112

576
333
839

3,391
2,875
6,951
Total revenue
21,714
19,072
42,284

8,788
11,831
24,546

30,502
30,903
66,830
Inter-segmental








(3,391)
(2,875)
(6,951)
Reported revenue








27,111
28,028
59,879
Operating profit:











Adjusted operating profit/(loss)
3,284
3,080
6,408

(369)
(232)
407

2,915
2,848
6,815
Central costs








(1,196)
(819)
(2,479)
Group adjusted operating profit








1,719
2,029
4,336
Amortisation of acquired intangibles
(750)
(175)
(572)

(156)
(481)
(848)

(906)
(656)
(1,420)
Non-recurring items
(374)
34
330

(69)
-
(42)

(443)
34
288
Central non-recurring items
-
-
-

-
-
-

1,704
-
(126)
Group total operating profit
2,160
2,939
6,166

(594)
(713)
(483)

2,074
1,407
3,078
GEOGRAPHIC REVENUE ANALYSIS BY DESTINATION
Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
'000
(Unaudited)
'000
(Audited) 
'000
UK & Europe
12,773
6,912
15,248
Americas
8,687
12,088
24,745
Middle East and Africa
2,716
6,847
13,619
Asia/Pacific
2,935
2,181
6,267

27,111
28,028
59,879
The amounts reported to the Executive Chairman with respect to total net assets are measured in a manner consistent with that of the financial statements. The assets are allocated based on the operations of the segment and the physical location of the asset


NET ASSETS
Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
'000
(Unaudited)
'000
(Audited)
'000




UK
32,056
26,438
30,579
US
19,340
20,334
18,741
Segment net assets
51,396
46,772
49,320
Group net assets
610
1,609
282

52,006
48,381
49,602
6. NON-RECURRING ITEMS
The following items of unusual nature, size or incidence have been charged to operating profit during the period and are described as non-recurring.
Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
(Unaudited)
(Audited)
000
000
000




Rationalisation and redundancy costs
443
143
-
Provision release against contractual issues
-
-
(330)
Acquisition related costs
296

168
Deferred consideration release
(2,000)
(177)
-
Total non-recurring items
(1,261)
(34)
(162)
The release of deferred consideration relates to the acquisition of Amplifier Technology Limited in 2013 where the post-acquisition performance criteria which would have triggered payment were not met. 
7. TAX ON PROFIT ON ORDINARY ACTIVITIES

Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
(Unaudited)
(Audited)
000
000
000
Current tax:



UK corporation tax 
76
46
-
Foreign tax
5
-
21
Total current tax
81
46
21
Deferred tax: 



UK corporation tax
(148)
(28)
(144)
Foreign tax
80
(91)
(261)
Total deferred tax
(68)
(119)
(405)
Total taxation charge
13
(73)
(384)
The tax charge for the six months ended 30 June 2014 is based on the effective tax rate of 1%, which is significantly lower than the standard rate principally due to the utilisation of tax losses. Deferred tax is calculated in full on temporary differences under the liability method using a tax rate appropriate to the country in which the deferred tax liability or assets has arisen. Deferred tax assets have been recognised in respect of all tax losses and other temporary differences to the extent that they are regarded as recoverable against future profits. 
8. DIVIDENDS
No interim dividend is proposed for the period. In respect of 2013 there was no interim dividend and the final dividend of 1.25 pence per share was approved at the Annual General Meeting on 21 May 2014 and paid on 18 July 2014. The total cash cost of the dividend was 1.5m.
9. 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 period, 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 115,803,000 ordinary shares in issue during the period (30 June 2013: 113,063,000 and 31 December 2013: 113,070,000). 
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 period. At 30 June 2014 there were 170,000 dilutive share options (30 June 2013: 156,000 and 31 December 2013: 278,000). The effect of dilutive shares was not material and therefore there is no difference between basic earnings per share and diluted earnings per share.
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 costs and their related tax effects. 
The reconciliation between reported and adjusted earnings and basic earnings per share for the continuing business is shown below:

Six months to 

Six months to 

Year ended
30-Jun-14
30-Jun-13
31-Dec-13

Pence per share 


Pence per share 


Pence per share
000
000
000
Reported earnings per share
2,010
1.7p

1,492
1.3p

3,477
3.1p
Amortisation of acquired intangibles after tax
758
0.7p

621
0.5p
1,336
1.2p
Non-recurring costs after tax
(1,420)
(1.2p)

(67)
(0.0p)

(124)
(0.1p)
Adjusted earnings per share
1,348
1.2p

2,046
1.8p

4,689
4.2p


10. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS

Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
(Unaudited)
(Audited)
000
000
000
Property, plant and equipment



Opening net book value as at 1 January 
2,430
2,695
2,695
Additions
440
170
473
Acquisitions through business combinations
162
-
124
Disposals
-
(57)
(67)
Depreciation 
(431)
(397)
(790)
Exchange adjustment
(22)
56
(5)
Closing net book value
2,579
2,467
2,430




Intangible assets



Capitalised development costs


Opening net book value as at 1 January 
7,569
5,439
5,439
Additions
1,999
2,010
4,453
Additions through business combinations
-
-
-
Amortisation 
(800)
(1,149)
(2,189)
Impairment Charge
-
-
-
Exchange adjustment
(161)
234
(134)
Capitalised development costs closing net book value
8,607
6,534
7,569




Goodwill and acquired intangible assets 



Opening net book value as at 1 January 
25,464
23,237
23,237
Additions
7,844
-
-
Additions through business combinations
3,076
-
3,752
Amortisation 
(906)
(656)
(1,420)
Exchange adjustment
(200)
446
(105)
Goodwill and acquired intangible assets closing net book value
35,278
23,027
25,464




Total closing net book value of intangible assets
43,885
29,561
33,033


11. CASH, BORROWINGS AND LOANS
The movements in cash and cash equivalents (net of overdrafts), borrowings and loans in the period were as follows:
 

Net cash and cash equivalents
Other borrowings
Total net cash


000
000
000
Six months ended 30 June 2014




At 1 January 2014

3,705
-
3,705
Cash flow for the period before financing and acquisition of subsidiary 

3,035
-
3,035
Purchase of subsidiary

(13,093)
-
(13,093)
Cash acquired with subsidiary

6,089

6,089
Movement in borrowings in the period

8,000
(8,000)
-
Exchange rate adjustments

13
-
13
At 30 June 2014

7,749
(8,000)
(251)





Six months ended 30 June 2013




At 1 January 2013

8,131
-
8,131
Cash flow for the period before financing 

(992)
-
(992)
Movement in borrowings in the period

-
-
-
Exchange rate adjustments

104
-
104
At 30 June 2013

7,243
-
7,243





Year ended 31 December 2013




At 1 January 2013

8,131
-
8,131
Cash flow for the period before financing and acquisition of subsidiary

(1,012)
-
(1,012)
Purchase of subsidiary

(2,093)

(2,093)
Cash acquired with subsidiary

62

62
Repayment of borrowings

-
-
-
Dividend paid to shareholders

(1,413)
-
(1,413)
Exchange rate adjustments

30
-
30
At 31 December 2013

3,705
-
3,705
The Group held cash of 7.7m at the period-end and taken together with the outstanding debt of 8.0m, there was a small net debt position of 0.3m. 


12. PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
(Unaudited)
(Audited)
000
000
000




Warranty provision
340
345
345
Property provision 
323
367
359
Rationalisation provision
247
103
-
Other provision
-
330
-

910
1,145
704




Amounts due within one year
846
1,040
638
Amounts due after one year
64
105
66

910
1,145
704
Warranty provisions are made in respect of the expected future warranty costs in certain businesses based on historic actual costs. Warranty periods on products are generally between one and two years.
The property provision is in respect of vacated leasehold properties acquired as part of the Gigawave acquisition and represents the estimated future liabilities associated with the properties. The provision has been reduced as a result of a recent lease surrender for a vacated property.
Rationalisation provisions are in respect of future liabilities for committed reorganisation costs at the statement of financial position dates.
The Group has since released the other provision that was in place at 30 June 2013 that represented an on-going dispute with a distributor regarding contractual obligations. The provision represented the potential liabilities associated with the costs incurred in resolving the dispute.


13. NOTES TO THE CASH FLOW STATEMENT 
Net cash flow from operating activities comprises:

Six months to 30 June 2014
Six months to 30 June 2013
Year ended 
31 December 2013
(Unaudited)
(Unaudited)
(Audited)
000
000
000
Profit before tax 
2,023
1,419
3,093
Depreciation
431
397
790
(Profit)/loss on disposal of property, plant and equipment
-
29
3
Acquisition related costs
227
-
93
Release of deferred consideration no longer payable
(2,000)
-
-
Amortisation and impairment of development costs
800
1,149
2,189
Amortisation of acquired intangibles
906
657
1,420
Share based payment expenses
198
125
361
Finance income from continuing operations
-
-
(19)
Finance costs from continuing operations
-
-
4
Increase in inventories
(1,092)
(3,298)
(1,478)
Decrease/(increase) in trade and other receivables 
1,563
(2,730)
(1,676)
Increase in payables 
2,344
4,161
365
Increase/(decrease) in provisions
210
(290)
(793)
Net cash inflow from operating activities
5,610
1,619
4,352
14. FOREIGN EXCHANGE RATES
The principal exchange rates used by the Group in translating overseas profits and net assets into GBP are set out in the table below.

Six months to 30 June 2014
Six months to 30 June 2013
Year ended 31 December 2013
(Unaudited)
(Unaudited)
(Audited)







Average rate for the period



US dollar
1.6690
1.5438
1.5645
Period end rate



US dollar
1.7097
1.5167
1.6528


Independent review report to Vislink plc
Introduction
We have been engaged by the company to review the condensed consolidated half-year financial information in the half-yearly financial report for the six months ended 30 June 2014, which comprises the Consolidated Group Income Statement, Consolidated Statement of Comprehensive Income, Consolidated Statement of Changes in Shareholders Equity, Consolidated Group Statement of Financial Position, Consolidated Group Cash Flow Statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the AIM Rules for Companies which require that the financial information must be presented and prepared in a form consistent with that which will be adopted in the company's annual financial statements.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting", as adopted by the European Union.
Our responsibility
Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the company for the purpose of the AIM Rules for Companies and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the AIM Rules for Companies.
PricewaterhouseCoopers LLP
Chartered Accountants
2 September 2014
Bristol
Notes:
(a) The maintenance and integrity of the Vislink plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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