Good morning. The most interesting results for me this morning are interim results for the six months to 30 Sep 2013 from Vianet (LON:VNET). This share has been a poor performer in my portfolio, since the group has been dogged by problems in the last year - the main one being a serious threat to its core business by the Government's proposed Statutory Code, which is designed to tackle the unfair treatment of Pub tenants in tied pubs.

The main thrust of the Statutory Code is to ensure that the tenants of Pubs which are tied to the brewery that owns them, are no worse off than if they were able to buy their supplies independently. At the moment breweries charge often much higher prices to tied pubs, in return for financing capex. However the concern in Government is that the breweries also squeeze tenants on higher rents too, leaving many pub tenants with virtually no income.

Vianet's core business is supplying the large breweries with beer flow monitoring equipment, which detects when tenants are using illicit supplies of cheaper beer, by flagging up imbalances in the stock reconciliations (i.e. more pints have been pulled than have been supplied by the brewery, indicating that the tenant is breaking the tie by sourcing their own supplies on the black market).

Therefore the possible threat to the brewery tie arrangements could undermine Vianet's core business, and in the meantime whilst it is in the consultation stage, it creates uncertainty, and makes it virtually impossible for Vianet to upgrade its existing clients to its latest iDraught product. Also, continued Pub closures means that their market (in which Vianet is by far the dominant player) is shrinking. So where they expected their installed base to stabilise at around 17,500 Pubs, it has actually shrunk further to just under 17,000 Pubs, and realstically I would expect that to continue falling slowly as more Pubs are closed - e.g. note the recent deal by Marstons to close 200 Pubs and sell them to Newriver Retail (LON:NRR) who intend turning them into convenience stores.

Therefore these figures from Vianet were never going to be good. Overall they're pretty much what I expected in what has been a very tough year for the company. They remain profitable, and most turnover is…

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