REG - Vianet Group PLC - Final Results
14/06/2022 07:00
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RNS Number : 7205O Vianet Group PLC 14 June 2022
14 June 2022
Vianet Group plc
("Vianet", "Company" or "the Group")
Final Results
Momentum gathers towards a return to pre-pandemic trading levels around
mid-year FY2023
Vianet Group plc (AIM: VNET), the international provider of actionable data
and business insight through devices connected to its Internet of Things
platform ("IOT"), is pleased to announce its final results for the year ended
31 March 2022.
Financial highlights
· Revenue increased 58% to £13.22m (FY2021: £8.37m) being 81.2% of
pre-pandemic levels.
· Recurring revenues remained strong at 88% (FY2021: 89%).
· Gross margin increased slightly to c. 65% (FY2021: c. 60%).
· Adjusted operating profit, pre-exceptional costs, amortisation and share
based payments, of £2.36m (FY2021: £0.69m loss).
· Profit before taxation was a loss of £0.17m (FY2021: £2.82m loss)
· Basic earnings per share was 0.65p positive (FY2021: 6.75p negative).
· At the year-end, net borrowings were £3.00m (2021: £2.66m) and the
Company had a gross cash balance of £1.58m (FY2021: £1.89m).
· The Board considers it would not be appropriate to pay a final
dividend as it is prudent to conserve cash until the trading has returned to
pre-pandemic performance levels.
Divisional highlights
· Smart Machines adjusted operating profit of £1.82m (FY2021: £1.1m),
representing a 19% increase on pre-pandemic FY2020 of £1.53m.
· Smart Machines added 12,895 new connected devices (FY2021: 7,215),
6.9% ahead of pre-pandemic levels despite the backdrop of the slow recovery
from C19 restrictions.
· Post period end our SmartContact Pro all-in-one contactless and
telemetry wins vending industry award as best payment system and launch of
SmartVend in H1 2023 strengthens Smart Machines offering.
· Smart Zones revenue increase to £7.83m (FY2021: £3.95m), as the
hospitality sector recovery gained momentum in Q2 FY2022.
· Smart Zones net installation based held at 10,100 as ongoing
investment and a pipeline of new installations offset a slowing rate of
hospitality sector closures.
All references to alternative performance measures are explained and
reconciled as noted in the Financial Review section below.
Commenting, James Dickson, Chairman of Vianet Group plc, said:
"Despite the unprecedented challenges of the COVID-19 pandemic, particularly
on the hospitality and leisure industry since early 2020, I am pleased to
report that the proactive measures we implemented together with the dedication
and hard work of our staff have wielded excellent results.
"Our focus over the last year has been on prudent cash management, further
strengthening our relations with customers and strategic investment in sales
and technology to support the Board's growth initiatives. These efforts now
place the Company on a good footing as we put the pandemic behind us.
"The business has recovered strongly, with revenue increasing to over 81% of
pre-pandemic levels. The initiatives to ensure that relations with customers
are maintained has also proven fruitful, with new connections and recurring
revenues remaining high over the period. Although pressures regarding global
semi-conductor supply chains and uncertainty from the conflict in Ukraine
remain, we are confident that our sales will continue to grow and that we will
return to pre-pandemic levels around the mid-year FY2023.
"We are delighted that, in our Smart Machines division, we reported a 6.9%
increase of new connected devices compared to pre-pandemic levels. With the
growing trend towards non-cash transactions and following our investment into
the division, we have seen Smart Machines increasingly converting
opportunities available to it. Having secured two significant recent contract
wins and with the launch of SmartVend solution expected in H1 2023, we are
confident that the division will continue to grow strongly. We continue to
invest in growth and innovation and were delighted that against international
competition our SmartContact Pro all-in-one contactless and telemetry solution
won best payment system at last week's vending industry awards ceremony where
we also won best supplier website.
"Our Smart Zones division has emerged from the pandemic with a strong H2
rebound, delivering strong revenues of £7.83m. We have been encouraged by the
slowing of pub closures in the UK and we now feel we have the base from which
to grow our sites, notably across the UK and Europe. The pandemic has brought
attention to existing and prospective customers on the inherent value of data
to guide decision-making and enhance profitability and we feel that there
remains a vast opportunity for Vianet to capture market share and grow
revenues accordingly.
"With both divisions capitalising on new vertical opportunities and the Group
on track to continue strong earnings growth, the Board is confident that
Vianet will return to pre-pandemic levels of trading in FY2023 and
double-digit growth in FY2024. While the pandemic has thrown its challenges
our way, we feel that we have weathered the storm well and that we are now in
a position to push forward and make up for lost time.
"We look forward to updating the market on our further progress in due
course."
- Ends -
An analyst briefing given by James Dickson, Chairman and Interim Chief
Executive Officer, and Mark Foster, Chief Financial Officer will be held today
at 09.30hrs at Cenkos, 6-8 Tokenhouse Yard, London EC2R 7AS or online via
Microsoft Teams. Please contact vianet@yellowjerseypr.com
(mailto:vianet@yellowjerseypr.com) for details.
Enquiries:
Vianet Group plc
James Dickson, Chairman & Interim CEO Tel: +44 (0) 1642 358 800
Mark Foster, CFO www.vianetplc.com (http://www.vianetplc.com)
Cenkos Securities plc
Stephen Keys / Camilla Hume Tel: +44 (0) 20 7397 8900
www.cenkos.com (http://www.cenkos.com)
Media enquiries:
Yellow Jersey PR
Sarah Hollins Tel: +44 (0)7764 947 137
Henry Wilkinson Tel: +44 (0)7951 402 336
vianet@yellowjerseypr.com (mailto:vianet@yellowjerseypr.com) www.yellowjerseypr.com (http://www.yellowjerseypr.com)
Chairman's Statement
Introduction
In last year's Annual Report and our H1 2022 report, I provided a
comprehensive update on our proactive response to the global Coronavirus
("C19") pandemic. This year, the emphasis has shifted to the strength of our
recovery and the clear sales and commercial momentum we have going into
FY2023, which I expect will return us to pre-pandemic financial performance
levels towards the end of H1 2023.
Encouragingly, strong H2 momentum resulted in FY2022 sales rebounding to
£13.22m, which equates to 80% of FY2020 pre-pandemic levels. Adjusted
operating profit of £2.36m compared to FY2021 loss of £0.7m, almost 60% of
the pre-pandemic FY2020 performance. Whilst we note the uncertainty in global
supply chains, the strong trading momentum that we have carried into H1 2023
gives us confidence that we have overcome the issues caused by the pandemic
and, with the Group now returning to its pre-pandemic performance levels, we
expect to deliver strong growth in both FY2023 and FY2024.
It has been a challenging time for any business with a reliance on the
hospitality and leisure sectors or exposure to the pace of city centre office
re-openings. This has now been compounded by the global semi-conductor supply
chain pressures and the conflict in Ukraine. Notwithstanding these realities,
we are confident that our sales will continue to grow, and the H1 2023
momentum will result in a return to pre-pandemic performance around the
mid-year.
As a result of our proactive response to the pandemic, together with the
investment made in technology and commercial resource, I am very pleased to
report that the Group has delivered resilient results and is in a strong
position to capitalise on the growing number of excellent growth
opportunities.
Performance
Given the C19 impact, there is little merit in drawing too much of a
comparison with FY2021 performance. While comparative figures are presented
for reporting purposes alongside FY2020 for context, my comments will be
restricted to the FY2022 performance.
The focus has been on cash management, customer engagement, and continued
investment in sales and technology as we migrate towards a fully cloud-native
environment to support growth. This approach allows us to build momentum and
accelerate our Smart Machines growth plans whilst developing the Smart Zones
contribution and commercialising data opportunities in new verticals. Whilst
the gradual re-opening of the hospitality sector from Q2 2022 and the
prolonged delay in return to more standard ways of work in city centre offices
has held back performance; Group revenues rebounded to 81.2% of pre-pandemic
levels at £13.22m (FY2021: £8.37m, FY2020: £16.28m).
Against a backdrop of delayed hospitality re-opening in H1 2022, and H2 2022
being impacted by the additional stock premium costs currently incurred to
source microchips and inflationary pressures, the Group delivered an adjusted
operating profit of £2.36m (FY2021: £0.69m loss, FY2020: £4.03m profit)
being almost 60% of pre-pandemic performance.
The Group had a loss before taxation of £0.17m (FY2021: £2.82m loss, FY2020:
£2.43m profit) which is a material step forward from FY2021, with basic EPS
rising to 0.65p this year compared to a loss of 6.75p for FY2021.
Net exceptional cost was £0.12m (FY2021: £0.34m, FY2020: negligible),
primarily related to corporate opportunity activity and staff rationalisation
net of a contingent consideration release.
Basic earnings per share was 0.65p (FY2021: 6.75p negative, FY2020: 8.56p
positive).
A £3.5m Coronavirus Business Interruption Loan ("CBIL") was taken on 26 May
2020 to provide a buffer against a prolonged recovery period and facilitate
investment in our commercial sales team and technology roadmap. We ended the
year with net borrowings of £3.00m (FY2021: £2.66m, FY2020: £0.95m) and a
gross cash balance of £1.58m (FY2021: £1.89m, FY2020: £1.73m).
Dividend
We are encouraged by the Group's FY2022 results and anticipate significantly
improved trading in the coming months, but there remain uncertainties around
semi-conductor supply, inflationary pressures and any prolonged impact of the
Ukrainian War. The Group has completed repayment of the Vendman acquisition
loan; however, we will continue with repayment of the CBIL facility and
investment in the exciting growth opportunities.
Given this background, the Board considers it prudent to delay reinstating a
dividend until we have returned to pre-pandemic performance levels and have a
clear line of sight on returning to a more normal economic and supply chain
backdrop.
The Board recognises this is a significant decision and that dividends are an
important part of total shareholder returns. Subject to global microchip
supply chain pressures abating, it fully intends to be in a position to resume
payment of dividends in the next 12-18 months.
Board Changes and Staff
The Board's composition and effectiveness are continually evaluated to ensure
the optimum balance of experience and independence to support the business and
our growth ambitions.
Given the requirement to navigate the pandemic, re-energise the organisation,
drive the recovery, and mitigate the impact of supply chain pressures, I have
remained in the post as Interim CEO, having previously held the CEO role.
There has been the opportunity to make certain changes to the operational
structure of the Group, and I am pleased to report that the management team
continues to be energised, excited by the opportunities and working well.
Having served on the Board for nine years, non-executive director and chair of
our audit committee, Chris Williams intends to retire at our next AGM in July,
however he will remain until a suitable successor is found, and a further
announcement will be made at that stage. I really appreciate the guidance,
honest counsel, and diligent support that Chris has provided to the Board over
the years, and we wish him well in retirement.
In the face of significant challenges over the past couple of years, the
performance of our people has been tremendous, engaging with their usual
enthusiasm, commitment, and openness. This underpins the Group's excellent
reputation with customers, suppliers, and other stakeholders.
The recent annual engagement survey demonstrated further year-on-year progress
in retaining our upper quartile position in the Best Companies evaluation and
our position in Technology's 50 Best Companies to work for.
I am extremely proud and humbled by how our executive team and employees have
stepped up during the last two years, and I thank them and my Board colleagues
for their ongoing commitment to taking the Group forward.
Conclusion and Outlook
We have had a robust recovery year, emerging strongly from the pandemic with a
clear line of sight towards achieving pre-pandemic performance levels in
FY2023, with excellent momentum and revenue growth opportunities across our
business areas.
The past two years provided a unique opportunity to regroup, reorganise, and
re-energise whilst progressing our product development plans and making
significant investments in our marketing, sales, commercial, and customer
experience teams. Notably, this was also an opportunity to demonstrate and
underline the value of the Group's solutions and deepen stakeholder
relationships, resulting in significant sales opportunities.
We have emerged out of C19 with a stronger platform, which will allow the
Group to achieve pre-pandemic levels of performance early in H2 2023, with
significant double-digit growth in FY2024.
The Group remains on track to resume strong earnings growth across the two
divisions and new vertical opportunities.
· Smart Machines already has the leading end-to-end product suite,
which is being strengthened by new releases of our SmartVend solution. At the
recent Vendies vending industry annual awards ceremony, Vianet won the awards
for Best Supplier Website and for Best Payment System where our SmartContact
Pro all-in-one contactless payment and telemetry solution prevailed over
international competition. We have a high performing commercial team, long
term contracts with major blue-chip customers, an established presence in the
UK market, with a significant pipeline of opportunities for telemetry and
contactless sales and data management in both the UK and Europe. The year saw
a number of business gains, including 41 customers being onboarded and two
significant contract wins, which underpin our growth plans.
· Smart Zones has a pipeline of new site installations in several
leased and tenanted pub companies. Our investment in hardware and data science
will enable further cost reductions, helping to drive the growth of our
installation footprint and provide additional opportunities to develop revenue
from data.
· Our investment in rapid prototyping has resulted in successful field
trials and initial orders for our technology and services. We expect to see
further growth prospects in sectors such as environmental, catering,
forecourts and tank monitoring.
· Ongoing investment in cloud infrastructure and mobile technology will
help develop existing revenues in Smart Zones and Smart Machines and provide
the scalability, flexibility, and speed to support rapid growth in existing
and potential new verticals.
· Our Smart Zones product roadmap and a developing technology
partnership opportunity will bring new features and functionality which should
generate increased customer interest and growth outside the UK leased and
tenanted market.
· The Group has high levels of contracted recurring income and will
continue to generate strong operating cash flow.
The Board is confident in the long-term growth strategy and that the Group is
very well positioned to deliver earnings growth and expand its future
strategic options.
In the meantime, the Board's absolute focus remains on sales growth and cash
management, particularly with respect to stock premium costs, building on the
results achieved to be in a strong position to take advantage of its exciting
growth opportunities whilst maintaining the health, well-being and safety of
our employees and customers.
James Dickson
Chairman
14 June 2022
Strategic Report
There is nothing like a crisis to create a shared sense of purpose and provide
an opportunity to demonstrate leadership. The last two years have galvanised
our people and business and improved our customer engagement. From the very
outset of C19 and the challenges of semi-conductor supply and stock premium
costs, we have managed cash to ensure business continuity and enable ongoing
investment, which has positioned the Group strongly to build on the solid
results of FY2022.
Our core strategy centres on IoT and the collection and processing of
customers' asset data to deliver actionable analytics and insights that drive
improved operating performance for businesses, machine owners, operators, and
brand owners.
By connecting and analysing c. 215,000 connected assets today, Vianet can
deliver insights and analytics that support better decision-making, enabling
customers to improve their key asset utilisation and performance metrics.
Combined with a leading-edge contactless payment capability to support sales
growth in unattended retail machines, Vianet continues to be well placed to
strengthen its position in this rapidly developing area.
While our focus is predominantly on delivering insight and analytics, both
hardware and software remain critical components in enabling remote assets to
be connected. Our IoT platform now supports much greater flexibility of device
connection and data connectivity to the extent that it is possible to connect
a range of business-critical third-party devices, and not just those we
supply.
This is underpinned by our ability to collaborate with customers to identify
compelling end-to-end solutions to address business opportunities. This
combination of capabilities will enable us to drive sustained business growth
over the coming years.
FY2022 has been challenging for many reasons, however, the Group has made
excellent progress with a sustained investment in technology and sales and
marketing capability. This has enabled us to execute key elements of our
growth plan, including securing new and renewed contracts over several years
and successfully launching our market data insights. Our strengthened customer
relationships have helped secure new business in existing and new verticals
such as retail, fuel forecourts and industrial kitchens, using our contactless
payment and telemetry solutions.
Smart Machines
Conversion of opportunities is gathering pace following a step-change increase
in sales, commercial and marketing capability in FY2021, which saw a c. 78%
growth in connected device sales in FY2022.
The investments made and the contract wins will further accelerate the rollout
of our contactless payment solution driving increased machine utilisation and
sales for customers, who benefit from the reduced cost of cash handling,
improved cash flow and assured payment.
The trend toward non-cash transactions is growing significantly, with
contactless payments giving a fast, easy and secure transaction in a world
where fewer people are carrying cash. The impact of C19 and our 'dirty cash'
campaign gave further impetus to this trend.
We are encouraged by the impact of our investment in the sales team, the
results achieved, and the opportunities being progressed both in this space
and in new verticals using contactless as the lead generator. Our route to
market and distribution opportunities are enhanced by establishing a solid
network and footprint with distributors and machine suppliers.
Smart Zones
It is well documented that through C19, we were very proactive in supporting
our hospitality sector customers severely impacted by prolonged closures and
restrictions. Enhanced insights and new reporting tools helped them make
better-informed decisions, targeting support, optimising revenues, and
minimising costs.
We are seeing an increased level of interest in new analytics and insights,
aided by a new reporting suite to support management decision-making. We are
exploring an exciting range of new services specifically designed to help
clients during this unprecedented crisis.
Operating Review
Smart Zones
The Smart Zones division gathered momentum, emerging from C19 at a better than
anticipated pace going into Q2 of FY2022. This resulted in revenues of c.
£7.83m (FY2021: £3.95m, FY2020: £11.06m) being 70.8% of pre-pandemic
performance and delivering a material step forward in profit performance.
Sales improved to 252 (FY2021: 61, FY2020: 121) new site installations, double
that of the pre-pandemic year. Technology upgrades to our 4th Generation IoT
hubs were completed in 1,053 pubs (FY2021: 137, FY2020: 2,519), with a handful
still to be completed in FY2023.
UK pub closures have been difficult to assess due to the pandemic, with
prolonged temporary closures in city centres, which may only re-open with a
full return to office-based working. The average community-based leased and
tenanted pubs have fared better.
Despite that, it is encouraging that the rate of pub closures slowed to 535
(FY2021: 723), which, with 252 (FY2021: 61) new installations, gives a net
reduction of 357 sites (FY2021: 662 reductions, FY2020: 838 reductions). This
underpins the belief that we are now seeing a base to build on our current
estate of c. 10,100 sites (FY2021: 10,800, FY2020: c. 11,700) in the UK and
Europe. There are a further c. 21 installations in the USA, giving a total
active base of c. 10,121.
The disruption to the hospitality sector during FY2021 was a significant
challenge but provided opportunities for broader engagement with our customers
and acceleration of our product roadmap. In addition to ongoing compliance
information, our customers are increasingly seeking trading data to improve
their decision-making, optimise revenues and minimise costs. There is also an
increasing desire to embrace digital capability to enhance efficiency and
enable more frictionless delivery from both back of house and front of house
to consumers.
Our Smart Zones connected device base remains significant with c. 167,000
devices in the active estate. Evermore granular data from our 4(th) Generation
IoT hubs, together with our increasingly sophisticated reporting capability,
delivered via our website and mobile applications, is resulting in growth in
our insight and analytics sales. This is particularly relevant for the
provision of retail data for Brewers. We are now contracted with the Oxford
Partnership to deliver ground-breaking insight that will support
consumer-level decision-making regarding beer brands, and we have seen
increased traction for insight data that is expected to show further growth
into FY2023.
The emergence from C19 will see an increased focus on operational and retail
performance to drive value from pubs, particularly for customers who are now
owned by private equity. This plays to the strength of our operational
analytics and retail insights capability and the positive C-Level exposure we
have recently seen.
Vianet Americas revenues were c. £178,000 (FY2021: £130,000, FY2020: c.
£400,000). The pandemic acutely impacted the USA cinema market, leading to
the loss of our key customer AMC Theatres during H2 2022 as they could no
longer afford to fund our services. This resulted in a £182,000 loss (FY2021:
£200,000 loss, FY2020: breakeven).
Whilst we have addressed the cost base to mitigate the AMC loss, a recent
strategic review has identified interesting options which will significantly
enhance the customer benefits from our SmartDraught solution and provide
direct access to a large proportion of national retail chains in the USA.
In addition, we were already re-engineering our product to reduce costs and
enhance the solution and are in active dialogue with two national chains that
have re-engaged since the pandemic.
The opportunity for the Company remains significant in the world's largest
single operator market, and FY2023 will be a definitive year for Vianet
Americas as we commit to establishing a US profit centre.
Overall, the Board remains confident that the Smart Zones division will return
to pre-pandemic performance levels in FY2023 whilst also delivering growth
from the UK managed pub sector, USA, and its data insight services.
Smart Machines
Smart Machines performed well in the year, with revenue and profit ahead of
pre-pandemic levels. The division made good progress but did not escape the
impact of C19, with major coffee brands and machine manufacturers being slow
to emerge, whilst many UK operators were held back by the slow pace of office
re-openings.
We continue to see an increase in demand and usage of our contactless payment
solution, with two significant contract wins. We anticipate a further
acceleration of a growing business requirement and industry trend for
telemetry and contactless payment solutions.
There is increasing recognition from vending operators that the use of cash by
consumers continues to decline. The ability to manage operations efficiently
and effectively is being materially inhibited by the pricing inflexibility of
cash, with the continued reliance on frequent and costly machine visits.
Our leading end-to-end product portfolio, enhanced by our launch of SmartVend,
which will be complete in H1 2023, means we are extremely well placed to help
our customers unlock the value our technology provides, fuelling growth.
There is a significant opportunity to drive growth in the unattended retail
market by delivering market-leading analytics and insight into premium coffee
and unattended retail snack & can channels from new device connections and
the rollout of contactless payment capability.
The Smart Machines division's turnover was £5.38m (FY2021: £4.42m, FY2020:
£5.22m), 3% ahead of pre-pandemic performance resulting in an operating
profit of £1.82m (FY2021: £1.1m, FY2020: £1.53m), being 19.0% ahead of
pre-pandemic performance.
Smart Machines' proportion of recurring revenues returned to near pre pandemic
levels at 77% (FY2021: 86%, FY2020: 80%), reflecting the revenue mix being
more toward capex this year due to a higher proportion of hardware sales. It
should be noted that Group FY2022 recurring revenues of 88% were positively
impacted by Smart Zones' revenue being over 90% due to limited new sales
during the various lockdowns.
Total new device connections grew to 12,895 (FY2021: 7,215, FY2020: 12,059),
6.9% ahead of pre-pandemic performance. This was despite a backdrop of home
working slowing the recovery of vending in city-centre offices, vending brands
and manufacturing sectors being slow to recover, and many customers taking the
opportunity to rationalise their estates. We were pleased with new unit sales,
which increased our overall device installations to just over c. 48,000
(FY2021: c. 38,000, FY2020: c. 38,000), giving a c. 26% estate growth in the
year.
The market opportunity for the Group is significant even when limited to the
immediately addressable market of over 300,000 vending machines in the UK. It
is estimated that the addressable market in mainland Europe is nearer 3
million devices, and there are 15 million machines worldwide, of which only
28% have any form of connectivity. As technology adoption evolves, contactless
transaction limits are increased (now at £100), and the benefits of insight
and analytics in the vending sector become more widely recognised, it is
anticipated that more of the addressable market will embrace the corresponding
opportunity.
Our contactless payment solution is supported by leading industry partners
Elavon, Worldpay and NMI and has been enhanced by establishing our PCI Master
Merchant service. This allows us to speed up the onboarding of customers for
payment capability and provide a more cost-effective reconciliation and
payment service to our customers.
Contactless payment remains a desirable solution in a market where traditional
cash-only payments have long been an inhibitor of vending-related usage,
consumption, and customer experience. We believe the evolution and growth of
contactless payment solutions, together with the insight of our telemetry
firmware, will materially change this dynamic and attract more consumers to
the vending vertical.
In summary, the growth prospects for our Smart Machines business are extremely
positive, and there is a clear line of sight toward doubling the business size
by the end of FY2024.
R&D Investment
Through FY2022, the Group continued to invest in developing and delivering its
product roadmap and operational capabilities. This has ranged from the
SmartVend product roadmap and customer experience enhancements to
revenue-generating analytics and insights from new platforms. This allows us
to leverage new revenue streams and provide the ability to operate a cloud
based self-service model.
Simultaneously, we began the gradual migration from legacy systems and
software to a cloud-based environment which was completed in May 2022. Further
product enhancement, a launch of SmartVend with the final phase being
delivered in H1 FY2023, and the plan for a cloud-native environment will
further boost the services we offer to both existing customers in existing
verticals and new customers in new verticals.
The Board believes this further investment in our core data management
capability and IoT technology will enhance the Group's ability to improve the
quality of the existing recurring revenue streams and generate substantial new
growth.
Looking Forward
C19 has had a significant impact on our stakeholders and economies
internationally. In the year, the supply of semi-conductor and stock premium
costs added to that impact and will still be present during FY2023.
We have acted during the period to ensure we are well placed to manage these
challenges and deliver growth in our chosen markets.
The business is strongly placed to benefit from its proven track record of
converting data gathered from its IoT devices into analytics and insight that
drive better decision-making for customers, improving asset utilisation and
increasing profitability.
Smart Machines will continue to leverage its strong portfolio of products and
services to existing customers across Europe, with significant investment in
commercial resources adding further momentum.
Our cloud and mobile capability will continue to transform the customer
experience and facilitate rapidly scalable growth in existing and new vertical
markets.
Our contactless payment solution and our PCI Master Merchant scheme, combined
with the declining use of cash by consumers and rapid technology adoption by
brand owners and machine operators, positions this division for long-term
solid year-on-year growth.
In FY2023, the Smart Zones division will deliver pre-pandemic performance,
whilst unlocking further opportunities for stock management, enhanced
analytics, and insight, which are expected to result in FY2024 growth across
all UK pub sectors and the USA. Private Equity pub company ownership is
expected to drive greater focus on operating and retail performance, where we
are well placed to deliver value for customers.
Whilst we cannot escape the impact of stock premium costs and inflationary
pressures, we have an exciting sales pipeline and growth opportunities that
will result in top-line recurring revenue growth for the foreseeable future.
Finally, our high-calibre, energised team, robust strategy, and strong
earnings visibility provides a natural platform for growth as we expand our
IoT capability and deliver data and insight applications that help our
customers make better decisions about their assets.
James Dickson
Chairman
15 June 2021
Financial Review
Group operating profit, pre-exceptional costs, amortisation and share based
payments was £2.36m (FY2021: £0.69m loss, FY2020: £4.03m profit), being
almost 60% of pre-pandemic performance.
Despite some headwinds from the tail end of support terms for customers
emerging from the pandemic and stock premium costs, solid management delivered
robust gross margins at c. 65% (FY2021: 60%, FY2020: 68%).
As is required, the Board has considered "Going Concern" and concluded we have
sufficient cash and reserves to get through the 12 months post the signing
date of the statutory accounts with associated renewed bank facilities. Going
Concern is covered in more detail in the Report of the Directors.
In this transitional year recovering from the impact of C19, operating profit
per unit has returned to a profitable level of £10.99 per device being 61% of
the pre-pandemic FY2020 of £17.96.
This KPI is measured by taking full year operating profit before
amortisation, share based payments and exceptional items and dividing by the
total number of connected devices at the year end.
Turnover
Turnover recovered well despite the tail end of supportive terms to customers,
and brands and manufacturers still being impacted in the Smart Machines
vertical by C19. Turnover significantly improved to £13.22m (2021: £8.37m,
2020: £16.28m) being c. 81% of pre-pandemic levels and demonstrating a
healthy recovery in both operating verticals we currently serve.
Recurring Revenue
Group contracted recurring revenue base remains very robust and has been
strengthened by several new 3-5 year contracts both from new customers and
contract renewals.
Recurring revenue is measured by taking full year revenue from service packs,
licenses, rentals and technology upgrades, as per Note 3.
Consolidated recurring revenue across the two divisions remained robust at 88%
(2021: 89%, 2020: 92%), being sustained by both new and renewed contracts and
the tail end of contracted variation to terms to support our customers through
the pandemic principally in Smart Zones.
The average recurring revenue per connected device has recovered to £54.02
(2021: £35.35, 2020: £59.18), being 91.3% of pre-pandemic levels.
This KPI is measured by taking full year recurring revenue and dividing by the
total number of connected devices at the year end.
Performance Summary
PBT was a small loss of £0.17m (2021: £2.82m loss, 2020: £2.43m profit),
being a material improvement from that of FY2021. This is principally due to
the impact of the tail end of pandemic customer support measures in Smart
Zones and some impact on brands and manufacturers in Smart Machines, together
with amortisation being c. £0.5m higher than in FY2021, without which would
have delivered a small PBT profit. The table below shows the performance of
the Group;
FY2022 FY2021 FY2020 Change
Revenue £13.22m £8.37m £16.28m 57.9%
Operating profit/(loss)((a)) £2.36m (£0.69m) £4.03m
(Loss)/profit before tax (£0.17m) (£2.82m) £2.43m
Basic EPS 0.65p (6.75)p 8.56p
Dividend per share 0p 0p 1.70p
Net debt ((b)) £3.00m £2.66m £0.95m (12.8%)
a) Pre-exceptional items, share based payments and amortisation
b) Refer to note 26
Exceptional Items
FY2022 FY2021 FY2020
'£000 '£000 '£000
People and office rationalisation 61 154 415
Network obsolescence costs 5 8 50
Contingent consideration release
(76) - (1,086)
Loan impairment - - 200
Corporate Activity 127 - 311
Other items 4 182 109
Total 121 343 (1)
Largely comprising of staff rationalisation costs and corporate activity
reviews.
Dividend
As noted in the Chairman's statement, the Board has delayed the
re-introduction of a dividend in the year (2021: nil, 2020: 1.70 pence).
Dividend cover has not been calculated due to the dividend being delayed and a
negative PBT. (2021: nil 2020: circa 1.56).
Cash
Net cash generation pre-working capital movements was an inflow of £2.74m
(2021: £0.34m outflow, 2020: £3.72m inflow), impacted by the strong recovery
in results.
Working capital was closely managed, noting the impact of semi-conductor
supply and stock premium costs together with inflationary pressures, which
delivered a contained and managed working capital generation outflow of
£0.34m (2021: £1.39m inflow, 2020: £0.49m inflow) and has meant that after
working capital movements there was an operational cash generation of £2.40m
(2021: £1.05m, 2020: £4.22m) which is c. 57% of pre-pandemic levels.
The cash generated was principally used to service varied terms for our
customers particularly in Smart Zones and the tail end emergence from C19,
full year investment in our sales capability in Smart Machines and continued
investment in R&D and servicing of borrowings. This resulted in an overall
cash outflow of £1.63m (2021: £1.51m inflow, 2020: £0.42m outflow noting
2021 benefitted from a £3.5m CBIL).
At the year end, pre-mortgage, CBIL and previous acquisition loans, the Group
had gross cash of £1.58 million (2021: £1.89m, 2020: £1.73m) and net debt
of £3.00 million (2021: £2.66m, 2020: £0.95m).
C19
The pressures of C19 largely receded into H2 of the year, notwithstanding the
lower pub estate and impact on brands and manufacturing in Smart Machines and
was to a degree replaced by the stock premium cost impacts in the year of over
£250,000. The performance, however, in the year was a strong recovery. With
the cash and facilities we have and the expected business plans we have
developed over three indicative years, we believe we have solid cash runway
forecasts well into 2023, which will underpin our business strategy and allow
for our growth plans.
The going concern section of the report of the Directors makes reference to
C19 and some challenges already trailed, but based on known factors, the
actions taken, and the facilities secured, we are well placed to build upon
this year's results with momentum.
Divisional Performance
Currently, the Smart Zones division principally consists of the core beer
monitoring and insight business services (including the US).
Smart Zones
FY2022 FY2021 FY2020
Turnover £7.83m £3.95m £11.06m
Operating profit((a)) £2.99m £0.50m £4.57m
Profit/(loss) before tax £2.23m (£0.02m) £3.75m
Connected devices 166,804 173,580 186,554
New site installations 252 61 151
YE Net premises((b)) c. 10,122 c. 10,800 c. 11,900
iDraught penetration((b)) 30.2% 29.5% 26.6%
a) Pre-exceptional items, share based payments and amortisation
b) UK, USA and Europe
Turnover mix is shown below with recurring revenue being 96% (2021: 92%, 2020:
98%).
Recurring revenue per device has improved as we emerged from C19 to £44.89
(2021: £21.06, 2020: £58.00) which is 77.4% of pre-pandemic levels.
Average operating profitability per device is measured by taking full year
operating profit before amortisation, share based payments and exceptional
items and dividing by the total number of connected devices at the year end.
The recovery has seen average adjusted operating profit per device in the year
return to £17.93 (2021: £2.90, 2020: £19.39) which is 92.5% of pre-pandemic
performance reflective of the cost management during the year.
The division has recovered well and ahead of what was expected at the outset
of the year demonstrating both the customer engagement for the services we
provided and the resilience of the revenue model. The net estate at the
year-end was circa 10,100 sites (UK & Europe) versus last year's c. 10,500
(excluding USA), the reduction stemming from disposals and C19 impact.
Despite this, we were able to maintain a small Smart Zones operating profit of
£2.99m (2021: £0.50m, 2020: £4.57m), which was 65.4% of pre-pandemic
performance.
Smart Machines
The Smart Machines division consists of telemetry insights and monitoring, and
contactless payment predominantly in the unattended vending retail and coffee
sector, as well as ERP and mobile connectivity services.
FY2022 FY2021 FY2020
Turnover £5.38m £4.42m £5.22m
Operating profit ((a)) £1.82m £1.11m £1.53m
Profit before tax ((b)) £1.59m £0.69m £2.09m
New Telemetry connections 2,275 2,311 3,111
New Contactless connections 10,620 4,904 8,948
YE Net estate ((c)) c. 48,179 c. 38,000 c. 38,000
a) Pre-exceptional items, share based payments and amortisation on a
continuing basis.
b) FY2022 includes £0.76m of deferred consideration release (2021:
£nil, 2020: £1.09m)
c) Excludes circa 180,000 Vendman connections.
Turnover mix is shown in the chart below. Recurring revenues were 77% of
turnover (2021: 86%, 2020: c. 80%) reflecting the revenue mix being more capex
sales this year.
Despite some hangover from the pandemic, in particular on office city centre
re-opening pace and brands and manufacturers taking some time to fully
recover, new contactless connections in our Smart Machines division continued
to be achieved with 10,620 new contactless devices compared to 4,904 last
year, 116.6% growth. The estate figures reflect the net movement shown above
which also includes some customers refining their estates in light of the
pandemic.
Average recurring revenue per device was £85.55 (2021: £101.34, 2020:
£64.40), lower than last year but above pre-pandemic levels. This is a direct
result of revenue mix where we had more bias towards capex sales in the year
alongside some estate refinement which would impact recurring revenue overall
levels. As stated previously, this is an evolving growth story, with overall
turnover and profit growth trends being driven by increased penetration of our
contactless solutions and so these measures will flex each year.
Profit per device improved to £37.73 (2021: £29.34, 2020: £40.32), being
93.6% of pre-pandemic performance. While overall profit is ahead of FY2020, it
must be noted that we invested heavily in a new sales commercial team in
FY2021 and as such FY2022 has the full year impact of that which did not exist
in FY2020, hence the overall profit per device being lower, noting also some
of the larger contracts won are at keener prices which does impact overall
profitability.
Taxation
The Group has continued to utilise available tax losses during the year
resulting in no tax being paid (2021, £nil, 2020: £nil). The Group will
continue to utilise the available tax losses carried forward into FY2022,
which will have been modestly enhanced due to the small PBT loss posted for
the year. In the financial year under review, the tax line includes a deferred
tax credit of £0.15m (2021, £0.87m, 2020: £0.03m) recognising the impact of
the tax losses available and being utilised. See note 20 for further detail on
the deferred tax asset.
Earnings per share
Basic EPS was 0.65 pence (2021: 6.75p loss, 2020: 8.56p positive). This
reflects the step forward in results.
Balance sheet and cash flow
The Group balance sheet remains resilient despite the impact of the pandemic
and addition of the CBIL facility.
The Group generated operating cash flow pre working capital of £2.74m (2021:
£0.34m outflow, 2020 £3.72m) being 69.4% of pre-pandemic performance.
Post working capital outflow of £0.34m (2021: £1.39m inflow, 2020: £0.49m
inflow) the Group generated operating cash flow of £2.40m (2021: £1.05m,
2020: £4.22m) being 56.9% of pre-pandemic performance. Working capital was
impacted by the stock premium costs we have referred to.
The cash generated was used to continue the Group's technology plans and to
service borrowings.
At the year-end, the Group had borrowings of £4.58m (2021: £4.57m, 2020:
£1.33m), including the CBIL facility and overdraft, with net debt of £3.00m
(2021: £2.66m, 2020: £0.95 m). The Vendman acquisition loan of £2.0m was
fully paid off in April 2022 which has reduced our outgoings by £125,000 per
quarter.
Our resilient balance sheet and capacity to generate cash provides the Company
with a solid base to build on the platform of FY2022 results to pursue the
significant growth opportunities that have been identified.
Business risk
The Board and senior management review business risk two to three times per
year. Naturally, over the last two years, C19 and its impact pushed the
ramifications of that to the top of the list and we covered a lot of that in
last years' Report and Accounts and the pathway out of C19 has been well
documented. The Directors had considered the areas of potential risk in
assessing the Group's prospects. On the basis of their review, and having
considered various factors such as market conditions, stock supply and premium
costs, emergence from C19, financial plans and approved bank facilities, they
believe that the business is of sound financial footing and has a forward
looking sustainable operating future. In particular, they note that the
business has achieved a good recovery financially in the year despite noting
some of the hurdles they have faced, set against overall market confidence in
liquidity and credit.
In addition to previous C19 comments, the Directors consider that material
business risks are limited to:
· The ongoing impact of well publicised headwinds in the pub retailing
market.
· The potential for a cyber security breach where data security is
compromised resulting in unauthorised access to information which is sensitive
and/or proprietary to Vianet or its customers. This threat is in common with
most technology businesses, however both short term and long-term mitigation
plans are in place. Payment Card Industry Data Security Standard (PCI DSS -
Level 1) highest level of compliance has already been achieved to support the
Group's contactless payment solutions and by May 2022 all on premise servers
are in the cloud.
· Supply chain strains in the semi-conductor market and stock premium
costs.
Key performance indicators
Actual Actual Actual
Target 2022 2021 2020
Percentage of revenue from recurring income streams(1) 80% 88% 89% 92%
Gross Margin(2) 70% 65% 61% 68%
Employee Turnover(3) 2% 3.5% 2.29% 2.1%
Notes to KPIs
(1) Percentage of revenue from recurring income streams = recurring income
streams as a percentage of all income streams. Group trading companies aim to
increase shareholder value through growth in revenue, linked to profitability
(see Gross Margin below). Source data is taken from management information.
The recurring contractual nature of the Company's income stream has led to
continued improvement in performance versus target. The achievement of this
target depends on the mix of new hardware sales versus on going recurring
revenue.
(2) Gross Margin = Gross profit as a percentage of revenue. Group trading
companies aim to generate sufficient profit for both distribution to
shareholders and re-investment in the Company, as measured by Gross Margin.
(3) Employee Turnover = Gross trading companies aim to be seen as a good,
attractive employer with positive values and career prospects, measured
against internal People and Development reports. In addition to normal
employee turnover, the figure also includes employees leaving as a result of
business rationalisation activity.
Mark Foster
Chief Financial Officer
14 June 2022
Consolidated Statement of Comprehensive Income for the year ended 31 March
2022
Before Exceptional Exceptional 2022 Total Before Exceptional 2021 Exceptional 2021 Total
2022 £000 2022 £000 £000 2021
£000 £000 £000
Note
Continuing operations
Revenue 13,215 - 13,215 8,369 - 8,369
Cost of sales (4,654) - (4,654) (3,307) - (3,307)
Gross profit 8,561 - 8,561 5,062 - 5,062
Administration and other operating expenses
(6,198) (121) (6,319) (5,749) (343) (6,092)
Operating profit/(loss) pre amortisation and share based payments
2,363 (121) 2,242 (687) (343) (1,030)
Intangible asset amortisation (2,195) - (2,195) (1,669) - (1,669)
Share based payments (83) - (83) (73) - (73)
Total administrative expenses (8,476) (121) (8,597) (7,491) (343) (7,834)
Operating profit/(loss)
85 (121) (36) (2,429) (343) (2,772)
Net finance costs (138) - (138) (50) - (50)
Loss before tax (53) (121) (174) (2,479) (343) (2,822)
Income tax credit 1 361 - 361 867 - 867
Profit/(loss) and other comprehensive income for the year
308 (121) 187 (1,612) (343) (1,955)
Earnings per share
Total
- Basic 3 0.65p (6.75)p
- Diluted 3 0.64p (6.75)p
Consolidated Balance Sheet at 31 March 2022
2022 As restated As restated
£000 2021 2020
£000 £000
Assets
Non-current assets
Goodwill 17,856 17,856 17,856
Other intangible assets 5,976 6,184 5,505
Property, plant and equipment 3,262 3,391 3,795
Deferred tax asset 386 26 -
Total non-current assets 27,480 27,457 27,156
Current assets
Inventories 1,573 1,431 1,491
Trade and other receivables 2,690 2,758 3,544
Cash and cash equivalents 1,583 1,894 1,728
5,846 6,083 6,763
Total assets 33,326 33,540 33,919
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables 2,983 3,257 2,710
Leases 25 53 64
Borrowings 2,310 1,265 2,011
5,318 4,575 4,785
Non-current liabilities
Other payables - 86 117
Leases - - 35
Borrowings 2,273 3,290 670
Deferred tax liability - - 841
2,273 3,376 1,663
Equity attributable to owners of the parent
Share capital 2,880 2,895 2,895
Share premium account 11,711 11,709 11,709
Capital redemption reserve 15 - -
Share based payment reserve 499 437 364
Merger reserve 310 310 310
Retained profit 10,320 10,238 12,193
Total equity 25,735 25,589 27,471
Total equity and liabilities 33,326 33,540 33,919
Consolidated Statement of Changes in Equity for the year ended 31 March 2022
Share capital Share premium Share Retained profit Total
account based
payment Merger Capital Redemption Reserve
reserve reserve
At 1 April 2020 (as previously stated) 2,895 11,709 364 310 - 12,403 27,681
Prior year restatement (note 7) - - - - - (210) (210)
At 1 April 2020 (restated) 2,895 11,709 364 310 0 12,193 27,471
Share based payments - - 73 - - - 73
Transactions with owners
- - 73 - - - (73)
Loss and total comprehensive income for the year
- - - - - (1,955) (1,955)
Total comprehensive income less owners transactions - - 73 - (1,955) (1,882)
-
At 31 March 2021 (as restated) 2,895 11,709 437 310 - 10,238 25,589
At 1 April 2021 (as restated) 2,895 11,709 437 310 - 10,238 25,589
Issue of shares - 2 - - - - 2
Cancellation of shares (15) - - - 15 (126) (126)
Share based payments - - 83 - - - 83
Share option forfeitures - - (21) - - 21 -
Transactions with owners
(15) 2 62 - 15 (105) (41)
Profit and total comprehensive income for the year
- - - - 187 187
Total comprehensive income less owners transactions (15) 2 62 - 15 82 146
At 31 March 2022 2,880 11,711 499 310 15 10,320 25,735
Consolidated Cash Flow Statement for the year ended 31 March 2022
Note 2022 2021
£000 £000
Cash flows from operating activities
Profit/(loss) for the year 187 (1,955)
Adjustments for
Net interest payable 138 50
Income tax credit (361) (867)
Amortisation of intangible assets 2,195 1,669
Depreciation 489 563
Contingent consideration release (76) -
Loss on impairment of property, plant and equipment and businesses 83 126
Share based payments 83 73
Operating cash flows before changes in working capital and provisions 2,738 (341)
Change in inventories (142) 60
Change in receivables 68 786
Change in payables (267) 547
(341) 1,393
Cash generated from operations 2,397 1,052
Net cash generated from operating activities 2,397 1,052
Cash flows from investing activities
Purchases of property, plant and equipment (465) (268)
Capitalisation of development costs (1,975) (2,312)
Purchases of intangible assets (12) (36)
Proceeds from disposal of property, plant and equipment 22 -
Net cash used in investing activities (2,430) (2,616)
Cash flows from financing activities
Net interest payable (138) (50)
Repayment of leases (28) (64)
Issue of share capital 2 -
New Borrowings - 3,540
Cancellation of shares (126) -
Payment of contingent consideration (16) (30)
Repayments of borrowings (1,289) (319)
Net cash (used in)/from financing activities (1,595) 3,077
Net (decrease)/increase in cash and cash equivalents (1,628) 1,513
Cash and cash equivalents at beginning of period 1,894 381
Cash and cash equivalents at end of period 266 1,894
Reconciliation to the cash balance in the Consolidated Balance Sheet
Cash balance as per consolidated balance sheet 1,583 1,894
Bank overdrafts (1,317) -
Balance per statement of cash flows 266 1,894
Notes to the financial statements
1. Taxation
Analysis of tax credit in period
2022 2021
£000 £000
Current tax expense
- Amounts in respect of the current year - -
- Amounts in respect of prior periods - -
- -
Deferred tax credit:
- Amounts in respect of the current year (390) (846)
- Amendment re-recognition of losses 29 (21)
Income tax credit (361) (867)
Reconciliation of effective tax rate
The tax for the 2022 period is lower (2021 was lower) than the standard rate
of corporation tax in the UK (2022: 19% and 2021: 19%). The differences are
explained below:
2022 2021
£000 £000
Loss before taxation (174) (2,822)
- Continuing operations
Loss before taxation multiplied by rate of corporation tax in the UK of 19% (33) (536)
(2021: 19%)
Effects of:
Other expenses not deductible for tax purposes (20) 15
Non taxable income (33) 16
Losses not provided for 129 82
Adjustments for prior years 29 (21)
Research and development (488) (492)
Other differences 55 69
Total tax credit (361) (867)
2. Ordinary dividends
2022 2021
£000 £000
Final dividend for the year ended 31 March 2021 of nil (year ended 31 March - -
2020: nil)
Interim dividend paid in respect of the year of nil (2021: nil) - -
Amounts recognised as distributions to equity holders - -
In addition, the directors are not proposing a final dividend in respect of
the year ended 31 March 2022. Total dividend payable nil (2021: nil).
3. Earnings per share
Earnings per share for the year ended 31 March 2022 was 0.65p (2021: loss
(6.75p).
Basic earnings per share are calculated by dividing the earnings attributable
to ordinary shareholders being a profit of £187,000 (2021: loss £1,955,000)
by the weighted average number of ordinary shares outstanding during the
period.
Diluted earnings per share are calculated on the basis of profit for the year
after tax divided by the weighted average number of shares in issue in the
year plus the weighted average number of shares which would be issued if all
the options granted were exercised.
2022 2021
Earnings Basic earnings per share Diluted earnings per share Earnings Basic earnings per share Diluted earnings per share
£000 £000
Post-tax profit/(loss) attributable to equity shareholders 187 0.65p 0.64p (1,955) (6.75)p (6.75)p
2022 2021
Number Number
Weighted average number of ordinary 28,949,491 28,953,414
shares
Dilutive effect of share options 380,517 -
Diluted weighted average number of ordinary shares 29,330,008 28,953,414
4. Exceptional items
2022 2021
£000 £000
Corporate activity and acquisition costs 127 -
Disposal costs - 101
Corporate restructuring and transitional costs 61 154
Contingent consideration release (76) -
Network obsolesce costs 5 8
Other 4 80
121 343
Corporate activity and acquisition costs relate to fees paid to corporate
advisors in respect of prospective acquisitions and corporate evaluations.
Disposal costs relate to the exit of the Stockport property lease, disposal of
associated leasehold improvements and associated costs.
Staff transitional costs relate to the transition of people and management to
ensure we have to succession and calibre of people on board to deliver the
strategic aims and aspirations of the Group.
The contingent consideration release refers to the acquisition of Lookout
Solutions Limited in 2011. This balance has now been fair valued at the year
end with the change in fair value recognised through the income statement as
the deferred period has now closed as at 31 March 2022.
5. Basis of preparation
The financial information set out in this preliminary announcement does not
constitute statutory accounts as defined by section 434 of the Companies Act
2006.
It has been prepared in accordance with the recognition and measurement
principles of UK adopted International Accounting Standards ('IFRS') in
conformity with the requirements of Companies act 2006 and in accordance
with the AIM rules and is not therefore in full compliance with IFRS. The
principal accounting policies of the Group have remained unchanged from those
set out in the Group's 2021 annual report. The financial statements have been
prepared under the historical cost convention with the exception of certain
items which are required to be measured at fair value.
This preliminary announcement does not constitute the Company's statutory
accounts within the meaning of Section 434 of the Companies Act 2006. The
results for the year ended 31 March 2022 have been extracted from the full
accounts of the Group for that year which received an unqualified auditor's
report and which have not yet been delivered to the Registrar of Companies.
The financial information for the year ended 31 March 2021 is derived from the
statutory accounts for that year, which have been delivered to the Registrar
of Companies. The report of the auditor on those filed accounts was
unqualified. The accounts for the year ended 31 March 2022 and 31 March 2021
did not contain a statement under s498 (1) to (4) of the Companies Act 2006.
The statutory accounts for the year ended 31 March 2022 will be posted to
shareholders at least 21 days before the Annual General Meeting and made
available on our website vianetplc.com (https://vianetplc.com/) and on request
by contacting the Company Secretary at the Company's Registered Office.
The Directors have prepared this financial information on the fundamental
assumption that the Group is a going concern and will continue to trade for at
least 12 months following the date of approval of the financial information.
In determining whether the Group's accounts should be prepared on a going
concern basis the Directors have considered the factors likely to affect
future performance.
6. Annual General Meeting
The Annual General Meeting will be held on 13 July 2022 at 11.00am, at the
offices of Vianet Group plc, One Surtees Way, Surtees Business Park, Stockton
on Tees, TS18 3HR.
7. Prior period adjustment
A prior year adjustment has been made to restate deferred tax assets and
opening reserves at 1st April 2020 (in the comparative period) to reflect the
outcome of voluntary disclosures made to HMRC during 2022 in respect of
previously disclosed tax losses relating to tax returns made between 2015 and
2020 that had not been picked up correctly historically, during tax review.
An issue was identified in relation to claims for third party subcontracted
expenditure and EPW costs. The Group had treated 100% of the third party EPW
costs and subcontracted expenditure as qualifying for R&D tax relief and
had not applied, for both categories of expenditure, the statutory restriction
to only include 65% of the qualifying costs within the claims. There was no
restriction included on these costs in the R&D claims for the periods 31
March 2015 to 31 March 2020 inclusive.
Therefore, the Group had overclaimed R&D tax relief for these periods. The
Company's R&D claims have only impacted the quantum of its trading losses
carried forward in each affected period. No trading losses have historically
been surrendered for an R&D credit and the tax profile of the Group is
such that it will still be loss making in each affected period, even when
taking account of reduced R&D claims for these periods.
The adjustment to losses brought forward represents six years' worth of
R&D claim adjustments, reflecting the full period that claims have
inadvertently not applied the appropriate restriction.
The Group did not surrender any of the brought forward trading losses for an
R&D tax credit. Therefore, there is no underpaid tax because of this
incorrect application of the R&D legislation and the Group have undertaken
an exercise to model the impact on carried forward loses for all periods in
question. Given there is no underpaid tax, the cumulative adjustments from
FY15 to FY20 inclusive have been included as an amendment to the trading
losses brought forward figure in the FY21 computation. Deferred Tax Asset
recognition for past trading losses has historically been included and
therefore, overstated.
An adjustment has been made in the FY21 tax returns in respect of the above,
though in terms of accounting presentation, this has been amended by way of a
prior period adjustment to opening reserves in the comparative period. There
is no impact on comparative profit or loss or cash flows.
The effects of the restatements are set out in the table below:
Previously As
reported restated
£000 £000
Net deferred tax liability at 1 April 2020 (631) (841)
Net deferred tax asset at 31 March 2021 236 26
Retained profit at 1 April 2020 12,403 12,193
Retained profit at 31 March 2021 10,548 10,238
8. Notes supporting statement of cashflows
Borrowings Borrowings Total
due within due after £000
one year one year
£000 £000
Net debt as 1 April 2020 (664)* (670) (1,334)
Cash flows (651) (2,620) (3,271)
Non cash-flows
- Interest accruing in the period 50 - 50
Net debt at 31 March 2021 (1,265) (3,290) (4,555)
Cash flows 134 1,017 1,151
Non cash-flows
- Interest accruing in the period 138 - 138
Net debt at 31 March 2022 (993)** (2,273) (3,266)
* The net debt as at 31 March 2020 for borrowing due within one year of
£664,000 as stated here, does not agree to the Balance Sheet amount of
£2,011,000, as this does not include the bank overdraft of £1,347,000 as at
31 March 2020.
** The net debt as at 31 March 2022 for borrowing due within one year of
£993,000 as stated here, does not agree to the Balance Sheet amount of
£2,310,000, as this does not include the bank overdraft of £1,317,000 as at
31 March 2022.
Cash and cash equivalents for the purpose of the statement of cash flows
comprises
2022 2021
£000 £000
Cash at bank available on 1,581 93
demand
Short term deposits - 1,800
Cash on hand 2 1
Adjusted net cash generation 1,583 1,894
No significant non-cash transactions from investing activities are noted.
Non- cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions in Note 8.
9. Alternative Performance Measures
In the reporting of financial information, the Directors have adopted the APMs
"Adjusted operating (loss)/profit", "Adjusted operating cash generation", and
"Adjusted net cash generation", (APMs were previously termed 'Non-GAAP
measures'), which is not defined or specified under International Financial
Reporting Standards (IFRS).
These measures are not defined by IFRS and therefore may not be directly
comparable with other companies' APMS, including those in the Group's
industry. APMs should be considered in addition to, and are not intended to be
a substitute for, or superior to, IFRS measurements.
Purpose
The Directors believe that this APM assists in providing additional useful
information on the underlying trends, performance and position of the Group.
This APM is also used to enhance the comparability of information between
reporting periods and business units, by adjusting for non-recurring or
uncontrollable factors which affect IFRS measures, to aid the user in
understanding the Group's performance.
Consequently, APMs are used by the Directors and management for performance
analysis, planning, reporting and incentive setting purposes and this remains
consistent with the prior year. Adjusted APMs are used by the Group in order
to understand underlying performance and exclude items which distort
compatibility, as well as being consistent with public broker forecasts and
measures.
2022 2021
£000 £000
Operating loss (IFRS (36) (2,772)
measure)
Add back/(deduct):
Amortisation charge 2,195 1,669
Share based payment charge 83 73
Exceptional items charge 121 343
Adjusted operating profit/(loss) 2,363 (687)
2022 2021
£000 £000
Operating cash generation (IFRS 2,738 (341)
measure)
Add back:
LTIP tax payment - -
Adjusted operating cash generation 2,738 (341)
2022 2021
£000 £000
Net cash generation (IFRS 2,397 1,052
measure)
Add back:
LTIP tax payment - -
Adjusted net cash generation 2,397 1,052
10. Post balance sheet events
No post balance sheet events were noted.
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