Shrinking US defence and government budgets have made it tough for Vitec's (VTC) communication and surveillance business, IMT. In fact, visibility is so poor that management has written down the value of the unit by £8.8m. There was a £6.4m loss on the sale of its staging business, too, and a further £4.9m of costs on acquisitions. Strip these out and underlying pre-tax profit rose 10 per cent to £36.2m - a quarter of which was organic growth - and further cost cutting could save £3m this year.
Shifting production from the UK, Israel and US to its plant in Costa Rica could save £5m a year from 2014 and nudge operating margin up again. Last year's savings and price increases beefed up operating margins by 160 basis points to 11.4 per cent and chief executive Stephen Bird remains adamant that Vitec is a mid-teens margin business. But its future does not depend solely on thrift. Profits increased at each division, with underlying operating profit at the Videocom unit up a quarter. Hiring camera equipment to cover the Olympics and US presidential election was a big money-spinner and the space antenna business, Haigh-Farr, is exceeding expectations. Vitec's photographic division made an extra £1m profit and selling camera bags and tripods in Wal-Mart and Best Buy can only help.