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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Videndum Plc | LSE:VTC | London | Ordinary Share | Ordinary Shares |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 1,290.00 | 1,280.00 | 1,288.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
TIDMVTC
RNS Number : 3755X
The Vitec Group PLC
21 February 2017
Hot Features
Premium
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. THIS ANNOUNCEMENT
CONTAINS INSIDE INFORMATION.
21 February 2017
The Vitec Group plc
2016 Full Year Results
Record performance with strong growth in revenue,
profit* and cash
The Vitec Group plc ("Vitec" or "the Group"), the
international provider of products and services for
the broadcast and photographic markets, announces
its audited results for the year ended 31 December
2016.
Results 2016 2015 Change
--------------------- ---------- ----------- ----------
Revenue GBP376.2m GBP317.8m +18.4%
Adjusted operating
profit* GBP41.5m GBP35.4m +17.2%
Adjusted profit
before tax* GBP37.5m GBP31.5m +19.0%
Adjusted earnings
per share* 61.3p 49.4p +24.1%
Total dividend
per share 27.2p 24.6p +10.6%
Statutory
Operating profit GBP14.5m GBP22.4m -35.3%
Profit before tax GBP10.5m GBP18.5m -43.2%
Basic earnings
per share 20.2p 29.3p -31.1%
Free cash flow(+) GBP44.6m GBP16.2m +GBP28.4m
Net debt GBP75.1m GBP76.3m -GBP1.2m
--------------------- ---------- ----------- ----------
Highlights
-- Strategic progress in higher technology products,
new growth markets and APAC
-- Strong Group performance in revenue, adjusted
profit* and EPS*, driven by:
-- Favourable benefit from foreign
exchange
-- Higher revenue growth in the second
half
-- Underlying sales and adjusted profit* growth,
excluding anticipated lower performance of non-core
Haigh-Farr business, and despite lower activity
in US broadcast rentals
-- Significant reduction in working capital through
management focus to produce strong free cash
flow(+) of GBP44.6 million
-- Total dividend for 2016 increased by 10.6% to
27.2p increasing dividend cover to 2.3x
* In addition to statutory reporting, Vitec reports
performance on an adjusted basis before restructuring
costs, charges associated with acquisition of businesses
and impairment of goodwill, as described on page
2.
(+) Free cash flow: cash generated from operations
in the financial year after net capital expenditure,
net interest and tax paid.
Commenting on the results, Stephen Bird, Group Chief
Executive, said:
"We are pleased to report that Vitec achieved a record
performance with strong growth in revenue, adjusted
profit* and cash. As expected, foreign exchange rates
had a significant favourable impact on our results.
We are continuing to transform the Group. We are
outperforming our markets by driving sales, investing
in new technologies, and expanding our capabilities
in the exciting and growing "image capture and sharing"
market. A strong cash flow performance and our robust
balance sheet support our clear growth strategy.
Vitec has a strong position in changing markets and
the Board remains confident about future growth prospects,
assuming no significant adverse change in exchange
rates."
For further information
please contact:
The Vitec Group plc Telephone: 020 8332
4600
Stephen Bird, Group Chief
Executive
Paul Hayes, Group Finance
Director
MHP Communications Telephone: 020 3128
8100
Tim Rowntree/ Jamie Ricketts/
Ollie Hoare
Vitec will present its results to analysts at 9.30am
on Tuesday, 21 February 2017. An audio recording
of the presentation, along with the presentation
slides, will be available on our website after the
meeting.
Users can pre-register to access the recording and
slides using the following link:
http://www.vitecgroup.com/full year results 2016
Notes to Editors:
Vitec is a leading global provider of premium branded
products and services to the fast changing and growing
"image capture and sharing" market.
Vitec's customers include broadcasters, independent
content creators, photographers and enterprises,
and our activities comprise: design, manufacture
and distribution of high performance products and
software including camera supports, wireless systems,
robotic camera systems, prompters, LED lights, mobile
power, monitors and bags; and premium services including
technical solutions, systems integration and equipment
rental for TV production teams, film crews and enterprises.
We employ around 1,700 people across the world in
ten different countries and are organised in two
Divisions: Broadcast and Photographic.
The Vitec Group plc is listed on the London Stock
Exchange with 2016 revenue of GBP376.2 million.
More information can be found at: www.vitecgroup.com.
LEI number: 2138007H5DQ4X8YOCF14
Notes * - Adjusted performance is before: GBP5.2m of
restructuring costs (2015: GBP4.9m); GBP9.7m
charges associated with acquisition of businesses
(2015: GBP8.1m); and GBP12.1m impairment of
goodwill (2015: GBPnil). Charges associated
with acquisition of businesses consisted of
GBP1.2m of earnout payments and purchase price
adjustment (2015: GBP2.6m); GBP0.6m of transaction
costs relating to acquisition of businesses
(2015: GBP0.1m); and GBP7.9m amortisation of
acquired intangible assets (2015: GBP5.4m).
- Adjusted operating expenses is before restructuring
costs, charges associated with acquisition
of businesses and impairment of goodwill. It
excludes GBP0.5m (2015: GBP0.9m) of restructuring
costs included in cost of sales.
- Adjusted earnings per share is earnings before
restructuring costs, charges associated with
acquisition of businesses and impairment of
goodwill divided by the weighted average number
of ordinary shares in issue.
- Where adjusted performance measures are provided,
they are compared to the equivalent measures
in the prior year.
1 This statement is based on information sourced
from management estimates and includes comparing
performance at constant exchange rates to assist
in understanding the underlying performance
of the Group.
2 2016 average exchange rates: GBP1 = $1.35,
GBP1 = EUR1.22, EUR1 = $1.10, GBP1 = Yen147.
3 2015 average exchange rates: GBP1 = $1.53,
GBP1 = EUR1.38, EUR1 = $1.11, GBP1 = Yen185.
4 The Company's Annual General Meeting ("AGM")
will be held on Wednesday, 17 May 2017. The
2016 Annual Report and Accounts and Notice
of AGM will be posted to shareholders and available
on the Company's website from Tuesday, 14 March
2017.
2016 management & financial review
Revenue increased by 18.4% to GBP376.2 million (2015:
GBP317.8 million) and adjusted operating profit* was
17.2% higher at GBP41.5 million (2015: GBP35.4 million).
This included a benefit from foreign exchange; at constant
exchange rates revenue grew by 4.8% while adjusted
operating profit* decreased by 0.3%. Growth in sales
of higher technology products and services in new markets
where Vitec continues to invest in new product development
was offset by anticipated lower activity in some of
our more mature markets. The statutory operating profit
was GBP14.5 million (2015: GBP22.4 million) as a result
of these trends and the GBP12.1 million (2015: GBPnil)
one-off, non-cash impairment of goodwill. At constant
exchange rates the Group delivered higher revenue growth
on the prior year of 6.3% in the second half of the
year in comparison to first half growth of 3.1%.
The Broadcast Division grew revenue by 18.9% to GBP224.8
million and adjusted operating profit* increased by
3.4% to GBP21.0 million. There was continued growth
in higher technology products including wireless transmitters
and receivers, camera monitors and mobile power. Revenue
growth includes a GBP24.1 million benefit from foreign
exchange and GBP3.2 million from the acquisitions of
Offhollywood and Wooden Camera. During the year Vitec
successfully supported the Rio 2016 Olympics. This
was partially offset by the anticipated lower revenue
performance of our Haigh-Farr antenna business and
a decrease in activity in our US asset rentals business.
The Photographic Division grew revenue by 17.5% to
GBP151.4 million and adjusted operating profit* increased
by 35.8% to GBP20.5 million. At constant exchange rates
adjusted operating profit* was 2.8% higher than the
prior year. Sales benefited from: a number of innovative
product launches in the year; the acquisition of our
Netherlands distributor, Provak; and favourable foreign
exchange. Adjusted operating profit* growth also included
the benefit from previous restructuring actions.
Statutory gross margin % at 39.4% was lower than the
prior year (2015: 40.6%). Excluding the impact of Haigh-Farr
of 40 bps and the US broadcast services business of
120 bps, gross margin % was 40 bps higher than the
prior year. This reflects the growth in new technology
sales, operational initiatives and acquisitions.
Adjusted operating expenses* were GBP12.7 million higher
than in 2015 at GBP107.1 million. This mainly reflects
an adverse currency impact of GBP10.0 million, incremental
costs from acquisitions and investments in our higher
technology businesses to drive future growth. This
has been partly offset by restructuring savings. Investment
in new product development at GBP13.4 million (2015:
GBP12.9 million) was broadly in line with the prior
year at 4% of Group product sales.
There was a restructuring charge of GBP5.2 million
in 2016 (2015: GBP4.9 million) relating to the actions
announced with our 2015 results. These actions were
taken in accordance with our plans, with incremental
savings of GBP5.7 million in the year. The restructuring
charge also reflected a GBP0.7 million gain on the
sale of the manufacturing site in Bury St. Edmunds
("Bury"). Consideration of GBP3.9 million was agreed
in January 2016. We plan to vacate the site in late
2017 and move to a lean, modern manufacturing facility
in a nearby leased site.
As expected, there was a net foreign exchange benefit
of GBP6.2 million on our adjusted operating profit*
of GBP41.5 million versus 2015 mainly due to a stronger
US Dollar and Euro, particularly in the second half
of the year. If exchange rates were to remain at current
levels, Vitec would realise a net currency benefit
in the first half of 2017 mainly from the translation
of its results into Sterling.
Adjusted profit before tax* of GBP37.5 million was
GBP6.0 million higher than the prior year (2015: GBP31.5
million). Statutory profit before tax of GBP10.5 million
(2015: GBP18.5 million) was after GBP5.2 million of
restructuring costs (2015: GBP4.9 million); GBP9.7
million charges associated with acquisition of businesses
(2015: GBP8.1 million) and a GBP12.1 million goodwill
impairment charge (2015: GBPnil) relating to Haigh-Farr
and the US broadcast services business. We decided
to impair this goodwill to better reflect the fair
value of each business in light of recent performance.
Adjusted earnings per share* increased by 24.1% to
61.3 pence per share (2015: 49.4 pence per share).
Basic earnings per share were 20.2 pence per share
(2015: 29.3 pence per share).
Free cash flow(+) of GBP44.6 million (2015: GBP16.2
million) is reported after GBP7.4 million of cash outflows
on restructuring actions (2015: GBP3.5 million). The
strong free cash flow(+) includes the benefits from
working capital management initiatives, including a
reduction in inventory of GBP11.2 million, and the
consideration of GBP3.9 million from the sale of the
Bury site. There was a total cash inflow of GBP12.8
million (2015: GBP3.3 million outflow) after investing
GBP20.3 million in acquisitions (2015: GBP9.0 million),
including a GBP3.0 million final earnout payment on
Teradek, and GBP11.1 million of dividend payments (2015:
GBP10.7 million).
Net debt at 31 December 2016 was GBP75.1 million (31
December 2015: GBP76.3 million). At constant currency
net debt would have reduced to GBP63.5 million given
a net adverse foreign exchange impact of GBP11.6 million.
The Group's balance sheet remains strong with a year-end
net debt to EBITDA ratio of 1.2 times (31 December
2015: 1.5 times).
The Board has recommended a final dividend of 17.3
pence per share (2015: 15.1 pence per share). The final
dividend, if approved by our shareholders at the 2017
AGM to be held on Wednesday, 17 May 2017, will be paid
on Friday, 19 May 2017. This will bring the total dividend
for 2016 to 27.2 pence per share (2015: 24.6 pence
per share) and provide full year adjusted dividend
cover of 2.3 times (2015: 2.0 times).
Delivering our strategy to realise growth in a changing
market
Vitec operates in the fast growing "image capture and
sharing" market. Technology is driving fundamental
changes to this market and Vitec's unique heritage
and the credibility of our premium brands enables us
to capitalise on those changes.
We have grown our addressable markets and end users
from traditional broadcast and photographic customers
to now encompass faster growing market segments, like
new media which includes social media. These include
independent content creators and enterprises that are
increasingly using high quality video for their communication.
Vitec continues to lead the market with its range of
products and services. We have developed a significantly
higher technology business by expanding our capabilities
in software development to support our hardware solutions,
by increasing our systems integration expertise, and
by designing products for new imaging devices.
We have been successfully transforming Vitec by implementing
a growth strategy focused on five main strategic priorities: 1. To improve the core by improving and strengthening
our business model while continuing to innovate.
In 2016 Vitec delivered a strong cash flow through
disciplined cost control and working capital
management initiatives that reduced inventory
levels significantly. The business has also
been improved through lean manufacturing programmes
and has realised savings on previously announced
restructuring activities. We have demonstrated
our innovation by launching new products, for
example new tripods, market-leading robotics
and innovative LED lights.
2. To maintain investment into new and faster growing
markets and technologies to underpin future
growth. For example, this year we expanded our
product offering in Apple stores globally and
we launched Sphere, our award winning Virtual
Reality product that allows the audience to
become the producer of content. We are also
building our business to address the growing
demand for high quality video produced by corporates,
religious, health and education establishments
and other enterprises.
3. To continue to get closer to our end customers
by owning more distributors and optimising our
e-commerce activities. In January 2016 we acquired
our former distribution partner in the Netherlands,
Provak, for a net consideration of GBP0.9 million,
which has expanded our strong photographic distribution
model. We are also investing in and optimising
our e-commerce capabilities through working
with our major e-commerce customers, such as
Amazon, and by further developing our own online
platforms.
4. To focus on geographical expansion, especially
in APAC, which we believe has good medium-term
growth opportunities. In 2016 we grew revenue
in this market by GBP12.8 million to GBP68.7
million, which included strong growth in Japan
where we have achieved record sales performances
this year. We expanded our Chinese direct distribution
model and invested in initiatives to improve
synergies across the Group in back office functions
in APAC. Vitec has a broad geographic spread
and a direct presence in ten countries: the
UK, the US, Costa Rica, France, Germany, Italy,
the Netherlands, Japan, China and Singapore.
In 2016, 48% of our revenues by destination
came from North America, with the remainder
split between Europe 31%, Asia-Pacific 18%,
and Rest of World 3%.
5. To supplement our many organic growth opportunities
with carefully targeted acquisitions and corporate
development. In April 2016 we acquired the business
and assets of Offhollywood that provides camera-back
modules for RED cameras and other services to
a similar customer base to that serviced by
the Group's existing higher technology businesses,
for an initial consideration of GBP1.5 million.
In September 2016 we acquired Wooden Camera,
a leading one-stop provider of high quality,
essential camera accessories used by filmmakers
and independent content creators, for an initial
consideration of GBP15.4 million. Wooden Camera
is performing ahead of our expectations. It
complements Vitec's strategy of providing premium
branded broadcast products and services to our
customers to capture and share exceptional images.
We believe that over the medium-term there are exciting
opportunities for Vitec that should deliver sustainable
sales growth while continuing to drive strong cash
performance. This will enable us to finance a growing
business, make value-adding acquisitions and pay well-supported,
progressive dividends.
Broadcast Division
The Broadcast Division designs, manufactures and distributes
premium branded products for broadcasting, film and
video production for broadcasters and independent content
creators. It also provides premium services including
equipment rental and technical solutions to TV production
teams, film crews, and corporate enterprises. Broadcast Division 2016 2015 % Change % Change
at constant
exchange
rates
-------------------- ---------- ---------- --------- -------------
Revenue GBP224.8m GBP189.0m +18.9% +5.6%
Adjusted operating
profit* GBP21.0m GBP20.3m +3.4% -2.7%
Adjusted operating -80
margin* 9.3% 10.7% -140 bps bps
-------------------- ---------- ---------- --------- -------------
* For Broadcast, before restructuring costs of GBP3.4m
(2015: GBP4.1m), charges associated with acquisition
of businesses of GBP8.9m (2015: GBP7.5m) and impairment
of goodwill of GBP12.1m (2015: GBPnil). There was a
statutory operating loss of GBP3.4m (2015: GBP8.7m
profit).
Revenue for 2016 was GBP224.8 million, an increase
of 18.9% on the prior year. At constant exchange rates
revenue grew by 5.6% on 2015 with a strong performance
from the higher technology businesses. Adjusted operating
profit* increased by GBP0.7 million to GBP21.0 million
although it was 2.7% lower than the prior year at constant
exchange rates.
Adjusted operating profit* and margins reflected a
strong performance by the higher margin technology
businesses but also the negative impact of the anticipated
lower volumes in the Haigh-Farr antenna business and
the lower activity at the US asset rentals business.
The Haigh-Farr business is a non-core activity. On
a constant currency basis excluding Haigh-Farr's results,
the Division's revenue grew by 7.0% and its adjusted
operating profit* was 11.2% higher.
The Division has continued to increase its sales of
higher technology products particularly for independent
content creators, including wireless transmitters and
receivers, camera monitors and mobile power. Our mobile
power business has grown, with the US broadcast battery
market performing well and we have gained a number
of large medical mobile power orders. This was offset
by lower sales in more mature markets.
We have continued to invest in new product development
in line with the changing nature of the broadcast market.
New products launched in the year include large High
Dynamic Range (HDR) monitors; virtual reality capabilities;
the Vinten Vantage, a compact robotic head providing
smooth on-air motion that supports many cameras and
lenses; and the Teradek Live:Air, an iOS app enabling
live video production with a full range of real time
features, using only an iPad.
Our higher technology offering was further enhanced
with the acquisitions of Offhollywood in April 2016
and Wooden Camera in September 2016. Both of these
acquisitions provide the Group with innovative ranges
of high quality branded camera accessories that we
are selling through our global distribution channel.
This builds on our recent strong acquisition track
record including the purchases of Teradek and SmallHD,
with SmallHD delivering growth in 2016 as it benefited
from investment in its monitor technology.
Revenue from the equipment rental and broadcast services
business was higher than the prior year, benefiting
from supporting the Rio 2016 Olympics and the award
of a significant contract with the NFL for project
management and technical support. However, the NFL
contract included high material costs with a low pass-through
margin.
The performance of the broadcast services business
was negatively impacted by a significant downturn in
the more competitive traditional US asset rentals market,
particularly in the second half of the year. We are
carefully reviewing the business' performance and taking
appropriate actions to drive improvement. This resulted
in a strong positive cash flow from this business despite
it making an operating loss in 2016. This has been
achieved by restructuring and further simplifying the
business model while significantly reducing the asset
base through lower levels of investment and by proactively
selling underperforming rental assets.
As previously identified, the Division's results were
also negatively impacted by the anticipated lower volumes
and planned cost investments within the higher margin
Haigh-Farr defence antenna business. The business remains
profitable but its outlook is much weaker having performed
particularly strongly for the last few years.
Photographic Division
The Photographic Division designs, manufactures and
distributes premium branded equipment for photographic
and video cameras and provides dedicated solutions
to professional and non-professional image makers.
This consists primarily of camera supports, tripods,
camera bags, lighting supports, LED lights, lighting
controls and filters. It also supplies an expanding
range of premium accessories for smartphones, action
cameras and drones. Photographic Division 2016 2015 % Change % Change
at constant
exchange
rates
----------------------- ---------- ---------- --------- -------------
Revenue GBP151.4m GBP128.8m +17.5% +3.6%
Adjusted operating
profit* GBP20.5m GBP15.1m +35.8% +2.8%
Adjusted operating -10
margin* 13.5% 11.7% +180bps bps
----------------------- ---------- ---------- --------- -------------
* For Photographic, before restructuring costs of GBP1.8m
(2015: GBP0.8m) and charges associated with acquisition
of businesses of GBP0.8m (2015: GBP0.6m). There was
a statutory operating profit of GBP17.9m (2015: GBP13.7m).
The Photographic Division performed well in 2016 growing
revenue by 17.5% to GBP151.4 million and adjusted operating
profit* by 35.8% to GBP20.5 million. After eliminating
the favourable effect of foreign exchange, revenue
was 3.6% higher and adjusted operating profit* increased
by 2.8%.
We continue to monitor the shipments of interchangeable
lens cameras as published by the Camera and Imaging
Products Association (CIPA). We believe that we are
continuing to outperform the market as our sales are
outperforming recent CIPA trends. Revenue growth has
been achieved through investing in and launching innovative
new products and developing our distribution channels.
As a result we have continued to grow our share in
most of our markets. Adjusted operating profit* growth
reflects this increase in sales and was helped by lean
initiatives and the restructuring actions completed
during the year.
New products launched this year include specialised
supports and bags that are designed for action cameras
and drones. This remains a higher growth area within
the photographic market. We have successfully grown
our video sales including the new Manfrotto monopod
and BeFree Live, a compact and lightweight head that
enables smooth camera movement.
We have also launched products aimed at smartphone
users who accessorise their phones because they want
to take better photographs. In 2016 we collaborated
with Apple to launch the TwistGrip that connects all
smartphones to any camera support. This is one of five
of our products that are sold in Apple's stores worldwide.
During the year the Division acquired the intellectual
property of Xume technology. This is a patented quick
release magnetic adapter that enables photographers
to connect filters to their lenses quickly and with
great precision. This range complements Manfrotto's
existing premium filters designed for professional
and non-professional image makers.
We continue to get closer to our customers with our
international distribution infrastructure and e-commerce
capabilities. We are pleased with the performance of
Provak, our former distribution partner in the Netherlands
that we acquired in January 2016. This business has
been successfully integrated into the Division and
further expands our strong photographic distribution
model. We believe that our distribution infrastructure
is a major asset in remaining close to our end customers.
This year we continued to develop our online platforms,
and launched and upgraded websites in several countries.
Our performance reflects the benefit from these investments
and the continued growth of our e-commerce sales, both
directly and through sales to our major online partners
including Amazon.
The Photographic Division has a good market share in
the APAC region and we are focused on delivering further
growth in this area. We have continued to grow sales
in APAC during 2016 supported by our direct distribution
in China, Hong Kong and Japan.
Financial detail
Adjusted operating profit* in 2016 was GBP6.1 million
higher than the prior year. This reflects a favourable
foreign exchange impact of GBP6.2 million, GBP1.1 million
contribution from acquisitions, and incremental savings
of GBP5.7 million from restructuring actions. This
was partly offset by investment in our higher technology
activities and the impact of lower volumes in Haigh-Farr
and our US broadcast asset rentals business. The statutory
operating profit of GBP14.5 million was GBP7.9 million
lower mainly due to the one-off, non-cash impairment
of GBP12.1 million of goodwill (2015: GBPnil).
Management's estimate of these drivers is summarised
in the following table: Adjusted operating profit* bridge
GBP million
2015 Adjusted operating
profit* 35.4
Decrease in adjusted gross
profit* in the year (1.1)
Incremental restructuring
savings 5.7
Increase in adjusted operating
expenses* (5.8)
(1.2)
Contribution from acquisitions 1.1
Foreign exchange effects:
- Translation 4.3
- Transaction after hedging 1.9
6.2
2016 Adjusted operating
profit* 41.5
------------------------------------ ------ ------
* Before restructuring costs, charges associated with
acquisition of businesses and impairment of goodwill
as defined on page 2 of this announcement.
Net financial expense
Net financial expense totalled GBP4.0 million and was
broadly in line with the prior year (2015: GBP3.9 million).
Interest payable was GBP4.2 million (2015: GBP4.0 million)
and was covered 14 times (2015: 13 times) by earnings
before interest, tax, depreciation and amortisation.
Profit before tax
Adjusted profit before tax* increased by GBP6.0 million
to GBP37.5 million (2015: GBP31.5 million). Statutory
profit before tax decreased by 43.2% to GBP10.5 million
(2015: GBP18.5 million).
Taxation
The effective taxation rate on adjusted profit before
tax* was 27% in 2016 (2015: 30%). The Group's tax rate
has improved year-on-year and we anticipate that the
tax rate will remain around 27% in 2017 supported by
reductions in the Italian corporation tax rate. Vitec's
tax charge is higher than the UK statutory rate because
the majority of our profits arise in overseas jurisdictions
with higher tax rates than the UK.
Earnings per share
Adjusted earnings per share* was 61.3 pence per share
(2015: 49.4 pence per share). Basic earnings per share
was 20.2 pence per share (2015: 29.3 pence per share).
Acquisitions
In January 2016 the Group acquired 100% of the share
capital of Manfrotto Distribution Benelux B.V. (formerly
Provak Foto Film Video B.V.), based in the Netherlands,
through a business combination for a net cash consideration
of EUR1.2 million (GBP0.9 million). The acquisition
complements the Group's owned distribution channels.
In April 2016, the Group acquired the business and
some of the assets of Offhollywood Digital, LLC ("Offhollywood"),
based in the US, through a business combination for
an initial net cash consideration of US$2.2 million
(GBP1.5 million). Under the terms of the acquisition,
there is a potential earnout payment of up to US$8.0
million that is dependent on performance against demanding
gross profit targets over the period to December 2018.
Offhollywood provides camera-back modules for RED cameras
and other services to a similar customer base to that
serviced by the Group's existing higher technology
businesses, and its products will be marketed through
the Group's global distribution network.
In September 2016 the Group acquired the whole of the
share capital of Wooden Camera, Inc. and Wooden Camera
Retail, Inc. ("Wooden Camera"), both based in the US,
through a business combination for an initial net cash
consideration of US$19.5 million (GBP14.9 million)
after taking account of US$0.6 million (GBP0.5 million)
of cash in the business at acquisition date. Under
the terms of the acquisition, there is a potential
earnout payment of up to US$15.0 million that is dependent
on performance against demanding EBITDA targets over
the period to December 2018. In 2016 an amount of US$2.0
million (GBP1.5 million) was provided for in relation
to its performance in 2016. Wooden Camera designs,
manufactures and retails directly and online, essential
professional camera accessories used by broadcasters
and independent content creators. The acquisition complements
the Group's existing range of broadcast products. Wooden
Camera operates within the Broadcast Division.
We continue to review various bolt-on acquisition opportunities.
These will be assessed as to the strategic, commercial
and financial benefits that they could provide against
acceptable risk parameters.
Restructuring costs
In 2016 there was a restructuring charge of GBP5.2
million (2015: GBP4.9 million) relating to actions
to streamline operations with lower growth prospects,
which we commenced in the second half of 2015. These
actions relate predominantly to redundancy costs and
have been completed in line with our plans.
The total year-on-year benefit from these restructuring
actions to our profitability was GBP5.7 million (2015:
GBP0.5 million). Cash outflows relating to restructuring
were GBP7.4 million in the year (2015: GBP3.5 million)
in line with expectations.
Charges associated with acquisition of businesses
The 2016 charges relate to the Group's acquisition
activities and amortisation of previously acquired
intangibles.
The amortisation of acquired intangibles of GBP7.9
million (2015: GBP5.4 million) relates to Provak acquired
in January 2016; Offhollywood acquired in April 2016;
Wooden Camera acquired in September 2016; and other
businesses acquired by the Group from 2011 to 2015.
Transaction costs of GBP0.6 million were incurred in
relation to acquisitions (2015: GBP0.1 million).
Earnout payments of GBP1.5 million (US$2.0 million)
were accrued during the year to be paid to the previous
owners of Wooden Camera in 2017 in relation to the
business' performance in 2016. The business has delivered
strong growth and has performed ahead of our pre-acquisition
expectations.
Impairment of goodwill
We have reviewed the carrying value of the Haigh-Farr
goodwill that arose on acquisition of the business
in 2011. The long-term opportunities and prospects
for this specialist antenna business have been reduced
to reflect recent trading activity and the outlook
in their niche markets. This has led to a one-off non-cash
goodwill impairment charge of GBP7.9 million to partially
impair the carrying value of this investment to GBP17.0
million.
We have also reviewed the carrying value of the US
broadcast services business that has been impacted
by a significant downturn in its US asset rentals activity
particularly in the second half of 2016. The business
made an operating loss in 2016 but delivered a strong
cash flow during the year through more cautious investments
and by selling non-core assets, and therefore converted
a proportion of its balance sheet into cash. The carrying
value of goodwill in the balance sheet of GBP4.2 million
that relates to the acquisition of parts of this business
acquired prior to 1998 has been fully impaired.
Cash flow and net debt
Cash generated from operating activities was GBP64.8
million (2015: GBP41.7 million).
The Group uses a number of key performance indicators
to manage cash including the percentage of operating
cash flow(++) generated from adjusted operating profit*,
the percentage of working capital to sales, inventory
days, trade receivable days and trade payable days.
Inventory, trade receivable and trade payable days
are stated at year end balances; inventory and trade
payable days are based on Q4 cost of sales (excluding
exchange gains/losses) while trade receivable days
are based on Q4 revenue.
The adjusted operating profit* into operating cash
flow(++) conversion at 155% for 2016 is high as a result
of a number of initiatives enacted in the year particularly
around inventory management. Vitec has an established
track record in converting adjusted operating profit*
into cash with a 97% conversion over the last five
years.
The working capital to sales metric has decreased to
15.7% (31 December 2015: 18.9%) and overall working
capital decreased by GBP12.0 million (2015: GBP5.2
million increase). This reflects a number of initiatives
taken across the Group to reduce working capital levels.
Trade receivable days increased to 43 days (2015: 40
days) and remain well controlled with a good ageing
profile. On a cash flow basis, trade and other receivables
increased by GBP4.5 million (2015: GBP0.8 million decrease)
on stronger sales in the last two months of the year.
The reported carrying value of trade receivables at
year end of GBP50.9 million includes GBP5.6 million
adverse foreign exchange compared to the prior year.
On a cash flow basis, inventory decreased by GBP11.2
million (2015: GBP3.0 million increase) to GBP57.9
million at the year end, reflecting focused initiatives
on inventory reduction across the Group. The reported
carrying value of inventory at year end includes GBP9.5
million adverse foreign exchange compared to the prior
year. Inventory days decreased to 83 days (2015: 105
days).
Trade payable days decreased to 38 days (2015: 44 days).
On a cash flow basis, there was a GBP5.3 million overall
increase in trade and other payables (2015: GBP3.0
million decrease) including bonus and commission accruals
and timing of payments. The reported carrying value
of trade payables at year end of GBP26.8 million includes
GBP3.7 million favourable foreign exchange compared
to the prior year.
Capital expenditure, including GBP3.4 million of software
and capitalised development costs (2015: GBP4.2 million),
totalled GBP16.8 million (2015: GBP20.6 million), of
which GBP7.1 million (2015: GBP10.9 million) related
to rental assets. This was partly financed by the proceeds
from rental asset disposals of GBP4.1 million (2015:
GBP4.4 million). Overall capital expenditure was equivalent
to 0.9 times depreciation (2015: 1.3 times) and included
investments in manufacturing processes and production
tooling.
We monitor Return on Capital Employed (ROCE), calculated
as adjusted operating profit* divided by average total
assets less current liabilities excluding the current
portion of interest-bearing borrowings. This has increased
from 16.3% in 2015 to 17.5% in 2016.
The net tax paid in 2016 of GBP7.2 million was GBP1.6
million higher than the GBP5.6 million paid in 2015
due to the timing of tax payments.
As a result, free cash inflow(+) increased by GBP28.4
million to GBP44.6 million (2015: GBP16.2 million). Free cash flow(+) 2016 2015
----------------------------------------- ----------- -----------
Adjusted operating profit * GBP41.5m GBP35.4m
Depreciation (1) GBP18.4m GBP16.2m
Changes in working capital GBP12.0m (GBP5.2m)
Restructuring costs paid (GBP7.4m) (GBP3.5m)
Other adjustments (2) GBP0.3m (GBP1.2m)
----------- -----------
Cash generated from operating activities GBP64.8m GBP41.7m
Purchase of property, plant and (GBP13.4m) (GBP16.4m)
equipment
Capitalisation of software and (GBP3.4m) (GBP4.2m)
development costs
Proceeds from sale of property, GBP9.0m GBP4.7m
plant and equipment and software
Interest paid (GBP5.2m) (GBP4.0m)
Tax paid (GBP7.2m) (GBP5.6m)
----------- -----------
Free cash flow(+) GBP 44.6m GBP16.2m
----------------------------------------- ----------- -----------
* Before restructuring costs, charges associated with
acquisition of businesses and impairment of goodwill
as defined on page 2 of this announcement.
+ Cash generated from operating activities after net
capital expenditure, net interest and tax paid.
++ Cash generated from operating activities after net
capital expenditure, before restructuring costs paid.
(1) Includes depreciation and amortisation of software
and capitalised development costs.
(2) Includes change in provisions, share based payments
charge, gain on disposal of property, plant and equipment,
fair value derivatives and transaction costs relating
to acquisitions.
There was a GBP20.3 million net cash outflow relating
to acquisitions during the year (2015: GBP9.0 million).
There was a net cash outflow in the period of GBP1.5
million relating to costs provided for on the disposal
of IMT in 2014 (2015: GBP0.7 million).
Dividends paid to shareholders totalled GBP11.1 million
(2015: GBP10.7 million) and there was a net cash inflow
in respect of shares purchased and issued of GBP1.1
million (2015: GBP0.9 million). The net cash inflow
for the Group was GBP12.8 million (2015: GBP3.3 million
outflow) which, after GBP11.6 million adverse exchange
(2015: GBP2.1 million adverse), decreased the net debt
to GBP75.1 million (2015: GBP76.3 million).
Treasury
Vitec manages its financing, hedging and tax planning
activities centrally to ensure that the Group has an
appropriate structure to support its geographically
diverse business. It has clearly defined policies and
procedures with any substantial changes to the financial
structure of the Group, or to its treasury practice,
referred to the Board for approval. The Group operates
strict controls over all treasury transactions including
clearly defined currency hedging processes to reduce
risks from volatility in exchange rates.
The Group is hedging a portion of its forecast future
foreign currency transactions to reduce the volatility
from changes in exchange rates. Our main exposure relates
to the US Dollar and the table below summarises the
contracts held as at 31 December 2016: Currency hedging December Average December Average
2016 rate 2015 rate
of contracts of contracts
--------------------- --------- -------------- --------- --------------
US Dollars sold for
Euros
Forward contracts $42.3m 1.13 $47.2m 1.15
US Dollars sold for
Sterling
Forward contracts $17.1m 1.37 $21.0m 1.52
--------------------- --------- -------------- --------- --------------
The Group does not hedge the translation of its foreign
currency profits. A portion of the Group's foreign
currency net assets are hedged using the Group's borrowing
facilities.
Financing activities
In July 2016 a new five year GBP125 million multi-currency
Revolving Credit Facility with five relationship banks
was agreed to replace the previous GBP100 million facility.
It has a better margin and will expire on 5 July 2021.
At the end of December 2016, GBP48.9 million (2015:
GBP53.9 million) of the facility was utilised.
The Group has a US$50 million (GBP40.5 million) private
placement facility which has been drawn down in two
tranches of US$25 million each. This financing has
a combined fixed interest rate of 4.77% and is due
for repayment on 11 May 2017.
The Group therefore has a total of GBP165.5 million
of committed facilities at the year end with drawings
of GBP89.4 million (31 December 2015: GBP87.6 million).
The average cost of borrowing for the year which includes
interest payable, commitment fees and amortisation
of set-up charges was 3.9% (2015: 4.1%) reflecting
an interest cost of GBP4.2 million (2015: GBP4.0 million).
The Board has maintained an appropriate capital structure
without exposing the Group to unnecessary levels of
risk and Vitec has operated comfortably within its
loan covenants during 2016.
Foreign exchange
2016 adjusted operating profit* included a GBP6.2 million
net favourable foreign exchange effect after hedging,
mainly due to more favourable GBP/$ and GBP/EUR rates
when compared to 2015. Should exchange rates remain
at current levels, Vitec should continue to benefit
to the order of GBP2.0 million from foreign exchange
in 2017.
Dividend
The Directors have recommended a final dividend of
17.3 pence per share amounting to GBP7.7 million (2015:
15.1 pence per share, amounting to GBP6.7 million).
The final dividend, subject to shareholder approval
at the AGM, will be paid on Friday, 19 May 2017 to
shareholders on the register at the close of business
on Friday, 21 April 2017. This will bring the total
dividend for the year to 27.2 pence per share (up 10.6%).
A dividend reinvestment alternative is available with
details available from our registrars, Capita Asset
Services.
Principal risks and uncertainties
Vitec is exposed to a number of risk factors which
may affect its performance. The Group has a well-established
framework for reviewing and assessing these risks on
a regular basis, and has put in place appropriate processes
and procedures to mitigate against them. However, no
system of control or mitigation can completely eliminate
all risks. The Board has determined that the following
are the principal risks facing the Group.
-- Demand for Vitec's products
Demand for our products may be adversely affected by
many factors, including changes in customer and consumer
preferences and our ability to deliver appropriate
products or to support changes in technology. The Group
increasingly produces and sells products that are more
technologically advanced, including encoders, transmitters
and on-camera monitors. These products have a shorter
life cycle than our historical products, and continuous
investment in new product development is needed to
keep up with the changing demand. Demand may also be
impacted by competitor activity, particularly from
low-cost countries.
We value our relationships with our customers and to
mitigate this risk we monitor closely our target markets
and user requirements. We maintain good relationships
with our key customers and make significant investments
in product development and marketing activities to
ensure that we remain competitive in these markets.
In support of our new product launches, we have completed
consumer research before developing new products to
ensure that they are appropriately designed for our
target markets. We monitor closely the demand for new
products and phase out old product lines. We are actively
pursuing growth in selected emerging markets.
-- New markets and channels of distribution
As we enter new markets and channels of distribution
we may achieve lower than anticipated trading volumes
and pricing levels or higher costs and resource requirements.
This may impact the levels of profitability and cash
flows delivered. During the year we continued to increase
our online presence by developing our e-commerce activity,
and using our platform to promote and distribute partner
brands. We have entered new, adjacent markets with
the creation of Enterprise Video ("VitecEV"), and the
acquisitions of Offhollywood and Wooden Camera. We
continue to increase our investment in new innovative
products which address the needs of independent content
creators.
To mitigate these risks, we have a thorough process
for assessing and planning the entry into new markets
and related opportunities. This includes marketing
and advertising strategies for our products and services.
We continuously assess our performance and the related
opportunities and risks in these markets. We adapt
our approach taking into account our actual and anticipated
performance. We review our channels of distribution
to make sure that they remain appropriate. Our increased
online presence creates IT security and compliance
challenges which the Group is addressing.
-- Acquisitions
In pursuing our business strategy we continuously explore
opportunities to enhance our business through development
activities such as strategic acquisitions. This involves
a number of calculated risks including: acquiring desired
businesses on economically acceptable terms; integrating
new businesses, employees, business systems and technology;
and realising satisfactory post-acquisition performance.
In 2016, we acquired Provak (Manfrotto Distribution
Benelux), Offhollywood and Wooden Camera. These acquisitions
are performing to plan.
We mitigate these risks by having a clear acquisition
strategy with a robust valuation model. Thorough due
diligence processes are completed including the use
of external advisers where appropriate. The post-acquisition
performance of each business is closely monitored and
a plan is developed to integrate the acquired businesses
in an effective way.
-- Pricing pressure
Vitec provides premium branded products and faces a
number of competitors. The strength of this competition
varies by product and geographical market. In 2016
we continued to see price pressure by low-cost entrants
to the market. In addition, there was continued price
pressure in broadcast services as major broadcasters
continue to manage their budgets tightly.
To mitigate this risk, we ensure that our product and
service offering remains competitive by investing in
new product development and in appropriate marketing
and product support, and by improving the management
of supply chain costs. This, and working closely with
our suppliers and managing our expenses and cost base
appropriately, allows us to support price increases
when required. We are rationalising our product range
to reduce complexity which will also allow us to achieve
some cost savings on production. Most of our products
and services have a premium or niche differentiation
which commands a price point that is higher than that
of the competition.
-- Dependence on key suppliers
We source materials and components from many suppliers
in various locations and in some instances are more
dependent on a limited number of suppliers for particular
items. If any of these suppliers or subcontractors
fail to meet the Group's requirements, we may not have
readily available alternatives, thereby impacting our
ability to provide an appropriate level of customer
service. Our overall dependence on key suppliers has
increased as a result of the Group's decision to reduce
its costs by outsourcing some manufacturing and assembly
activities.
To address this risk we aim to secure multiple sources
of supply for all materials and components and develop
strong relationships with our major suppliers. We review
the performance of strategically important suppliers
and outsourced providers globally on an ongoing basis.
Where economical we look to source materials closer
to the manufacturing facilities to reduce lead times
and improve control over the supply chain.
-- Dependence on key customers
While the Group has a wide customer base, the loss
of a key customer, or a significant worsening in their
success or financial performance, could result in a
material impact on the Group's results. As in previous
years, Vitec has no customer that accounts for more
than 10% of revenue. The business works with a variety
of customers on large sporting events and the extent
of these activities varies year-on-year.
We mitigate this risk by monitoring closely our performance
with all customers through developing strong relationships,
and we monitor the financial performance of our key
customers. We continue to expand our customer base
including entering into new channels of distribution
to expand our portfolio of customers.
-- People
We employ around 1,700 people and are exposed to a
risk of being unable to retain or recruit suitable
diverse talent to support the business. We manufacture
and supply products from a number of locations and
it is important that our people operate in a professional
and safe environment.
We recognise that it is important to motivate and retain
capable people across our businesses to ensure we are
not exposed to risk of unplanned employee turnover.
We fairly reward our people and have appropriate recruitment,
appraisal, talent management and succession planning
strategies to ensure we recruit and retain good quality
people and leadership across the business. We take
our employees' health and safety very seriously and
have appropriate processes in place to allow us to
monitor and address any issues appropriately.
-- Laws and regulations
We are subject to a comprehensive range of legal obligations
in all countries in which we operate. As a result,
we are exposed to many forms of legal risk. These include,
without limitation, regulations relating to government
contracting rules, taxation, data protection regimes,
anti-bribery provisions, competition, and health and
safety laws in numerous jurisdictions around the world.
Failure to comply with such laws could significantly
impact the Group's reputation and could expose the
Group to fines and penalties. We may also incur additional
cost from any legal action that is required to protect
our intellectual property. Although there are no specific
issues arising in the near term, recent political developments
in the US and Europe may have implications for several
areas of regulations including but not limited to:
the customs and import tariffs our businesses will
be subject to; corporation tax rates; employment laws
and regulations; and other business regulation.
We address this risk by having resources dedicated
to legal and regulatory compliance supported by external
advice where necessary. We monitor and respond to developments
in the regulatory environment in which our companies
operate. We enhance our controls, processes and employee
knowledge to maintain good governance and to comply
with laws and regulations such as the provisions of
the UK Bribery Act 2010. The Group has processes in
place, including senior management training, to ensure
that its worldwide business units understand and apply
the Group's culture and processes to their own operations.
We actively protect our intellectual property, and
will legally pursue any party that infringes our intellectual
property rights.
-- Reputation of the Vitec Group
Damage to our reputation and our brand names can arise
from a range of events such as poor product performance,
unsatisfactory customer service, and other events either
within or outside our control.
We manage this risk by recognising the importance of
our reputation and attempting to identify any potential
issues quickly and address them appropriately. We recognise
the importance of providing high quality products,
good customer service and managing our business in
a safe and professional manner. This requires all employees
to commit to, and comply with, the Code of Conduct.
-- Exchange rates
The global nature of the Group's business means it
is exposed to volatility in currency exchange rates
in respect of foreign currency denominated transactions,
and the translation of net assets and income statements
of foreign subsidiaries and equity accounted investments.
The Group is exposed to a number of foreign currencies,
the most significant being the US Dollar, Euro and
Japanese Yen. There were significant currency fluctuations
affecting Sterling in 2016, partly reflecting the uncertainty
caused by the result of the UK referendum on membership
of the European Union.
We regularly review and assess our exposure to changes
in exchange rates. We reduce the impact of sudden movements
in exchange rates with the use of appropriate hedging
activities on forecast foreign exchange net exposures.
We do not hedge the translation effect of exchange
rate movements on the Income Statement or Balance Sheet
of overseas subsidiaries. However, the Group does finance
overseas investments partly through the use of foreign
currency borrowings in order to provide a net investment
hedge over the foreign currency risk that arises on
translation of its foreign currency subsidiaries.
-- Business continuity
There are risks relating to business continuity resulting
from specific events that may impact our manufacturing
plants or supply chain, particularly where these account
for a significant amount of our trading activity. We
are also dependent on our IT platforms continuing to
work effectively in supporting our business and therefore
there is a cyber security risk for the Group.
We address this risk with Business Continuity Plans
and Disaster Recovery Plans at our key sites, and by
carrying out periodic IT and cyber security vulnerability
assessments. We have global insurance schemes in place
which provide cover for business interruption.
-- Effectiveness and impact of restructuring projects
In 2015/16 we conducted a number of restructuring projects
to streamline the business, and to deliver cost savings.
There is a risk that the restructuring activity could
have been poorly executed and that the objectives might
not be achieved. The main restructuring projects are
now substantially complete, and have already started
to generate year-on-year savings. We have also sold
our Bury site and plan to move these activities to
a lean, modern manufacturing facility in late 2017.
To address this risk, projects are monitored closely
by senior operational management with regular updates
provided to the Board. We anticipate that there will
be significant year-on-year savings. The status of
the restructuring activities and risks relating to
these projects are being carefully monitored.
Forward-looking statements
This announcement contains forward-looking statements
with respect to the financial condition, performance,
position, strategy, results and plans of The Vitec
Group plc (the "Group" or the "Company") based on management's
current expectations or beliefs as well as assumptions
about future events. These forward-looking statements
are not guarantees of future performance. Undue reliance
should not be placed on forward-looking statements
because, by their very nature, they are subject to
known and unknown risks and uncertainties and can be
affected by other factors that could cause actual results,
and the Group's plans and objectives, to differ materially
from those expressed or implied in the forward-looking
statements. The Company undertakes no obligation to
publically revise or update any forward-looking statements
or adjust them for future events or developments. Nothing
in this announcement should be construed as a profit
forecast.
The information in this announcement does not constitute
an offer to sell or an invitation to buy shares in
the Company in any jurisdiction or an invitation or
inducement to engage in any other investment activities.
The release or publication of this announcement in
certain jurisdictions may be restricted by law. Persons
who are not resident in the United Kingdom or who are
subject to other jurisdictions should inform themselves
of, and observe, any applicable requirements.
This announcement contains brands and products that
are protected in accordance with applicable trademark
and patent laws by virtue of their registration.
Board changes
As previously announced, Paul Hayes will be standing
down from his position as Group Finance Director to
take up his new appointment as Chief Financial Officer
of Consort Medical plc.
As previously announced, Martin Green has been appointed
an Executive Director of the Company with effect from
4 January 2017. In this role Martin's title will be
Group Business Development Director and he will have
responsibility for business development particularly
focusing on APAC and opportunities in the Creative
Solutions businesses as well as his existing responsibility
for corporate development and HR.
Outlook
We are continuing to transform the Group. We are outperforming
our markets by driving sales, investing in new technologies,
and expanding our capabilities in the exciting and
growing "image capture and sharing" market. A strong
cash flow performance and our robust balance sheet
support our clear growth strategy.
Vitec has a strong position in changing markets and
the Board remains confident about future growth prospects,
assuming no significant adverse change in exchange
rates.
Going concern and viability
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.
The Directors have also assessed the long-term viability
of the Group over a three year period, taking account
of the Group's current position and prospects, its
strategic plan, risk appetite and the principal risks
and how these are managed. Based on this assessment,
the Directors have a reasonable expectation that the
Group will be able to continue in operation and meet
its liabilities as they fall due over this period.
For and on behalf of the Board Stephen Bird Paul Hayes
Group Chief Executive Group Finance Director
Consolidated Income Statement
For the year ended 31 December 2016
2016 2015
Notes GBPm GBPm
------ -------- --------
Revenue 376.2 317.8
Cost of sales (228.1) (188.9)
-------------------------------------------------------------- ------ -------- --------
Gross profit 148.1 128.9
Operating expenses (133.6) (106.5)
-------------------------------------------------------------- ------ -------- --------
Operating profit 14.5 22.4
-------------------------------------------------------------- ------ -------- --------
Comprising
* Operating profit before restructuring costs, charges
associated with acquisition of businesses and
impairment of goodwill 41.5 35.4
- Restructuring costs 2 (5.2) (4.9)
- Charges associated with acquisition
of businesses 2 (9.7) (8.1)
* Impairment of goodwill 2 (12.1) -
-------------------------------------------------------------- ------ -------- --------
14.5 22.4
-------------------------------------------------------------- ------ -------- --------
Net finance expense 3 (4.0) (3.9)
Profit before tax 10.5 18.5
-------------------------------------------------------------- ------ -------- --------
Comprising
* Profit before tax, excluding restructuring costs,
charges associated with acquisition of businesses and
impairment of goodwill 37.5 31.5
* Restructuring costs 2 (5.2) (4.9)
* Charges associated with acquisition of businesses 2 (9.7) (8.1)
* Impairment of goodwill 2 (12.1) -
-------------------------------------------------------------- ------ -------- --------
10.5 18.5
-------------------------------------------------------------- ------ -------- --------
Taxation 4 (1.5) (5.5)
-------------------------------------------------------------- ------ -------- --------
Profit for the year attributable
to owners of the parent 9.0 13.0
-------------------------------------------------------------- ------ -------- --------
Adjusted earnings per share (see
note 5)
Basic earnings per share 61.3p 49.4p
Diluted earnings per share 61.2p 49.3p
Earnings per share (see note 5)
Basic earnings per share 20.2p 29.3p
Diluted earnings per share 20.1p 29.2p
Dividends per ordinary share (see
note 6)
Prior year final paid 15.1p GBP6.7m
Current year interim paid 9.9p GBP4.4m
Current year final proposed 17.3p GBP7.7m
Average exchange rates
Euro 1.22 1.38
US$ 1.35 1.53
Consolidated Statement of Comprehensive
Income
For the year ended 31 December 2016
2016 2015
GBPm GBPm
----------------------------------------------- ------- ------
Profit for the year 9.0 13.0
Other comprehensive income:
Items that will not be reclassified to
profit or loss:
Remeasurements of defined benefit obligation (6.4) 1.5
Related tax 1.0 (0.5)
Items that are or may be reclassified
to profit or loss:
Currency translation differences on foreign
currency subsidiaries 37.7 4.2
Net investment hedges - net loss (16.6) (1.5)
Cash flow hedges - reclassified to the
Income Statement, net of tax 0.8 0.6
Cash flow hedges - effective portion of
changes in fair value (4.6) (1.5)
Related tax 0.9 0.5
Other comprehensive income, net of tax 12.8 3.3
----------------------------------------------- ------- ------
Total comprehensive income for the year
attributable to owners of the parent 21.8 16.3
----------------------------------------------- ------- ------
Consolidated Balance Sheet
As at 31 December 2016
2016 2015
GBPm GBPm
--------------------------------------- ------ ------
Assets
Non-current assets
Intangible assets 99.0 90.7
Property, plant and equipment 54.0 53.8
Trade and other receivables 0.9 0.6
Derivative financial instruments 0.2 0.1
Deferred tax assets 26.6 15.2
180.7 160.4
--------------------------------------- ------ ------
Current assets
Assets held for sale - 1.0
Inventories 57.9 58.9
Trade and other receivables 66.2 50.7
Derivative financial instruments 0.2 0.5
Current tax assets 0.7 0.9
Cash and cash equivalents 17.1 13.6
142.1 125.6
--------------------------------------- ------ ------
Total assets 322.8 286.0
---------------------------------------- ------ ------
Liabilities
Current liabilities
Bank overdrafts 0.3 1.1
Interest-bearing loans and borrowings 40.9 0.2
Trade and other payables 55.3 43.5
Derivative financial instruments 4.8 1.7
Current tax liabilities 8.1 6.6
Provisions 4.9 8.1
114.3 61.2
--------------------------------------- ------ ------
Non-current liabilities
Interest-bearing loans and borrowings 51.0 88.6
Derivative financial instruments 1.2 0.5
Post-employment obligations 13.0 6.1
Provisions 1.1 1.2
Deferred tax liabilities 2.4 2.1
----------------------------------------
68.7 98.5
--------------------------------------- ------ ------
Total liabilities 183.0 159.7
---------------------------------------- ------ ------
Net assets 139.8 126.3
---------------------------------------- ------ ------
Equity
Share capital 9.0 8.9
Share premium 15.4 14.3
Translation reserve 16.8 (4.3)
Capital redemption reserve 1.6 1.6
Cash flow hedging reserve (3.9) (1.0)
Retained earnings 100.9 106.8
---------------------------------------- ------ ------
Total equity 139.8 126.3
---------------------------------------- ------ ------
Balance Sheet exchange rates
Euro 1.17 1.36
US$ 1.24 1.48
Consolidated Statement of Changes in Equity
Cash
Capital flow
Share Share Translation redemption hedging Retained Total
capital premium reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------
Balance at 1 January
2016 8.9 14.3 (4.3) 1.6 (1.0) 106.8 126.3
Total comprehensive
income for the
year
Profit for the
year - - - - - 9.0 9.0
Other comprehensive
income/(expense)
for the year - - 21.1 - (2.9) (5.4) 12.8
Contributions by
and distributions
to owners
Dividends paid - - - - - (11.1) (11.1)
Own shares purchased - - - - - (0.1) (0.1)
Share-based payment
charge - - - - - 1.6 1.6
Related tax - - - - - 0.1 0.1
New shares issued 0.1 1.1 - - - - 1.2
------------------------ ---------- ---------- ------------- ------------- ---------- ----------- ---------
Balance at 31 December
2016 9.0 15.4 16.8 1.6 (3.9) 100.9 139.8
------------------------ ---------- ---------- ------------- ------------- ---------- ----------- ---------
Cash
Capital flow
Share Share Translation redemption hedging Retained Total
capital premium reserve reserve reserve earnings equity
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------------
Balance at 1 January
2015 8.9 13.4 (7.0) 1.6 (0.6) 102.3 118.6
Total comprehensive
income for the
year
Profit for the
year - - - - - 13.0 13.0
Other comprehensive
income/(expense)
for the year - - 2.7 - (0.4) 1.0 3.3
Contributions by
and distributions
to owners
Dividends paid - - - - - (10.7) (10.7)
Share-based payment
charge - - - - - 1.1 1.1
Related tax - - - - - 0.1 0.1
New shares issued - 0.9 - - - - 0.9
------------------------ ---------- ---------- ------------- ------------- ---------- ----------- ---------
Balance at 31 December
2015 8.9 14.3 (4.3) 1.6 (1.0) 106.8 126.3
------------------------ ---------- ---------- ------------- ------------- ---------- ----------- ---------
Consolidated Statement of Cash Flows
For the year ended 31 December 2016
2016 2015
Notes GBPm GBPm
----------------------------------------------- ------- ------- -------
Cash flows from operating activities
Profit for the year 9.0 13.0
Adjustments for:
Taxation 1.5 5.5
Depreciation 15.3 13.8
Amortisation of intangible assets 11.0 7.8
Impairment of intangible assets 12.1 0.2
Net gain on disposal of property,
plant and equipment and
software (1.5) (1.2)
Fair value losses on derivative
financial instruments 0.4 0.1
Share-based payment charge 1.6 1.1
Earnout payments and purchase price
adjustment 1.2 2.6
Net finance expense 4.0 3.9
----------------------------------------------- ------- ------- -------
Operating profit before changes in
working capital and provisions 54.6 46.8
Decrease/(increase) in inventories 11.2 (3.0)
(Increase)/decrease in receivables (4.5) 0.8
Increase/(decrease) in payables 5.3 (3.0)
(Decrease)/increase in provisions (1.8) 0.1
Cash generated from operating activities 64.8 41.7
Interest paid (5.2) (4.0)
Tax paid (7.2) (5.6)
-----------------------------------------------
Net cash from operating activities 52.4 32.1
----------------------------------------------- ------- ------- -------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment and software 9.0 4.7
Purchase of property, plant and equipment (13.4) (16.4)
Capitalisation of software and development
costs (3.4) (4.2)
Acquisition of businesses, net of
cash acquired 7 (20.3) (9.0)
Cash outflow on previous disposal (1.5) (0.7)
Net cash used in investing activities (29.6) (25.6)
----------------------------------------------- ------- ------- -------
Cash flows from financing activities
Proceeds from the issue of shares 1.2 0.9
Own shares purchased (0.1) -
(Repayment of)/proceeds from interest-bearing
loans and borrowings (13.6) 8.5
Dividends paid (11.1) (10.7)
-----------------------------------------------
Net cash used in financing activities (23.6) (1.3)
----------------------------------------------- ------- ------- -------
(Decrease)/increase in cash and cash
equivalents (0.8) 5.2
Cash and cash equivalents at 1 January 12.5 7.9
Effect of exchange rate fluctuations
on cash held 5.1 (0.6)
----------------------------------------------- ------- ------- -------
Cash and cash equivalents at 31 December 8 16.8 12.5
----------------------------------------------- ------- ------- -------
Segment reporting
The Group has two reportable segments which are reported
in a manner that is consistent with the internal reporting
provided to the Chief Operating Decision Maker (considered
to be the Board).
Broadcast Photographic Corporate Consolidated
and unallocated
------------------- ---------------------- --------------------- -------------------- ----------------
2016 2015 2016 2015 2016 2015 2016 2015
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
------------------- ------------- ------- ------------- ------ ------------ ------ ------- -------
Revenue from
external
customers:
Sales 190.9 160.3 151.4 128.8 - - 342.3 289.1
Services 33.9 28.7 - - - - 33.9 28.7
------------------- ------------- ------- ------------- ------ ------------ ------ ------- -------
Total revenue from
external
customers 224.8 189.0 151.4 128.8 - - 376.2 317.8
Inter-segment
revenue
(1) 0.4 0.9 0.6 0.2 (1.0) (1.1) - -
------------- ------- ------------- ------ ------------ ------
Total revenue 225.2 189.9 152.0 129.0 (1.0) (1.1) 376.2 317.8
------------------- ------------- ------- ------------- ------ ------------ ------ ------- -------
Segment result 21.0 20.3 20.5 15.1 - - 41.5 35.4
Restructuring
costs (3.4) (4.1) (1.8) (0.8) - - (5.2) (4.9)
Earnout payments
and purchase
price
adjustment (1.3) (2.6) 0.1 - - - (1.2) (2.6)
Transaction costs
relating to
acquisition
of businesses (0.5) (0.1) (0.1) - - - (0.6) (0.1)
Amortisation of
acquired
intangible
assets (7.1) (4.8) (0.8) (0.6) - - (7.9) (5.4)
Impairment of
goodwill (12.1) - - - - - (12.1) -
------------------- ------------- ------- ------------- ------ ------------ ------ ------- -------
Operating profit (3.4) 8.7 17.9 13.7 - - 14.5 22.4
Net finance
expense (4.0) (3.9)
Taxation (1.5) (5.5)
------- -------
Profit for the
year 9.0 13.0
------------------- ------------- ------- ------------- ------ ------------ ------ ------- -------
Segment assets 182.1 172.2 94.8 82.7 1.5 1.4 278.4 256.3
Unallocated assets
Cash and cash
equivalents 17.1 13.6 17.1 13.6
Current tax
assets 0.7 0.9 0.7 0.9
Deferred tax
assets 26.6 15.2 26.6 15.2
-------
Total assets 322.8 286.0
------------------- ------------- ------- ------------- ------ ------------ ------ ------- -------
Segment
liabilities 38.2 28.1 31.3 26.0 10.8 7.0 80.3 61.1
Other liabilities
Bank overdrafts - - 0.3 - - 1.1 0.3 1.1
Interest-bearing
loans and
borrowings - - 1.1 0.4 90.8 88.4 91.9 88.8
Current tax
liabilities - - - - 8.1 6.6 8.1 6.6
Deferred tax
liabilities - - - - 2.4 2.1 2.4 2.1
------- -------
Total liabilities 183.0 159.7
------------------- ------------- ------- ------------- ------ ------------ ------ ------- -------
Cash flows from
operating
activities 34.5 19.4 18.6 15.2 (0.7) (2.5) 52.4 32.1
Cash flows from
investing
activities (25.2) (21.7) (4.3) (3.9) (0.1) - (29.6) (25.6)
Cash flows from
financing
activities - - 1.1 0.4 (24.7) (1.7) (23.6) (1.3)
------------------- ------------- ------- ------------- ------ ------------ ------ ------- -------
Capital
expenditure
Property, plant
and equipment 10.8 14.1 2.6 2.3 - - 13.4 16.4
Software and
development
costs 1.8 2.6 1.5 1.6 0.1 - 3.4 4.2
------------------- ------------- ------- ------------- ------ ------------ ------ ------- -------
(1) Inter-segment pricing is determined on an arm's
length basis.
No individual customer accounted for more than 10%
of external revenue in either 2016 or 2015.
Geographical segments
2016 2015
GBPm GBPm
-------------------------------------------------------------------------------- --------------- -------
Analysis of revenue from external customers,
by location of customer
United Kingdom 35.5 31.5
The rest of Europe 80.5 64.0
North America 180.9 150.2
Asia Pacific 68.7 55.9
The rest of the World 10.6 16.2
-------------------------------------------------------------------------------- --------------- -------
Total revenue from external customers 376.2 317.8
-------------------------------------------------------------------------------- --------------- -------
The Group's operations are located in several geographical
locations, and sell products and services on to external
customers in all parts of the world.
1 Accounting policies
Basis of consolidation
Subsidiaries are entities that are directly or indirectly
controlled by the Group. Control exists when the Group
has the rights to variable returns from its involvement
with an entity and has the ability to affect those
returns through its power over the entity. The results
of subsidiaries sold or acquired during the year are
included in the accounts up to, or from, the date
that control exists.
New standards and interpretations not yet adopted
The following standards, amendments to standards and
interpretations will become effective for the Group
in future years.
IFRS 16 "Leases" was revised on 13 January 2016 and
is effective for the 31 December 2019 year end. The
adoption of this standard removes the distinction
between operating and finance leases and will result
in all operating leases, above a de minimis level,
being capitalised with the associated assets and liabilities
being brought on to the Balance Sheet. Given the effective
date of the standard, the Directors have not yet evaluated
the full impact.
The adoption of the following standards is not expected
to have a significant impact on these consolidated
financial statements. They are effective for the 31
December 2018 year end:
IFRS 15 "Revenue from Contracts with Customers"
IFRS 9 "Financial Instruments"
2 Restructuring costs, charges associated with acquisition
of businesses and impairment of goodwill
Restructuring costs, charges associated with acquisition
of businesses and impairment of goodwill are excluded
from key performance measures in order to more accurately
show the underlying current business performance of
the Group in a consistent manner. This also reflects
how the business is managed and measured on a day-to-day
basis. Restructuring costs include employment termination
and other site rationalisation costs. Charges associated
with acquisition of businesses include non-cash charges
such as amortisation of acquired intangible assets,
and cash charges such as transaction costs and earnout
payments.
2016 2015
GBPm GBPm
-------------------------------------------------------------------------------- --------------- -------
Restructuring costs (1) (5.2) (4.9)
-------------------------------------------------------------------------------- --------------- -------
Earnout payments and purchase price adjustment
(2) (1.2) (2.6)
Transaction costs relating to acquisition
of businesses (3) (0.6) (0.1)
Amortisation of acquired intangible assets (7.9) (5.4)
-------------------------------------------------------------------------------- --------------- -------
Charges associated with acquisition of
businesses (9.7) (8.1)
-------------------------------------------------------------------------------- --------------- -------
Impairment of goodwill (4) (12.1) -
-------------------------------------------------------------------------------- --------------- -------
(1) Restructuring costs of GBP5.2 million primarily
relate to the Group streamlining certain operations
by downsizing selected activities mainly in the UK,
US and Europe. This specific restructuring programme
commenced in 2015 and finished in 2016. This includes
employment termination costs of GBP3.5 million and
other rationalisation costs of GBP1.7 million. Of
the total GBP5.2 million restructuring costs, GBP4.7
million is in operating expenses and the remaining
GBP0.5 million is included in cost of sales. A provision
of GBP1.5 million has been recognised at the end of
the period in relation to restructuring primarily
related to committed redundancy costs. These actions
have better positioned the Group for the future.
(2) A net charge of GBP1.2 million primarily relates
to earnout payable of GBP1.4 million (US$2.0 million)
and a credit on the receipt of GBP0.2 million for
the purchase price adjustment of Autocue (acquired
in 2014) which was agreed with the vendors during
the year. The earnout to Wooden Camera was as a result
of its performance for the year ending 31 December
2016.
(3) Transaction costs of GBP0.6 million were incurred
in relation to acquisitions in the year.
(4) The annual impairment review of goodwill led to
an impairment charge of GBP12.1 million (US Broadcast
Services business: GBP4.2 million, Haigh-Farr: GBP7.9
million) both in the Broadcast division.
3 Net finance expense
2016 2015
GBPm GBPm
-------------------------------------------------------------------------------- --------------- -------
Finance income
Net currency translation gains 0.4 0.3
-------------------------------------------------------------------------------- --------------- -------
Finance expense
Interest payable on interest-bearing loans
and borrowings (4.2) (4.0)
Net interest expense on net defined benefit
pension scheme liabilities (0.2) (0.2)
--------------------------------------------------------------------------------
(4.4) (4.2)
-------------------------------------------------------------------------------- --------------- -------
Net finance expense (4.0) (3.9)
-------------------------------------------------------------------------------- --------------- -------
4 Taxation
2016 2015
GBPm GBPm
-------------------------------------------------------------------------------- --------------- -------
The total taxation charge in the Income
Statement is analysed as follows:
Before restructuring costs, charges associated
with acquisition of businesses and impairment
of goodwill.
Current tax 13.3 7.5
Deferred tax (3.1) 2.1
-------------------------------------------------------------------------------- --------------- -------
10.2 9.6
-------------------------------------------------------------------------------- --------------- -------
Restructuring costs, charges associated
with acquisition of businesses and impairment
of goodwill.
Current tax (1) (4.9) (1.2)
Deferred tax (2) (3.8) (2.9)
-------------------------------------------------------------------------------- -------
(8.7) (4.1)
-------------------------------------------------------------------------------- --------------- -------
Summarised in the Income Statement as
follows
Current tax 8.4 6.3
Deferred tax (6.9) (0.8)
-------------------------------------------------------------------------------- --------------- -------
1.5 5.5
-------------------------------------------------------------------------------- --------------- -------
(1) Current tax credits of GBP4.9 million (2015: GBP1.2
million) were recognised in the year of which GBP0.7
million (2015: GBP0.2 million) related to restructuring
costs and GBP4.2 million (2015: GBP1.0 million) related
to amortisation of intangible assets.
(2) Deferred tax credits of GBP3.8 million (2015:
GBP2.9 million) were recognised in the year of which
GBP1.1 million (2015: GBP1.1 million) related to restructuring
costs, GBP0.7 million (2015: GBP1.0 million) to acquisitions
and GBP2.0 million (2015: GBP0.8 million) to amortisation
of intangible assets.
5 Earnings per 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 year
divided by the weighted average number of ordinary
shares in issue during the year.
Diluted EPS is calculated on the profit for the year
divided by the weighted average number of ordinary
shares in issue during the year, 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,
and therefore excludes restructuring costs, charges
associated with acquisition of businesses and impairment
of goodwill, all net of tax.
The calculation of basic, diluted and adjusted EPS
is set out below:
2016 2015
GBPm GBPm
--------------- -------
Profit for the financial year 9.0 13.0
Add back restructuring costs, charges
associated with acquisition of businesses
and impairment of goodwill, net of tax 18.3 8.9
Earnings before restructuring costs, charges
associated with acquisition of businesses
and impairment of goodwill. 27.3 21.9
-------------------------------------------------------------------------------- --------------- -------
2016 2015 2016 2015 2016 2015
No. No. pence pence pence pence
------------------- ------------- ------- ------------- -------------------- --------------- -------
Weighted average Adjusted earnings Earnings per
number of per share share
shares '000
Basic 44,568 44,364 61.3 49.4 20.2 29.3
Dilutive potential
ordinary shares 96 133 (0.1) (0.1) (0.1) (0.1)
------------------- ------------- ------- ------------- -------------------- --------------- -------
Diluted 44,664 44,497 61.2 49.3 20.1 29.2
------------------- ------------- ------- ------------- -------------------- --------------- -------
6 Dividends
After the Balance Sheet date the following final dividend
for the year ended 31 December 2016 was recommended
by the Directors and subject to approval by shareholders
at the AGM on 17 May 2017 will be paid on 19 May 2017.
The dividend has not been included as a liability
in these financial statements.
2016 2015
GBPm GBPm
Amounts arising in respect of the year
----------------------------------------------------------------------------- ------------- ------------------
Interim dividend for the year ended 31
December 2016 of 9.9p (2015: 9.5p) per
ordinary share 4.4 4.2
Proposed final dividend for the year ended
31 December 2016 of 17.3p (2015: 15.1p)
per ordinary share 7.7 6.7
----------------------------------------------------------------------------- ------------- ------------------
12.1 10.9
----------------------------------------------------------------------------- ------------- ------------------
The aggregate amount of dividends paid
in the year
----------------------------------------------------------------------------- ------------- ------------------
Final dividend for the year ended 31 December
2015 of 15.1p (2014: 14.7p) per ordinary
share 6.7 6.5
Interim dividend for the year ended 31
December 2016 of 9.9p (2015: 9.5p) per
ordinary share 4.4 4.2
----------------------------------------------------------------------------- ------------- ------------------
11.1 10.7
----------------------------------------------------------------------------- ------------- ------------------
7 Acquisitions
Acquisitions are accounted for under the acquisition
method of accounting. As part of the acquisition accounting
the Group has adopted a process to identify the fair
values of the assets and liabilities acquired, including
contingent considerations assumed. This includes the
separate identification of intangible assets and the
allocation of the consideration paid. This process
continues as information is finalised, and accordingly
the fair value adjustments presented in the tables
below are provisional. In accordance with IFRS 3 until
the assessment is complete the allocation period will
remain open up to a maximum of 12 months from the
acquisition date so long as information remains outstanding.
Acquisition-related costs are recognised in the Income
Statement as incurred in accordance with IFRS 3.
Acquisition of Manfrotto Distribution Benelux (formerly
Provak Foto Film Video B.V.)
On 13 January 2016, the Group acquired 100% of the
issued share capital of Manfrotto Distribution Benelux
B.V. (formerly Provak Foto Film Video B.V.), based
in the Netherlands, through a business combination
for a net cash consideration of EUR1.2 million (GBP0.9
million). The acquisition complements the Group's
owned distribution channels. The fair value of the
net assets acquired in the business at acquisition
date was GBP0.4 million resulting in goodwill of GBP0.5
million.
A summary of the effect of the acquisition of Manfrotto
Distribution Benelux is detailed below:
Book
and fair
value
of net
assets
acquired
GBPm
------------------------------------------- ---------------- -------------- ---------------------------------
Net Assets acquired
Inventories 0.2
Trade and other receivables 0.4
Trade and other payables (0.2)
0.4
Goodwill 0.5
Consideration satisfied from
existing cash resources 0.9
------------------------------------------- ---------------- -------------- ---------------------------------
The trade receivables acquired had a fair value and
a gross contractual value of GBP0.3 million. No net
deferred tax asset or liability has arisen on the
net assets acquired.
Acquisition of Offhollywood
On 12 April 2016, the Group acquired the business
and some of the assets of Offhollywood Digital, LLC
("Offhollywood"), based in the US, through a business
combination for an initial net cash consideration
of US$2.2 million (GBP1.5 million). The fair value
of the net assets acquired in the business at acquisition
date was GBP1.5 million resulting in goodwill of GBPnil.
Under the terms of the acquisition, there is a potential
earnout payment of up to $8.0 million that is dependent
on the performance against demanding gross profit
targets over the period to December 2018. There was
no earnout payable in relation to its performance
in 2016. Offhollywood provides camera-back modules
for RED cameras and other services to a similar customer
base to that serviced by the Group's existing higher
technology businesses, and its products will be marketed
through the Group's global distribution network.
A summary of the effect of the acquisition of Offhollywood
is detailed below:
Fair value
of net
Book value Fair value assets
at acquisition adjustments acquired
GBPm GBPm GBPm
------------------------------------------- ---------------- -------------- ---------------------------------
Net Assets acquired
Intangible assets - 1.6 1.6
Trade and other payables (0.1) - (0.1)
------------------------------------------- ---------------- -------------- ---------------------------------
(0.1) 1.6 1.5
Goodwill -
------------------------------------------- ---------------- -------------- ---------------------------------
Consideration satisfied from
existing cash resources 1.5
------------------------------------------- ---------------- -------------- ---------------------------------
The process to identify the fair values of the assets
and liabilities acquired was completed in the year.
As a result, an increase in intangible assets of GBP0.8
million was recognised since the half year. No net
deferred tax asset or liability has arisen on the
net assets acquired.
Acquisition of Wooden Camera
On 19 September 2016, the Group acquired the whole
of the share capital of Wooden Camera, Inc. and Wooden
Camera Retail, Inc., ("Wooden Camera"), both based
in the US, through a business combination for an initial
net cash consideration of US$19.5 million (GBP14.9
million) after taking account of US$0.6 million (GBP0.5
million) of cash in the business at acquisition date.
The fair value of the net assets acquired, excluding
cash in the business at acquisition date was GBP14.2
million resulting in goodwill of GBP0.7 million. Wooden
Camera designs, manufactures and retails directly
and online, essential professional camera accessories
used by broadcasters and independent content creators.
The acquisition complements the Group's existing range
of products. Wooden Camera operates within the Broadcast
Division.
Under the terms of the acquisition, there is a potential
earnout payment of up to US$15.0 million payable in
cash. This is dependent on the performance against
demanding EBITDA targets over the period to December
2018. In 2016 an amount of GBP1.5 million (US$2.0
million) was provided for in relation to its performance
in 2016.
A summary of the effect of the acquisition of Wooden
Camera is detailed below:
Fair value
of net
Book value Fair value assets
at acquisition adjustments acquired
GBPm GBPm GBPm
------------------------------------------- ---------------- -------------- ---------------------------------
Net Assets acquired
Intangible assets - 13.2 13.2
Property, plant and equipment 0.1 - 0.1
Inventories 0.8 (0.2) 0.6
Trade and other receivables 0.8 (0.2) 0.6
Trade and other payables (0.1) - (0.1)
Provisions - (0.2) (0.2)
Cash 0.5 - 0.5
------------------------------------------- ---------------- -------------- ---------------------------------
2.1 12.6 14.7
Goodwill 0.7
------------------------------------------- ---------------- -------------- ---------------------------------
Consideration satisfied from
existing cash resources 15.4
------------------------------------------- ---------------- -------------- ---------------------------------
The trade receivables acquired had a gross contractual
value of GBP0.7 million and a fair value of GBP0.5
million. No net deferred tax asset or liability has
arisen on the acquisition due to a joint election
made by the sellers and the Group to treat the acquisition
as an asset acquisition for tax purposes.
The results of the acquisitions made during the year
comprise the following:
Manfrotto Distribution Offhollywood Wooden Camera
Benelux GBPm GBPm
GBPm
------------------------- ----------------------- ------------- --------------
Revenue 1.2 1.2 2.0
Operating profit/(loss) 0.2 (0.6) 0.4
------------------------- ----------------------- ------------- --------------
Had the acquisitions been made at the beginning of
the year (i.e. 1 January 2016), they would have contributed
GBP9.9 million to revenue and GBP0.7 million to the
operating profit of the Group. The level of profitability
is stated after amortisation of intangible assets.
An analysis of the cash flows relating to acquisitions
is provided below:
2016
GBPm
----------------------------------------------------------------------------- ---------------------------------
Net outflow of cash in respect of acquisitions
Cash consideration(1) 18.0
Cash acquired (0.5)
Transaction costs 0.6
----------------------------------------------------------------------------- ---------------------------------
Net cash outflow in respect of 2016 acquisitions 18.1
Cash paid in respect of contingent consideration
for Teradek (acquired in 2013). 3.0
Cash received in relation to the purchase price
adjustment for Autocue (acquired in 2014),
agreed with the vendors during the period. (0.2)
----------------------------------------------------------------------------- ---------------------------------
Cash paid in 2016 in respect of prior year
acquisitions 2.8
----------------------------------------------------------------------------- ---------------------------------
Net cash outflow in respect of acquisitions
(2) 20.9
----------------------------------------------------------------------------- ---------------------------------
(1) Cash consideration of GBP18.0 million includes
GBP0.2 million relating to the purchase of the intellectual
property of Xume technology in September 2016. This
has been fully amortised in the year.
(2) Of the GBP20.9 million net cash outflow in respect
of acquisitions, transaction costs of GBP0.6 million
are included in cash flows from operating activities
and the net cash consideration paid of GBP20.3 million
is included in cash flows from investing activities.
8 Analysis of net debt
The table below analyses the Group's components of
net debt and their movements in the year:
2016 2015
GBPm GBPm
----------------------------------------------------------------------------- ------------- ------------------
(Decrease)/increase in cash and cash equivalents (0.8) 5.2
Proceeds of/(proceeds from) interest-bearing
loans and borrowings 13.6 (8.5)
-----------------------------------------------------------------------------
Decrease/(increase) in net debt resulting
from cash flows 12.8 (3.3)
----------------------------------------------------------------------------- ------------- ------------------
Effect of exchange rate fluctuations on
cash held 5.1 (0.6)
Effect of exchange rate fluctuations on
debt held (16.7) (1.5)
----------------------------------------------------------------------------- ------------- ------------------
Effect of exchange rate fluctuations on
net debt (11.6) (2.1)
----------------------------------------------------------------------------- ------------- ------------------
Movements in net debt in the year 1.2 (5.4)
Net debt at 1 January (76.3) (70.9)
----------------------------------------------------------------------------- ------------- ------------------
Net debt at 31 December (75.1) (76.3)
----------------------------------------------------------------------------- ------------- ------------------
Cash and cash equivalents in the Balance
Sheet 17.1 13.6
Bank overdrafts (0.3) (1.1)
----------------------------------------------------------------------------- ------------- ------------------
Cash and cash equivalents in the Statement
of Cash Flows 16.8 12.5
Interest-bearing loans and borrowings (91.9) (88.8)
----------------------------------------------------------------------------- ------------- ------------------
Net debt at 31 December (75.1) (76.3)
----------------------------------------------------------------------------- ------------- ------------------
9 Financial instruments
This provides details on:
- Financial risk management
- Derivative financial instruments
- Fair value hierarchy
- Interest rate profile
- Maturity profile of financial liabilities
Financial risk management
The Group's multinational operations and debt financing
expose it to a variety of financial risks. In the
course of its business, the Group is exposed to foreign
currency risk, interest rate risk, liquidity risk
and credit risk.
Financial risk management is an integral part of the
way the Group is managed. Financial risk management
policies are set by the Board of Directors. These
policies are implemented by a central treasury department
that has formal procedures to manage foreign currency
risk, interest rate risk and liquidity risk, including,
where appropriate, the use of derivative financial
instruments. The Group has clearly defined authority
and approval limits built into these procedures.
Foreign currency risk
Foreign currency risk arises both where sale or purchase
transactions are undertaken in currencies other than
the respective functional currencies of Group companies
(transactional exposures) and where the results of
overseas companies are consolidated into the Group's
reporting currency of Sterling (translational exposures).
The Group has businesses that operate around the world
and accordingly record their results in a number of
different functional currencies. Some of these operations
also have some customers or suppliers that transact
in a foreign currency. The Group's results which are
reported in Sterling are therefore exposed to changes
in foreign currency exchange rates across a number
of different currencies with the most significant
exposures relating to the US Dollar (USD), Euro (EUR)
and Japanese Yen (JPY). There has been volatility
in currency exchange rates during the year as a result
of the EU referendum and other factors. The Group
proactively manages a proportion of its short-term
transactional foreign currency exposures using derivative
financial instruments, but remains exposed to the
underlying translational movements which remain outside
the control of the Group.
The Group manages its transactional exposures to foreign
currency risks through the use of forward exchange
contracts including the US Dollar, Euro and Japanese
Yen. Forward exchange contracts are typically used
to hedge approximately 75% of the Group's forecasted
foreign currency exposure in respect of forecast cash
transactions for the following 12 months. Forward
exchange contracts may also be used to hedge a proportion
of the forecast cash transactions for the following
13 to 24 months. The forward exchange contracts currently
have maturities of less than two years at the Balance
Sheet date.
The Group's translational exposures to foreign currency
risks relate to both the Income Statement and net
assets of overseas subsidiaries which are converted
into Sterling on consolidation. The Group does not
seek to hedge the translational exposure that arises
primarily from changes in the exchange rates of the
US Dollar, Euro and Japanese Yen against Sterling.
However the Group does finance overseas investments
partly through the use of foreign currency borrowings
in order to provide a net investment hedge over the
foreign currency risk that arises on translation of
its foreign currency subsidiaries.
The Group ensures that its net exposure to foreign
denominated cash balances is kept to an acceptable
level by buying or selling foreign currencies at spot
rates when necessary to address short-term imbalances.
In addition the Group manages the denomination of
surplus cash balances across the overseas subsidiaries
to allow natural hedging where effective in any particular
country.
It is estimated that the Group's operating profit
before restructuring costs, charges associated with
acquisition of businesses and impairment of goodwill
for the year ended 31 December 2016 would have increased/decreased
by approximately GBP1.4 million from a ten cent stronger/weaker
US Dollar against Sterling, by approximately GBP1.3
million from a ten cent stronger/weaker Euro against
Sterling and by approximately GBP0.3 million from
a ten Yen stronger/weaker Japanese Yen against Sterling.
This reflects the impact of the sensitivities to the
translational exposures and to the proportion of the
transactional exposures that is not hedged. The Group,
in accordance with its policy, does not use derivatives
to manage the translational risks. During 2016 the
Group's operating profit included a net loss of GBP5.0
million (2015: GBP2.2 million) upon the crystallisation
of forward exchange contracts as described later in
this note.
It is estimated that statutory operating profit for
the year ended 31 December 2016, that includes the
one-off impairment of goodwill, restructuring costs
and charges associated with the acquisition of businesses,
would have increased/decreased by approximately GBP3.1
million from a ten cent stronger/weaker US Dollar
against Sterling, by approximately GBP1.5 million
from a ten cent stronger/weaker Euro against Sterling
and by approximately GBP0.3 million from a ten Yen
stronger/weaker Japanese Yen against Sterling.
Interest rate risk
Interest rate risk comprises both the interest rate
price risk that results from borrowing at fixed rates
of interest and also the interest cash flow risk that
results from borrowing at variable rates.
For the year ended 31 December 2016, it is estimated
that a general increase/decrease of one percentage
point in interest rates, would decrease/increase the
Group's profit before tax by approximately GBP1.0
million.
Liquidity risk
Liquidity risk is the risk that the Group will not
be able to meet its financial obligations as they
fall due.
The Group has a five year GBP125 million Multicurrency
Revolving Credit Facility Agreement with a syndicate
comprising five banks: two UK banks, two American
banks, and one European bank, that expires in July
2021. The Group was utilising 39% of the GBP125 million
Multicurrency Revolving Credit Facility at 31 December
2016. In 2011 the Group drew down US$50 million from
a Private Placement shelf facility with repayment
due in May 2017.
Credit risk
Credit risk arises because a counterparty may fail
to meet its obligations. The Group is exposed to credit
risk on financial assets such as trade receivables,
cash balances and derivative financial instruments.
The Group's maximum exposure to credit risk is represented
by the carrying amount of each financial asset, including
derivative financial instruments, in the Group Balance
Sheet.
a) Trade receivables
The Group's credit risk is primarily attributable
to its trade receivables. Trade receivables are subject
to credit limits, and control and approval procedures
in the operating companies. Due to its large geographic
base and number of customers, the Group is not exposed
to material concentrations of credit risk on its trade
receivables.
b) Cash balances and derivative financial instruments
Credit risk associated with cash balances is managed
by transacting with a number of major financial institutions
worldwide and periodically reviewing their credit
worthiness. Transactions involving derivative financial
instruments are managed centrally. These are only
with banks that are part of the Group's GBP125 million
Multicurrency Revolving Credit Facility Agreement.
Accordingly, the Group's associated credit risk is
limited. The Group has no significant concentration
of credit risk.
Derivative financial instruments
This is a summary of the derivative financial instruments
that the Group holds and uses to manage risk. The
value of these derivatives changes over time in response
to underlying variables such as exchange rates. They
are carried in the Balance Sheet at fair value.
The fair value of forward exchange contracts is determined
by estimating the market value of that contract at
the reporting date. Derivatives with a positive fair
value are recorded as assets and negative fair values
as liabilities, and presented as current or non-current
based on their contracted maturity dates.
Accounting policies
Derivative financial instruments
In accordance with Board approved policies, the Group
uses derivative financial instruments such as forward
foreign exchange contracts to hedge its exposure to
fluctuations in foreign exchange rates arising from
operational activities. These are designated as cash
flow hedges. It does not hold or use derivative financial
instruments for trading or speculative purposes.
Cash flow hedge accounting
Cash flow hedges are used to hedge the variability
in cash flows of highly probable forecast transactions
or a recognised asset or liability, caused by changes
in exchange rates.
Where a derivative financial instrument is designated
in a cash flow hedge relationship with a highly probable
forecast transaction, the effective part of any change
in fair value arising is deferred in the cash flow
hedging reserve within Equity, via the Statement of
Comprehensive Income. The gain or loss relating to
the ineffective part is recognised in the Income Statement
within net finance expense. Amounts deferred in the
cash flow hedging reserve are reflected in the Income
Statement in the periods when the hedged item is recognised
in the Income Statement.
If a hedging instrument expires or is sold but the
hedged forecast transaction is still expected to occur,
the cumulative gain or loss at that point remains
in equity and is recognised in accordance with the
above policy when the transaction occurs. If the hedged
transaction is no longer expected to take place, the
cumulative unrealised gain or loss recognised in equity
is recognised immediately in the Income Statement.
Where a derivative is used to hedge economically the
foreign exchange exposure of a recognised monetary
asset or liability, no hedge accounting is applied
and any gain or loss on the hedging instrument is
recognised in the Income Statement.
If a derivative financial instrument is not formally
designated in a cash flow hedge relationship, any
change in fair value is recognised in the Income Statement.
Forward exchange contracts
The following table shows the forward exchange contracts
in place at the Balance Sheet date. These contracts
mature in the next 24 months, therefore the cash flows
and resulting effect on profit and loss are expected
to occur within the next 24 months.
Average Average
exchange exchange
As at rate As at rate
31 December of contracts 31 December of contracts
2016 2015
currency millions millions
------------------------- ---------------- ---------------- -------------- ------------- ------------------
Cash flow hedging
contracts
USD / GBP forward
exchange
contracts USD 17.1 1.37 21.0 1.52
USD / EUR forward
exchange
contracts USD 42.3 1.13 47.2 1.15
EUR / GBP forward
exchange
contracts EUR 25.9 1.25 28.4 1.33
JPY / GBP forward
exchange
contracts JPY 769.1 159.2 1,009.0 179.1
JPY / EUR forward
exchange
contracts JPY 1,233.4 124.1 1,059.0 134.6
------------------------- ---------------- ---------------- -------------- ------------- ------------------
A net loss of GBP5.0m relating to forward exchange
contracts was reclassified to the Income Statement,
to match the crystallisation of the hedged forecast
cash flows which affect the Income Statement.
Fair value hierarchy
The following summarises financial instruments carried
at fair values and the major methods and assumptions
used in estimating these fair values.
The different levels of fair value hierarchy have
been defined as follows:
Level 1
Fair value measured using quoted prices (unadjusted)
in active markets for identical assets or liabilities.
Level 2
Fair values measured using inputs other than quoted
prices included within Level 1 that are observable
for the asset or liability, either directly (i.e.
as prices) or indirectly (i.e. derived from prices).
Level 3
Fair values measured using inputs for the asset or
liability that are not based on observable market
data (unobservable inputs).
The table below shows the carrying values and fair
values of financial assets and liabilities:
Carrying Fair Carrying Fair
value value value value
2016 2016 2015 2015
GBPm GBPm GBPm GBPm
----------------------------------------------- --------------- ------- ------------ ------------
Forward exchange contracts
- Assets 0.4 0.4 0.6 0.6
Forward exchange contracts
- Liabilities (6.0) (6.0) (2.2) (2.2)
Cash at bank and in hand 17.1 17.1 13.6 13.6
Net trade receivables 50.9 50.9 38.3 38.3
Trade payables (26.8) (26.8) (24.9) (24.9)
Fixed rate borrowings (43.0) (43.7) (34.9) (35.6)
Floating rate borrowings (49.2) (49.2) (55.0) (55.0)
----------------------------------------------- --------------- ------- ------------ ------------
(56.6) (57.3) (64.5) (65.2)
----------------------------------------------- --------------- ------- ------------ ------------
The fair value of floating rate borrowings approximates
to the carrying value because interest rates are at
floating rates where payments are reset to market
rates at intervals of less than one year.
The fair value of fixed rate borrowings is estimated
by discounting the future contracted cash flow, using
appropriate yield curves, to the net present values.
All financial instruments are deemed Level 2.
Interest rate profile
The table below analyses the Group's interest rate
exposure arising from bank loans by currency.
Accounting policies
Net investment hedge accounting
The Group uses US Dollar, Euro and Japanese Yen denominated
borrowings as a hedge against the translation exposure
on the Group's net investment in overseas companies.
Where the hedge is fully effective at hedging the
variability in the net assets of such companies caused
by changes in exchange rates, the changes in value
of the borrowings are recognised in the translation
reserve within Equity, via the Statement of Comprehensive
Income. The ineffective part of any change in value
caused by changes in exchange rates is recognised
in the Income Statement.
The effective portion will be recycled into the Income
Statement on the sale of the foreign operation.
Interest-bearing loans and borrowings
The table below analyses the Group's interest-bearing
loans and borrowings including bank overdrafts, by
currency:
Fixed Floating
rate rate
Total borrowings borrowings
Currency GBPm GBPm GBPm
---------------------------------------------------------------- ------- ------------ --------------
US Dollar 73.7 40.5 33.2
Euro 16.4 2.5 13.9
Japanese Yen 2.1 - 2.1
----------------------------------------------------------------
At 31 December 2016 92.2 43.0 49.2
---------------------------------------------------------------- ------- ------------ --------------
US Dollar 63.5 33.7 29.8
Euro 17.7 1.2 16.5
Sterling 7.0 - 7.0
Japanese Yen 1.7 - 1.7
----------------------------------------------------------------
At 31 December 2015 89.9 34.9 55.0
---------------------------------------------------------------- ------- ------------ --------------
The floating rate borrowings comprise borrowings bearing
interest at rates based on LIBOR. The fixed rate borrowings
in US Dollar are due for repayment on 11 May 2017.
Maturity profile of financial liabilities
The table below analyses the Group's financial liabilities
and derivative financial liabilities into relevant
maturity groupings based on the period remaining until
the contractual maturity date. The amounts disclosed
in the table are the contractual undiscounted cash
flows (including interest), so will not always reconcile
with the carrying amounts disclosed on the Balance
Sheet.
The following are the contractual maturities of financial
liabilities, including undiscounted future interest
payments:
Total From From
contractual Within two six
Carrying cash one to five to ten
amount flows year years years
GBPm GBPm GBPm GBPm GBPm
---------------------------- --------- ------------- ------- --------- --------
2016
Unsecured interest-bearing
loans and borrowings
including bank overdrafts (92.2) (95.1) (43.3) (51.8) -
Trade payables (26.8) (26.8) (26.8) - -
Forward exchange contracts (6.0) (6.0) (4.9) (1.1) -
(125.0) (127.9) (75.0) (52.9) -
---------------------------- --------- ------------- ------- --------- --------
2015
Unsecured interest-bearing
loans and borrowings (89.9) (94.2) (3.9) (90.0) (0.3)
Trade payables (24.9) (24.9) (24.9) - -
Forward exchange contracts (2.2) (2.2) (1.7) (0.5) -
(117.0) (121.3) (30.5) (90.5) (0.3)
---------------------------- --------- ------------- ------- --------- --------
The Group had the following undrawn borrowing facilities
at the end of the year:
2016 2015
Expiring in : GBPm GBPm
--------------------------------------------------------------- --------- --------
Less than one year
- Uncommitted facilities 10.6 9.3
More than one year but not more than five years - Committed facilities 76.1 46.2 --------------------------------------------------------------- --------- -------- Total 86.7 55.5 --------------------------------------------------------------- --------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR OKKDKCBKDCBB
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February 21, 2017 02:01 ET (07:01 GMT)
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