2004 saw real progress in growing the business. For almost
three years we have been operating the ‘Consolidate-Leverage-
Grow’ strategy. 2002 and the first half of 2003 saw multiple
plant and facility closures at a time of static sales, while in the
second half of 2003 we began to see growth returning. In 2004
we delivered both operational improvements and significant
revenue growth, most of it organic, due to the multiple new
products and services that we have launched. While we expect
to see further benefits from the consolidation actions already
announced and implemented, the emphasis on delivery is
moving from ‘Consolidate’ and ‘Leverage’, to ‘Grow’.
Results
2004 saw revenues from continuing operations grow 18% in
constant currency terms, including a 4% contribution from
acquisitions. Profit before tax, exceptional items, goodwill
amortisation and impairment, grew 30% in constant currency
terms due to the volume increases and the benefits of the plant
closure programme and other cost control measures, despite
increases in UK pension costs.
Foreign currency is a major factor in the performance of a
worldwide business such as Vitec, and the fall in the US dollar,
particularly against the euro, continued to have a significant
effect, even after the hedging we have in place.
In £ sterling terms the sales growth was still strong at 8.8%
(from £170.4 million to £185.4 million), while operating profit
before exceptional items, goodwill amortisation and impairment,
was £17.8 million (£17.8 million in 2003), after reflecting
adverse transactional and translational impacts of some £4.8
million.
After a slightly lower interest charge, profit before tax before
exceptional items, goodwill amortisation and impairment was
£16.2 million (£16.1 million in 2003). There was a net operating
exceptional charge of £2.1 million relating principally to the
previously announced restructuring of the commercial
operations within Broadcast Systems.
Revenue Growth
The growth in revenue coming from a combination of new
products and market growth. In order to stimulate product sales
we have, in the last two years, launched new intercoms systems,
new studio camera pedestal and head products, new battery
systems, new photographic tripods, and new lighting truss
systems. Every brand has reinvigorated its product portfolio and
some have replaced their range completely. We continue to win
meaningful awards for these new products at trade shows and
in trade magazines, which is an encouraging indicator of future
prospects. Many of these new products are being patented
which, together with an ongoing R&D spend of roughly 5% of
non-rental sales, reinforces our market-leading positions. We
believe continued innovation is critical to Vitec’s future.
The market for our photographic accessories continues to
expand, driven by the uptake of digital cameras, which is
particularly strong in the ‘35mm SLR’ segment, where we have
targeted products for the keen amateur. In our broadcast
market, many of the major networks have moved rapidly into
making programmes in ‘High Definition’ (HD), a digital format
that greatly enhances the clarity of video images, which is
particularly useful for sports coverage. The US rentals market is
reviving somewhat and our Broadcast Services Division has
developed greater capacity for HD productions in response. It
has also been active in coming forward with new service
offerings: in particular for complex ‘Reality TV’ shows. We also
generated growth by entering new markets, in particular Air
Traffic Control, where we have installed several large intercom
systems.
2004 also saw some major external and internal events that
boosted revenues. The presidential elections in the USA lifted
advertising expenditure, whilst the Athens Olympics saw
significant contracts for our rental business, as well as product
sales to broadcasters and freelancers. Internally, operational
improvements in Photographic reduced lead times to normal
levels, converting some backlog into sales. While there are no
major sporting events in 2005, most Vitec businesses entered
2005 with order books higher than at the start of 2004.
Restructuring Benefits
We continue to improve the operational efficiency of the Group,
exploiting our manufacturing and purchasing scale in both
product divisions, greatly reducing the negative effect of the
falling US dollar. The benefits from the restructuring of our
manufacturing, which although offset by mix changes and some
provisions for ageing stock, have underpinned the results for
2004. Our manufacturing operations are now focusing on
continuous improvement actions for 2005 and beyond, which
enabled us to announce in July the rationalisation of the
commercial side of the Broadcast Systems business. A cost of
£4 million to £5 million was anticipated, of which a net £2.1
million was charged in 2004. This process is also going well.
Ongoing cost control and better use of our rental asset base also
improved profitability in Broadcast Services.
It was encouraging that most of our businesses showed a
significant improvement in the second half of the year over the
first half, as the effects of earlier actions came through.
Executive team
During 2004 we strengthened the management team in the
Photographic business in Italy and we recently made several key
appointments within Broadcast Systems, further improving the
team there.
With the scaling up of our plant in Costa Rica behind us, Brian
McCluskie, formerly Operations Director, has left the Company
and we wish him well in his future career.