RNS Number : 9295A
The Vitec Group PLC
26 February 2014
 



 

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.

26 February 2014

The Vitec Group plc

2013 Full Year Results

A good performance in challenging markets

The Vitec Group plc ("Vitec" or "The Group"), the international provider of products and services for the Broadcast and Video, Photographic, and MAG (Military, Aerospace and Government) markets, announces its audited results for the year ended 31 December 2013.

 

Results

2013

2012

% Change

% Change

 

 

 

 

Organic CER**

Revenue

£315.4m

£345.3m

-8.7%

-9.2%

 

 

 

 

 

Operating profit*

£39.5m

£39.3m

+0.5%

-4.2%

Operating margin* %

12.5%

11.4%

+110 bps

 

 

 

 

 

 

Profit before tax*

£35.6m

£36.2m

-1.7%

-5.6%

Adjusted earnings per share*

56.1p

55.8p

+0.5%

 

 

 

 

 

 

Operating profit

£24.3m

£25.6m

-5.1%

 

Profit before tax

£20.4m

£16.1m

+26.7%

 

Basic earnings per share

31.9p

13.6p

+134.6%

 

 

 

 

 

 

Free cash flow+

£21.4m

£10.8m

 

 

Net debt

£61.5m

£63.7m

 

 

 

 

 

 

 

Total dividend per share

23.0p

22.0p

+4.5%

 

 

 Key Points

 

Operating profit* in line with our expectations

Further improvement in margins with a 110bps increase in operating margin* to 12.5%

Good margin* performance in all three Divisions despite challenging markets

Strong free cash flow+ of £21.4 million after £7.9 million of restructuring spend

Teradek acquisition performing well and complementing our Broadcast activities

Following the successful restructuring, the streamlined business is strongly positioned to benefit from any market upturn

Recommended 4.5% increase in the total dividend for the full year

 

* Before restructuring costs and charges associated with acquired businesses. Profit before tax and adjusted earnings per share are also before disposal of business. The Staging business was disposed of in 2012 for a loss of £6.4 million. Restructuring costs in 2013 were £11.4 million (2012: £nil) and charges associated with acquired businesses were a net charge of £3.8 million (2012: £13.7 million) consisting of £2.6 million for the amortisation of acquired intangibles (2012: £3.6 million), £0.4 million of transaction costs relating to an acquisition (2012: £0.3 million), £0.8 million of contingent consideration on previous acquisitions (2012: £1.0 million), and £nil goodwill impairment charge (2012: £8.8 million relating to IMT).

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

+ 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 have delivered a good performance in 2013 despite challenging markets. We have strengthened the business and delivered a further improvement in margins by streamlining our operations and closely managing our cost base. We have continued to make good progress in delivering our strategy of focussing on our core markets and supplementing this with selective value-adding acquisitions.

Within the Videocom Division, the Broadcast and MAG businesses performed well compared with 2012 which had the benefit of the London Olympics. These activities have been complemented by the acquisition of the Teradek wireless device business, which is performing well. The Imaging Division has faced challenging markets, particularly in the US, yet delivered a good level of profitability at similar margins to last year.

Our operational outlook for 2014 remains positive; expected benefits include: a full-year impact from having streamlined our business; a full year's ownership of Teradek; and increased activity arising from the Winter Olympics and FIFA World Cup. Foreign exchange movements particularly from the US Dollar and Japanese Yen are expected to negatively impact our results. Although our markets remain challenging, we are well positioned to benefit from any upturn."

 

Enquiries:

 

The Vitec Group plc

Telephone: 020 8332 4600

Stephen Bird, Group Chief Executive

 

Paul Hayes, Group Finance Director

 

FTI Consulting

 

Nick Hasell / Susanne Yule

Telephone: 020 7269 7291

Notes

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

2.  Current market exchange rates as at 24 February 2014: £1 = $1.66, £1 = €1.21, €1 = $1.37, £1 = Yen170.

3.  2013 average exchange rates: £1 = $1.56, £1 = €1.17, €1 = $1.33, £1 = Yen152.

4.  2012 average exchange rates: £1 = $1.58, £1 = €1.23, €1 = $1.29, £1 = Yen127.

5.  The Company's Annual General Meeting ("AGM") will be held on Thursday, 8 May 2014. The 2013 Annual Report and Accounts and Notice of Annual General Meeting will be posted to shareholders and available on the Company's website from 18 March 2014.

Vitec is an international Group principally serving customers in the Broadcast & Video, Photographic and Military, Aerospace and Government (MAG) markets. Listed on the London Stock Exchange with 2013 revenue of £315.4 million, Vitec is based on strong, well known, premium brands on which its customers worldwide rely. Vitec is organised in three Divisions: Videocom, Imaging and Services.

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

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

Services provides equipment rental, workflow design and technical support to TV production teams and film crews.

More information can be found at: www.vitecgroup.com.

Vitec will be presenting its results to analysts at 10.00 am on Wednesday, 26 February.  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: www.vitecgroup.com/results2013.

 

Directors' responsibility statement

The financial information for the year ended 31 December 2013 contained in this announcement was approved by the Board on 25 February 2014. This announcement does not constitute the statutory accounts of the Company within the meaning of section 435 of the Companies Act 2006, but is derived from those accounts.

Statutory accounts for the year ended 31 December 2012 have been delivered to the Registrar of Companies. Statutory accounts for the year ended 31 December 2013 will be delivered to the Registrar of Companies in due course. The auditors have reported on these accounts. Their reports were not qualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

This announcement contains forward looking statements that are based on management's current expectations or beliefs as well as assumptions about future events. These are subject to risk factors associated with, amongst other things, the economic and business circumstances occurring from time to time in the countries and sectors in which the Group operates. It is believed that the expectations reflected in these statements are reasonable but they may be affected by a wide range of variables which could cause actual results, and Vitec's plans and objectives, to differ materially from those currently anticipated or implied in the forward looking statements. Investors should not place undue reliance on any such statements. Nothing in this press release should be construed as a profit forecast.

 

2013 Performance Overview

Vitec delivered an improvement in operating profit* and margins* during 2013 in challenging markets. We streamlined the business while continuing to bring innovative new products to market and maintaining or increasing our share in our key markets.

Revenue decreased by 8.7% to £315.4 million (2012: £345.3 million) reflecting the challenging market conditions and the absence of the London Olympics that contributed approximately £10 million of sales in 2012. Despite this decline in revenue, the continued focus on driving profitability has led to a £0.2 million increase in operating profit* to £39.5 million (2012: £39.3 million) and a 110 bps improvement in operating margin* to 12.5%.

Within our Videocom Division, the Broadcast & Video businesses performed well, improving operating margins* despite lower volumes through pricing initiatives, tight cost management and the initial benefits of the streamlining actions. The performance of this Division also included a strong initial performance from the Teradek acquisition. Our MAG activities, which represent a relatively small part of this Division, made good progress including a $5.8 million contract with the US Department of Justice that was delivered in the year. The Imaging Division maintained a similar margin* percentage despite lower sales. Towards the end of the year, this Division launched a number of important new products that are already performing well. The Services Division delivered an improvement in profit* and operating margin* during the year despite it being a non-Olympic year.

Operating expenses* were £8.8 million lower than in 2012 at £99.1 million. This reflects focused cost control and £4.4 million of initial benefit from restructuring activities. The total benefit from restructuring was £6.2 million during the year with £1.8 million of the savings included in gross margin.

Profit before tax* of £35.6 million was £0.6 million lower than the prior year following a full year of the higher interest charges from the renewal of credit facilities in mid-2012. Adjusted earnings per share* increased by 0.5% at 56.1 pence per share (2012: 55.8 pence per share). Group profit before tax of £20.4 million (2012: £16.1 million) was after £11.4 million of restructuring costs (2012: £nil) and £3.8 million charges associated with acquired businesses (2012: £13.7 million).

Free cash flow+ was strong and increased by £10.6 million to £21.4 million reflecting a continued focus on working capital management. 2013 free cash flow+ is reported after £7.9 million of cash outflows on restructuring activities. There was a total cash inflow of £2.0 million (2012: £15.1 million outflow) after outflows relating to acquisitions, purchases of shares to meet share plan commitments and dividend payments.

Net debt at 31 December 2013 of £61.5 million was £2.2 million lower than at 31 December 2012 despite cash outflows in relation to the restructuring and acquisition activity. This is due to the very strong operating cashflow as a result of good working capital management. The Group's balance sheet remains solid with a year-end net debt to EBITDA ratio of 1.1 times (31 December 2012: 1.2 times).

As a result of our financial performance in 2013 and our confidence in the future, the Board has recommended a final dividend of 14.1 pence per share (2012: 13.5 pence per share). The final dividend, if approved by our shareholders at the 2014 Annual General Meeting to be held on Thursday, 8 May 2014, will be paid on Friday, 9 May 2014. This will bring the total dividend for 2013 to 23.0 pence per share (2012: 22.0 pence per share).

* Before restructuring costs and charges associated with acquired businesses. Profit before tax and adjusted earnings per share are also before disposal of business. These are defined on page 1 of this announcement.

+ Cash generated from operations after net capital expenditure, net interest and tax paid.

Streamlining our UK and international operations in 2013

During 2013, we strengthened the Group by streamlining our UK and international operations and improving our business processes. These complex projects have been delivered on schedule and were substantially completed during the year. The main projects were consolidating activities in the UK, Israel and the US and the transfer of manufacturing from the UK to Costa Rica.

As a result of these activities in 2013, there was a one-off restructuring charge of £11.4 million (2012: £nil). There is a remaining expense of approximately £1.0 million to fund the completion of the projects in 2014 with the total restructuring expenditure expected to be in line with our previous guidance.

The benefit of these restructuring plans to our profitability in 2013 was £6.2 million. Cash outflows relating to restructuring were £7.9 million in the year, with a further outflow of approximately £4.0 million anticipated in 2014 to complete the streamlining activities.

Progress on delivering our Strategy

We have continued to make good progress in delivering our strategy of focussing on our core markets and supplementing this with selective value-adding acquisitions.

Within our Videocom Division we have further developed our premium product and service offerings to Broadcast and Video customers such as expanding our range of higher power LED lights. We have a global sales team that provides a strong international coverage and is now able to offer a full range of products and services to our customers all over the world. Our products and services were at the Sochi Winter Olympics and will be at the FIFA World Cup in 2014.

Our product offering has been strengthened with the acquisition of Teradek which is a world leading provider of wireless video devices and platforms that are used by broadcasters, businesses and web channels to transmit images wirelessly. Teradek fits perfectly within our current product ranges, and complements our existing video activities including its range of broadcast microwave systems. There is significant scope for Teradek's products to be sold through Vitec's global sales and distributor network.

We have continued to make progress in developing Videocom's MAG activities with its mission-critical visual communication and surveillance products for security and defence applications. The business has delivered a $5.8 million contract with the US Department of Justice in 2013. We have also been successful in providing high quality application-specific antennas on a significant number of programmes including certain space projects.

Our Imaging Division supplies premium ranges of tripods, heads, camera bags, and lighting supports and controls to professional, hobbyist and amateur photographers. In a challenging market, we have continued to serve the traditional photographic speciality stores and increased our penetration in consumer electronics stores and mass merchandising outlets. We have continued to grow our online sales to both the professional and consumer segments and maintained or increased our market shares.

We launched a number of innovative products for both professional and amateur users. We are pleased with the initial sales of a number of new tripod and bag ranges that were launched towards the end of 2013.

Our Services Division has improved its performance by focussing on providing premium services and managing its cost base. We will continue to drive the profitable growth of this business which performs more strongly in years of significant sporting events such as the Olympic Games in 2012.

Videocom Division

The Videocom Division specialises in the supply of high-quality broadcast equipment principally for professionals engaged in producing video content for the media industries globally: broadcast, film and live events. This equipment is also supplied to business and industry or "pro-video" users including corporate, educational and religious entities. Videocom also supplies mission-critical wireless communication products to the MAG market.

 

 

2013

2012

r %

Revenue

£143.1m

£146.2m

-2.1%

Operating Profit*

£17.9m

£15.8m

+13.3%

Operating Margin*

12.5%

10.8%

+170 bps

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

Markets

We estimate that the Broadcast & Video market for products and services supplied by Vitec is worth around £700 million annually. This includes the traditional broadcast and film markets as well as the video production market.  Videocom is well positioned due to its broad geographical reach and premium products. The acquisition of Teradek has strengthened its product offering particularly to the growing number of independent videographers and business users, and will complement our existing activities.

Vitec also manufactures and supplies the MAG market with microwave transmitters, receivers and antennas. We estimate this market to be worth around a further £400 million. Videocom's MAG sales are dependent on the level and timing of investment by the US Government and key US Government agencies. There continues to be investment in the market that we serve but the timing of these investments is uncertain.

Operations

Videocom's revenue for 2013 was £143.1 million, a decrease of 2.1% on 2012 reflecting market conditions and the absence of the London Olympics. Despite this decline in sales, our operating profit* increased by 13.3% to £17.9 million and operating margin* improved by 170 bps as a result of the streamlining of the business and cost control measures. The restructuring within the Division is substantially complete, including the relocation of certain manufacturing activities to Costa Rica and the streamlining of our US Broadcast and MAG activities. We have simplified and improved our systems and processes within the Division reducing our costs while improving our customer service.

Camera supports sales increased with continuing strong demand particularly for our premium robotics products. Litepanels LED lighting products benefited from growth in the EMEA and Asian markets. We are in the process of broadening this product range to maintain our leading position in the market. Our Anton/Bauer mobile power products experienced a challenging video market while making progress in supplying batteries and chargers to medical carts in hospitals.

Camera Corps traded in line with expectations, with a lower level of sales activity reflecting the lack of significant sporting events during the year. This is in comparison to 2012 where the business benefited from the London Olympics and the UEFA European football championships.

The recently acquired Teradek business performed well, delivering a strong post-acquisition performance.

The Division's MAG sales included $5.8 million of transmitters and receivers to the US Department of Justice. We continue to bid for a number of significant opportunities, though the timing of major awards from US Government agencies remains difficult to predict.

Imaging Division

The Imaging Division provides premium photographic and increasingly video equipment to both professional and non-professional users. The photographic and video equipment consists primarily of camera supports, tripods, camera bags, lighting supports, LED lights and lighting accessories. We also supply a range of tripods, bags, lighting and other photographic products to the consumer segment.

The Division included the non-core Staging business until its disposal in August 2012. The performance of the Imaging Division, excluding the Staging business, is summarised below. The non-core Staging business recorded a loss of £0.6 million in 2012 on sales of £8.2 million.

 

Imaging (excluding Staging)

2013

2012

r %

Revenue

£141.2m

£157.9m

-10.6%

Operating Profit*

£20.1m

£22.9m

-12.2%

Operating Margin*

14.2%

14.5%

-30 bps

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

 

Markets

We estimate that the photographic market for product categories supplied or distributed by Vitec is worth around £800 million. Approximately half of this market is professional photographers and the remainder is consumers who have a keen interest in photography or who simply want to record and share images.  Photography continues to attract new consumers as the number and type of image-taking devices increases and the distribution of images via social media continues to grow in popularity.

The sale of new cameras is a key driver in the photographic market and according to the Camera & Imaging Products Association (CIPA), global shipments of interchangeable lens cameras in 2013 were 15% lower than in 2012. The growth of sales through online channels is continuing as customers migrate away from independent specialist retailers.

Operations

Revenue decreased by £16.7 million to £141.2 million reflecting the continuation of the more challenging photographic market from the second half of 2012. Independent market research data shows that we at least maintained or grew our market shares over the period.

Total operating profit* fell by 12.2% to £20.1 million, yet operating margin* was maintained at a similar level to 2012 as a result of price initiatives, restructuring activities and a strong control over the cost base. The restructuring activities included the streamlining of our operations in Israel, the UK and other European activities which are all substantially complete.

We continue to develop new products for our professional and hobbyist customers including upgraded versions of popular tripod ranges, such as the 190 series, that now have further new, exclusive and stylish features. The 'BeFree', a compact lightweight support for travel photography, has also been well-received by the market.

Our sales into the consumer market continue to grow and are supported by the introduction of a number of new products including the 'Pixi' mini-tripod and an iPhone 5 version of the 'Klyp' that were launched into consumer retail channels.

We saw growth in our Manfrotto branded range of camera bags. We have launched new ranges during the year including a collection aimed at the professional user with a premium shock-absorbing camera system. The market for camera bags has decreased during the year. Although our overall sales of bags has declined, we have grown our relatively small share of this large market.

Services Division

Our Services Division provides broadcast equipment rental and technical support to television production teams and film crews. It provides a complete one-stop solution for producers globally, enabling customers to deliver the most demanding projects. It also enables Vitec to monitor closely changes in technology and to showcase our products. The Division has a strategy to focus on events where higher levels of service are most needed.

 

 

2013

2012

r %

Revenue

£31.1m

£33.0m

-5.8%

Operating Profit*

£1.5m

£1.2m

+25.0%

Operating Margin*

4.8%

3.6%

+120 bps

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

 

Operations

Revenue for 2013 decreased by 5.8% to £31.1 million compared with 2012 which benefited from contracts to supply the London Olympics and the US Presidential election. The underlying business performed well as we continue to focus on providing premium solutions to broadcasters while streamlining the business. Despite the sales decline the operating profit* increased by 25.0% to £1.5 million with operating margin* 120 bps higher including the benefits of disposing of surplus assets and streamlining its operations.

 

Geographic Spread

Vitec has a broad geographic spread. In 2013, 45% of our revenues by destination came from North America, with the remainder split between Europe 31%, Asia-Pacific 18% and Rest of World 6%. Only 8% of our revenue is derived from the UK. We currently have a direct presence in 12 countries around the world: the UK, USA, Brazil, Costa Rica, France, Germany, Italy, Netherlands, Israel, Japan, China and Singapore.

Board Changes

We have a strong, diverse Board of Directors with relevant experience to support the Company in delivering its strategy.

During 2013, Maria Richter, John Hughes and Simon Beresford-Wylie stood down as independent Non-Executive Directors. The Board would like to thank each of them for their considerable contribution to Vitec. In their place we are very pleased to have secured the services of Mark Rollins, Lorraine Rienecker and Christopher Humphrey as independent Non-Executive Directors. Each of these individuals serves as an executive in other organisations and brings a wide range of commercial and international experience.

Carolyn Fairburn was appointed as Chairman of the Remuneration Committee with effect from 1 December 2013 in succession to Simon Beresford-Wylie. Carolyn will lead the process around our executive remuneration policy to ensure that it appropriately rewards our executives for the execution of strategy and long term growth in shareholder value.

Financial Review

Revenue

The Group's revenue for 2013 at £315.4 million was 8.7% lower than the prior year (2012: £345.3 million). Revenue included a £5.3 million contribution from acquisitions offset by £8.2 million lower revenue due to the disposal of the non-core Staging business in 2012 and approximately £10 million sales due to the non-repeat of the London 2012 Olympics. On an organic basis, after excluding the effect of £4.1 million of favourable movements in exchange rates, revenue fell by £31.1 million or 9.2%.

Operating profit

Operating profit* was £0.2 million higher than prior year at £39.5 million, despite the lower sales activity. On an organic basis, operating profit* decreased by £1.7 million after excluding £0.8 million of contributions from acquisitions, a £0.6 million operating loss at the Staging businesses in 2012, and £0.5 million of favourable exchange rate movements, after hedging.

Operating profit* increased despite the lower revenue as we have focused on improving margins in the more challenging macroeconomic environment. This included £3.1 million of benefits from pricing over commodity cost increases (2012: £1.6 million), £6.2 million savings from restructuring activities, and a further £5.3 million reduction in operating expenses during the year. As a result the operating margin* increased by 110 bps to 12.5%.

We maintained our investment in product development and innovation at 4% of Group product sales (2012: 4%). Research, development and engineering expenditure on a like-for-like basis was £11.1 million (2012: £10.8 million) after adjusting for capitalised expenditure of £2.4 million (2012: £0.3 million) and £0.7 million of amortisation (2012: £0.6 million).

Management's estimate of the main drivers that reconcile the 2013 to the 2012 operating profit* are summarised in the following table:

 

Operating profit * Bridge

 (£ million)

2012 Operating profit*

 

39.3

  Gross margin effects:

 

 

    - Volume, mix and efficiency

(16.3)

 

    - Sales price less cost inflation

3.1

 

  Restructuring savings

6.2

 

  Underlying operating expenses

5.3

 

 

 

(1.7)

  Acquisitions

0.8

 

  Disposals

0.6

 

 

 

1.4

  Foreign exchange effects:

 

 

    - Translation

0.7

 

    - Transaction after hedging

(0.2)

 

 

 

0.5

2013 Operating profit*    

 

39.5

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

Net financial expense

Net financial expense totalled £3.9 million (2012: £3.1 million). Interest payable was £3.6 million (2012: £3.2 million) and was covered 15 times (2012: 17 times) by earnings before interest, tax, depreciation and amortisation. Vitec has a $50 million private placement facility. A new five year £100 million multi-currency revolving credit facility was arranged in July 2012. The higher finance costs predominantly reflect a full year of the higher interest charges on the new facility.

Profit before tax

Profit before tax* decreased by £0.6 million to £35.6 million (2012: £36.2 million). The reported profit before tax after restructuring costs, charges associated with acquired businesses and disposal of business increased by 26.7% to £20.4 million (2012: £16.1 million).

Taxation

The effective taxation rate on operating profit* after net finance expense has decreased to 31% (2012: 33%) reflecting the mix of territories in which the profits arose. The Group's tax charge is higher than the UK statutory rate because the majority of its profits arise in overseas jurisdictions with higher tax rates.

Earnings per share

Earnings per share before restructuring costs, charges associated with acquired businesses and disposal of a business was 56.1 pence per share (2012: 55.8 pence per share) representing growth of 0.5%. This reflects the growth in operating profit* partly offset by a higher net finance expense and a higher weighted average number of shares. The basic reported earnings per share was 31.9 pence per share (2012: 13.6 pence per share).

Acquisitions and disposals

In August 2013, Vitec acquired Teradek in the US for an initial consideration of $14.8 million (£9.5 million) after a $0.2 million credit relating to post-completion adjustments for changes in working capital. This comprised net cash consideration of $11.3 million (£7.3 million), the issue of $2.0 million (£1.3 million) of new Vitec ordinary shares to be held in escrow for two years post-completion, and $1.5 million (£0.9 million) to be paid to certain key employees in cash over a two year period after completion.

$3.2 million (£2.1 million) of deferred consideration is to be paid in 2014 in relation to the results of Teradek for the year ended 31 December 2013. Up to a further $11.0 million (£7.0 million) is payable contingent upon the achievement against stretching annual EBIT targets for the years ending 31 December 2014 and 2015.

The acquisition strengthens Vitec's product offering particularly to the growing number of independent videographers and business users, and will complement our existing video activities including our range of broadcast microwave systems. Teradek operates as an autonomous business unit within the Videocom Division.

During the second half of 2012 Vitec sold its Staging business which had previously been included in the Imaging Division.

Restructuring costs

In 2013 there was a restructuring charge of £11.4 million (2012: £nil) relating to activities to streamline our operations and improve our processes. Restructuring charges include redundancy payments, closure costs, transfer of manufacturing and project management costs together with specific stock write offs. Of the total charge, £4.5 million is included in cost of sales with the balance of £6.9 million charged within operating expenses. These projects have been delivered on schedule and were substantially completed during the year. The main projects have included the consolidation of activities in the UK, Israel and the US and the transfer of manufacturing from the UK to Costa Rica.

The benefit of these restructuring plans to our profitability in 2013 was £6.2 million which was at the top end of our expectations as outlined in the November 2013 Interim Management Statement. Cash outflows relating to restructuring were £7.9 million in the year.

Charges associated with acquired businesses

The 2013 charges relate to the Group's acquisition activities and amortisation of previously acquired intangibles. In 2012 there was also a one off non-cash impairment charge relating to goodwill.

The amortisation of acquired intangibles of £2.6 million (2012: £3.6 million) related to: Manfrotto Lighting (formerly Lastolite) acquired in March 2011; Haigh-Farr acquired in December 2011; Camera Corps acquired in April 2012; and Teradek acquired in August 2013.

Transaction costs of £0.4 million were incurred in relation to the acquisition of Teradek (2012: £0.3 million in relation to the acquisition of Camera Corps).

Contingent consideration of £0.8 million was accrued during the year to be paid to the previous owners of Haigh-Farr in relation to their 2013 performance targets (2012: £1.2 million).

Cash flow and net debt

Cash generated from operating activities was strong at £52.4 million (2012: £38.4 million) with the Group maintaining a focus on cash generation.

The Group uses a number of key performance indicators to manage cash including the percentage of working capital to sales, inventory days, receivable days and 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 working capital to sales metric has decreased to 16.5% (31 December 2012: 20.0%) and overall working capital decreased by £8.6 million (2012: £14.9 million increase).

Trade receivables days decreased to 39 days (2012: 43 days), reflecting strong cash collection. Trade and other receivables decreased by £1.8 million accordingly (2012: £4.4 million increase) and the ageing remained good and well controlled.

Inventory levels decreased by £4.9 million (2012: £1.3 million decrease) to £55.3 million at the year-end, reflecting management focus throughout the year in this area. Inventory days decreased to 106 (2012: 113 days).

Trade payable days increased to 49 days (2012: 42 days) and there was a £3.1 million overall increase in trade and other payables against a relatively low balance at the end of 2012 (2012: £11.8 million decrease).

Capital expenditure, including capitalised software and development costs, totalled £22.7 million (2012: £15.5 million), of which £11.8 million (2012: £7.7 million) related to rental assets including £3.8 million relating to the 2014 Winter Olympics. This was partly financed by the proceeds from rental asset disposals of £3.5 million (2012: £1.6 million). Overall capital expenditure was equivalent to 1.6 times depreciation (2012: 1.1 times) and included investments in manufacturing processes and production tooling.

Net tax paid in 2013 of £8.5 million was lower than in 2012 of £10.8 million mainly due to lower payments in Germany and the UK partially offset by higher payments in Italy.

As a result, free cash inflow+ increased by £10.6 million to £21.4 million (2012: £10.8 million).

 

Free cash flow+

2013

2012

Operating profit *

£39.5m

£39.3m

Depreciation (1)

£14.3m

£14.2m

Changes in working capital

£8.6m

(£14.9m)

Restructuring costs (2013 plans)

(£7.9m)

-

Other adjustments (2)

(£2.1m)

(£0.2m)

Cash generated from operating activities

£52.4m

£38.4m

Purchase of property, plant and equipment

(£19.3m)

(£14.2m)

Capitalisation of software and development costs

(£3.4m)

(£1.3m)

Proceeds from sale of property, plant and equipment and software

£3.8m

£1.8m

Interest paid

(£3.6m)

(£3.1m)

Tax paid

(£8.5m)

(£10.8m)

Free Cash Flow+

£21.4m

£10.8m

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

+ Cash generated from operations after net capital expenditure, net interest and tax paid.

(1)   Includes depreciation and amortisation of capitalised software and development costs.

(2)   Includes change in provisions, share based charge, gain on disposal of property, plant and equipment, fair value derivatives and transaction costs relating to acquisitions.

There was a £8.5 million net cash outflow relating to acquisitions and disposals during the year (2012: £10.6 million). In 2012 there was also a cash outflow of £2.1 million relating to the disposal of the Staging business. Dividends paid to shareholders totalled £9.8 million (2012: £9.1million) and there was a net cash outflow in respect of shares purchased and issued of £1.1 million (2012: £4.1 million). The net cash inflow for the Group was £2.0 million (2012: £15.1 million outflow) which, after £0.2 million favourable exchange (2011: £1.8 million favourable), decreased the net debt to £61.5 million (2012: £63.7 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 2013:

 

Currency hedging

December

Average rate of

December

Average rate of

 

2013

contracts

2012

contracts

US Dollars sold for Euros

 

 

 

 

Forward contracts

$56.2m

1.32

$61.2m

1.29

US Dollars sold for Sterling

 

 

 

 

Forward contracts

$13.5m

1.56

$17.3m

1.57

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

The Group's principal financing facility is a £100 million five year multi-currency revolving credit facility involving five relationship banks, expiring on 19 July 2017. At the end of December 2013, £44.2 million (2012: £42.2 million) of the facility was utilised.

The Group has a $50 million (£30.2 million) private placement facility which has been drawn down in two tranches of $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 £130.2 million of committed facilities at the year-end with drawings of £74.4 million (31 December 2013: £73.0 million).

The average cost of borrowing for the year which includes interest payable, commitment fees and amortisation of set-up charges was 4.4% (2012: 4.0%) reflecting a net interest cost of £3.6 million (2012: £3.2 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 2013.

Foreign Exchange

2013 operating profit* included a £0.5 million net favourable foreign exchange effect after hedging, mainly due to more favourable £/$ and £/€ rates when compared to 2012.

Dividend

The Directors have recommended a final dividend of 14.1 pence per share amounting to £6.2 million (2012: 13.5 pence per share, amounting to £5.9 million). The dividend, subject to shareholder approval at the AGM, will be paid on Friday, 9 May 2014 to shareholders on the register at the close of business on Friday, 11 April 2014. This will bring the total dividend for the year to 23.0 pence per share (up 4.5%).  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

As experienced during the year in our Imaging Division, demand for our products may be adversely affected by many factors. These include changes in customer and consumer preferences and our ability to deliver appropriate products or to support changes in technology. During the year we have continued to invest in new product development and launched a number of new products particularly in the second half of the year. Demand may be impacted by competitor activity and the level of customer demand in our target markets particularly in the current challenging market environment.

We value our relationships with our customers and closely monitor our target markets and user requirements. We maintain good relationships with all our key customers and make appropriate investments in product development and marketing activities to ensure that we remain competitive in each market. 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.

Major contract awards

Our operating performance and cash flow may be dependent on the timing of major contract awards. The timing of the award of these contracts can be difficult to predict. In addition, the loss, suspension or cancellation of contracts may impact trading performance. In particular our MAG business has benefited from the award of some significant contracts from the US Government during the year but could be adversely impacted by a lower level of investment in the US defence budget.

We attempt to gain a good understanding of likely demand through developing close relationships with our customers. We also have a broad range of contracts that reduce our dependence on any particular contract or customer. We actively review our orders and trading outlook and manage our resources in line with anticipated activity.

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 have seen a continuation of the trend of sales increasingly being made online rather than through stores.

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 in these markets and the related opportunities and risks. We adapt our approach taking into account our actual and anticipated performance.

Restructuring activities

During 2013 we have restructured our business activities to streamline our business and reduce our  cost base. This includes streamlining operations by downsizing selected activities in Europe, Israel and the US and expanding manufacturing capabilities in Costa Rica to further shift to lower cost manufacturing. These activities have progressed well and will better position the Group for the future. Our operating performance and cash flow has reflected the effective delivery of these restructuring projects.

Although many of these projects have been completed, some will be finalised in 2014. We have and continue to manage these projects by using experienced project management teams with clearly defined project plans supported by regular reporting of key tasks, financial performance and other metrics. We are separately tracking the costs and benefits of these projects to ensure that we can compare their actual performance against our expectations while monitoring the underlying results of the business. We are implementing these changes professionally including consulting with our employees during this period of change.

Acquisitions and disposals

In pursuing our business strategy we continuously explore opportunities to enhance our business through development activities such as strategic acquisitions and disposals. 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. During the year we acquired Teradek which is being integrated into the Group and is performing strongly.

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. There is a clear focus on integrating acquired businesses and monitoring post-acquisition performance. Over the past three years the Group has made four acquisitions and completed the disposal of a non-core business.

Pricing pressure

We might experience pricing pressure including challenges in raising prices, especially in the current economic climate, or not recovering increases in commodity and other costs. If the price of products does not at least recover movements in commodity costs and other expenses and we are unable to reduce our expenses, our results could be adversely affected.

We ensure that our product and service offering remains competitive by investing in new product development, in appropriate marketing and product support, and improving the management of supply chain costs. This allows us to support price increases when required by working closely with our suppliers and managing our expenses and cost base appropriately.

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.

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 globally on an on-going basis.

Dependence on key customers

Whilst 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 sales.

We monitor closely our performance with all customers through developing strong relationships, analysis of sales trends and 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.

Employees

We employ around 1,800 people and are exposed to a risk of being unable to retain or recruit suitable talent to support the business. We manufacture and supply products from a number of locations and it is important that our employees operate in a professional and safe environment. The restructuring of our business has impacted many of our employees and their motivation and commitment has been important in delivering these projects as well as the underlying performance of the business.

We recognise that it is important to motivate and retain capable people across our businesses to ensure that we are not exposed to risk of unplanned staff turnover. We fairly reward our employees and have appropriate staff recruitment, appraisal, talent management and succession planning strategies to ensure we recruit and retain good quality people 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, 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 have resources dedicated to legal and regulatory compliance supported by external advice where necessary. We enhance our controls, processes and employee knowledge to maintain good governance and to comply with new laws and regulations such as the provisions of the UK Bribery Act 2010. The Group has processes in place to ensure that its worldwide business units understand and apply the Group's culture and processes to their own operations.

Reputation of 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 have many premium brands within our niche markets as well as the reputation of the Group.

We recognise the importance of our reputation and attempt 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 Vitec Code of Business Conduct which was recommunicated to all employees in 2013.

Exchange rate

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 and Euro. We have also seen a significant weakening of the Japanese Yen that will have a detrimental impact on our future reported performance.

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.

Outlook

Going Concern

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

 

 

John McDonough CBE

Stephen Bird

Chairman

Group Chief Executive

 

 

Consolidated Income Statement



 

For the year ended 31 December 2013

 

 


 

 

2013

2012

 

 Notes

£m

£m

Revenue

 

315.4

345.3

Cost of sales

 

(181.3)

(198.1)

Gross profit

 

134.1

147.2

Operating expenses

 

(109.8)

(121.6)

Operating profit

 

24.3

25.6

Comprising 

 



-  Operating profit before restructuring costs and charges associated with acquired businesses

 

39.5

39.3

-  Restructuring costs

2

(11.4)

-

-  Charges associated with acquired businesses

2

(3.8)

(13.7)

 

 

24.3

25.6

Net finance expense

3

(3.9)

(3.1)

Disposal of business


-

(6.4)

Profit before tax

 

20.4

16.1

Comprising 

 



-  Profit before tax, excluding restructuring costs, charges   associated with acquired businesses and disposal of business

 

35.6

36.2

-  Restructuring costs

2

(11.4)

-

-  Charges associated with acquired businesses

2

(3.8)

(13.7)

-  Disposal of business

 

-

(6.4)

 

 

20.4

16.1

Taxation

4

(6.4)

(10.2)

Profit for the year attributable to owners of the parent

 

14.0

5.9





Adjusted earnings per share (see note 5)

 



Basic earnings per share

 

56.1p

55.8p

Diluted earnings per share

 

55.9p

55.3p

 

 

 


Earnings per share (see note 5)

 

 


Basic earnings per share

 

31.9p

13.6p

Diluted earnings per share

 

31.8p

13.4p

 

 

 


Dividends per ordinary share (see note 6)

 

 


Prior year final paid 13.5p

 

£5.9m


Current year interim paid 8.9p

 

£3.9m


Current year final proposed 14.1p

 

£6.2m


 

 

 


Average exchange rates

 



      Euro

 

1.17

1.23

      US$

 

1.56

1.58

 

 

Consolidated Statement of Comprehensive Income

 

For the year ended 31 December 2013

 

 

 

2013

2012

 

 £m

 £m

Profit for the year

14.0

5.9

Other comprehensive income:



Items that will not be reclassified subsequently to profit and loss:



Remeasurements of defined benefit obligation, net of tax

(0.2)

(3.8)

Items that may be reclassified subsequently to profit and loss:



Foreign exchange gain recycled to the Income Statement on disposal of business

-

(2.0)

Currency translation differences on foreign currency subsidiaries

(2.8)

(8.2)

Net gain on designated effective net investment hedges

0.5

2.4

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

(1.8)

0.3

Effective portion of changes in fair value of cash flow hedges

2.6

2.1

Total comprehensive income/(loss) for the year attributable to owners of the parent

12.3

(3.3)

 

 

Consolidated Balance Sheet

 


 

As at 31 December 2013

 


 


 

2013

2012


 

 £m

 £m

Assets




Non-current assets




Intangible assets


76.3

68.2

Property, plant and equipment


53.5

48.6

Trade and other receivables


0.4

0.5

Derivative financial instruments


1.0

0.6

Deferred tax assets


14.0

14.4



145.2

132.3

Current assets




Inventories


55.3

59.5

Trade and other receivables


48.5

50.1

Derivative financial instruments


2.5

1.8

Current tax assets


2.7

1.0

Cash and cash equivalents


12.9

10.0



121.9

122.4

Total assets


267.1

254.7

Liabilities




Current liabilities




Bank overdrafts


-

0.7

Trade and other payables


48.1

44.4

Derivative financial instruments


0.1

0.1

Current tax liabilities


5.2

6.6

Provisions


6.5

2.5



59.9

54.3

Non-current liabilities




Interest-bearing loans and borrowings


74.4

73.0

Other payables


0.8

1.0

Post-employment obligations 


9.1

9.4

Provisions


1.4

1.2

Deferred tax liabilities


1.3

1.2



87.0

85.8

Total liabilities


146.9

140.1





Net assets


120.2

114.6





Equity




Share capital


8.8

8.8

Share premium


12.1

10.4

Translation reserve


(4.3)

(2.0)

Capital redemption reserve


1.6

1.6

Cash flow hedging reserve


2.3

1.5

Retained earnings


99.7

94.3

Total equity


120.2

114.6





Balance Sheet exchange rates




      Euro


1.20

1.23

      US$


1.66

1.63

 

 

Consolidated Statement of Changes in Equity


 Share capital

 Share premium 

 Translation reserve

 Capital redemption reserve

 Cash flow hedging reserve

 Retained earnings

 Total equity


 £m

 £m

 £m

 £m

 £m

 £m

 £m

Balance at 1 January 2013

8.8

10.4

(2.0)

1.6

1.5

94.3

114.6

Total comprehensive income for the year








Profit for the year

-

-

-

-

-

14.0

14.0

Other comprehensive income








Remeasurements of defined benefit obligation, net of tax

-

-

-

-

-

(0.2)

(0.2)

Currency translation differences on foreign currency subsidiaries

-

-

(2.8)

-

-

-

(2.8)

Net gain on designated effective net investment hedges

-

-

0.5

-

-

-

0.5

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

-

-

-

-

(1.8)

-

(1.8)

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

2.6

-

2.6

Contributions by and distributions to owners








Dividends paid

-

-

-

-

-

(9.8)

(9.8)

Own shares purchased

-

-

-

-

-

(1.5)

(1.5)

Share-based payment charge, net of tax

-

-

-

-

-

2.9

2.9

New shares issued

-

1.7

-

-

-

-

1.7

Balance at 31 December 2013

8.8

12.1

(4.3)

1.6

2.3

99.7

120.2










 Share capital

 Share premium 

 Translation reserve

 Capital redemption reserve

 Cash flow hedging reserve

 Retained earnings

 Total equity


 £m

 £m

 £m

 £m

 £m

 £m

 £m

Balance at 1 January 2012

8.7

9.8

5.8

1.6

(0.9)

104.3

129.3

Total comprehensive income for the year








Profit for the year

-

-

-

-

-

5.9

5.9

Other comprehensive income








Remeasurements of defined benefit obligation, net of tax

-

-

-

-

-

(3.8)

(3.8)

Foreign exchange gain recycled to the Income Statement on disposal of business

-

-

(2.0)

-

-

-

(2.0)

Currency translation differences on foreign currency subsidiaries

-

-

(8.2)

-

-

-

(8.2)

Net gain on designated effective net investment hedges

-

-

2.4

-

-

-

2.4

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

-

-

-

-

0.3

-

0.3

Effective portion of changes in fair value of cash flow hedges

-

-

-

-

2.1

-

2.1

Contributions by and distributions to owners








Dividends paid

-

-

-

-

-

(9.1)

(9.1)

Own shares purchased

-

-

-

-

-

(4.8)

(4.8)

Share-based payment charge

-

-

-

-

-

1.8

1.8

New shares issued

0.1

0.6

-

-

-

-

0.7

Balance at 31 December 2012

8.8

10.4

(2.0)

1.6

1.5

94.3

114.6

 

 

Consolidated Statement of Cash Flows




For the year ended 31 December 2013




 


2013

2012

 

 Notes

 £m

 £m

Cash flows from operating activities 



 

Profit for the year


14.0

5.9

Adjustments for:




 Taxation


6.4

10.2

 Depreciation


12.4

12.6

 Amortisation of intangible assets


4.5

5.2

 Impairment of goodwill 


-

8.8

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


(2.1)

(0.3)

 Fair value gains on derivative financial instruments


-

(0.2)

 Share-based payment charge


1.4

1.8

 Contingent consideration since date of acquisition


0.8

1.0

 Disposal of business


-

6.4

 Net finance expense


3.9

3.1

Operating profit before changes in working capital and provisions 


41.3

54.5

Decrease in inventories


4.9

1.3

Decrease/(increase) in receivables


1.8

(4.4)

(Decrease)/increase in payables


3.1

(11.8)

(Decrease)/increase in provisions


1.3

(1.2)

Cash generated from operating activities


52.4

38.4

Interest paid


(3.6)

(3.1)

Tax paid


(8.5)

(10.8)

Net cash from operating activities


40.3

24.5





Cash flows from investing activities 




Proceeds from sale of property, plant and equipment and    software


3.8

1.8

Purchase of property, plant and equipment


(19.3)

(14.2)

Capitalisation of software and development costs


(3.4)

(1.3)

Acquisition of businesses, net of cash acquired

7       

(8.5)

(10.6)

Disposal of business


-

(2.1)

Net cash used in investing activities


(27.4)

(26.4)





Cash flows from financing activities 




Proceeds from the issue of shares


0.4

0.7

Own shares purchased


(1.5)

(4.8)

Proceeds from interest-bearing loans and borrowings


1.9

18.8

Dividends paid


(9.8)

(9.1)

Net cash used in financing activities


(9.0)

5.6





Increase in cash and cash equivalents  


3.9

3.7

Cash and cash equivalents at 1 January


9.3

6.2

Effect of exchange rate fluctuations on cash held 


(0.3)

(0.6)

Cash and cash equivalents at 31 December

12.9

9.3

 

 

Segment reporting

The Group has three 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). Further details on the nature of these segments and the products and services they provide are contained in the Directors' Report.


 Videocom

Imaging (1)

 Services

 Corporate and unallocated

 Consolidated


2013

2012

2013

2012

2013

2012

2013

2012

2013

2012


 £m

 £m

 £m

 £m

 £m

 £m

 £m

 £m

 £m

 £m

Revenue from external customers:











     Sales

140.0

137.1

141.2

166.1

9.4

7.0

-

-

290.6

310.2

     Services

3.1

9.1

-

-

21.7

26.0

-

-

24.8

35.1

Total revenue from external customers

143.1

146.2

141.2

166.1

31.1

33.0

-

-

315.4

345.3

Inter-segment revenue (2)

2.2

2.5

0.6

0.2

-

0.1

(2.8)

(2.8)

-

-

Total revenue

145.3

148.7

141.8

166.3

31.1

33.1

(2.8)

(2.8)

315.4

345.3












Segment result

17.9

15.8

20.1

22.3

1.5

1.2

-

-

39.5

39.3

Restructuring costs

(5.3)

-

(5.6)

-

(0.5)

-

-

-

(11.4)

-

Fair value adjustment to contingent consideration on previous acquisitions

(0.8)

(1.2)

-

0.2

-

-

-

-

(0.8)

(1.0)

Transaction costs relating to acquisitions

(0.4)

(0.3)

-

-

-

-

-

-

(0.4)

(0.3)

Impairment of goodwill

-

(8.8)

-

-

-

-

-

-

-

(8.8)

Amortisation of acquired intangible assets

(2.2)

(3.1)

(0.4)

(0.5)

-

-

-

-

(2.6)

(3.6)

Operating profit

9.2

2.4

14.1

22.0

1.0

1.2

-

-

24.3

25.6

Net finance expense









(3.9)

(3.1)

Loss on disposal of Staging business

-

-

-

(6.4)

-

-

-

-

-

(6.4)

Taxation









(6.4)

(10.2)

Profit for the year









14.0

5.9












Segment assets

120.5

111.6

85.5

90.8

26.2

22.4

5.3

4.5

237.5

229.3

Unallocated assets











      Cash and cash equivalents







12.9

10.0

12.9

10.0

      Current tax assets







2.7

1.0

2.7

1.0

      Deferred tax assets







14.0

14.4

14.0

14.4

Total assets









267.1

254.7

Segment liabilities

27.0

23.1

25.3

27.2

6.6

3.9

7.1

4.4

66.0

58.6

Unallocated liabilities











      Bank overdrafts







-

0.7

-

0.7

      Interest-bearing loans and borrowings







74.4

73.0

74.4

73.0

      Current tax liabilities







5.2

6.6

5.2

6.6

      Deferred tax liabilities







1.3

1.2

1.3

1.2

Total liabilities









146.9

140.1












Cash flows from operating activities

14.8

2.8

15.3

13.1

6.8

5.4

3.4

3.2

40.3

24.5

Cash flows from investing activities

(13.5)

(14.2)

(5.8)

6.8)

(7.8)

(5.3)

(0.3)

(0.1)

(27.4)

(26.4)

Cash flows from financing activities

-

-

-

-

-

-

(9.0)

5.6

(9.0)

5.6

Capital expenditure











      Property, plant and equipment

3.7

3.1

4.2

4.2

11.4

6.8

-

0.1

19.3

14.2

      Software and development costs

1.7

0.6

1.6

0.6

0.1

0.1

-

-

3.4

1.3

(1) 2012 includes Staging business, which was sold by the Group during the second half of 2012.

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

No individual customer accounted for more than 10% of external revenue in either 2013 or 2012.

 

 

Geographical segments



 

2013

2012


 £m

 £m

Analysis of revenue from external customers, by location of customer



United Kingdom

26.5

32.9

The rest of Europe

71.6

79.4

North America

142.0

155.5

Asia Pacific

56.8

60.4

The rest of the World

18.5

17.1

Total revenue from external customers

315.4

345.3

The Group's operating segments 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 power to govern the financial and operating policies of an entity in order to obtain benefits from its activities.  The results of subsidiaries sold or acquired during the year are included in the accounts up to, or from, the date that control exists.

Application of new or amended EU endorsed accounting standards

IAS 19 "Employee Benefits (2011)"

The principal changes require the replacement of the interest income on plan assets and the interest charge on pension liabilities with a single net financing cost, based on the discount rate. Previously, the Group determined interest income on plan assets based on their long-term rate of expected return. The change had no significant impact on the consolidated financial statements, and accordingly, the 2012 comparatives have not been restated.

IFRS 13 "Fair Value Measurement"

IFRS 13 replaces and expands the disclosure requirements in other IFRSs, including IFRS 7 "Financial Instruments: Disclosures". These had no significant impact on the consolidated financial statements, and accordingly, the Group has not provided 2012 comparatives.

IAS 1 "Presentation of financial statements"

The Group has modified the presentation of items of other comprehensive income in its consolidated statement of other comprehensive income, to present separately items that would be reclassified to the consolidated income statement in the future from those that would never be. Comparative information has also been re-presented accordingly.

New standards and interpretations not yet adopted

There are a number of new standards, amendments to standards and interpretations that are not yet effective for the year ended 31 December 2013, and have not been adopted early in preparing these consolidated financial statements. None of these are anticipated to have any material impact on these consolidated financial statements.

 

 

2 Restructuring costs and charges associated with acquired businesses

Restructuring costs and charges associated with acquired businesses are excluded from key performance measures in order to more accurately show the underlying current business performance of the Group in a consistent manner and reflect how the business is managed and measured on a day-to-day basis. Restructuring costs include employment termination, streamlining of operations, relocation of certain manufacturing activities to Costa Rica, improvement of systems and processes, and inventory write off. Charges associated with acquired businesses include non-cash charges such as impairment of goodwill and amortisation of acquired intangible assets, and cash charges such as transaction costs and fair value adjustments to contingent consideration since date of acquisition.


2013

2012


 £m

 £m

Restructuring costs (1)

(11.4)

-

Contingent consideration since date of acquisition (2)

(0.8)

(1.0)

Transaction costs relating to acquisitions (3)

(0.4)

(0.3)

Impairment of goodwill

-

(8.8)

Amortisation of acquired intangible assets

(2.6)

(3.6)

Restructuring costs and charges associated with acquired businesses, before tax

(15.2)

(13.7)

Tax on restructuring costs and charges associated with acquired businesses

4.6

1.3

Restructuring costs and charges associated with acquired businesses, net of tax

(10.6)

(12.4)

(1)  One-off restructuring costs of £11.4 million relate to the Group streamlining certain operations by downsizing selected activities in the UK, Israel and US and expanding its manufacturing capabilities in Costa Rica to further shift to lower cost manufacturing. This includes employment termination costs of £6.2 million and other site rationalisation and closure costs of £5.2 million. Of the total £11.4 million restructuring costs, £4.5 million is included in cost of sales of which £0.9 million represents inventory write off, and the remaining £6.9 million in operating expenses. A provision of £2.7 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 fair value adjustment of £0.8 million has been provided for in respect of contingent consideration of Haigh-Farr, a prior period acquisition. This is included within administrative expenses, in the restructuring costs and charges associated with acquired businesses.           

(3) £0.4 million transaction costs were incurred in relation to the acquisition of Teradek. See note 7.

 

 

3 Net finance expense

 

 


2013

2012


 £m

 £m

Finance income



Net currency translation gains

-

0.3

Finance expense



Interest payable on interest-bearing loans and borrowings

(3.6)

(3.2)

Net interest expense on net defined benefit pension scheme liabilities

(0.3)

(0.2)

 

(3.9)

(3.4)

Net finance expense

(3.9)

(3.1)

 

 

4 Taxation




2013

2012


 £m

 £m

The total taxation charge/(credit) in the Income Statement is analysed as follows:



 

 

Current tax

11.2

9.8

Deferred tax

(0.2)

2.1


11.0

11.9

Restructuring costs, charges associated with acquired businesses and disposal of business

 

 

Current tax (1)

(4.6)

-

Deferred tax (2)

-

(1.7)


(4.6)

(1.7)

Summarised in the Income Statement as follows

 

 

Current tax

6.6

9.8

Deferred tax

(0.2)

0.4


6.4

10.2


(1) Current tax credits of £4.6 million were recognised in respect of restructuring costs, charges associated with acquired businesses and disposal of businesses.  This tax credit is split between restructuring costs (£3.5 million) and amortisation of intangible assets in the period (£1.1 million).

(2) No overall net deferred tax charge or credit arises from restructuring costs, charges associated with acquired businesses and disposal of businesses in 2013.  In 2012, deferred tax credits of £1.7 million were recognised; £1.3 million related to the deferred tax impacts of the amortisation of intangible assets and the remaining £0.4 million related to the deferred tax impact of the Staging disposal.

 

 

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 acquired businesses and disposal of business, both net of tax.

 


 

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

 



2013

2012

 

Profit

 £m

 £m

 

Profit for the financial year

14.0

5.9

 

Add back:



 

Restructuring costs and charges associated with acquired businesses, net of tax

10.6

12.4

 

Loss on disposal of Staging business, net of tax

-

6.0

 

Earnings before restructuring costs, charges associated with acquired businesses and disposal of business

24.6

24.3

 


 


2013

2012

2013

2012

2013

2012

 


 No

 No

 pence

 pence

 pence

 pence

 


Weighted average number of shares '000

Adjusted earnings per share

Earnings per share

 

Basic

43,869

43,520

56.1

55.8

31.9

13.6

 

Dilutive potential ordinary shares

204

426

(0.2)

(0.5)

(0.1)

(0.2)

 

Diluted

44,073

43,946

55.9

55.3

31.8

13.4

 

 

 

6 Dividend

After the Balance Sheet date the following final dividend for the year ended 31 December 2013 was recommended by the Directors and subject to approval by shareholders at the AGM on 9 May 2014 will be paid on 10 May 2014. The dividend has not been provided for at the year end and there are no tax consequences.


2013

2012


 £m

 £m

14.1p per ordinary share (2012: 13.5p per ordinary share)

6.2

5.9

 

 

7 Acquisition of Teradek

On 28 August 2013, the Group acquired the partnership interests in Teradek, LLC (Teradek), a private company based in Irvine, California, USA.

Teradek is a world leader in the design and manufacture of wireless video devices and platforms that are used by broadcasters, businesses and web channels to transmit images wirelessly. Its products are used in live electronic news gathering, real-time monitoring and recording, aerial visual capture and webcasting. The acquisition complements the Group's existing video activities including its range of broadcast microwave systems and its products are marketed through the Group's global distribution network. Teradek operates within the Videocom Division.

The acquisition was funded in part by the issue of 214,847 new Vitec ordinary shares worth US$2.0 million (£1.3 million) to be held in escrow for two years post-completion, and net cash consideration of US$11.3 million (£7.3 million) after taking account of US$0.5 million (£0.3 million) of cash in the business at acquisition date.                           

A summary of the effect of the acquisition of Teradek is detailed below:

 

 Book value at acquisition

 Provisional fair value adjustments

 Fair value of net assets acquired

 

 £m

 £m

 £m

Net Assets acquired




Intangible assets

-

6.1

6.1

Property plant and equipment

0.3

(0.3)

-

Inventories

1.6

(0.3)

1.3

Trade and other receivables

0.8

-

0.8

Trade and other payables

(1.0)

-

(1.0)

Provisions

-

(0.1)

(0.1)

Cash

0.3

-

0.3

 

2.0

5.4

7.4

Goodwill



4.5

Consideration



11.9

 




Satisfied by




   - Issue of new ordinary shares



1.3

   - Deferred and contingent consideration



3.0

   - Cash consideration



7.6

 



11.9

The trade receivables acquired had a fair value of £0.7 million and a gross contractual value of £0.8 million. No net deferred tax asset or liability has arisen on the net assets acquired.

Of the US$4.7 million (£3.0 million) deferred and contingent consideration, US$3.2 million (£2.1 million) is due to be paid on 31 March 2014 dependant upon the results of Teradek for the year ending 31 December 2013 and is subject to final agreement. The remaining US$1.5 million (£0.9 million) is payable over a two year period after acquisition date.

Under the terms of the acquisition, there is a total potential contingent consideration of US$15.5 million that is dependent on the performance against certain EBIT targets over the three year period to 31 December 2015. Management's assessment at the acquisition date is that US$3.2 million is payable relating to Teradek's performance in 2013 (as described above) and that no further payments are payable relating to Teradek's performance for the years ending 31 December 2014 and 2015.  This reflects that the targets for 2014 and 2015 are over and above those included in the Board approved acquisition projections and confirmed by the approved 2014 budget.  Any payment that would be made relating to 2014 and/or 2015 shall be charged to the Income Statement as and when incurred. Up to a third of any deferred consideration paid to the vendors may be satisfied by issuing new Vitec ordinary shares with the remainder paid in cash. The recipients of these shares are required to hold them for a certain period under the terms of this acquisition.

 

 

The results of Teradek have been included in the Videocom division and comprise:

 

2013


 £m

Revenue

4.9  

Operating profit (1)

1.0  

(1) Operating profit is stated before amortisation of intangible assets and after allocation of Head Office costs.

Had the acquisition been made at the beginning of the year (i.e.1 January 2013) it would have contributed £12.6 million to revenue and £2.0 million to the operating profit of the Group.


An analysis of the cash flows relating to acquisitions is provided below.


2013


 £m

Net outflow of cash in respect of acquisition


Total purchase consideration

11.9  

Issue of new ordinary shares

(1.3) 

Deferred and contingent consideration

(3.0) 

Cash consideration

7.6  

Transaction costs

0.4  

Cash acquired

(0.3) 

Net cash outflow in respect of 2013 acquisition

7.7  

Contingent consideration in relation to Haigh-Farr, acquired in December 2011

1.2  

Net cash outflow in respect of acquisitions (2)

8.9  

(2)  Of the £8.9 million net cash outflow in respect of acquisitions, transaction costs of £0.4 million are included in cash flows from operating activities and the net cash consideration paid of £8.5 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.


2013

2012


 £m

 £m

 Increase in cash and cash equivalents

3.9

3.7

 Proceeds from interest-bearing loans and borrowings

(1.9)

(18.8)

 Decrease/(increase) in net debt resulting from cash flows

2.0

(15.1)

 Effect of exchange rate fluctuations on cash held

(0.3)

(0.6)

 Effect of exchange rate fluctuations on debt held

0.5

2.4

 Effect of exchange rate fluctuations on net debt

0.2

1.8

 Movements in net debt in the year

2.2

(13.3)

 Net debt at 1 January

(63.7)

(50.4)

 Net debt at 31 December 

(61.5)

(63.7)




 Cash and cash equivalents in the Balance Sheet

12.9

10.0

 Bank overdrafts

-

(0.7)

 Cash and cash equivalents in the Statement of Cash Flows

12.9

9.3

 Interest-bearing loans and borrowings

(74.4)

(73.0)

 Net debt at 31 December

(61.5)

(63.7)

 

 

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, Euro and Japanese Yen. The Group pro-actively 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 and a proportion of the Group's forecasted foreign currency exposure in respect of forecast cash transactions for the following 12 to 24 months. These contracts have maturities of less than one year and between one and two years at the Balance Sheet date respectively.

 

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 to 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 and charges associated with acquired businesses for the year ended 31 December 2013 would have increased/decreased by approximately £1.3 million from a ten cent stronger/weaker US Dollar against Sterling, by approximately £1.5 million from a ten cent stronger/weaker Euro against Sterling and by approximately £0.4 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 2013 the Group's operating profit benefitted from a net gain of £1.7 million (2012: £0.8 million loss) upon the crystallisation of forward exchange contracts as described later in this note.

 

 

Interest rate risk 

 

Interest rate risk comprises of 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 2013, 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 £0.8 million. 

 

Liquidity risk

 

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due.

On 19 July 2012 the Group signed a five year £100 million Multicurrency Revolving Credit Facility Agreement with a syndicate comprising of five banks: three UK banks, one American bank, and one European bank. The Group was utilising 44% of the £100 million Multicurrency Revolving Credit Facility at 31 December 2013. 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 £100 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 change over time in response to underlying variables such as exchange rates and 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 to hedge its exposure to fluctuations in foreign exchange rates arising from operational activities. It does not hold or use derivative financial instruments for trading or speculative purposes.  

 

 

Cash flow hedge accounting

 

Derivative financial instruments 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 gain or loss arising is recognised in the Cash flow hedging reserve within Equity, via the Statement of Comprehensive Income. The ineffective part of any gain or loss is recognised in the Income Statement within net finance expense. When the forecast transaction subsequently occurs and results in the recognition of a financial asset or liability that impacts on the Income Statement, the associated cumulative gain or loss is removed from the hedging reserve and presented within 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.

 

As at 31 December

Average exchange rate of contracts

As at 31 December

Average exchange rate of contracts

 

2013

2013

2012

2012

 

 currency

millions

 

millions

 

Cash flow hedging contracts

 

 

 

 

 

USD  / GBP forward exchange contracts

USD

13.5

1.56

17.3

1.57

USD  / EUR forward exchange contracts

USD

56.2

1.32

61.2

1.29

USD / RMB forward exchange contracts

USD

-

-

3.0

6.40

EUR / GBP forward exchange contracts

EUR

17.2

1.20

18.4

1.21

JPY / GBP forward exchange contracts

JPY

506.9

143.7

361.1

123.0

JPY / Euro forward exchange contracts

JPY

618.0

121.5

491.0

101.0

A net gain of £1.7 million (2012: £0.8 million loss) relating to forward exchange contracts that crystallised during the year was charged to 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 value

Fair value

Carrying value

Fair value

 

2013

2013

2012

2012

 

 £m

 £m

 £m

 £m

Forward exchange contracts - Assets

3.5

3.5

2.4

2.4

Forward exchange contracts - Liabilities

(0.1)

(0.1)

(0.1)

(0.1)

Cash at bank and in hand

12.9

12.9

10.0

10.0

Net trade receivables

35.8

35.8

38.2

38.2

Trade payables

(25.1)

(25.1)

(22.4)

(22.4)

Fixed rate borrowings

(30.2)

(31.7)

(30.8)

(32.7)

Floating rate borrowings

(44.2)

(44.2)

(42.9)

(42.9)

 

(47.4)

(48.9)

(45.6)

(47.5)

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 Yen, US Dollar and Euro 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, by currency.

 

 Total

 Fixed rate borrowings

 Floating rate borrowings

Currency

 £m

 £m

 £m

Yen

1.7

-

1.7

US Dollar

44.1

30.2

13.9

Euro

16.6

-

16.6

Sterling

12.0

-

12.0

At 31 December 2013

74.4

30.2

44.2

Yen

2.1

-

2.1

US Dollar

39.4

30.8

8.6

Euro

20.2

-

20.2

Sterling

12.0

-

12.0

At 31 December 2012

73.7

30.8

42.9

The floating rate borrowings comprise borrowings bearing interest at rates based on LIBOR. The fixed rate borrowings 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.

 

 Carrying amount

 Total contractual cash flows

 Within one year

 From one to five years

 From five to ten years

 

 £m

 £m

 £m

 £m

 £m

2013

Unsecured bank loans/overdrafts

(74.4)

(82.8)

(2.2)

(80.6)

-

Trade payables

(25.1)

(25.1)

(25.1)

-

-

Forward exchange contracts

(0.1)

(0.1)

(0.1)

-

-

 

(99.6)

(108.0)

(27.4)

(80.6)

-

2012

 

 

 

 

 

Unsecured bank loans/overdrafts

(73.7)

(84.4)

(2.9)

(81.5)

-

Trade payables

(22.4)

(22.3)

(22.3)

-

-

Forward exchange contracts

(0.1)

(0.1)

(0.1)

-

-

 

(96.2)

(106.8)

(25.3)

(81.5)

-

 

The Group had the following undrawn borrowing facilities at the end of the year:

 

2013

2012

 Expiring in :

 £m

 £m

 less than one year

  - Uncommitted facilities

10.8

25.4

More than one year but not more than two years

 

 

  - Uncommitted facilities

-

-

More than one year but not more than five years

 

 

  - Committed facilities

55.8

57.8

Total

66.6

83.2

 


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