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Vislink – half-year results, TIMBERRR!

By Steve Moore | Friday 30 September 2016

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

A July profit warning meant results for the first half of 2016 from Vislink (VLK) were not going to be good but, on revenue 15% lower than in the corresponding 2015 period, at £22.6 million, a loss of £32.8 million!?! And there’s worse.

Even excluding £24.51 million of “amortisation and impairment of goodwill and acquired intangibles” and £6.36 million of “non-recurring items”, there was still a £1.29 million pre-tax loss. This flowed through to a £3.08 million increase in net debt to £8.83 million, though there was an, albeit much reduced, net current assets position. However, this £3.58 million position includes more than £18 million of receivables (sub £12 million at the same point in 2015) and still £8 million of inventories. Hmmm.

The performance reflects “a slower than expected start to the year” and “investment in software development and expansion of sales capability” at software business, Pebble Beach (adjusted operating profit £0.64 million lower to £1.20 million on revenue 1.4% lower at £5.4 million), but particularly Communication Systems woes (swing to a £0.86 million adjusted operating loss on revenue 18.5% lower at £17.3 million).

On the latter, it is stated that “the board is initiating a business improvement plan… focusing the business on key, leading edge technologies and a restructuring plan that is directed at further reducing costs”. But then it is also admitted “the business was restructured during 2015”!

The 'worse' is that the company “is forecast to breach its September 2016 banking covenant” and is in discussions with its bankers, while trying to implement a plan “directed at enabling the business to remain within its borrowing facilities through a combination of actively managing cash, cutting unnecessary expenditure and looking at other sources of finance or disposal opportunities within the group”.

This all sounds pretty desperate, but not to worry as “senior management to voluntarily cancel the Value Creation Plan Scheme and there is no intention to replace this scheme” and “we also have a pipeline of partners and software bolt-on acquisitions which will further enhance the group strategy”. Extraordinary when existing business is in a mess and the company in financial peril!

As I previously concluded, is it a rescue fundraising ahoy? (though any takers now?). It’s certainly still bargepole ahoy! Sell.

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