REG - Vianet Group PLC - Interim Results
8 December 2020
Vianet Group plc
("Vianet", "Company" or "the Group")
Interim Results
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 interim results for the six months ended 30 September 2020 ("H1 2021").
2020 has been a challenging year for many businesses and, as anticipated at the time of our Full Year ("FY2020") results announcement, the COVID-19 (C19) pandemic has had a significant impact on the financial performance of the Group. The reported results reflect the impact of lockdowns enforced by the Government and, accordingly, year-on-year comparisons should be read in that context.
Financial highlights
· Revenue of £4.07 million (H1 2020: £8.41 million)
· Recurring revenues at 87% (H1 2020: 82%)
· Adjusted operating loss(a) of £0.38 million (H1 2020: adjusted operating profit of £2.00 million)
· Operating loss post exceptional items, pre-amortisation and share-based payments of £0.52 million (H1 2020: £2.56 million profit)
· Operational cash generation of £1.19 million (H1 2020: £2.44 million)
· Basic loss per share at 4.86p (H1 2020: basic earnings per share at 6.00p, including the impact of the Vendman Systems Limited deferred consideration release - see note 4)
· Coronavirus Business Interruption Loan (CBIL) of £3.5 million secured, resulting in gross debt of £4.87 million (H1 2020: £1.67 million)
· Net debt of £1.15 million (H1 2020: net debt £1.18 million)
· Interim dividend withdrawn (H1 2020: 1.70p)
Divisional highlights
· Smart Machines growth slowed, with new unit sales at 3,212 (H1 2020: 7,634 units), of which contactless payment sales at 2,152 units (H1 2020: 4,796 units)
· Smart Machines adjusted operating profit(a) at £0.55 million (H1 2020: £0.78 million) and unadjusted profit of £0.38 million (H1 2020: £1.47 million)
· Smart Zones adjusted operating profit(a) at £0.13 million (H1 2020: £2.32 million), with unadjusted loss £0.11 million (H1 2020: unadjusted profit £2.02 million)
· Smart Zones contract renewals with Star Pubs and Bars, Admiral and Young's
· Investment in new sales team helped Smart Machines deliver over 20 new and re-signed contracts with 3-5-year terms
a) Adjusted operating profit is profit before exceptional costs, amortisation, interest and share-based payments
Commenting, James Dickson, Chairman of Vianet Group plc, said:
"The period ended 30 September 2020 has been challenging for the Group as a result of the COVID-19 pandemic and the subsequent lockdowns and tier system restrictions forcing closures to the hospitality sector. Nevertheless, trading for the first six months of the financial year has been ahead of management's internal revised revenue and profit forecasts, which is testament to the hard work of our employees and the forward-thinking measures introduced by the Board and management to safeguard the business.
"While our Smart Zones division saw a dramatic reduction in demand for our services, given the overnight closure of pubs, we were able to engage with our customers as they seek data to understand the 'new normal' trading environment and to look to improve decision-making during the exit phase. We envisage this demand continuing as the hospitality sector returns to levels seen before the pandemic hit.
"Our Smart Machines division, which experienced reduced levels of activity as a result of the pandemic, has noted a rapid acceleration of the significant structural trend away from cash payments towards connected assets and contactless payment as customers seek to improve sales and operational performance. We believe the Group is well positioned to benefit from this growing trend.
"Group turnover of £4.07 million was credible given the C19 backdrop and in particular the closure of pubs. Both divisions reported an operating profit for H1 2021, helped principally from securing contract variations in Smart Zones, as well as the Smart Machines division continuing to trade profitably and gaining new sales throughout the period, as the new sales team hit the ground running post lockdown.
"From the outset of the pandemic, our intention was to manage our cash and come through C19 strongly and in better shape to take advantage of the significant opportunities available to the Group. Both sides of our business have benefitted immensely from prudent investment and have a healthy pipeline from which to grow. The proactive measures we took early in the pandemic to reduce fees to support our customers has allowed us to retain close relations with them and we believe this will put us in good stead as the impact of the pandemic subsides.
"As such, we are confident of the long-term success of the Group and we look forward to updating the market on our progress in due course."
- Ends -
An online analyst briefing, given by Mark Foster, Chief Financial Officer, Stewart Darling, Chief Executive Officer and James Dickson, Chairman will be held today at 09.30hrs via Microsoft Teams. Please contact vianet@yellowjerseypr.com for details.
Enquiries:
Vianet Group plc
James Dickson, Chairman
Stewart Darling, CEO / Mark Foster, CFO
Tel: +44 (0) 1642 358 800
Cenkos Securities plc
Stephen Keys / Cameron MacRitchie
Tel: +44 (0) 20 7397 8900
Media enquiries:
Yellow Jersey PR
Sarah Hollins
Henry Wilkinson
Tel: +44 (0)7764 947 137
Tel: +44 (0)7951 402 336
COVID-19 ("C19") report
Proactive Response to Management of C19
Our primary goal has been to safeguard employee health and wellbeing, whilst continuing to support our customers and maintaining the Group's solid financial position, with the aim of being strongly positioned for the C19 exit phase. This crisis has created a common sense of purpose and provided an opportunity to demonstrate leadership. I am pleased that our people, customers and suppliers have all responded positively and trading for the first six months of the financial year has been ahead of management's internal revised revenue and profit forecasts.
Commercial Approach
Our approach to supporting customers has continued to evolve as the C19 landscape has unfolded and has included, amongst other things:
· Smart Zones customers signed up to letters of variation for the seven months to 30 October 2020, with those pubs not trading being billed at 30% of their normal weekly fees and those who were trading being billed at 70% of their normal weekly fees. This initiative was very well received by customers, as it provided the option to continue contracts at a reduced rate during shutdown rather than incur a more costly future reconnection charge.
The reduced billing for closed sites will continue until 31 March 2021, whilst a return to full billing for pubs which are trading, which was due to re-commence in November, will now resume on 3 December 2020.
· In Smart Machines, we continue to see mixed trading impacts for customers. Some vending machines, including those for essential workers, are trading very well, whereas those in city centre offices have seen much reduced sales activity. Prior to the November lockdown, around 70% of machines had remained active and we have seen modest commercial growth. We continue to support customers in this division with initiatives as needed.
Government Assistance
· As reported at the time of the FY2020 results, the Group secured a £3.5 million Coronavirus Business Interruption Loan ("CBIL") to provide a financial backstop should there be a prolonged recovery period. The capital repayment schedule deferment has been extended from 6 to 12 months, in line with the latest support measures from the Government. Our strategy is that the CBIL will be used for maintaining investment in growth rather than the day-to-day running of the business.
· Vianet moved swiftly to utilise the Government's Job Retention scheme, with almost 60% of our 155 employees furloughed during the first national lockdown and mandatory closure of pubs, whilst the balance worked from home.
· Following the re-opening of pubs on 4 July 2020 and an increase in vending operations, only a handful of people remained on flexible furlough at the end of H1 2021, as we constantly balanced resources to deal with the shifting impact of Government policy.
· November's second national lockdown resulted in around 40% of our workforce being furloughed again whilst the hospitality sector was shut down.
Our People
· We have supported our staff through these difficult and mentally challenging times. Microsoft Teams continues to be used extensively to maintain strong two-way communication across the business to ensure everyone is fully engaged and supported, regardless of status or role.
· We recognise that this way of working is difficult for many and is often less productive and inspiring than our office environment. We were able to open our offices in June 2020 and move towards a full complement of staff utilising safe working arrangements and a C19 secure environment, including the monthly application of our 30-day Smart Shield sanitisation product.
C19 Exit Strategy
As anticipated at the time of the FY2020 report, the business impact of C19 has been markedly different in each of our divisions.
· Smart Zones - the overnight closure of pubs meant that the full range of insight and analytics required to support compliance and retail services was temporarily no longer required by our customers. Notwithstanding this, the closure of pubs has provided opportunities for a wider engagement with our customers, as they seek data to understand the 'new normal' trading environment and to look to improve decision-making during the exit phase. There is also a demand to embrace digital capability to improve efficiency and frictionless delivery from both back of house and front of house to consumers.
· Smart Machines - activity levels in our Smart Machines Division saw only marginal declines helped by many unattended retail assets being installed in sites where essential workers were still required. The C19 crisis is accelerating a continued and significant growing structural trend away from cash payments towards connected assets and contactless payment as customers seek to improve sales and operational performance. We remain well positioned to benefit from this shift in behaviour.
The C19 second wave, the most recent nationwide lockdown and subsequent Tier system restrictions has temporarily slowed our momentum. Whilst uncertainty remains, we are encouraged by the UK approval of a C19 vaccine for widespread use in the coming weeks. This news represents a significant milestone for so many businesses and gives us all real hope for a return to a more normal operating backdrop. Despite all the uncertainty we have been proactive in positioning the business to give ourselves the flexibility to react quickly to events as they unfurl during these unprecedented times.
Chairman's Statement
Performance
I continue to be impressed with how Vianet and its employees have responded to this crisis. I believe the actions implemented will ensure Vianet comes through the C19 exit phase with momentum to accelerate our growth plans in the Smart Machines division, whilst delivering a solid performance in the Smart Zones division.
The steps we took in advance of the second wave, together with current cash, available resources, cost management plans, and conservative forecasts point to a healthy cash runway into 2021 and well beyond a projected general recovery next summer, even in the event of a prolonged lockdown, tier restrictions and widespread pub closures during the winter.
Given the C19 backdrop, there is little merit in drawing too much from comparison with H1 2020 performance, so while comparative figures are presented for reporting purposes, my comments will be restricted to the H1 2021 performance only.
The performance achieved, albeit loss making, was much better than we had anticipated in the early weeks of the pandemic, with the pre-exceptional loss of £0.4 million materially less than our internal re-forecasted loss for the half year.
Turnover of £4.07 million (H1 2020: £8.41 million) was credible given the C19 backdrop and in particular the closure of pubs. Both divisions reported an operating profit for H1 2021, helped principally from securing contract variations in Smart Zones, as well as the Smart Machines division continuing to trade profitably and gaining new sales throughout the period, as the new sales team hit the ground running post lockdown.
The Group's adjusted operating loss, pre-exceptional costs, was £0.38 million (H1 2020: £2.00 million profit) and the loss post exceptional items was £0.14 million (H1 2020: £0.59 million profit). The pre-tax loss was £1.44 million (H1 2020: £1.77 million profit).
There was an exceptional cost of £0.14 million principally related to further costs associated with staff transition and C19 costs, whilst H1 2019 saw a net credit of £0.59 million arising from partial release of Vendman deferred consideration.
The Group's loss per share was 4.86 pence (H1 2019: earnings 6.00 pence).
The Smart Machines division adjusted operating profit was £0.55 million (H1 2020: £0.78 million). Post-lockdown the new sales team delivered over 20 new and re-signed contracts in the period.
Despite very challenging trading in the hospitality sector during the period, the Group's adjusted operating profit in the Smart Zones division was £0.13 million (H1 2019: £2.32 million) and was aided by increased demand for our data analytics capability, proactive cost management and new revenues from market insights. This performance was achieved despite the early closure of the sector and the continued discount support we have given our customers to help them through this challenging period.
Dividend
The ongoing level of uncertainty as to how the C19 recovery phase will develop, has led the Board to take a prudent view and withdraw the interim dividend for H1 2021 alongside the other measures we are taking to preserve the Company's strong liquidity, cash flow, and financial position through these uncertain times.
The Board will review this decision again later in the year once the outlook becomes clearer, and our goal remains to re-introduce dividends as soon as it is practical and prudent to do so.
Board Changes
Stewart Darling, CEO, has notified the Group of his intention to stand down from the Board, having been with the Company since 2008 and CEO since 2013.
During his time as CEO, Stewart led the business to five successive years of profit and turnover growth and helped transform Vianet into a technology business through developing IoT and data capabilities, which have driven solid commercial progress.
Stewart will leave the Group at the end of March 2021, following the completion of several initiatives that will continue to drive the future growth of the business and this timing will enable an orderly transition and a smooth handover. For the remainder of 2021, he has committed to providing independent support to the Smart Machines team as it pursues the exciting growth opportunities available in the unattended retail market.
A search for Stewart's successor will commence in due course. Meanwhile, having held the position of CEO prior to Stewart, I will assume the role of Interim Executive Chairman to ensure continuity of executive leadership and support for the management team through this transition.
While Stewart will remain close to the Group for the foreseeable future, I would like to take this opportunity to thank him personally for his hard work and dedication over the years. We wish him every success in his future endeavours.
Outlook
Prior to the first lockdown in March 2020, the momentum and performance of both divisions had been encouraging. My view is that the business will come through these challenging times stronger, leaner, and in even better shape to accelerate our digital capability and take advantage of the excellent growth opportunities.
· Smart Machines is building momentum from strong growth opportunities here in the UK and across Europe. The division has won new, and renewed existing, contracts throughout the period, supported by the investment in sales resources we made during the period.
· Smart Zones has a healthy pipeline, including several major customer technology upgrade programmes expected, subject to lockdown measures, to continue in Q4 2021. The division is already benefitting from previous infrastructure investment, enabling a rebuild of profitability, with growth opportunities in our hospitality markets and market data.
Notwithstanding the speed at which each of our major markets return to normal levels, my view is that the high levels of contracted recurring revenue will support a recovery in underlying Group cash flow. The Board remains confident in Vianet's long-term growth strategy and considers the Group to be well positioned to deliver earnings growth as the world recovers from the pandemic.
James Dickson
Chairman
8 December 2020
Chief Executive Officer and Chief Financial Officer Review
In his statement, the Chairman has provided a clear and detailed view of the challenging landscape in which we have had to operate in the first six months of the financial year. Whilst our Smart Machines division continued to perform at a good level, despite the impact of the pandemic, it has been a very challenging period for our hospitality industry customers and our Smart Zones division, given the impact of the lockdowns on pubs and restaurants.
Despite this, the underlying trading performance for the six months to 30 September 2020 has exceeded our initial internal estimates at the start of the pandemic and we are pleased with the outcome, considering the circumstances.
Our strategy of delivering added value insight and analytics by connecting customers to their assets has been reinforced by the challenges of C19 and positions our solutions strongly as we emerge from the effects of the pandemic. As we emerged from the first lockdown, Smart Zones was a critical provider of trading performance data to pub customers, which in turn has supported senior level decision making in respect of business support plans. Our ability to provide accurate trading and other performance data from pubs on a frequent basis has reinforced the value of the insight we provide to the industry and provides a platform for further support. Growth in contactless payment, driven by the perception of 'dirty cash', has accelerated the installation of contactless payment devices in unattended retail machines. In many cases, this is now viewed as a business survival issue.
At the same time, there is significantly greater focus by operators on reducing site visit frequency to reduce operating costs and mitigate the risk of contact between employees and customers. This underpins why Smart Machines' connected devices and contactless payment services continued to progress during lockdown and we have signed a substantial number of new contracts.
Our strategic approach to driving recurring revenue and profit growth remains unchanged and many of the fundamental drivers have been reinforced by the change in behaviour resulting from the pandemic. However, we do recognise that the hospitality industry is in unchartered territory where much will depend how the sector emerges from the impact of lockdown and how pub company customers will organise their businesses beyond this. Conversely, in our Smart Machines business, the trends which were driving the pace of adoption of telemetry and contactless payment have simply been reinforced by the impact of the pandemic.
Operational cash generation, post working capital, was a credible £1.19 million (H1 2020: £2.44 million) given the challenging trading performance in a pub sector closed for the first quarter and on reduced billing terms through the second quarter. The cash position was helped by close management of our costs and continuing payments by our customers. This is clearly an area that we will closely monitor and manage in the coming months as the C19 landscape unfolds. Whatever form that takes, we are confident that our cash trajectory is robust enough to see us through this crisis.
The Group had an overall net debt position of £1.15 million at the half year, compared to £1.18 million last year, with gross debt of £4.87 million (H1 2020: £1.67 million) taking account of the CBIL facility.
Smart Machines
Smart Machines sales of new telemetry and contactless device connections continued, with overall sales of 3,212 units (H1 2020: 7,634 units) of which contactless payment sales were 2,152 units (H1 2020: 4,796 units). Given the impact of C19 and the resulting lockdown period, this is a relatively strong performance given many city centre offices were closed.
Turnover was £2.04 million (H1 2020 £2.71 million), with over a third of unit sales being on an annuity only basis. Whilst this model reduces upfront cash receipts, it is more profitable over the life of contracts and generates significantly enhanced quality of earnings for the Group and provides a clearer projection of forward earnings due to a reduction in the impact of variable capital sales.
Since we emerged from the initial lockdown, industry recognition that contactless payment adoption will accelerate and operating overheads need to be reduced by visiting sites less frequently, has led to over 20 new contracts being signed.
Momentum into H2 2021 is encouraging despite the challenging landscape and we are confident that the Smart Machines growth opportunity in connected devices and contactless payment has been enhanced as a result of changing behaviour arising from the pandemic. Whilst we may experience short term challenges due to local or national lockdowns, the underlying opportunity remains strong and we are confident will enhance future earnings growth.
Smart Zones
The underlying performance of the Group's core beer monitoring business was significantly impacted by the national lockdown and closure of the hospitality sector between 20 March 2020 and 4 July 2020. This had a materially adverse impact on divisional turnover and profitability, with resulting reduction in Group turnover and profitability. Given the C19 backdrop and reduced billing to support customers through the crisis, which was warmly welcomed throughout the industry, we are satisfied with the result in the period.
Long-term contract renewals were signed with Star Pubs and Bars and Admiral, along with an annual renewal with Young's, and we managed to install 41 new systems in the period. Whatever shape the post-COVID world takes, we have been greatly encouraged by how our trading performance insights and other data analytics were embraced by customers during lockdown and as we emerged from it. We were able to rapidly redeploy our capabilities to support senior level decision making beyond that which we have done historically, giving us every confidence in the future growth prospects for iDraughtTM in the UK. Furthermore, we have received continued commitments to technology upgrades from major customers. In addition, our investment in new technology and the migration of data and services to the cloud has significantly increased the opportunity for Smart Zones to capture data from a wider array of sources for our customers and roll-out enhanced insight and data services.
In the US, where the impact of lockdown has also widely impacted the hospitality industry, new sales stalled, and alongside the support package provided to customers resulted in our business in the US suffering a £0.16 millon loss in the period. As with all cinema chains, our largest US customer, AMC Theatres, has been affected by C19 closures and fragile consumer confidence, so it was encouraging to see that investors supported their recent fund-raising.
Looking Forward
We have been truly inspired and humbled in equal measure, by the response of all employees during this crisis, and the senior management team who, along with the Board, have helped steer a way through the many challenges that have confronted us. Our principal aim during the crisis has always been to come through it in the best possible shape, and with the critical drivers of our business capability intact. Whilst it is not yet over, we are confident that the opportunities for growth remain, particularly given how the crisis has changed and accelerated customer behaviour in our chosen markets.
We remain confident that the Group's significant investment in a cloud-based IoT platform, data analytics and insight led capabilities, which have underpinned our strategic approach, combined with a relentless focus on growing our presence in the Smart Machines marketplace, will continue to unlock transformational business opportunities. This will provide the foundation for strong growth in revenues and profitability as we emerge from the impact of this pandemic.
Stewart Darling
Chief Executive Officer
Mark Foster
Chief Financial Officer
8 December 2020
Consolidated Statement of Comprehensive Income
For the six months ended 30 September 2020
Before Exceptional
6 months
Exceptional
6 months
Total Unaudited
6 months
Before
Exceptional
6 months
Exceptional
6 months
Unaudited
6 months
Audited
Year
Ended
Ended
Ended
Ended
Ended
Ended
Ended
30 Sept
30 Sept
30 Sept
30 Sept
30 Sept
30 Sept
31 March
2020
2020
2020
2019
2019
2019
2020
Note
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Continuing operations
Revenue
3
4,066
-
4,066
8,408
-
8,408
16,282
Cost of sales
(1,497)
-
(1,497)
(2,716)
-
(2,716)
(5,164)
Gross profit
2,569
-
2,569
5,692
-
5,692
11,118
Administration and other operating expenses
4
(2,946)
(142)
(3,088)
(3,689)
585
(3,104)
(7,087)
Operating (loss)/profit pre amortisation and share based payments
3
(377)
(142)
(519)
2,003
585
2,588
4,031
Intangible asset amortisation
(837)
-
(837)
(696)
-
(696)
(1,390)
Share based payments
(48)
-
(48)
(68)
-
(68)
(125)
Operating (loss)/profit post amortisation and share based payments
(1,262)
(142)
(1,404)
1,239
585
1,824
2,516
Net finance costs
(32)
-
(32)
(53)
-
(53)
(113)
(Loss)/profit from continuing operations before tax
(1,294)
(142)
(1,436)
1,186
585
1,771
2,403
Income tax expense
5
30
-
30
(82)
-
(82)
28
(Loss)/profit and other comprehensive income for the year
3
(1,264)
(142)
(1,406)
1,104
585
1,689
2,431
(Loss)/earnings per share
Continuing Operations
- Basic
6
(4.86p)
6.00p
8.56p
- Diluted
6
(4.83p)
5.97p
8.47p
Consolidated Balance Sheet
At 30 September 2020
Unaudited
As at
30 Sept
2020
Unaudited
As at
30 Sept
2019
Audited
As at
31 March 2020
£'000
£'000
£'000
Assets
Non-current assets
Intangible assets
23,708
23,037
23,361
Property, plant and equipment
3,610
3,852
3,795
Deferred Tax asset
510
200
510
Total non-current assets
27,828
27,089
27,666
Current assets
Inventories
1,519
1,365
1,491
Trade and other receivables
2,509
4,179
3,544
Cash and cash equivalents
3,721
1,836
1,728
7,749
7,380
6,763
Total assets
35,577
34,469
34,429
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables
3,098
4,027
2,710
Borrowings
1,466
2,016
2,011
Leases
34
-
64
4,598
6,043
4,785
Non-current liabilities
Other payables
117
117
117
Borrowings
3,408
1,002
670
Deferred tax
1,111
941
1,141
Leases
20
-
35
4,656
2,060
1,963
Equity attributable to owners of the parent
Share capital
2,895
2,894
2,895
Share premium account
11,709
11,702
11,709
Share based payment reserve
412
306
364
Own shares
-
(743)
-
Merger reserve
310
310
310
Retained profit
10,997
11,897
12,403
Total equity
26,323
26,366
27,681
Total equity and liabilities
35,577
34,469
34,429
Summarised Consolidated Cash Flow Statement
For the six months ended 30 September 2020
Unaudited
6 months
Unaudited
6 months
Audited
Year
Ended
Ended
Ended
30 Sept
30 Sept
31 March
2020
2019
2020
£'000
£'000
£'000
Cash flows from operating activities
(Loss)/profit for the period
(1,406)
1,689
2,431
Adjustments for
Net Interest payable
32
53
113
Income tax (credit)/expense
(30)
82
(28)
Amortisation of intangible assets
837
696
1,390
Depreciation
309
335
674
Deferred consideration release
-
(920)
(1,088)
Loss on sale of property, plant and equipment
7
1
3
Goodwill write off
-
-
119
Share-based payments expense
48
68
125
Tax payment in respect of LTIP
-
(18)
(17)
Operating (loss)/profit before changes in
working capital and provisions
(203)
1,986
3,722
Change in inventories
(28)
304
178
Change in receivables
1,035
(378)
125
Change in payables
389
523
191
1,396
449
494
Net cash from operating activities
1,193
2,435
4,216
Cash flows from investing activities
Purchases of property, plant and equipment
(131)
(685)
(730)
Purchase of intangible assets
(1,185)
(882)
(2,020)
Net cash used in investing activities
(1,316)
(1,567)
(2,750)
Cash flows from financing activities
Net Interest payable
(32)
(53)
(113)
Issue of share capital
-
191
200
New leases
-
229
-
Repayment of leases
(45)
(75)
(141)
Repayments of borrowings
-
(330)
(661)
New borrowings
3,540
-
-
Payment of deferred consideration
-
(22)
(552)
Dividends paid
-
(1,123)
(1,604)
Disposal of own shares
-
-
988
Net cash used in financing activities
3,463
(1,183)
(1,883)
Net increase/(decrease) in cash and cash equivalents
3,340
(315)
(417)
Cash and cash equivalents at beginning of period
381
798
798
Cash and cash equivalents at end of period
3,721
483
381
Reconciliation to the cash balance in the Consolidated Balance Sheet
Cash balance as per consolidated balance sheet
3,721
1,836
1,728
Bank overdrafts
-
(1,353)
(1,347)
Balance per statement of cash flows
3,721
483
381
Statement of changes in equity
Six months ended 30 September 2020
Share
capital
Share
premium
account
Share based payment reserve
Own shares
Merger
reserve
Retained profit
Total
£000
£000
£000
£000
£000
£000
£000
At 1 April 2020
2,895
11,709
364
-
310
12,403
27,681
Share based payment
-
-
48
-
-
-
48
Transactions with owners
-
-
48
-
-
-
48
Loss and total comprehensive income for the period
-
-
-
-
-
(1,406)
(1,406)
Total comprehensive income less owners transactions
-
-
48
-
-
(1,406)
(1,358)
At 30 September 2020
2,895
11,709
412
-
310
10,997
26,323
Six months ended 30 September 2019
Share
capital
Share
premium
account
Share based payment reserve
Own shares
Merger
reserve
Retained profit
Total
£000
£000
£000
£000
£000
£000
£000
At 1 April 2019
2,874
11,530
314
(754)
310
11,285
25,559
Dividends
-
-
-
-
-
(1,123)
(1,123)
Issue of shares
20
171
-
-
-
-
191
Share based payment
-
-
68
-
-
-
68
Share based forfeitures
-
-
(43)
-
-
43
-
LTIP exercise
-
-
(33)
12
-
3
(18)
Transactions with owners
20
171
(8)
12
-
(1,077)
(882)
Profit and total comprehensive income for the period
-
-
-
-
-
1,689
1,689
Total comprehensive income less owners transactions
20
171
(8)
12
-
612
807
At 30 September 2019
2,894
11,701
306
(742)
310
11,897
26,366
12 months ended 31 March 2020
Share
capital
Share
premium
account
Share based payment reserve
Own shares
Merger
reserve
Retained profit
Total
£000
£000
£000
£000
£000
£000
£000
At 1 April 2019
2,874
11,530
314
(754)
310
11,285
25,559
Dividends
-
-
-
-
-
(1,604)
(1,604)
Issue of shares
21
179
-
-
-
-
200
Share based payment
-
-
125
-
-
-
125
Share based forfeitures
-
-
(43)
-
-
43
-
LTIP exercise
-
-
(32)
12
-
3
(17)
Disposal of own shares
-
-
-
232
-
83
315
Disposal of treasury shares
-
-
-
510
-
162
672
Transactions with owners
21
179
50
754
-
(1,313)
(309)
Profit and total comprehensive income for the year
-
-
-
-
-
2,431
2,431
Total comprehensive income less owners transactions
21
179
50
754
-
1,118
2,122
At 31 March 2020
2,895
11,709
364
-
310
12,403
27,681
Notes to the interim report
1. Statutory information
The interim financial statements are neither audited nor reviewed and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.
The financial information for the year ended 31 March 2020 has been derived from the published statutory accounts. A copy of the full accounts for that period, on which the auditor issued an unmodified report that did not contain statements under 498(2) or (3) of the Companies Act 2006, has been delivered to the Registrar of Companies.
These interim financial statements will be posted to all shareholders and are available from the registered office at One Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR or from our website at www.vianetplc.com/investors.
2. Basis of preparation
This consolidated half yearly financial information for the half year ended 30 September 2020 has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 March 2020, except for the introduction of IFRS 16. IFRS 16 'Leases' replaced IAS 17 'Leases' and IFRIC4 'determining whether an arrangement contains a lease' and sets out the principles for the recognition, measurement, presentation and disclosure of leases and has been applied from 1 April 2019 using the modified retrospective approach. Under IFRS 16 the main difference for the Group is that certain leases where the Group is a lessee are recognised on the balance sheet, as both a right-of-use asset and a lease liability. Low value (defined as leases with an individual asset value of less than £5,000 at the date of initial recognition) and short-term leases (those with a term of 12 months or less) were excluded from these calculations under the practical expedients allowed in the standard. The right-of-use asset is depreciated in accordance with IAS 16 'Property, Plant and Equipment' and the liability is increased for the accumulation of interest and reduced by cash lease payments. There is no impact on cash flow.
The Directors have concluded that the adoption of these accounting standards has not had a material impact on the financial statements. The Group's accounting policies are based on the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU.
3. Segmental information
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses. The segment operating results are regularly reviewed by the Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance. Vianet Group is analysed into to two trading segments (defined below) being Smart Zones (mainly adopted in the leisure sector, including US (particularly in pubs and gaming)) and Smart Machines (mainly adopted in the vending sector (particularly in vending machines)) supported by Corporate/Technology & stores costs.
The products/services offered by each operating segment are:
Smart Zones: Data insight & actionable data services, design, product development, sale and rental of fluid monitoring equipment.
Smart Machines: Data insight & actionable data services, design product development, sale and rental of machine monitoring equipment.
Corporate/Technology: Centralised Group overheads along with technology and stores related costs for the Group
The inter-segment sales are immaterial. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated assets and liabilities comprise items such as cash and cash equivalents, certain intangible assets, taxation, and borrowings. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one period.
The segmental results for the six months ended 30 September 2020 are as follows:
Continuing Operations
Smart Zones
Smart Machines
Corporate/Technology
Total
£'000
£'000
£'000
£'000
Total revenue
2,025
2,041
-
4,066
Profit/(loss) before amortisation, share based payments and exceptional costs
132
550
(1,059)
(377)
Pre-exceptional segment result
(76)
430
(1,616)
(1,262)
Exceptional costs
(12)
(39)
(91)
(142)
Post exceptional segment result
(88)
391
(1,707)
(1,404)
Finance income
-
-
1
1
Finance costs
(19)
(14)
-
(33)
(Loss)/profit before taxation
(107)
377
(1,706)
(1,436)
Taxation
30
Loss for the year from continuing operations
(1,406)
Smart Zones
Smart Machines
Corporate/Technology
Total
£'000
£'000
£'000
£'000
Segment assets
29,089
4,083
1,895
35,067
Unallocated assets
-
-
510
510
Total assets
29,089
4,083
2,405
35,577
Segment liabilities
7,780
-
363
8,143
Unallocated assets
-
-
1,111
1,111
Total liabilities
7,780
-
1,474
9,254
Notes to the interim report (continued)
The segmental results for the six months ended 30 September 2019 are as follows:
Continuing Operations
Smart Zones
Smart Machines
Corporate/Technology
Total
£'000
£'000
£'000
£'000
Total revenue
5,703
2,705
-
8,408
Profit/(loss) before amortisation, share based payments and exceptional costs
2,316
781
(1,094)
2,003
Pre-exceptional segment result
2,179
644
(1,584)
1,239
Exceptional costs
(119)
843
(139)
585
Post exceptional segment result
2,060
1,487
(1,723)
1,824
Finance income
-
-
8
8
Finance costs
(39)
(22)
-
(61)
Profit/(loss) before taxation
2,021
1,465
(1,715)
1,771
Taxation
(82)
Profit for the year from continuing operations
1,689
Smart Zones
Smart Machines
Corporate/Technology
Total
£'000
£'000
£'000
£'000
Segment assets
28,279
4,083
1,907
34,269
Unallocated assets
-
-
200
200
Total assets
28,279
4,083
2,107
34,469
Segment liabilities
6,903
-
259
7,162
Unallocated assets
-
-
941
941
Total liabilities
6,903
-
1,200
8,103
Notes to the interim report (continued)
The segmental results for the 12 months ended 31 March 2020 are as follows:
Continuing Operations
Smart Zones
Smart Machines
Corporate/Technology
Total
£'000
£'000
£'000
£'000
Total revenue
11,061
5,221
-
16,282
Profit/(loss) before amortisation, share based payments and exceptional costs
4,568
1,527
(2,065)
4,030
Pre-exceptional segment result
4,299
1,260
(3,044)
2,515
Exceptional costs
(462)
867
(404)
1
Post exceptional segment result
3,837
2,127
(3,448)
2,516
Finance income
-
-
13
13
Finance costs
(86)
(40)
-
(126)
Profit/(loss) before taxation
3,751
2,087
(3,435)
2,403
Taxation
28
Profit for the year from continuing operations
2,431
Smart Zones
Smart Machines
Corporate/Technology
Total
£'000
£'000
£'000
£'000
Segment assets
28,069
4,083
1,767
33,919
Unallocated assets
-
-
510
510
Total assets
28,069
4,083
2,277
34,429
Segment liabilities
5,291
-
316
5,607
Unallocated assets
-
-
1,141
1,141
Total liabilities
5,291
-
1,457
6,748
Notes to the interim report (continued)
4. Exceptional items
6 months
6 months
Year
Ended
Ended
Ended
30 Sept
30 Sept
31 March
2020
2019
2020
£'000
£'000
£'000
Corporate activity and acquisitions costs
-
-
311
Corporate restructuring and transitional costs
59
297
415
Deferred consideration release
-
(920)
(1,086)
COVID19 Costs
78
-
-
Network Obsolescence costs
-
33
50
Loan impairment
-
-
200
Other
5
5
109
142
(585)
(1)
Corporate activity and acquisition costs relate to fees paid to corporate advisors in respect of prospective acquisitions and corporate evaluations.
Corporate restructuring and transitional costs relate to the transition of people and management to ensure we have the succession and calibre of people on board to deliver the strategic aims and aspirations of the Group.
Coronavirus (COVID-19) costs directly relate to initial management time in the early weeks of the pandemic implementing the operational needs, customer engagement, and financial planning needed to ensure the business developed a pathway through COVID-19.
The deferred consideration release refers to the acquisition of Vendman Systems Limited where a proportion of the consideration was based upon results of the company for two years post acquisition. Within the year the final balance was paid and the change in fair value recognised through the income statement. The deferred period has now closed.
5. Tax
The (credit)/charge for tax is based on the (loss)/profit for the period and comprises:
6 months
6 months
Year
Ended
Ended
Ended
30 Sept
30 Sept
31 March
2020
2019
2020
£'000
£'000
£'000
United Kingdom corporation tax
(30)
82
(28)
The tax (credit)/charge reflects the utilisation of brought forward trading losses, which had previously been recognised as a deferred tax asset, against the taxable profit for the period within Vianet Limited
6. (Loss)/earnings per share
Loss per share has been directly impacted by the impact of COVID-19 on our financial performance and as such is not a representative comparison to prior periods.
Earlier periods are influenced by the reversal of a deferred tax asset provision realised in previous years and the Vendman Systems Limited deferred consideration release referred to in note in 4. Exceptionals items above.
Basic loss per share are calculated by dividing the earnings attributable to ordinary shareholders (loss of £1,406k) by the weighted average number of ordinary shares outstanding during the period.
Diluted earnings per share are calculated on the basis of (loss)/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
The table below shows the earnings pre and post the impact of the movement in the deferred tax asset.
30 September 2020
30 September 2019
(Loss)
£000
Basic (loss) per share
Diluted (loss) per share
Earnings
£000
Basic earnings per share
Diluted earnings per share
Pre-tax (loss)/profit attributable to equity shareholders
(1,436)
(4.96p)
(4.93p)
1,771
6.29p
6.26p
Post-tax (loss)/profit attributable to equity shareholders
(1,406)
(4.86p)
(4.83p)
1,689
6.00p
5.97p
Pre-tax, pre-exceptional (loss)/profit attributable to equity shareholders
(1,294)
(4.47p)
(4.44p)
1,186
4.21p
4.19p
Post-tax, pre-exceptional (loss)/profit attributable to equity shareholders
(1,264)
(4.37p)
(4.34p)
1,104
3.92p
3.90p
30 Sept
2020
Number
30 Sept
2019
Number
Weighted average number of ordinary shares
28,953,414
28,149,205
Dilutive effect of share options
172,967
123,338
Diluted weighted average number of ordinary shares
29,126,381
28,272,543
INDEPENDENT REVIEW REPORT TO VIANET GROUP PLC AND CHANGE OF AUDITORS
For H1 2021, we have chosen not to undertake an independent audit review which is an agreed standard approach.
We would like to place on record our thanks to Grant Thornton UK LLP (GTUK) for their support and help over a long association, but both parties now believe after 15 years a mutual change of auditors would be appropriate. GTUK have therefore resigned as auditors and the Company has appointed BDO LLP who will be undertaking the FY21 full year audit.
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