Vislink

www.vislink.com TICKER: VLK     EXCHANGE: AIM

Vislink plc is a global business. The group sells secure communications solutions into the broadcast and the surveillance markets, specialising in wireless, video and IP (Internet Protocol) technologies.

LATEST REPORTS

 
Opening a new chapter
Published: Oct 21 2016

A lot can happen in 1 ½ weeks. Firstly on the 12th October, Vislink announced that its broadcast software arm, Pebble Beach Systems (PBS), had traded strongly – reporting H1 order intake up 53% LFL. Then the following day, Finance Director (Ian Davies) resigned with immediate effect due to personal health-related reasons, with the shares hitting an all-time low of 8p.
Finally the stock has almost doubled to 15.5p over the past 2 days, on the back of positive news that the Board has conditionally agreed to dispose of its hardware division, Vislink Communication Systems (VCS), to xG Technology Inc (Nasdaq: XGTI) for $16m (or c. £13m gross, representing 0.4x 2016 sales). 
The transaction is subject to shareholder approval (date to be confirmed), and if authorised as anticipated, should close by the end of 2016. Proceeds (say £12m net) have been ear-marked to pay back the vast majority of the company’s £15m revolving credit facility with Santander - thus leaving the business “substantially debt-free”.
On this basis we have upgraded our adjusted PBT forecasts for next year from £1.7m to £2.8m - delivering EPS of 1.8p on top of a re-introduced 0.4p dividend. Likewise our price target increases from 20p to 23p per share – equating to a 2017 sales multiple for PBS of 2.3x, and within the typical range of 2x-3x for smallcap software stocks. 
 
Decisive action being taken
Published: Sep 30 2016

Given July’s profit warning, Vislink’s interims this morning were never going to be pretty. H1’16 orders and turnover fell 21% and 15% respectively to £22.3m and £22.6m, reflecting ongoing difficulties at VSC (where sales dropped -18.5% to £17.2m) as broadcasters continued to divert budgets from infrastructure to content and transition to IP technologies (re delayed orders). Accordingly this pushed group adjusted EBIT to a loss of -£1.1m (vs £2.2m LY) - excluding £2.2m of forex gains which were credited to reserves - with net debt rising to £8.8m from £5.75m as at December. £1.9m of R&D was capitalised vs £1.6m of amortisation charged to the P&L. 
This was largely as anticipated, albeit since June, cashflow has remained tight with the business now fully utilising (vs 80% in June) its £15m RCF facility with Santander after paying a £1.8m dividend on 18th July, and is expected to breach covenants as the end of this month. That said the company is in constructive discussions with its bankers, and management are already lowering working capital levels (% revenues), capex, overheads and non-discretionary spend. A number of self-help measures have been kicked off, involving: a “root and branch review” of VCS with the aim of delivering annualised savings of £2-3m and returning the division to profitability next year by focusing more on newer IP related technology, cessation of future dividends until net debt falls below 1x EBITDA, re-examination of the Board and Group structure and moving the VCS finance function to Head Office to improve debt collection and overall cashflow. We think this strategy makes sense, and suspect too that it could include asset disposals and/or securing other “sources of finance” in order to temporarily shore up the balance sheet.
With regards to the numbers, although we have cut our forecasts, we estimate the software division on its own is worth a minimum of £34m (vs VLK mrk cap of £10.6m) - equating to a modest 2017 EBIT contribution multiple of 8.5x. Additionally, if we put VCS on a rating of circa 0.4x next year’s turnover – adjusting for net debt, forex and central costs – then the revised sum-of-the-parts price target for the entire group comes out at 20p/share (see below) vs 23p previously. 
 
2016 to be 'materially below estimates'
Published: Jul 07 2016

Vislink is a market leading, video capture and playout provider to the broadcast industry. Its cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". 
Unfortunately it appears our views earlier this year were too optimistic, after news yesterday that Vislink's hardware division (VCS) had traded materially below forecasts in H1'16, due to much tougher conditions across the patch, coupled with delays in launching some new products.
As a result, management are now implementing a "major root and branch" restructuring exercise - including product/brand rationalisation and the consolidation of VCS' engineering and manufacturing operations - with the intention of delivering annualised savings of £1-2m. 
Elsewhere, Pebble Beach's long term prospects "remain strong" - however even here a limited number of software orders (say £0.5m worth) have "slipped" from Q2 into H2. Our FY EBITA estimate for the division is unchanged at £3.55m on revenues of £11.5m. 
Assuming the 2015 dividend of 1.5p/share (worth £1.8m) is paid as scheduled on 18th July, then we believe overall net debt (sterling denominated) will close December 2016 at circa £8.0m, representing 2.0x trailing EBITDA (post R&D amortisation). Going forward this should settle back to <2x in 2017 - based on a worst case scenario of the 2016 dividend being passed; but then re-instated 12 months later, offering a 5.6% yield with an earnings cover of 3x.
We have therefore cut our 2016 adjusted EPS by 52% from 3.6p to 1.7p, but believe the software division on its own is worth £34m (vs group market cap of <£15m) - equating to 2017 revenue and EBITA multiples of 2.8x and 10x respectively  (discounted back at 12%). 
Additionally, if we put VCS on a rating of 0.5x sales - adjusting too for net debt, forex and central costs - then we arrive at a revised sum-of-the-parts price target for the entire group of 23p/share, vs 54p previously. At 12p the stock currently trades on a modest forward PER of 6.9 times. 
 
2016 diluted EPS set to jump 20.7% to 3.6p
Published: Mar 22 2016

Vislink is a market leading, video capture and playout provider to the broadcast industry. Its cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". Its 3 core markets are broadcast hardware (68% of 2015 sales; news, sport and entertainment), surveillance equipment (13%; law enforcement, armed forces and public safety), and studio broadcast software (19%, or Pebble Beach Systems).
Given the recent bounce in equities since mid-February, it is somewhat surprising to still find the shares languishing at 27.5p, equivalent to adjusted 2016 EV/EBITA and PER multiples of 6.3x and 7.6x, along with paying a 5.5% dividend yield.
Today's results did show that 2015 revenues and adjusted EPS fell to £57.8m (-6.7%) and 3.0p (-26%) respectively, but this was partly down to the one-off nature of a large UK public safety contract where profits were recognised mostly in 2014.
Looking ahead, we believe that the Board is investing in the right areas, which should help lift adjusted diluted EPS by 20.7% to 3.6p this year and to 4.5p by 2018 - underpinned by continued strong results from Pebble Beach Systems (54% of 2015 EBITA), steady growth at Vislink Communication Systems ('VCS') and a healthy closing order book of £11.0m (vs £8.8m LY) after reporting a 2015 Book:Bill of 1.04x.
In spite of the ongoing difficulties in VCS, the broader fundamentals for the group as a whole remain supportive for double digit earnings expansion for this year and beyond. The client base includes many blue-chip names such as Al Jazeera and the Metropolitan Police - to which heavyweights like GoPro, Harmonic and BT Sport have been added over the past 2 years.
Vislink shares at 27.5p appear far too lowly rated, particularly compared to the sector and our unchanged price target of 54p/share.
 
Shares underpinned by 5.4% dividend yield
Published: Dec 09 2015

Vislink's cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". 
Trading is tough for many companies and sectors at the moment. In Q3'15, 79 profit warnings were issued across UK equities (Source: EY), up 38% sequentially on Q2 - the biggest % change in almost four years. Yesterday, Vislink also reported that conditions were challenging at its wireless equipment arm (est'15 56% of EBITA).
In that unit orderflow at VCS (Vislink Communication Systems) has slipped (£42.4m Nov'YTD) - meaning sales will be "more back end loaded" than usual. Given that December is traditionally a strong month, there is a chance that some/all of the pipeline will convert in time, but we make prudent changes to forecasts. 
Going forward, things look brighter. VCS' newly launched IP products, incorporating 2-way wireless communication technologies to enable smart applications in the field, have been well received by clients and are already selling well. Elsewhere Pebble Beach Systems (PBS) continues to perform in line with expectations, "benefitting from further product innovation, strengthening relationships (eg Harmonic) and access to North America".
We are now forecasting 2015 group sales and adjusted EBITA of £55m and £4.5m (8.2% margin) respectively - generating an underlying EPS of 2.5p and paying a 1.5p dividend (yield 5.4%). Consequently the stock at 28p appears very cheap, compared to both peers on ratings and versus our revised price target of 54p/share (from 80p).
 
Blazing a trail in ultra HD / 4k live video
Published: Sep 16 2015

Vislink's cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". 
Positive industry trends provide a strong backdrop for profitable growth, borne out by today's solid H1 numbers (EBITA up 26% to £2.2m) and the outlook for the second half. Overall we expect H2'15 operating profit to be £5.3m; not too dissimilar to last year's £5.5m level.
Long term clients include household names such as Al Jazeera and the Metropolitan Police, to which GoPro and Harmonic have been added over the past year - and more recently BT Sport.
Better still, we think UHD/4K could lead to the start of a significant new industry upgrade cycle (perhaps assisted too by the Olympics in Brazil and US Presidential Elections next year) - which together with the increasing need to deploy real-time mobile surveillance for public safety purposes (eg in UAVs, helicopters, etc) - should drive Vislink Communication Systems' (VCS, representing 50% H1'15 profits) growth for the foreseeable future.
On numbers, we make no change to our profit estimates, but have nudged down our 2015 revenue figure to £62m from £62.9m (re mix), along with tweaking our year end net debt position to £0.5m (vs £1.2m as at 30th June). H1'15 cash inflow from operations was £829k (conversion of 38%) reflecting investment in working capital to support future growth and one-off restructuring payments. 
We retain our price target of 80p/share, and believe the stock at yesterday's price of 54p appears cheap: trading on mean EV/EBITA and PER multiples of 9.0x and 11.4x respectively versus the sector averages of 15.5x and 20.4x
 
Potential $1bn on-officer camera market
Published: Apr 30 2015

Vislink's cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". 
Take a look at what happens when police officers wear body cameras. Not only does the need to use force while arresting offenders decline by 59%, but also citizen complaints drop by 87% (source Taser). We think the next generation of these devices will be "smart" enabled allowing secure 2-way communication: incorporating state-of-the-art, mission-critical, wireless technology just like that offered by Vislink.
Currently investors have plenty of other exciting growth prospects to look forward to, as detailed at Wednesday's Capital Market's Day. Here the Board outlined the company's work with the likes of GoPro (NHL), Harmonic, Moto GP, Formula E and many others.
As yet we have absolutely nothing in our forecasts or 80p/share target price (TP) with regards to this potential 'on-officer' opportunity. Furthermore, the stock at 53p still trades at an unwarranted discount to its peers across the four main valuation benchmarks of EV/Sales, EV/EBITDA, EV/EBITA and PER. 

ARCHIVE

2015
Vislink - ED Investor Forum 25th March 2015
Published: Mar 27 2015

John Hawkins, Executive Chairman, presents on behalf of Vislink.
The Apple of live TV broadcasting
Published: Mar 24 2015

Vislink's cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". Although not quite on such a grand scale as Apple, we think Vislink is also quietly building a similar ecosystem across multiple customer touchpoints within the premium wireless video transmission and playout market. 
At the interims in September, the Board promised a barnstorming second half, and today investors were not short-changed with adjusted EBIT coming in 66% higher at £7.2m. Exceeding both our £6.2m estimate by 15.6% and consensus by 7.4%
As an encouraging indicator of future prospects, the dividend was hiked 20% to 1.5p (2.9% yield) - the first increase since 2007. Operating margins climbed sequentially to 15.8% in H2 from 6.3% H1 - delivering 11.6% (vs 7.2%) for the year as a whole, on the back of PBS license sales, improved product mix, operating leverage and forex. 
Looking ahead, we are forecasting 2015 revenues and adjusted EBITA of £62.9m and £7.4m respectively, climbing to £67.8m and £9.0m by 2017 - reflecting a 25% rise in adjusted PBT over the next 3 years. 
Overall, although conditions continue to be "challenging" in broadcast hardware, our target price has been lifted from 75p to 80p/share. The shares at 52p still trade at an unwarranted discount to its peers across the four main valuation benchmarks of EV/Sales, EV/EBITDA, EV/EBITA and PER.
FY14 PBTA set to climb over 40%
Published: Mar 04 2015

Vislink's cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". Its 3 core markets are broadcast hardware (66% of H1'14 sales; news, sport and entertainment), surveillance equipment (22%; law enforcement, armed forces and public safety), and studio broadcast software (11%).
On 2nd September the Board predicted a strong second half, and today investors were certainly not disappointed with 2014 PBTA said to be 'ahead' of consensus (previously £6.5m).
Although we shall only update our forecasts at the time of the prelims on 24th March, we expect H2'14 adjusted PBTA to be more than 10% above our current estimate of £4.3m - representing a sequential growth rate of c. 180% 
We think the stock at 48p remains cheap both in absolute and relative terms: trading on a 2015 EV/EBITA multiple of only 8.1x, equivalent to a 30%+ discount to the electronic equipment sector. Raising 2015 and 2016 forecasts by the amounts envisaged would mean our share price target climbing from the current 75p level to 80p/share.
Secures landmark deal with Go Pro
Published: Jan 14 2015

Vislink's cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". 
Yesterday, market leader GoPro revealed that it had chosen Vislink to help it develop its new professional grade, live, HD wireless broadcast solution for its most advanced camera yet, the HERO4.
GoPro is transitioning from offering just hardware into becoming a major media group: but it needs specialist communication technology that has been tried and tested under the most extreme, mission critical conditions.
So we see this is as a terrific endorsement of Vislink's technology by one of the world's most iconic camera brands. 
Our forecasts and 75p/share target price are unchanged, but we look forward to the prelims in late March and hearing more positive news in terms of the outlook. The shares, at 39p, trade on a 7.4x EV/EBITA multiple, and in our opinion stand at an unjustified discount to the electronic equipment sector.
2014
Possible forex upside to our forecasts
Published: Nov 25 2014

Vislink's cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". 
Forex headwinds (£0.4m loss) impacted results in H1'14, as the £ strengthened versus the US$, peaking at 1.71 in July. However, since then expectations of interest rate hikes by the Bank of England have receded, leading to the cable cross rate falling 8% to 14 month lows of 1.57
We think this is positive for our 2014 forecasts, since 90% of Vislink's 2013 sales were outside of the UK. Although we do not plan to change our numbers at this stage, we believe that our 2014 EBIT target of £6.2m is well underpinned. 
On valuation, we reiterate our 75p/share fair value price, and stress that at 41p the stock trades at an unjustified discount to its peer group across the four main valuation benchmarks of EV/Sales, EV/EBITDA, EV/EBITA and PER.
Vislink Interim Results Webinar 3rd September 2014
Published: Sep 03 2014

John Hawkins, Executive Chairman, and Ian Davies, Group Finance Director, discuss their interim results for the half year to June 2014.
Lights, camera, action!
Published: Sep 02 2014

Vislink's cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". 
Yesterday Vislink signed a strategic 5 year partnership with Harmonic, a global leader in video delivery infrastructure with a market cap of c.$600m. The relationship will integrate Vislink's studio broadcast software (Re Pebble Beach Systems) into Harmonic's products.
H1 results showed order intake, turnover, adjusted EBIT and EPS at £33.3m (vs £33.6m LY), £27.1m (£28m, flat in constant currency), £1.7m (£2.0m, +3.4% CC) and 1.2p (1.8p) respectively. Going forward we expect a 'blow-out' H2 (£4.5m EBIT) on the back of: better equipment volumes, a 10% headcount reduction (£1.6m savings pa), HLIT license sales, a 6 month contribution from PBS, and a stronger orderbook.
Although we make no changes to adj. EBIT forecasts, our estimates for FY15-FY16 appear conservative given H2 momentum. The balance sheet is strong too, helped by H1 operating cashflow of £5.5m (vs £1.6m) thanks partly to lower working capital, leaving June net debt at -£0.3m. 
In terms of valuation, we increase our target price from 70p to 75p/share, reflecting H2's step change in quantity and quality of earnings.
Vislink Preliminary Results Webinar March 2014
Published: Mar 30 2014

John Hawkins, Executive Chairman and Ian Davies, Group Finance Director discuss their preliminary results for the year to 31 Dec 2013 and answer questions.
In the fast lane
Published: Mar 26 2014

Vislink's cutting edge technology enables the collection of high quality live video, wirelessly, from the "scene to the screen". Its two core markets are broadcast (80% of sales; news, sport and entertainment) and surveillance (20%; law enforcement, armed forces and public safety).
Today's 2013 prelims were in line with consensus, registering positive y-o-y trends in orders £60.1m (+20.1%), sales £59.9m (+4.7%), EBITA £4.3m (+40.3%), margins 7.2% (vs 5.4% 2012) and adjusted EPS 3.2p (+45.5%). Net cash closed December at £3.7m, with the dividend steady at 1.25p, reflecting favourable future growth opportunities.
Vislink is the leading player and product leader in the £232m broadcast market, enjoying a c.20% share. The company further extended its reach into studio applications last week by snapping up Pebble Beach Systems (PBS) for £9m on a cash/debt free basis. PBS is a leading global developer of digital archiving, content management and automated play-out software for TV broadcasters, cable and satellite operators. 
Outside of broadcasting, Vislink is also leveraging its expertise into the £200m surveillance/defence sector, where the police and armed forces require real-time information to respond quickly to events.
Going forward, we believe the stock could be set for a break-out year. Indeed, based on a 13x 2016 EBITA multiple, discounting back at 12% and adjusting for proforma net debt of £3.3m - we initiate coverage with a target price of 70p/share, versus 49p last closing price.
2013
Vislink June 2013
Published: Jun 25 2013

John Hawkins of Vislink presents at the Equity Development Investor Forum, 26th June 2013