AI assistant
VIANET GROUP PLC — Earnings Release 2020
Dec 12, 2019
8008_ir_2019-12-12_32fa10a7-5c32-47ac-a5b5-06325cf371af.html
Earnings Release
Open in viewerOpens in your device viewer
National Storage Mechanism | Additional information
You don't have Javascript enabled. For full functionality this page requires javascript to be enabled.
RNS Number : 5831W
Vianet Group PLC
12 December 2019
Press release 12 December 2019
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 2019 ("H1 2020").
Financial summary
| ● | Revenue increase of 9.5% to £8.41 million (H1 2019: £7.68 million) |
| ● | Recurring revenues at 82% (H1 2019: 88%) |
| ● | Adjusted operating profit(a) up 11.1% to £2.00 million (H1 2019: £1.80 million) |
| ● | Operating profit post exceptional items, pre amortisation and share based payments up 51.5% to £2.56 million (H1 2019: £1.69 million) |
| ● | Pre-exceptional profit before tax up 7.3% at £1.19 million (H1 2019: £1.11 million) |
| ● | Operational cash generation of £2.44 million (H1 2019: £0.72 million)(b) |
| ● | Basic earnings per share up 96.7% at 6.00p (H1 2019: 3.05p), including a tax adjustment charge of 0.29p and the impact of the Vendman Systems Limited deferred consideration release (see note 4) |
| ● | Net debt of £1.18 million (H1 2019: net debt £1.00 million(c)), debt reduced to £1.67 million (H1 2019: £2.33 million) |
| ● | Interim dividend of 1.70p (H1 2019: 1.70p) |
Divisional highlights
| ● | Smart Machines growth continues with new unit sales up 40.1% to 7,634 units (H1 2019: 5,427 units) and contactless payment sales up 21.1% at 4,796 units (H1 2019: 3,960 units) |
| ● | Smart Machines adjusted operating profit(a) up 14.7% at £0.78 million (H1 2019: £0.68 million) and unadjusted profit of £1.47 million (H1 2019: £0.50 million) |
| ● | Smart Zones adjusted operating profit(a) up 8.9% at £2.32 million (H1 2019: £2.13 million), with unadjusted profit £2.02 million (H1 2019: £1.95 million) |
| ● | Smart Zones long term contract renewals with Charles Wells, Greene King, Hawthorne, Hydes, JW Lees and Punch |
| ● | Smart Machines wins three significant contracts for a combined 20,000 units over 3-5 years |
a) Adjusted operating profit is profit before exceptional costs, amortisation, interest and share based payments
b) H1 2019 Operational cash generation is pre LTIP taxation of £0.50m
c) Net debt impacted by both the drawdown of a £2.0m term loan for the Vendman acquisition and strategic investments in the technology stack, annuity model and stock
Commenting on the interim results, James Dickson, Chairman of Vianet Group plc, said:
"Vianet's IOT platform investment and focus on growth areas is delivering an earnings breakthrough and I am pleased to report that this has resulted in an 11.1% increase in operating profit for the six months to 30 September 2019, compared to the same period last year. Encouragingly, on a like for like basis, this growth was closer to 20% as H1 2019 did not include employee performance related bonus provisions.
The Group's strategy of delivering added value insight and analytics by connecting customers to their assets continues to drive sales. Smart Machines' connected devices and contactless payment services have continued to progress significantly, whilst Smart Zones' increase in revenue and profits was encouraging, despite the impact of pub disposals. Looking forward, the significant ongoing influx of capital, and the very recent Stampede report on UK pub numbers gives us further confidence that the industry is at last recovering.
We are confident that our significant investment in the Group's cloud based IOT platform and new data analytics and insight led capabilities will accelerate Vianet's growth plans and develop higher quality revenue streams from existing customers and other industry sectors.
Underpinned by high levels of recurring revenue, underlying Group cash flow is strong and we have a solid financial platform to facilitate further expansion and development. The Board remains confident that Vianet's long term growth strategy is the right one and that the Group is very well positioned to deliver strong earnings growth and expand our future strategic options."
- Ends -
An interim results analyst briefing given by Stewart Darling, Chief Executive and Mark Foster, Chief Financial Officer will be held today at 09.30hrs at Cenkos, 6-8 Tokenhouse Yard, London EC2R 7AS.
Enquiries:
| Vianet Group plc | |
| James Dickson, Chairman Stewart Darling, CEO / Mark Foster, CFO |
Tel: +44 (0) 1642 358 800 www.vianetplc.com |
| Cenkos Securities plc | |
| Stephen Keys / Cameron MacRitchie | Tel: +44 (0) 20 7397 8900 |
| www.cenkos.com |
Media enquiries:
| Yellow Jersey PR | |
| Sarah Hollins Henry Wilkinson [email protected] |
Tel: +44 (0)7764 947 137 Tel: +44 (0)7951 402 336 www.yellowjerseypr.com |
Chairman's Statement
Performance
Vianet's IOT platform investment in and focus on growth areas is delivering an earnings breakthrough and I am pleased to report that this has resulted in a 11.1% increase in adjusted operating profit for the six months to 30 September 2019, compared to the same period last year. Encouragingly, on a like for like basis, this growth was closer to 20% as H1 2019 did not include employee performance related bonus provisions.
Turnover of £8.41 million (H1 2019: £7.68 million) was up 9.5% helped by growth in Smart Machines and a solid contribution from Smart Zones. This pleasing result arose despite sales for Smart Zones being held back by corporate activity amongst large customers and some further pub closures, and in Smart Machines by the short term impact of our transitioning from capital sales to annuity only streams. Whilst this shift from capital to annuity sales reduced reported H1 revenues by £0.49 million and profits by £0.25 million, it provides greater future earnings visibility and is more profitable over the life of the contracts. As a result, the Group's high level of recurring revenue has been further strengthened by growth in the Smart Machines division.
The Group's adjusted operating profit pre-exceptional costs was up 11.1% to £2.00 million (H1 2019: £1.80 million) and post exceptional items were up 51.5% at £2.56 million (H1 2019: £1.69 million), whilst profit before taxation was at £1.77 million (H1 2019: £0.99 million) helped by an exceptional net credit.
There was an exceptional net credit of £0.59 million (H1 2019: net cost £0.11 million), principally related to the release of the Vendman acquisition deferred consideration provision reduced by further costs associated with network obsolescence, staff transition and corporate restructuring. Whilst there has been a £1.45 million overall write back on the Vendman earn out provision, including £0.92 million in the period, we are delighted with the progress and momentum in this part of the business against what was a stretching earn out which concluded at H1 2020 period end.
Group earnings per share increased 96.7% to 6.00 pence (H1 2019: 3.05 pence).
The Smart Machines division adjusted operating profit was up 14.7% to £0.78 million (H1 2019: £0.68 million) helped by a strong year on year increase in the number of connected devices deployed.
Building on the initial success in converting approximately 200,000 Vendman mobile connections to higher value Smart Machines connections, the division is also seeing increased momentum from the rollout of the recently concluded negotiations on three long-term contracts with leading vending operators. These combined contracts for 20,000 units will generate in the region of £10 million of revenue over the three to five year contract terms, which further underpins the growth of Smart Machines.
Helped by investment in Pubco data analytics capability, the increased automation of transactional processes, and new revenues from market data, adjusted operating profit in the Smart Zones division increased by 8.9% at £2.32 million (H1 2019: £2.13 million). This performance was achieved despite challenging market conditions for our customers, and delays in the sales pipeline due to Pubco corporate activity. Vianet Americas added a further 48 new sites since H1 2019 helping to deliver a H1 adjusted operating profit of £6,000 (H1 2019: £30,000 loss).
Dividend
Reflecting the Board's continued confidence in the Group's growth plans, we are pleased to maintain the interim dividend at 1.70 pence per share (H1 2019: 1.70 pence per share), payable on 5 February 2020 to shareholders on the register at 20 December 2019. A final dividend of 4.00 pence per share was paid on 26 July 2019 in respect of the financial year ended 31 March 2019.
Outlook
Vianet's markets have a very exciting future: Global IOT and analytics revenue in the B2B sector is forecast to reach $331 billion in the next year or so through increasing demand for comprehensive analytics platforms and effective user experience. This should act as a gateway to new verticals for Vianet through its distinctive industry-agnostic technology platform and IOT expertise.
Our key contactless payment solutions market is scaling rapidly and is expected to have revenues of $27 billion market globally by 2025. This backdrop and the transition to industry-wide intelligent vending presents Vianet with a really significant growth opportunity for its end to end proposition in this sector - across the UK and Continental Europe there is an addressable market of c. 3.3 million machines, including 300,000 in the UK.
Against this background, Vianet clearly has very exciting opportunities to leverage our cutting-edge technology platform and is in excellent shape to deliver strong earnings growth from our existing markets in the short to medium term as well:
· Smart Machines is continuing to build momentum by creating and converting strong growth opportunities here in the UK and across Europe as demonstrated by good progress on rolling out our recently reported long term contract wins with three major vending customers.
· Full realisation of our major global coffee contract, conversion of the c. 200,000 Vendman mobile connections to higher value Smart Machines connections, and other cross-selling opportunities from our leading end to end portfolio will accelerate future earnings growth in the short to medium term.
· Smart Zones' momentum from several major customer technology upgrade programs will continue through FY2020 and the division is already benefitting from previous infrastructure investment. This will allow Smart Zones to build on the existing profit contribution whilst taking advantage of improving growth prospects in the UK and US hospitality markets as well as exploiting market data provision opportunities.
Underpinned by high levels of recurring revenue, underlying Group cash flow is strong and we have a solid financial platform to facilitate further expansion and development.
The Board remains confident that Vianet's long term growth strategy is the right one and that the Group is very well positioned to deliver strong earnings growth and expand our strategic options into exciting growth areas.
James Dickson
Chairman
11 December 2019
Chief Executive and Chief Financial Officer Review
Underlying trading for the six months to 30 September 2019 has seen a good improvement compared to the same period last year. Vianet's strategy of delivering added value insight and analytics by connecting customers to their assets continues to drive sales. Smart Machines' connected devices and contactless payment services have continued to progress materially, whilst Smart Zones' performance was encouraging, even if progress was partially offset by the continued impact of pub disposals.
The Board's strategic decision to transition to an annuity revenue model in Smart Machines continues to fuel acceleration in device connections. Whilst this tends to hold back revenue and cash in the short term, it will continue to drive a material increase in quality of earnings and profit for the business over the life of our contracts. The proportion of recurring revenue has continued at high levels.
For two years, Vianet has been working on a substantial c. £3.00 million project ("NEO") to develop a new cloud based IOT and data analytics platform. This will see replacement of ageing legacy technology, particularly in our Smart Zones division, and it also creates a highly scalable self-service insight and analytics led capability to capitalise on the growing demand from customers for new data driven services. The new platform enables rapid prototyping and innovation of IOT led applications and is already opening up new business growth opportunities in existing and new verticals. The new capability has been very well received and migration of all customers is expected to be complete by summer 2020.
Operational cash generation, post working capital, increased to £2.44 million (H1 2019: £0.72 million) before LTIP costs and built upon the H1 2019 transitional investment reported at that time and forecast to unwind through H2 2019 into the current year, which it has done.
The Group had an overall net debt position of £1.18 million at the half year compared to £1.00 million last year, with reduced gross debt of £1.67 million (H1 2019: £2.33 million).
The Group's underlying cash generation remains strong with £1.98 million (before LTIP tax payment and working capital movements) compared to £1.91 million in the same period last year.
Smart Machines
Smart Machines had a strong increase in the number of device connections with growth in telemetry devices and contactless devices of 93.5% and 21.1%, respectively over the same period last year.
Turnover was up 16.4% despite one third of unit sales being on an annuity only basis which reduces upfront cash receipts. The annuity model is, however, more profitable over the life of contracts, providing significantly enhanced quality of earnings for the Group and a clearer projection of business performance due to a reduction in the impact of variable capital sales.
The major contract roll out with a leading global coffee supplier has seen more devices deployed this year compared to last but is still behind the previously anticipated pace. However, we are encouraged that action is being taken to accelerate the rate of deployment against what remains a significant and exciting roll out plan.
Vendman, included in the Smart Machines overall results, saw adjusted operating profit growth of 18.2% to £0.26 million (H1 2019: £0.22 million) and we continue to focus on this area for an accelerated rate of growth.
Additionally, the division is now generating significant cross-selling opportunities as the capability of the Group continues to reach a wider audience in IOT market connectivity, where customers are seeking to transform business performance largely through connecting their assets, contactless payment technology and making decisions based on new insight and analytics.
Momentum into H2 2020 has been encouraging and it is anticipated that Smart Machines growth in connected devices and contactless payment will continue and significantly enhance future earnings growth.
Smart Zones
The underlying performance of the Group's core beer monitoring business was encouraging with 8.9% growth in operating profit, helped by good traction in technology upgrades with over 1,300 sites upgraded and further new sales of iDraughtTM.
Over the period, Smart Zones, held back by corporate activity amongst large customers, secured 43 new beer monitoring installations (H1 2019: 44) and 1,302 technology upgrades (H1 2019: 709).
Long-term contract renewals were achieved with Greene King, Punch and Charles Wells renewing for five years whilst Hawthorne, J W Lees and Hydes extended for three years.
Pub disposals resulted in a net reduction of c. 448 sites for the division to approximately 12,145 sites.
Our continued confidence in the future growth prospects for iDraughtTM in the UK is driven by continued commitments for technology upgrades from existing major customers and installations for new 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, the roll out of iDraughtTM has increased the installation base to 327 sites. The increase in installation base combined with a refined cost base contributed to a small adjusted operating profit of £6,000 (H1 2019: £33,000 loss).
Looking forward
The Group's significant investment in our cloud based IOT platform and new data analytics and insight led capabilities will accelerate Vianet's growth plans and develop higher quality revenue streams from existing customers and sectors, whilst making our cutting-edge end-to-end capability highly relevant to other industry sectors.
We believe that this strategic approach, combined with a relentless focus on growing our presence in the Smart Machines marketplace, will continue to unlock transformational business opportunities and provide the foundation for a strong increase in revenues and profitability.
| Stewart Darling Chief Executive |
Mark Foster Chief Financial Officer |
| 11 December 2019 |
Consolidated Statement of Comprehensive Income
For the six months ended 30 September 2019
| 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 | ||
| 2019 | 2019 | 2019 | 2018 | 2018 | 2018 | 2019 | ||
| Note | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Continuing operations | ||||||||
| Revenue | 3 | 8,408 | - | 8,408 | 7,683 | - | 7,683 | 15,683 |
| Cost of sales | (2,716) | - | (2,716) | (2,465) | - | (2,465) | (5,023) | |
| Gross profit | 5,692 | - | 5,692 | 5,218 | - | 5,218 | 10,660 | |
| Administration and other operating expenses | 4 | (3,689) | 585 | (3,104) | (3,414) | (112) | (3,526) | (6,583) |
| Operating profit pre amortisation and share based payments | 3 | 2,003 | 585 | 2,558 | 1,804 | (112) | 1,692 | 4,077 |
| Intangible asset amortisation | (696) | - | (696) | (597) | - | (597) | (1,192) | |
| Share based payments | (68) | - | (68) | (68) | - | (68) | (132) | |
| Operating profit post amortisation and share based payments | 1,239 | 585 | 1,824 | 1,139 | (112) | 1,027 | 2,753 | |
| Net finance costs | (53) | - | (53) | (34) | - | (34) | (95) | |
| Profit from continuing operations before tax | 1,186 | 585 | 1,771 | 1,105 | (112) | 993 | 2,658 | |
| Income tax expense | 5 | (82) | - | (82) | (144) | - | (144) | (178) |
| Profit and other comprehensive income for the year | 3 | 1,104 | 585 | 1,689 | 961 | (112) | 849 | 2,480 |
| Earnings per share | ||||||||
| Continuing Operations | ||||||||
| - Basic | 6 | 6.00p | 3.05p | 8.87p | ||||
| - Diluted | 6 | 5.97p | 3.02p | 8.80p | ||||
Consolidated Balance Sheet
At 30 September 2019
| Unaudited As at 30 Sept 2019 |
Unaudited As at 30 Sept 2018 |
Audited As at 31 March 2019 |
||
| £'000 | £'000 | £'000 | ||
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 23,037 | 22,847 | 22,850 | |
| Property, plant and equipment | 3,852 | 3,371 | 3,503 | |
| Deferred Tax asset | 200 | 247 | 313 | |
| Total non-current assets | 27,089 | 26,465 | 26,666 | |
| Current assets | ||||
| Inventories | 1,365 | 1,556 | 1,670 | |
| Trade and other receivables | 4,179 | 3,799 | 3,669 | |
| Cash and cash equivalents | 1,836 | 2,592 | 1,788 | |
| 7,380 | 7,947 | 7,127 | ||
| Total assets | 34,469 | 34,412 | 33,793 | |
| Equity and liabilities | ||||
| Liabilities | ||||
| Current liabilities | ||||
| Trade and other payables | 4,027 | 4,267 | 4,138 | |
| Borrowings | 2,016 | 1,926 | 1,652 | |
| 6,043 | 6,193 | 5,790 | ||
| Non-current liabilities | ||||
| Other payables | 117 | 1,339 | 139 | |
| Borrowings | 1,002 | 1,665 | 1,333 | |
| Deferred tax | 941 | 874 | 972 | |
| 2,060 | 3,878 | 2,444 | ||
| Equity attributable to owners of the parent | ||||
| Share capital | 2,894 | 2,874 | 2,874 | |
| Share premium account | 11,702 | 11,530 | 11,530 | |
| Share based payment reserve | 306 | 252 | 314 | |
| Own shares | (743) | (754) | (754) | |
| Merger reserve | 310 | 310 | 310 | |
| Retained profit | 11,897 | 10,129 | 11,285 | |
| Total equity | 26,366 | 24,341 | 25,559 | |
| Total equity and liabilities | 34,469 | 34,412 | 33,793 | |
Summarised Consolidated Cash Flow Statement
For the six months ended 30 September 2019
| Unaudited 6 months |
Unaudited 6 months |
Audited Year |
||
| Ended | Ended | Ended | ||
| 30 Sept | 30 Sept | 31 March | ||
| 2019 | 2018 | 2019 | ||
| £'000 | £'000 | £'000 | ||
| Cash flows from operating activities | ||||
| Profit for the period | 1,689 | 849 | 2,480 | |
| Adjustments for | ||||
| Net Interest payable | 53 | 34 | 95 | |
| Income tax expense | 82 | 144 | 178 | |
| Amortisation of intangible assets | 696 | 597 | 1,192 | |
| Depreciation | 335 | 215 | 450 | |
| Deferred consideration release | (920) | - | (530) | |
| Loss on sale of property, plant and equipment | 1 | 4 | 14 | |
| Share-based payments expense | 68 | 68 | 132 | |
| Tax payment in respect of LTIP | (18) | (495) | (495) | |
| Operating profit before changes in working capital and provisions |
1,986 | 1,416 | 3,516 | |
| Change in inventories | 304 | (468) | (583) | |
| Change in receivables | (378) | (554) | (423) | |
| Change in payables | 523 | (169) | (948) | |
| 449 | (1,191) | (1,954) | ||
| Net cash from operating activities | 2,435 | 225 | 1,562 | |
| Cash flows from investing activities | ||||
| Purchases of property, plant and equipment | (685) | (424) | (801) | |
| Purchase of intangible assets | (882) | (940) | (1,538) | |
| Net cash used in investing activities | (1,567) | (1,364) | (2,339) | |
| Cash flows from financing activities | ||||
| Net Interest payable | (53) | (34) | (95) | |
| Issue of share capital | 191 | 13 | 13 | |
| New leases | 229 | - | - | |
| Repayment of leases | (75) | - | - | |
| Repayments of borrowings | (330) | (329) | (659) | |
| Payment of deferred consideration | (22) | - | (21) | |
| Dividends paid | (1,123) | (1,108) | (1,585) | |
| Net cash used in financing activities | (1,183) | (1,458) | (2,347) | |
| Net decrease in cash and cash equivalents | (315) | (2,597) | (3,124) | |
| Cash and cash equivalents at beginning of period | 798 | 3,922 | 3,922 | |
| Cash and cash equivalents at end of period | 483 | 1,325 | 798 | |
| Reconciliation to the cash balance in the Consolidated Balance Sheet | ||||
| Cash balance as per consolidated balance sheet | 1,836 | 2,592 | 1,788 | |
| Bank overdrafts | (1,353) | (1,267) | (990) | |
| Balance per statement of cash flows | 483 | 1,325 | 798 |
Statement of changes in equity
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 |
Six months ended 30 September 2018
| 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 2018 | 2,872 | 11,519 | 483 | (1,114) | 310 | 10,944 | 25,014 |
| Dividends | - | - | - | - | - | (1,108) | (1,108) |
| Issue of shares | 2 | 11 | - | - | - | - | 13 |
| Share based payment | - | - | 68 | - | - | - | 68 |
| LTIP exercise | - | - | (299) | 360 | - | (556) | (495) |
| Transactions with owners | 2 | 11 | (231) | 360 | - | (1,664) | (1,522) |
| Profit and total comprehensive income for the period | - | - | - | - | - | 849 | 849 |
| Total comprehensive income less owners transactions | 2 | 11 | (231) | 360 | - | (815) | (673) |
| At 30 September 2018 | 2,874 | 11,530 | 252 | (754) | 310 | 10,129 | 24,341 |
12 months ended 31 March 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 2018 | 2,872 | 11,519 | 483 | (1,114) | 310 | 10,944 | 25,014 |
| Dividends | - | - | - | - | - | (1,585) | (1,585) |
| Issue of shares | 2 | 11 | - | - | - | - | 13 |
| Share based payment | - | - | 132 | - | - | - | 132 |
| Share based forfeitures | - | - | (2) | - | - | 2 | - |
| LTIP exercise | - | - | (299) | 360 | - | (556) | (495) |
| Transactions with owners | 2 | 11 | (169) | 360 | - | (2,139) | (1,935) |
| Profit and total comprehensive income for the year | - | - | - | - | - | 2,480 | 2,480 |
| Total comprehensive income less owners transactions | 2 | 11 | (169) | 360 | - | 341 | 545 |
| At 31 March 2019 | 2,874 | 11,530 | 314 | (754) | 310 | 11,285 | 25,559 |
Notes to the interim report
1. Statutory information
The interim financial statements are unaudited and do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The auditor's review report on the interim financial information for the six months ended 30 September 2019 is set out on page 16.
The financial information for the year ended 31 March 2019 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 2019 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 2019, 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 application of IFRS 16 led to a right-of-use asset of £0.2m being created at 1 April 2019 and a corresponding finance lease liability of £0.2m.
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.
The financial information contained in the interim report has not been audited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and does not include all of the information and disclosures required for complete financial statements.
The financial information relating to the year ended 31 March 2019 is an extract from the latest published financial statements on which the auditor gave an unmodified report that did not contain statements under Section 498 (2) or (3) of the Companies Act 2006 and which have been filed with the Registrar of Companies.
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 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 six months ended 30 September 2018 are as follows:
| Continuing Operations | Smart Zones | Smart Machines | Corporate/Technology | Total | ||
| £'000 | £'000 | £'000 | £'000 | |||
| Total revenue | 5,360 | 2,323 | - | 7,683 | ||
| Profit/(loss) before amortisation, share based payments and exceptional costs | 2,126 | 675 | (997) | 1,804 | ||
| Pre-exceptional segment result | 2,018 | 542 | (1,421) | 1,139 | ||
| Exceptional costs | (52) | (14) | (46) | (112) | ||
| Post exceptional segment result | 1,966 | 528 | (1,467) | 1,027 | ||
| Finance income | - | - | 11 | 11 | ||
| Finance costs | (17) | (28) | - | (45) | ||
| Profit/(loss) before taxation | 1,949 | 500 | (1,456) | 993 | ||
| Taxation | (144) | |||||
| Profit for the year from continuing operations | 849 | |||||
| Smart Zones | Smart Machines | Corporate/Technology | Total | |||
| £'000 | £'000 | £'000 | £'000 | |||
| Segment assets | 27,325 | 3,905 | 2,935 | 34,165 | ||
| Unallocated assets | - | - | 247 | 247 | ||
| Total assets | 27,325 | 3,905 | 3,182 | 34,412 | ||
| Segment liabilities | 8,136 | - | 1,061 | 9,197 | ||
| Unallocated assets | - | - | 874 | 874 | ||
| Total liabilities | 8,136 | - | 1,935 | 10,071 | ||
Notes to the interim report (continued)
The segmental results for the 12 months ended 31 March 2019 are as follows:
| Continuing Operations | Smart Zones | Smart Machines | Corporate/Technology | Total | ||
| £'000 | £'000 | £'000 | £'000 | |||
| Total revenue | 10,999 | 4,684 | - | 15,683 | ||
| Profit/(loss) before amortisation, share based payments and exceptional costs | 4,477 | 1,406 | (2,028) | 3,855 | ||
| Pre-exceptional segment result | 4,260 | 1,143 | (2,872) | 2,531 | ||
| Exceptional costs | (141) | (109) | 472 | 222 | ||
| Post exceptional segment result | 4,119 | 1,034 | (2,400) | 2,753 | ||
| Finance income | - | - | 22 | 22 | ||
| Finance costs | (63) | (54) | - | (117) | ||
| Profit/(loss) before taxation | 4,056 | 980 | (2,378) | 2,658 | ||
| Taxation | (178) | |||||
| Profit for the year from continuing operations | 2,480 | |||||
| Smart Zones | Smart Machines | Corporate/Technology | Total | |||
| £'000 | £'000 | £'000 | £'000 | |||
| Segment assets | 27,568 | 4,083 | 1,829 | 33,480 | ||
| Unallocated assets | - | - | 313 | 313 | ||
| Total assets | 27,568 | 4,083 | 2,142 | 33,793 | ||
| Segment liabilities | 7,028 | - | 234 | 7,262 | ||
| Unallocated assets | - | - | 972 | 972 | ||
| Total liabilities | 7,028 | - | 1,206 | 8,234 | ||
Notes to the interim report (continued)
4. Exceptional items
| 6 months | 6 months | Year | ||
| Ended | Ended | Ended | ||
| 30 Sept | 30 Sept | 31 March | ||
| 2019 | 2018 | 2019 | ||
| £'000 | £'000 | £'000 | ||
| Corporate restructuring and transitional costs | 297 | 60 | 163 | |
| Deferred consideration release | (920) | - | (530) | |
| Network obsolescence costs | 33 | 27 | 107 | |
| Other | 5 | 25 | 38 | |
| (585) | 112 | (222) |
Exceptional costs principally relate to
1. employee transition costs relating to the shift in skillset required to being a technology data analytics company
2. network obsolescence costs
3. deferred consideration release in relation to the Vendman Systems Limited acquisition expected final earn out payment lead to release of deferred consideration at March 2019 and September 2019.
5. Tax
The charge for tax is based on the profit for the period and comprises:
| 6 months | 6 months | Year | ||
| Ended | Ended | Ended | ||
| 30 Sept | 30 Sept | 31 March | ||
| 2019 | 2018 | 2019 | ||
| £'000 | £'000 | £'000 | ||
| United Kingdom corporation tax | 82 | 144 | 178 |
The tax 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. Earnings per share
Earnings per share has been impacted 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. Exceptional items above.
Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders (£1,689k) 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
The table below shows the earnings pre and post the impact of the movement in the deferred tax asset.
| 30 September 2019 | 30 September 2018 | |||||
| Earnings £000 |
Basic earnings per share | Diluted earnings per share | Earnings £000 |
Basic earnings per share | Diluted earnings per share | |
| Pre-tax profit attributable to equity shareholders | 1,771 | 6.29p | 6.26p | 993 | 3.56p | 3.53p |
| Post-tax profit attributable to equity shareholders | 1,689 | 6.00p | 5.97p | 849 | 3.05p | 3.02p |
| Pre-tax, pre-exceptional profit attributable to equity shareholders | 1,186 | 4.21p | 4.19p | 1,105 | 3.97p | 3.93p |
| Post-tax, pre-exceptional profit attributable to equity shareholders | 1,104 | 3.92p | 3.90p | 961 | 3.45p | 3.42p |
| 30 Sept 2019 Number |
30 Sept 2018 Number |
|
| Weighted average number of ordinary shares | 28,149,205 | 27,867,264 |
| Dilutive effect of share options | 123,338 | 246,112 |
| Diluted weighted average number of ordinary shares | 28,272,543 | 28,113,376 |
INDEPENDENT REVIEW REPORT TO VIANET GROUP PLC
Introduction
We have been engaged by the company to review the financial information in the half-yearly financial report for the six months ended 30 September 2019 which comprises the consolidated statement of comprehensive income, the consolidated balance sheet, the summarised consolidated cash flow statement, the statement of changes in equity and the related explanatory notes. We have read the other information contained in the half yearly financial report which comprises only the Chairman's Statement, and the Chief Executive and Chief Financial Officer Review and considered whether they contain any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.
This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.
As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union using the historic cost convention. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in note 2.
Our responsibility
Our responsibility is to express to the company a conclusion on the financial information in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 September 2019 is not prepared, in all material respects, in accordance with the basis of accounting described in note 2.
Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Leeds
11 December 2019
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
END
IR CKDDBOBDDOBD