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The Year in Review The Vitec Group has delivered another year of strong operating profit growth, reflecting the continuing success of our strategy of launching innovative products, continually improving our operations and developing our global distribution network. The RF Systems and Litepanels acquisitions performed well. Key highlights of 2008 include: • Strong revenue growth of 23% (5% constant currency, organic) • All divisions achieved organic growth, reflecting positive market drivers • Operating profit before significant items** up 18% (1% constant currency, organic) • Loan facility increased by 25% to £125 milllion, committed until 2013 • Excellent cash generated from operations, up 31% to £44.3 million • Three acquisitions in 2008, including Litepanels, performing well Front cover pictures: Vinten’s Vector 750 now has the X Factor thanks to The Camera Store. Photo courtesy of Fountain Studios & TalkbackThames/ Syco TV. Simone Moro with his Manfrotto 190CX PRO4 tripod and 701HDV head on their ascent to the summit of Mount Makalu in Nepal. ** 2008 significant items total a PBT charge of £9.9 million and comprise amortisation of acquired intangibles (£7.1 million), goodwill impairment (£2.1 million) and a provision against equity accounted investee (£1.3 million), offset by profit on sale of property (£0.3 million) and fair value adjustments relating to volatile financial instruments (£0.3 million); with an earnings charge of £3.3 million after deferred tax credits (£6.6 million). 2007 significant items totalled a PBT charge of £4.5 million; with an earning charge of £0.8 million after deferred tax credits (£3.7 million). THE VITEC GROUP 01 Directors’ Report Chairman’s & Interim Chief Executive’s A higher finance charge* of £3.0 million (2007: £2.3 million) Business Development arose mainly because of the effects of acquisitions and the Statement adverse foreign exchange effect of non Sterling loan interest. We are delighted to report another year of good progress for Group profit before tax and significant items* increased 17% Research, development & engineering The Vitec Group in terms of revenue, operating profit and to £35.4 million (2007: £30.3 million). The headline tax rate As in previous years, we have maintained our emphasis on earnings per share growth. for the Group was reduced again, by 3% to 34%, and earnings continuous innovation, bringing large numbers of new per share, before significant items* rose to 55.9p (2007: products to market and simultaneously widening our service Results 46.0p), an improvement of 22%. offering. Revenue increased 23%, to £337.7 million in 2008 (2007: £273.8 million). Before acquisitions and favourable foreign Cash generated from operations rose by 31% to £44.3 million Within Imaging & Staging and Broadcast Systems the Group exchange, revenue growth was around 5%. We achieved good (2007: £33.8 million). Working capital increased due to typically spends approximately 4% of revenue on new product organic growth, particularly in Broadcast Systems, which higher revenue, adverse movements in exchange rates and RF development, amounting to £12.5 million in 2008 (2007: reflects Vitec’s position in markets with positive underlying Systems’ advance payments reducing. Inventory days, restated £10.4 million). While Vitec's businesses are known for the drivers and our focus on continuous innovation. Acquisitions in constant currency at year end rates before acquisitions and quality and reliability of their products, there is also an also contributed to growth, the most significant being an RF Systems (whose inventory is not comparable to activity exciting pipeline of new ideas for the future. In 2008 we additional five months of revenue from RF Systems (acquired levels due to BAS related accounting), were 101 in 2008 vs again received a large number of awards for innovation, a sign in May 2007) and four months from Litepanels (acquired in 112 in 2007. that the Group's products remain very relevant to our August 2008). customers (see page 15). Around 36% of product revenues in 2008 dividend 2008 (2007: 35%) were derived from products launched in Broadcast Systems: Revenue increased 33%, of which The full year total dividend will be 18.3p (2007: 17.8p), an the last three years; this is a very high level of innovation and constant currency organic growth was 7%, due principally to increase of 3%, with a final dividend of 10.9p per share. a source of significant competitive advantage. strong global demand for broadcast video camera supports, Subject to approval by shareholders at the Annual General together with the acquisition effects of RF Systems and Meeting, the final dividend will be paid on 22 May 2009 to Within Broadcast Services we continue to expand our range of Litepanels. Clear-Com and Autoscript, our intercoms and shareholders on the register on 24 April 2009. services; this year we supported a number of 3D initiatives. teleprompting businesses respectively, had excellent years. RF Systems performed strongly, as deliveries relating to the BAS Using adjusted earnings per share before significant items* Acquisitions Relocation Project reached their peak. the dividend is covered 3.1 times (2007: 2.6 times), whilst During 2008 we bought three businesses, all of which became after significant items* it is covered 2.6 times (2007: 2.5 part of the Broadcast Systems division: Litepanels, a Imaging & Staging: Overall constant currency revenue growth times). manufacturer of LED lights (based in North Hollywood, August in 2008 was 3%. This is the sixth year of growth in our 2008), Talkdynamics, a developer of IP-based intercoms Imaging business, which experienced strong demand for The Company has introduced a Dividend Reinvestment Plan software (based in Montreal, October 2008) to complement camera tripods, monopods and bags, particularly in the pro- that allows shareholders to reinvest dividends to purchase our Communications business and The Camera Store (based in sumer market where sales of the higher priced digital SLR additional shares in the Company. For shareholders to apply Twickenham, UK, September 2008), a broadcast equipment cameras continued to grow rapidly. However, there was no the proceeds of the final dividend for the year ended 31 rental company. growth in sales of lighting stands, typically sold to the December 2008 to the plan, application forms must be photographic professional. In Staging, reported revenue received by the Company’s Registrars by no later than 27 April increased, but underlying volumes were largely unchanged Senior Management Changes 2009. Details on the Plan can be obtained from Capita We recently announced the appointment of Stephen Bird as compared to 2007. We took a number of actions to improve Registrars on 0871 664 0381. Chief Executive of the Group, commencing 14 April 2009. profitability in the business, including closing Tomcat UK, Stephen is currently divisional managing director of Weir Oil & moving the low cost Tomcat Mexico business to larger Gas, part of Weir plc. Richard Cotton, previously Group premises and making significant changes to senior Outlook Finance Director of Wagon plc, joined us as Group Finance management. In 2009, orders and revenues have been in line with our expectations. However we have seen weakness in some of our Director in November 2008. Broadcast Services: Operating mainly in the US, the division Broadcast Systems businesses and experienced lower sales The Board would like to express its thanks to Alastair Hewgill, saw reported revenue in Sterling increase by 10%. Revenue in volumes, which have impacted our profitability. As a result we who is currently Interim Chief Executive and was previously US Dollars increased by 1%. Bexel had a successful Beijing have taken further actions to reduce our cost base, the Group Finance Director, for his major contribution to the Olympics and benefited from the US elections. This was benefits of which will flow through during the course of the Group over almost seven years. Alastair will be working with largely negated by a further weakening in the general US current year. Vitec has leading market positions and, whilst Stephen to ensure a smooth transition and will then leave the broadcast rentals market. our trading visibility is limited, at this stage the Board’s view of 2009 remains in line with its expectations. Company in due course. Reported Group operating profit* improved by 18% or Gareth Rhys Williams resigned from the Board on 29 October £5.8 million, to £38.4 million. Excluding acquisitions, and 2008 having served as Chief Executive of the Group for almost after favourable foreign exchange effects of £2.1 million seven years. The Board would like to express its thanks to (2007: £3.7 million adverse), constant currency organic Gareth for his valuable service and achievements during Michael Harper Alastair Hewgill operating profit* growth was 1%. Operating profit is stated this time. Chairman Interim Chief Executive after charging £1.6 million of one-off costs relating to redundancies and rationalisation, including the closure of Tomcat UK. * Before significant items: significant items are those items of financial performance that the directors consider should be separately disclosed to assist in the understanding of the underlying trading and financial performance achieved by the Group and in making projections of future results. These items are quantified and explained in the Financial Review and in Note 5. 02 ANNUAL REPORT 2008 THE VITEC GROUP 03 Directors’ Report continued Business Review Strategy: 'Consolidate - Leverage - Grow' Overview The Group's strategy is summarised in the phrase 'Consolidate – Leverage – Grow'. After the initial phase, during Vitec is an international Group, principally serving customers in the worldwide media sector with which we consolidated multiple locations, smaller businesses and distribution channels into a more streamlined products, services and solutions for the Broadcast, Photographic and Entertainment industries. Vitec is structure in order to extract scale economies, the focus has shifted to leveraging our skills in product development based on strong, well known, premium brands that professionals rely on.