TIDMVNET
RNS Number : 6050O
Vianet Group PLC
02 June 2020
2 June 2020
Vianet Group plc
("Vianet", "Company" or "the Group")
Final 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
final results for the year ended 31 March 2020.
Financial highlights
-- Revenue increased 3.8% to GBP16.28 million (2019: GBP15.68 million)
-- Recurring revenues remain strong at 92% (2019: 94%,) being
sustained by both contactless growth, maintained Smart Zones
contribution and continued shift towards annuity-based sales from
capital sales in Smart Machines
-- Gross margin remained constant year-on-year at c. 68% (2019: 68%)
-- Adjusted operating profit, pre-exceptional costs,
amortisation and share based payments was up 4.5% to GBP4.03
million (2019: GBP3.86 million)
-- Profit before taxation was GBP2.40 million post exceptional
items (2019: GBP2.66 million), with profit after tax flat at
GBP2.43 million (2019: GBP2.48 million)
-- Basic earnings per share at 8.56 pence (2019: 8.87 pence)
-- The Board decided to withdraw its recommendation to pay a
final dividend due to COVID-19, which would amount to approximately
GBP1.16 million. This makes a total dividend for the year of 1.70
pence (2019: 5.70 pence)
-- Government business support measures being utilised including
GBP3.5 million CIBL facility, Job Retention Scheme and loan
repayment deferrals
Divisional highlights
-- Smart Machines adjusted operating profit of GBP1.53 million
was up 8.5% (2019: GBP1.41 million)
-- Smart Machines added 12,059 new connected devices (2019: 10,285)
-- Three significant new 3 - 5-year contracts with leading
vending operators. The combined contracts for 20,000 units will
generate in the region of GBP10 million of revenue over the
contract terms
-- Smart Zones recurring revenue per device has increased 9.5%
to GBP58.00 (2019: GBP52.99), reflecting the higher quality
recurring revenue streams which has resulted from customers'
disposal of relatively lower performing pubs during their estate
rationalisation programmes
-- Smart Zones average adjusted operating profit per device
increased c. 7.5% to GBP19.39 (2019: GBP18.03), reflecting
sustained profitability against a lower estate size
-- Smart Zones adjusted operating profit of GBP4.57 million (2019: GBP4.48 million)
-- Smart Zones Technology upgrades in 2,518 pubs (2019: 1,901
pubs) creating IOT hubs, with a further 900 in the pipeline for
FY21
Commenting, James Dickson, Chairman of Vianet Group plc,
said:
"I am pleased to report the Company's final results for the year
ended 31 March 2020. Operationally, both divisions of the business
have performed well. Smart Machines connections grew by c. 12,000
to c. 38,000 in the year, excluding the Vendman estate of c.
200,000 mobile connections. Our plan is to convert the majority of
these Vendman connections to higher value Smart Machines
connections, with some 8,600 now converted. Significantly, we also
announced three significant new 3 - 5-year contracts with leading
vending operators, which will generate in the region of GBP10
million of revenue over the contract terms.
"Despite continued pub disposals in the UK, our Smart Zones
division maintained its profit contribution, helped by our Tech
Refresh programmes, and we are delighted to note several key
contract renewals, including Charles Wells, Greene King, Hawthorn,
Hydes, JW Lees, and Punch. Having already received orders and
enquiries for installations of new systems as we look to pubs
reopening, we believe Smart Zones are well positioned to navigate
the COVID-19 exit and recover strongly.
"From the very outset of the pandemic, our goal has been to
preserve cash to ensure both business continuity and to enable
ongoing investment in the business, with the aim of being strongly
positioned for the COVID-19 exit phase. Whilst these are still
early days, we are encouraged that April's trading performance was
well ahead of our revised forecasts, and that the measures we have
taken to protect the business have been successful, giving us
confidence that we are well positioned to exit from the COVID-19
phase with momentum to accelerate our growth plans.
"As such, we would like to thank all Vianet employees for their
efforts during this unprecedented time and we look forward to
updating the market on our progress in due course."
- Ends -
An online analyst briefing given by Stewart Darling, Chief
Executive and Mark Foster, Chief Financial Officer will be held
today at 09.30hrs via Microsoft Teams. Please contact
vianet@yellowjerseypr.com for details.
Enquiries:
Vianet Group plc
James Dickson, Chairman Tel: +44 (0) 1642 358
Stewart Darling, CEO / Mark Foster, 800
CFO 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 Tel: +44 (0)7764 947
Henry Wilkinson 137
vianet@yellowjerseypr.com Tel: +44 (0)7951 402
336
www.yellowjerseypr.com
COVID-19 ("C19") report
Proactive Initial Response to Management of C19
There is nothing like a crisis to create a common sense of
purpose and provide an opportunity to demonstrate leadership. From
the very outset, our goal has been to preserve cash to ensure both
business continuity and to enable ongoing investment in the
business with the aim of being strongly positioned for the C19 exit
phase. To this end we have been proactive on a number of
fronts:
Commercial Approach
-- The majority of our Smart Zones customers have signed up to a
new and reduced weekly charge. The result of this variation is that
approximately 25% of our recurring revenue income is protected.
Prior to the mandatory pub closures by the Government, we contacted
all of our customers to confirm our business continuity
preparations and our commercial response to C19. These plans, which
were well received by customers, provided the option to continue
contracts at a reduced rate during shutdown rather than incur a
more costly future reconnection charge.
-- For our Smart Machines customers, we proactively introduced
reduced monthly charges for Vending machines with no activity.
There have been 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 little or no
sales. For vending machines which are subject to lockdown in closed
offices, we provided the option of a reduced weekly charge rather
than the more costly option of a future reconnection.
Encouragingly, approximately 70% of machines have remained active
and we are seeing an increase in demand and usage of our
contactless payment solution rather than 'dirty' coins.
-- Both these initiatives have been extremely well received and
bodes well for relationships during the exit and recovery phase
from C19.
Technology
-- We have been working hard in recent weeks to drive our
Technology roadmap forward and also progress some exciting new
product development opportunities, including potential new
verticals for our contactless payment solution, new features for
Smart Zones customers, and establishing a C19 sanitisation service
for pubs and bars.
Government Assistance
-- Vianet moved swiftly to utilise the Governments Job Retention
scheme and almost 60% of our 155 employees are now furloughed,
whilst the balance are working from home.
-- The business also secured a GBP3.5 million Coronavirus
Business Interruption Loan ("CBIL") which provides some comfort
should there be a prolonged recovery period. Our aim is that the
CBIL will be used for maintaining investment in growth rather than
day-to-day business.
Our People
-- Systems and processes are in place to support both retained
and furloughed employees through what may be difficult and mentally
challenging times. Microsoft Teams is being used extensively to
maintain strong two-way communication across the business to ensure
that we keep everyone fully engaged regardless of status or
role.
Taking account of our current cash, available resources and
possible worst case forecasts, the actions that we have already
taken will provide us with a healthy cash runway into 2021,
protecting our business for a period well beyond official
indications of the likely duration of the crisis.
Whilst these are still early days, we are encouraged that
April's trading performance was well ahead of our prudent C19
re-forecasted loss, giving us confidence that we are well
positioned going forward.
C19 exit strategy
The business impact of C19 has been markedly different in each
of our divisions.
For Smart Zones, the overnight closure of pubs meant that the
full range of insight and analytics required to support compliance
and retail services were temporarily no longer required by our
customers. This has been a significant challenge: however it has
also provided opportunities for a wider 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 decision-making during the exit
phase. There is also an increasing desire to embrace digital
capability to improve efficiency and to enable more frictionless
delivery both back of house and front of house to consumers.
By contrast, activity levels in our Smart Machines Division has
seen only marginal declines due to many unattended retail assets
being installed in sites where essential workers were still
required. Importantly we anticipate that the C19 crisis will
accelerate the growing business requirement and industry trend for
telemetry and contactless payment solutions.
Pub market recovery and implications for Smart Zones
Current thinking suggests that the mandatory closure of pubs
could be removed as early as July with strict social distancing
criteria required.
The existing two metre social distancing guidelines would likely
restrict capacity in a pub to around 30% of maximum, well below
profitable levels. By contrast a move from the current two metres
to one metre, now being used in France, will restrict capacity to
around 70% of maximum.
The social distancing requirements may put extreme pressure on
the viability of city centre pubs whereas the average
community-based leased and tenanted pubs are likely to fare
better.
This could mean that some pubs will decide not to re-open whilst
the existing social distancing measures remain in place.
It is also likely that some 15-20% of managed estates may also
not open immediately, whilst others will only be able to open if
they are successful in finding some way to effectively manage their
existing cost base.
Our core Leased & Tenanted customers are likely to be highly
proactive in exploring all possible avenues to ensure they find
effective ways to re-open from the outset:
-- Self-employed tenants are generally more entrepreneurial and creative than managers
-- Tenants may be able to work longer hours to reduce staff costs
-- Pubco's may be able to flex rents during the recovery period
- with the potential to use Smart Zones data to validate trading
levels
-- Community-based pubs are more likely to work with locals to find ways to re-open effectively.
Whilst pubs may find ways of resuming operations, consumer
confidence is likely to be impacted. A recent MCA Insight snap poll
identified that a majority of consumers were either "worried" or
"very worried" about the prospect of eating or drinking out.
In the absence of a vaccine, rebuilding consumer confidence is
likely to require focus on three key areas:
-- Hyper Clean - everything from cutlery to toilets - even
sachets of ketchup will need to be clean and perceived as being
clean.
-- Frictionless - finding ways of demonstrating less handling of
everything in the consumer experience, for example, drinks
pre-ordering apps with serve at table.
-- Employee welfare - effective PPE for staff and employee training and welfare.
Consumers will want to know that retailers are proactively
managing the C19 threat.
Smart Zones are well positioned to navigate the C19 exit and
recover strongly
We are currently running at 25-30% of weekly service pack
charges during mandatory closure and we are working proactively to
support our customers during this difficult time.
When pubs are allowed to re-open, albeit with social distancing
conditions, we anticipate that:
-- In those pubs remaining closed we will receive 30% of normal weekly charges.
-- In pubs which are able to open we will invoice 70% of weekly
charges for a period of time which will remain under review.
Draught beer insights will be vital to our customers in order to
better understand tenant and lessee trading performance and
patterns during the C19 exit phase. Consequently, we have already
received orders and enquiries for installations of new systems.
Our Smart Zones product roadmap has been accelerated during the
crisis to bring new features and functionality which will generate
increased customer interest. These include automated line cleaning
manager, automated till variance alerts, market data provision, and
interface with labour management.
In the past month, in partnership with Filta Group Holdings plc,
we have introduced Vianet Smart Shield, which is a C19 sanitisation
service which kills C19 and provides 30-day protection. The
solution utilises an existing certified product and vapour
applicator. Initial interest has been encouraging and we are also
introducing to vending operators for sanitisation of keypads.
Whilst very early days, we see this as an opportunity to help our
customers and allow our field engineers to provide a valuable
service.
Smart Machines to accelerate growth during C19 exit
Unattended machines have been operating in sites for essential
workers, with a material increase in the use of contactless
payments. We strongly believe that the trend away from cash
payments will accelerate post lockdown, increasing the requirement
for remote connection to unattended retail assets.
We have made a significant investment in additional sales and
marketing capability in addition to increasing investment in the
product roadmap.
The Group has the cash to invest in growth through C19 exit
phase
We have conservatively modelled our cash forecasts on a range of
recovery scenarios over varying periods of time with a return to
more normal trading in the second half of FY21. This includes a
full review of cash and bank facilities and all trade debt and
receipts post 31 March.
A CBIL scheme facility of GBP3.5 million was signed for on 26
May 2020. Combined with the measures already taken the Group is
confident that it has funding to support business cash requirements
and ongoing investment in growth for a period significantly beyond
the next 12 months.
We have assumed no reduction in staff, but this will be reviewed
on an ongoing basis during the easing of lockdown and resumption of
business.
Chairman's Statement
Performance
I have been very pleased with how Vianet and its employees have
responded to this crisis, and the actions implemented to ensure
Vianet comes through the C19 exit phase with momentum to accelerate
our growth plans.
Prior to C19, the Group has made very good progress towards
delivery of earnings momentum and continues to benefit from the
focus on exploiting growth opportunities in the Smart Machines
division whilst delivering a solid performance in the Smart Zones
division.
Group turnover was GBP16.28 million (2019: GBP15.68 million) and
adjusted operating profit was up by 4.5% at GBP4.03 million. Group
profit before taxation was GBP2.40 million post exceptional items
(2019: GBP2.66 million), with profit after tax flat at GBP2.43
million (2019: GBP2.48 million). Our Smart Machines division's move
from Capex to an Opex annuity only model had the short-term impact
of reducing FY2020 turnover by GBP0.73 million and profit by
GBP0.40 million. However, there will be a significant long-term
benefit for future recurring income streams and the visibility of
profits.
Net exceptional cost was minimal (2019: net credit GBP0.22
million) as the release of the Vendman acquisition deferred
consideration provision was offset by costs associated with staff
transition, corporate restructuring, network obsolescence, and loan
impairment. Whilst there has been a GBP1.45 million overall write
back on the Vendman earn out provision, including GBP1.08 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.
Basic earnings per share was 8.56p (2019: 8.87p).
Despite the strong financial position of the Group, given the
level of uncertainty as to how the C19 exit and recovery phase will
develop and alongside the other measures we are taking to preserve
the Company's cash position, the Board withdrew its recommendation
to pay a final dividend at the forthcoming AGM, which would amount
to approximately GBP1.16 million. This makes a total dividend for
the year of 1.70 pence (2019: 5.70 pence).
The Board will review this decision again later in the year once
the outlook becomes clearer, however our goal remains to
re-introduce the dividend as soon as it is practical and prudent to
do so.
The Board recognises that this is a significant decision but
believes that it is an appropriate and prudent measure to take at
this point as the Group seeks to preserve its strong liquidity,
cash flow, and financial position through these uncertain
times.
Board and Staff
The Board's composition and effectiveness is continually
evaluated to ensure it has the optimum balance of experience and
independence to support the business and our growth ambitions.
We continue to evaluate and develop the Group's management team
who in addition to navigating C19 are focused on executing against
the exciting growth opportunities for Vianet's IOT expertise and
technology.
In an age where change is a constant, our people continue to
engage with their usual enthusiasm, commitment, and openness which
helps underpin the Group's excellent reputation with customers.
Whilst there is still much to be done, the Group's recent annual
engagement survey demonstrated further year-on-year progress and
provided valuable feedback from employees.
Thank you once again to all employees and my Board colleagues
for their ongoing commitment and enthusiasm in taking the Group
forward.
Conclusion and Outlook
Ahead of the impact of the C19 restrictive measures introduced
in March by the Government, momentum and performance of the Group
had been encouraging across both divisions.
Whilst the start to the new financial year has been challenging,
initial results have been encouraging with losses being well lower
than forecast, and the Group is very well equipped to weather this
storm and emerge with even stronger customer relationships and
growth prospects.
It is worth re-iterating that through the C19 exit phase the
Group remains in good shape to resume strong earnings growth and
pick up the solid momentum that was building into FY2021 in order
to deliver on our exciting growth opportunities.
-- Smart Machines' leading end-to-end product suite and
established presence is continuing to create strong growth
opportunities across UK and Europe, having already gained long-term
contracts with major global and national customers, coupled with
the opportunities from the now integrated business and estate of
Vendman.
-- The Group is making further sales investment to accelerate
growth in the above areas, with an extra focus on developing our
capability and accelerating growth from our leading position in
coffee device and contactless payment device connectivity where
sales momentum will continue to grow.
-- The recent investment in cloud infrastructure and mobile
technology will help develop existing revenues in both Smart Zones
and Smart Machines, and also provide the scalability, flexibility
and speed to support rapid growth in existing and potential new
verticals.
-- Smart Zones will continue to complete the customer technology
upgrade programs through FY2021 and will benefit greatly from our
recent infrastructure investment. This will allow our Smart Zones
division to maintain its existing profit contribution whilst taking
advantage of improving growth prospects both in the UK pub market
and the significant US hospitality market.
-- The Group has high levels of recurring income and strong cash
flow. This operational cash generation and strong balance sheet
gives scope for further investment to accelerate Smart Machines
expansion and for selective strategic acquisitions.
The Board remains confident that Vianet's long term growth
strategy is the right one and that the Group is well positioned to
deliver earnings growth and expand the future strategic options for
Vianet.
In the meantime, the Board's absolute focus is on ensuring that
Vianet comes through this global crisis in a position to continue
to take advantage of its exciting growth opportunities, whilst
maintaining the health, well-being and safety of our employees and
customers.
James Dickson
Chairman
Strategic Report
Our core strategy centres on IOT and the collection and
collation of customers' asset data, to deliver actionable insight
and analytics that drive improved operating performance for
businesses, machine owners and operators in our chosen market
segments.
By connecting and analysing an increasing number of remote
assets, Vianet is able to 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 is well
placed to strengthen its position in this rapidly developing
area.
Whilst our focus is predominantly on delivering insight and
analytics, hardware and software remain critical components in
enabling remote assets to be connected. To support this our IOT
platform has evolved in a manner that supports much greater
flexibility of device connection and data connectivity to the
extent that it is now possible to connect a range of business
critical third-party devices and not just those we supply.
Underpinning this is our ability to collaborate with customers to
identify compelling end-to-end solutions to address business
opportunities. This rich combination of capabilities will enable us
to drive sustained business growth over the coming years.
The process of developing and promoting end-to-end solutions has
also been supported by a conscious and strategic choice to explore
partnerships with industry leading third-party technology providers
such as Elavon and OTI, rather than attempt to replicate
technologies and market knowledge that already exist.
In the last year, the Group has continued to take positive steps
forward to execute key elements of our growth plan and secure new
business. One of our key strategic goals is to accelerate growth
and improve revenue visibility by continuing to migrate to an Opex
annuity model where hardware is effectively leased and not
purchased, thereby aligning payment out of customers' cash flow.
The result of this will be an increase in the quality, visibility
and longevity of earnings for the Group.
The transition from higher value one off capital sales to
regular smaller payments over the contract duration hits turnover
and profit in the short term but has a positive impact in the
longer term. Typically, the Opex model will deliver 1.3x the profit
of an outright sale over the life of the device. In this financial
year, on a like for like basis, the impact was a reduction of c.
GBP726,000 in turnover and c. GBP370,000 in profit.
Smart Machines
Conversion of the Vendman estate to higher value Smart Machines
connections will be further accelerated through a significant
increase in resource in the commercial team towards the end of the
financial year. There are now c. 200,000 vending machines in the
Vendman estate, the vast majority of which are not yet connected
via a real-time device. To date we have connected almost 8,600 (c.
3.8%) of these machines which leaves a significant conversion
runway that will be addressed in the coming year, principally
through increased marketing and commercial efforts.
This will further accelerate the roll out of our contactless
payment solution which drives increased machine utilisation and
sales. The growth of non-cash transactions is accelerating with
contactless payments giving customers a fast, easy and secure
transaction in a world where fewer people are carrying cash.
Retailers benefit from reduced cost of cash handling, improved cash
flow and an assured payment. This trend is likely to accelerate
further as a result of the C19 crisis.
I am encouraged by our continued progress in Continental Europe
with key customers and significant major distributors, all of which
enhances our route to market and distribution opportunities through
establishing a strong network and footprint with distributors and
machine suppliers.
Smart Zones
We are proactively supporting our clients during these difficult
times through temporarily reduced fees and adapting our contract
terms. As the lockdown begins to be relaxed and the pub and
hospitality sectors re-open we believe that the insights and
analytics offered by our iDraught offering will be especially
valuable, helping to optimise revenues and minimise costs. We are
seeing an increased level of interest in new analytics and insights
to support management decision making and we are exploring an
exciting range of new services specifically designed to help
clients during this unprecedented crisis.
Operating Review
Smart Zones
We saw modest growth in the operating profit of our drinks
monitoring and support services solutions for the UK Hospitality
sector supported by high gross margins and strong cash
generation.
In the period, technology upgrades to our fourth generation IOT
hubs were completed in 2,519 pubs (FY20: 1,901) with a potential
further c. 900 to complete in the pipeline for FY2021. This
progress in deploying new technology capability has also created a
healthy pipeline of installs for the next 12 months or so which
will help sustain the divisional contribution. Despite customers
being focused on this high level of technology upgrade activity, we
still carried out 151 new site installations, which was ahead of
the 88 new installations in the prior year.
UK pub disposals have continued but it is encouraging that the
rate of disposal has slowed (FY 2020: 838 and FY 2019: 911). The
resulting impact is that there was a net reduction of 687 (FY 2019:
823) licenced premises in our installation base over the financial
year, with a consequential impact on operating contribution.
However, our Smart Zones connected device base remains
significant with c. 186,000 devices in c. 12,000 premises in the UK
and USA, and with evermore granular levels of data from our fourth
generation IOT hubs, we are better placed than ever to offer
insight and analytics delivered via our website and mobile
applications. This is particularly relevant for the provision of
retail data for Brewers where we are now contracted with the Oxford
Partnership to deliver ground-breaking insight that will support
consumer level decision making in respect of beer brands.
Whilst we focus on strengthening our recurring income streams ,
pub companies are also adapting to the changing landscape through
different strategies, such as developing managed estates from high
performing or strategically located properties and creating
franchised models with increased operating performance potential
and greater transparency.
The past year has also seen significant level of corporate
activity with the acquisition of major pub companies by Private
Equity . Consequently, we expect to see increased focus on
operational and retail performance in pubs with the aim of driving
greater value. This will play to the strengths of our operational
and retail analytics and insight toolsets against which we will
likely be targeting investment expenditure.
Our annual Beer Quality report continues to demonstrate the cost
to the industry of poor draught beer management and we will
continue to use this as the basis for discussion with our customers
to unlock business improvement opportunities.
The Vianet Americas business achieved break even on GBP0.4
million of revenue and we look to build on this going forward.
The quality of our installation base in Blue Chip operators,
including AMC Theatres, across the USA continues to be a source of
encouragement and provides strong validation of the value provided
by iDraught(TM) . The expectation for the coming year is still to
secure a new scale operator which will further cement our position
in the USA.
A review of the competitor landscape clearly indicates that
Vianet's iDraught(TM) solution is substantially ahead of all
competitors in the USA, and this advantage, combined with our
strategic alliance with Micro Matic USA for nationwide
installation, service and sales support, places us in a strong
position to build sales momentum.
The opportunity for the Company remains significant in the
world's largest single operator market, and while progress is
slower than anticipated, the Company remains committed to
establishing a US profit centre.
The combination of strong recurring revenues from long term
contract extensions, a robust cost base and margin management
offset by the lower turnover resulting from pub closures enabled
the Group to maintain profit contribution year-on-year. Overall,
the Board remains confident that the Smart Zones division will not
only maintain its significant contribution but also has the
potential to grow further post C19.
Smart Machines
Smart Machines made strong progress in the year as our strategy
of securing long-term agreements with significant industry players
with the scale to invest and the sophistication to unlock the value
our technology provides, continues to fuel growth.
In this combined division we are now driving growth in the
unattended retail market by delivering market-leading analytics and
insight in premium coffee and snack & can channels from new
device connections to assets and roll-out of contactless payment
capability. This is supported by increasing recognition from
vending operators that the use of cash by consumers continues to
decline and that the ability to manage the operation efficiently
and effectively is being materially inhibited by the pricing
inflexibility of cash and the continued reliance on frequent and
costly machine visits.
We secured long term contracts with fast growing major industry
operators, which contributed to an overall operating profit growth
of 8.5% to GBP1.53 million in the year. The shift from capital
sales to Opex effectively reduced profit by GBP373,000.
This gives us confidence that the transition from capital sales
to an Opex model will be well supported by customers, giving the
Company a more balanced mix of revenues and greater profit
potential over the longer term.
Our strategy is to continue to drive more annuity income sales,
to improve the quality and visibility of earnings, but we recognise
that the business model must be able to adapt to meet different
customer requirements. Whilst turnover for the year was held back
by annuity sales there was also a year on year increase in Capex
sales during the period. This sales mix resulted in the portion of
recurring revenues reducing from 87% to 78%.
Total Smart Machine connections grew by just over 12,000 devices
in the year, helped by the highly encouraging roll-out of our
cloud-based contactless payment solution which is driving an
average sales growth of around 17% per unattended retail machine
for our customers. This acceleration is also unlocking further
growth opportunities through the provision of analytics and insight
to machine operators who wish to unlock more value from their
assets and overall operation.
The market opportunity remains extensive even when limited to
the immediately addressable market projections of over 300,000
vending machines in the UK. Beyond this, it is estimated that the
addressable market in mainland Europe is nearer 3 million machines.
As technology adoption evolves, 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
technology and the corresponding opportunity.
Our contactless payment solution, is supported by leading
industry partners, Elavon and NMI. This was further evolved in the
year when our PCI Master Merchant status was granted and launched,
allowing us to speed up the on-boarding of customers for payment
capability. Contactless payment remains a very attractive solution
to the marketplace where traditional cash-only payments have long
been an inhibitor of vending-related consumption, usage and
customer experience. We believe the evolution and growth of
contactless payment solutions will materially change this dynamic
and attract more consumers to the vending vertical, which will
accelerate post C19.
In summary, the prospects for our Smart Machines business are
extremely positive, and we expect that Vianet's analytics and
insight delivered from data harvested from unattended retailing
assets and evolving contactless payment solution will continue to
provide exciting growth opportunities.
R&D Investment
The Group continued to invest in the development of its
technology and capabilities with accelerated activity in the year.
Development has ranged from customer experience enhancements
through to revenue generating analytics and insights from new
platforms which allow us to leverage new revenue streams, and
provide the ability to operate a cloud based self-service
model.
Simultaneously, it has allowed us to gradually migrate from
legacy systems and software to a cloud-based environment. We have
now migrated all our Smart Machines customers to the new platform
and expect to migrate our historic Smart Zones division in the
coming months.
The Board believes this further investment in enhancing our core
data management capability and IOT technology will enhance the
Group's ability to improve the quality of the existing recurring
revenue stream and to generate substantial new growth
opportunities.
Looking Forward
Whilst it is difficult to ignore the short-term impact of C19,
it is equally important to acknowledge that its impact may be short
term and that we will return to the levels of growth the Group has
enjoyed for the past 5 years. In short, the Group is well placed to
operate within the anticipated "new normal" of a post C19
landscape.
Beyond C19, 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 aimed at improving asset utilisation
and increased profitability.
Smart Machines will continue to leverage its strong portfolio of
products and services to existing customers across Europe and the
recent significant investment in commercial resource will add
further momentum. Our new cloud and mobile capability will continue
to transform what we deliver to customers and will facilitate
rapidly scalable growth in existing and new vertical markets. Our
contactless payment solution and introduction of our PCI Master
Merchant scheme, combined with declining use of cash by consumers
and rapid adoption of technology by brand owners and machine
operators, positions this division for strong year-on-year
growth.
The Smart Zones division will strive to maintain contribution
from the UK pub market, helped by new technology upgrades for
existing customers, which will enhance existing income streams and
unlock further opportunities for enhanced analytics and insight.
The arrival of Private Equity into the pub market is expected to
drive greater focus on operating and retail performance, areas in
which we are well placed to deliver value for customers.
Finally, the combination of our experienced team and robust
finances provide a strong platform for the further development and
expansion of our IOT capability and the delivery of data and
insight applications that help our customers make better decisions
about their assets.
Stewart Darling
Chief Executive Officer
Financial Review
Pre C19
Growing Profitability
Group operating profit, pre-exceptional costs, amortisation and
share based payments was up 4.5% to GBP4.03 million (FY2019:
GBP3.86 million).
Gross margin remained healthy year-on-year at c. 68%.
The average operating profitability per connected device has
grown 6.9% to GBP17.96 (2019: GBP16.80). 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 increased by 3.8% principally from growth in Smart
Machines division despite it being held back by c. GBP0.73 million
due to the shift from Capex to Opex. Smart Zones division had
modest year on year growth despite being impacted by the ongoing
decline in pub numbers, albeit the rate of closure has slowed year
on year.
Recurring Revenue
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
strong at 92% (2019: 94%), being sustained by contactless growth,
maintained smart zones contribution and a continued strategic shift
towards an Opex annuity-based sales model in Smart Machines, albeit
with a more balanced mix in the year.
Impacted positively by higher value technology upgrades in Smart
Zones the average recurring revenue per connected device has grown
7.4% to GBP59.18 (2019: GBP55.12). 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 down 9.8% at GBP2.40 million (2019: GBP2.66 million)
principally from higher intangible amortisation of R&D costs in
the year. The table below shows the performance of the Group;
FY2020 FY2019 Change
%
Revenue GBP16.28m GBP15.68m 3.8
Operating
profit(a) GBP4.03m GBP3.86m 4.4
Profit
after tax GBP2.43m GBP2.48m (2.0)
Basic EPS 8.56p 8.87p (3.5)
Dividend
per share 1.70p 5.70p
Net debt GBP0.95m GBP1.20m
(b)
a) Pre-exceptional items, share based payments and amortisation
b) Cash at bank after deduction of bank loans including loan for
the acquisition of Vendman Systems Limited
Exceptionals
FY2020 FY2019
'GBP000 'GBP000
People and
office rationalisation 415 163
Network obsolescence
costs 50 107
Deferred consideration
release (1,086) (530)
Loan impairment 200 -
Corporate Activity 311 -
Other items 109 38
------------------------- ---------- ---------
Total (1) (222)
========================= ========== =========
Net impact was negligible overall, with a deferred consideration
release in relation to the Vendman acquisition, offset by staff
rationalisation costs, network obsolescence costs and corporate
activity costs in the main.
Dividend
Due to C19 the Board has not proposed a final dividend giving a
total dividend for the year of 1.70 pence (2019: 5.70 pence).
Dividend cover has not been calculated due to the dividend being
suspended due to C19 (2019: circa 1.56).
Cash
Net cash generation pre-working capital movements and LTIP
taxation payments was down 6.3% to GBP3.74 million (2019: GBP4.01
million), impacted by the net movement between amortisation,
depreciation and the Vendman deferred consideration release.
Relatively stable working capital, together with the unwinding
of the working capital investment in FY19, has meant that after
working capital movements but before LTIP taxation payment there
was an operational cash generation of GBP4.23 million versus
GBP2.06 million last year. Operational cash generation post LTIP
taxation payment was GBP4.22 million (2019: GBP1.56 million).
The cash generated was principally used to service accelerated
R&D investment, dividend payment, servicing of borrowings and
deferred consideration payment, offset by Treasury and share option
sale proceeds which resulted in a much-reduced outflow of GBP0.42
million (2019: GBP3.12 million outflow).
At the year end, pre-mortgage and the acquisition loan, the
Group had net cash including overdraft of GBP0.38 million (2019:
GBP0.80 million) and net debt of GBP0.95 million (2019: GBP1.20
million).
C19
C19 has impacted our business as referred to in the C19 Report
where the actions taken to mitigate the impact have been presented.
In addition to the borrowing we had at the year end, we have
secured a GBP3.5 million CBIL. Following the CIBL we now have solid
cash runway forecasts well into 2021, which will underpin our
business strategy and allow us to return to our growth plans.
The going concern section of the report and accounts makes
reference to this, but based on known factors, the actions taken,
and the funding secured, we are well placed to navigate C19
successfully and exit with momentum.
Divisional Performance
Currently the Smart Zones division principally consists of the
core beer monitoring business (including the US) and gaming machine
monitoring.
Smart Zones
FY2020 FY2019 Change
%
Turnover GBP11.06m GBP11.00m 0.5
Operating
profit(a) GBP4.57m GBP4.48m 2.0
Profit
before
tax GBP3.75m 4.06m (7.6)
Total connected
devices 186,554 202,513 (7.9)
New Installation
sales 151 88 71.6
YE Net
premises(b) c12,000 c12,600 (4.8)
iDraught
penetration(b) 26.6% 27.0%
a) Pre-exceptional items, share based payments and amortisation
b) UK, USA and Europe only
Turnover mix is shown below with recurring revenue being 98%
(2019: 97%)
Recurring revenue per device has increased 9.5% to GBP58.00
(2019: GBP52.99) reflecting the higher quality recurring revenue
streams which has resulted from our customers' disposal of
relatively lower performing pubs during their estate
rationalisation programmes.
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.
Average adjusted operating profit per device (above) has
increased circa 7.5% to GBP19.39 (2019: GBP18.03) reflecting
sustained profitability against a lower estate size.
The Smart Zones division has performed well against a
challenging pub market backdrop that resulted in a net estate
reduction of 687 sites (2019: 823) to circa 11,600 (2018: 12,300)
in the UK and Europe (excluding USA).
Despite this we were able to maintain Smart Zones operating
profit at GBP4.57 million (2019: GBP4.48 million).
Smart Machines
The Smart Machines division consists of telemetry and
contactless monitoring predominantly in the vending sector, as well
as ERP and mobile connectivity services from the Vendman
integration.
FY2020 FY2019 Change
%
Turnover GBP5.22m GBP4.68m 11.5
Operating profit
(a) GBP1.53m GBP1.41m 8.5
Profit before
tax (b) GBP2.09m GBP0.98m 113.3
New Telemetry
connections 3,111 2,485 25.2
New Contactless
connections 8,948 7,800 14.7
YE Net estate
(c) C38,000 c27,000 40.7
a) Pre-exceptional items, share based payments and amortisation on a continuing basis.
b) FY2020 includes GBP1.09 million of deferred consideration release (2019: GBP0.53 million)
c) Excludes circa 200,000 Vendman connections.
Turnover mix is shown in the chart below. Recurring revenues
were 80% of turnover (2019: c. 87%) impacted by year-on-year Capex
sales being higher in the year.
New contactless connections in our Smart Machines division
continued to show good progress. New connected devices grew by
14.7% to 8,948 an increase of 1,148 year on year. The estate
figures reflect the net movement shown above.
Average recurring revenue per device was GBP64.40 (2019:
GBP71.11) principally due to the mix of estate, with a more
balanced split between Capex and annuity sales in the year. As
stated previously we consider this to be an evolving growth story,
with overall turnover and profit growth trends being driven by
increased penetration of our contactless solutions.
There was a reduction in profit per device to GBP40.32 (2019:
GBP52.13). This was due to higher one-off income from development
fees in FY19 versus FY20, as well as a large competitively priced
order, increased investment in commercial sales resource in Q4 and
some legacy Vendman debt provisions which were prudently taken at
the time of the earn out closing.
Taxation
The Group has continued to utilise available tax losses during
the year resulting in no tax being paid (2019: GBPnil). The Group
will continue to utilise the available tax losses carried forward
into FY2021. In the financial year under review, the tax line
includes a deferred tax credit of GBP0.03 million (2019: tax charge
of GBP0.18 million) recognising the impact of the tax losses
available and being utilised.
Earnings per share
Basic EPS was 8.56 pence compared to 8.87 pence in 2019. This
small fall was principally due to an additional c. GBP0.20 million
intangible asset amortisation for R&D, c. GBP0.14 million bad
debt provisions for C19 and Vendman earn out, together with the
weighted average number of shares increasing by c. 451,000 in the
year.
Balance sheet and cash flow
The Group balance sheet remains strong.
The Group generated operating cash flow (pre LTIP tax payment)
of GBP4.23 million (2019: GBP2.06 million).
Helped by Treasury and Share option sale proceeds the cash
generated in FY2020 was used to accelerate the Group's technology
plans, to service borrowings, and fund the final payment for
Vendman and the share dividend.
At the year end, the Group had borrowings of GBP1.33 million
(2019: GBP1.99 million), and net debt of GBP0.95 million (2019:
GBP1.20 million) with a post balance sheet borrowing of GBP3.5m in
relation to a Coronavirus Business Interruption Loan facility.
Our strong balance sheet and capacity to generate cash provides
the Company with a solid base to pursue the significant growth
opportunities that have been identified.
Mark Foster
Chief Financial Officer
Business Risk
In normal circumstances, the Board and senior management review
business risk at least half yearly. Prior to the impact of C19, the
Directors had considered the areas of potential risk in assessing
the Group's future prospects. On the basis of their review, and
having considered various factors such as market conditions, they
believe that the business is of sound financial footing and has a
sustainable operating future. In particular they note that the
business has achieved an acceptable result in the year despite the
difficult trading conditions for the pub sector, and overall market
confidence in liquidity and credit.
In addition to C19 which is covered earlier, 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.
Key performance indicators
Actual Actual
Target 2020 2019
Percentage of
revenue from recurring
income streams
(1) 80% 92% 94%
Gross Margin (2) 70% 68% 68%
Employee Turnover
(3) 2% 2.1% 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. Source data is taken from the audited
financial statements. The above gross margin represents continuing
operations excluding the margin impact of the fuel business which
operated on lower margins. It is important to recognise the margins
we achieve are a reflection of the direct cost of sale and not do
not include some of the key infrastructure overheads required to
provide the services to our customers.
(3) Employee Turnover = Group trading companies aim to be seen
as a good, attractive employer with positive values and career
prospects, measured against internal People & Development
reports. In addition to normal employee turnover, the figure also
includes employees leaving as a result of business rationalisation
activity.
The Strategic Report includes the above sections on Business
risks and KPI.
C19
Despite the current uncertainty surrounding C-19, this report
has sought to outline our approach to managing and mitigating its
impact and risk and we remain confident of the future path for our
business.
On behalf of the Board
Stewart Darling
Chief Executive Officer
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2020
Before Exceptional Before
Exceptional 2020 Total Exceptional Exceptional Total
2020 GBP000 2020 2019 2019 2019
GBP000 GBP000 GBP000 GBP000 GBP000
Note
Continuing
operations
Revenue 16,282 - 16,282 15,683 - 15,683
Cost of
sales (5,164) - (5,164) (5,023) - (5,023)
Gross profit 11,118 - 11,118 10,660 - 10,660
Administration
and other
operating
expenses (7,088) 1 (7,087) (6,805) 222 (6,583)
Operating
profit
pre amortisation
and share
based payments
from continuing
operations 4,030 1 4,031 3,855 222 4,077
Intangible
asset
amortisation (1,390) - (1,390) (1,192) - (1,192)
Share based
payments (125) - (125) (132) - (132)
------------------- ----- ------------------ -------------- ---------- -------------- -------------- ----------
Total
administrative
expenses (8,603) 1 (8,602) (8,129) 222 (7,907)
Operating
profit 2,515 1 2,516 2,531 222 2,753
------------------- ----- ------------------ -------------- ---------- -------------- -------------- ----------
Net finance
costs (113) - (113) (95) - (95)
Profit
from continuing
operations
before
tax 2,402 1 2,403 2,436 222 2,658
Income
tax
credit/(expense) 1 28 - 28 (178) - (178)
Profit
and other
comprehensive
income
for the
year 2,430 1 2,431 2,258 222 2,480
Earnings
per share
Total
- Basic 3 8.56p 8.87p
- Diluted 3 8.47p 8.80p
------------------- ----- ------------------ -------------- ---------- -------------- -------------- ----------
Continuing
Operations
- Basic 3 8.56p 8.87p
- Diluted 3 8.47p 8.80p
------------------- ----- ------------------ -------------- ---------- -------------- -------------- ----------
Consolidated Balance Sheet at 31 March 2020
2020 2019
GBP000 GBP000
Assets
Non-current assets
Goodwill 17,856 17,975
Other intangible assets 5,505 4,875
Property, plant and equipment 3,795 3,503
Deferred tax asset 510 313
Total non-current assets 27,666 26,666
---------------------------------- -------- --------
Current assets
Inventories 1,491 1,670
Trade and other receivables 3,544 3,669
Cash and cash equivalents 1,728 1,788
---------------------------------- -------- --------
6,763 7,127
------------------------------- -------- --------
Total assets 34,429 33,793
---------------------------------- -------- --------
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables 2,710 4,138
Leases 64 -
Borrowings 2,011 1,652
Tax - -
4,785 5,790
Non-current liabilities
Other payables 117 139
Leases 35 -
Borrowings 670 1,333
Deferred tax 1,141 972
1,963 2,444
------------------------------- -------- --------
Equity attributable to owners
of the parent
Share capital 2,895 2,874
Share premium account 11,709 11,530
Share based payment reserve 364 314
Own shares - (754)
Merger reserve 310 310
Retained profit 12,403 11,285
---------------------------------- -------- --------
Total equity 27,681 25,559
---------------------------------- -------- --------
Total equity and liabilities 34,429 33,793
---------------------------------- -------- --------
Consolidated Statement of Changes in Equity for the year ended
31 March 2020
Share
Share based
Share premium Own payment Merger Retained
capital account shares reserve reserve profit Total
At 1 April 2018 2,872 11,519 (1,114) 483 310 10,944 25,014
Dividends - - - - - (1,585) (1,585)
Issue of shares 2 11 - - - - 13
Share based payments - - - 132 - - 132
Share option forfeitures - - - (2) - 2 -
LTIP exercise - - 360 (299) - (556) (495)
Transactions with
owners 2 11 360 (169) - (2,139) (1,935)
------------------------- -------- -------- -------- -------- --------- --------- ---------
Profit and total
comprehensive
income for the
year - - - - - 2,480 2,480
------------------------- -------- -------- -------- -------- --------- --------- ---------
Total comprehensive
income less owners
transactions 2 11 360 (169) - 341 545
------------------------- -------- -------- -------- -------- --------- --------- ---------
At 31 March 2019 2,874 11,530 (754) 314 310 11,285 25,559
------------------------- -------- -------- -------- -------- --------- --------- ---------
At 1 April 2019 2,874 11,530 (754) 314 310 11,285 25,559
Dividends - - - - - (1,604) (1,604)
Issue of shares 21 179 - - - - 200
Share based payments - - - 125 - - 125
Share option forfeitures - - - (43) - 43 -
LTIP exercise - - 12 (32) - 3 (17)
Disposal of own
shares - - 232 - - 83 315
Disposal of treasury
shares - - 510 - - 162 672
Transactions with
owners 21 179 754 50 - (1,313) (309)
------------------------- -------- -------- -------- -------- --------- --------- ---------
Profit and total
comprehensive
income for the
year - - - - - 2,431 2,431
------------------------- -------- -------- -------- -------- --------- --------- ---------
Total comprehensive
income less owners
transactions 21 179 754 50 - 1,118 2,122
------------------------- -------- -------- -------- -------- --------- --------- ---------
At 31 March 2020 2,895 11,709 - 364 310 12,403 27,681
------------------------- -------- -------- -------- -------- --------- --------- ---------
Consolidated Cash Flow Statement for the year ended 31 March
2020
2020 2019
Note GBP000 GBP000
Cash flows from operating activities
Profit for the year 2,431 2,480
Adjustments for
Net interest payable 113 95
Income tax (credit)/expense (28) 178
Amortisation of intangible assets 1,390 1,192
Depreciation 674 450
Deferred consideration release (1,088) (530)
Loss on sale of property, plant
and equipment 3 14
Goodwill write off 119 -
Share based payments 125 132
Tax payment in respect of LTIP (17) (495)
Operating cash flows before changes
in working capital and provisions 3,722 3,516
Change in inventories 178 (583)
Change in receivables 125 (423)
Change in payables 191 (948)
494 (1,954)
Cash generated from operations 4,216 1,562
Net cash generated from operating
activities 4,216 1,562
------------------------------------------- ----- -------- --------
Cash flows from investing activities
Purchases of property, plant and
equipment (969) (801)
Purchases of intangible assets (2,020) (1,538)
Net cash used in investing activities (2,989) (2,339)
------------------------------------------- ----- -------- --------
Cash flows from financing activities
Net interest payable (113) (95)
New leases 239 -
Repayment of leases (141) -
Issue of share capital 200 13
Disposal of own shares 988 -
Payment of deferred consideration (552) (21)
Repayments of borrowings (661) (659)
Dividends paid 2 (1,604) (1,585)
Net cash used in financing activities (1,644) (2,347)
------------------------------------------- ----- -------- --------
Net decrease in cash and cash equivalents (417) (3,124)
Cash and cash equivalents at beginning
of period 798 3,922
------------------------------------------- ----- -------- --------
Cash and cash equivalents at end
of period 381 798
------------------------------------------- ----- -------- --------
Reconciliation to the cash balance in the Consolidated Balance
Sheet
Cash balance as per consolidated
balance sheet 1,728 1,788
Bank overdrafts (1,347) (990)
-------------------------------------- -------- ------
Balance per statement of cash flows 381 798
-------------------------------------- -------- ------
Notes to the financial statements
1. Taxation
Analysis of charge in period
2020 2019
GBP000 GBP000
Current tax expense
- Amounts in respect of the current year - -
- Amounts in respect of prior periods - -
- -
Deferred tax (credit)/charge:
- Amounts in respect of the current year (9) 174
- Amendment re-recognition of losses (19) 4
Income tax charge (28) 178
------------------------------------------ -------- --------
Reconciliation of effective tax rate
The tax for the 2020 period is lower (2019 was lower) than the
standard rate of corporation tax in the UK (2020: 19% and 2019:
19%). The differences are explained below:
2020 2019
GBP000 GBP000
Profit before taxation
- Continuing and discontinuing operations 2,403 2,658
Profit before taxation multiplied by rate
of corporation tax in the UK of 19% (2019:
19%) 457 505
Effects of:
Other expenses not deductible for tax purposes 132 44
Non taxable income (205) (101)
Amortisation of intangibles 201 189
Movement on losses 46 55
Adjustments for prior years (19) 4
Research and development (640) (518)
Total tax (credit)/charge (28) 178
------------------------------------------------ -------- --------
2. Ordinary dividends
2020 2019
GBP000 GBP000
Final dividend for the year ended 31 March
2019 of 4.0p (year ended 31 March 2018:
4.0p) 1,123 1,108
Interim dividend paid in respect of the
year of 1.70p (2019: 1.70p) 481 477
Amounts recognised as distributions to equity
holders 1,604 1,585
----------------------------------------------- -------- --------
In addition, the directors are not proposing a final dividend in
respect of the year ended 31 March 2020. Total dividend payable
1.70p (2019: 5.70p).
3. Earnings per share
Earnings per share for the year ended 31 March 2020 was 8.56p
(2019: 8.87p).
Basic earnings per share are calculated by dividing the earnings
attributable to ordinary shareholders (GBP2,431k) 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.
2020 2019
Earnings Basic Diluted Earnings Basic Diluted
GBP000 earnings earnings GBP000 earnings earnings
per share per share per share per share
Post-tax profit attributable
to equity shareholders 2,431 8.56p 8.47p 2,480 8.87p 8.80p
2020 2019
Number Number
Weighted average number of ordinary shares 28,410,348 27,959,532
Dilutive effect of share options 281,866 216,908
------------------------------------------------------------------- ----------- --------------------------
Diluted weighted average number of ordinary
shares 28,692,214 28,176,440
------------------------------------------------------------------- ----------- --------------------------
4. Exceptional items
2020 2019
GBP000 GBP000
Corporate activity and acquisition costs 311 -
Corporate restructuring and transitional
costs 415 163
Deferred consideration release (1,086) (530)
Network obsolesce costs 50 107
Loan impairment 200 -
Other 109 38
(1) (222)
------------------------------------------ -------- --------
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 to succession
and calibre of people on board to deliver the strategic aims and
aspirations of the Group.
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 has been recognised through the income statement. The
deferred period has now closed.
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 International Financial Reporting
Standards (IFRS) adopted for use in the European Union, including
IFRIC interpretations issued by the International Accounting
Standards Board, and in accordance with the AIM rules and is not
therefore in full compliance with IFRS. Except for the adoption of
IFRS 16, the principal accounting policies of the Group have
remained unchanged from those set out in the Group's 2019 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 2020
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 2019 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
2020 and 31 March 2019 did not contain a statement under s498 (1)
to (4) of the Companies Act 2006. The statutory accounts for the
year ended 31 March 2020 will be posted to shareholders at least 21
days before the Annual General Meeting and made available on our
website 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
COVID-19
COVID-19 is an unprecedented business interruption event
impacting business and economies globally.
The potential uncertainty as to the future impact on the Group
from COVID19 has been separately considered and acted upon, as part
of the Directors consideration of the going concern basis of
preparation, noting FY20 was largely un-impacted by COVID-19 pre
the month of March 2020. In any downside scenario analysis
performed, the Directors have considered the potential impact of
COVID19 alongside the proactive actions implemented, in its trading
and, in particular, cash forecasts. The Board has taken a number of
key steps and reviews in those cash projections as follows;
1) Pro-actively worked with its customers to vary their business
trading terms during the mandatory lockdown period, in both trading
divisions, where such varied terms are appropriate. In so doing,
the majority of customers have agreed to these terms which provides
a level of certainty regarding revenue and cash coming into the
business
2) Trading terms at the time of writing will revert to normal
terms at the end of the mandatory lockdown period
3) Cash forecasting assuming the above trading conditions for a
period of time with a move toward normality in the second half of
FY21, such forecasting taking a cautious view versus what is more
likely to be better trading
4) Company Cash and bank facilities
5) Overlay of opportunities won or likely to be won above those scenario reviews
6) Trade receivable receipts post 31 March 2020
7) Appropriate staff have been furloughed to take advantage of
the Government Job Retention Scheme support measure
8) We have assumed no reduction in staff but this will be
reviewed on an ongoing basis during the easing of lockdown and
resumption of business.
9) Shareholder dividend has been cancelled for the forthcoming
Final and Interim dividend due in July 2020 and January 2021
10) Loan and mortgage payments have been deferred for 6 months,
reducing due within one year from GBP664,000 to GBP639,000
11) Business running costs cancelled, suspended, deferred as
appropriate
12) A Coronavirus Business Interruption Loan Scheme receipt of
GBP3.5 million confirmed on 12 May 2020.
It is difficult to predict the overall impact of COVID-19 in the
vertical markets we serve beyond a recognition that the Pub trade,
which we expect to re-open in July, will be slower to recover
whereas the Vending and contactless payment activity is likely to
see a more rapid return to more normal levels helped by the
accelerated demise of cash in that industry.
Based on the above, however, the combination of all actions
taken provide Vianet with a clear cash runway well into 2021,
noting there are further mitigating operational actions we can take
that have not been factored in, thereby allowing the company to
pro-actively come through COVID-19 and return to the growth
ambition it has, building on the last 5 years of year on year
growth, with market opportunities that clearly exist in the
verticals it serves, particularly for Contactless growth.
As a result of the above principal factors, the Board consider
the Group has adequate resources to continue in operational
existence for at least 12 months from the date of signing these
accounts. Thus, they continue to adopt the going concern basis in
preparing the annual financial statements. The Board does
recognise, however, COVID-19 provides a level of uncertainty
arising from COVID-19 only, and as such, dependent on the recovery
path from COVID-19, there is a level of uncertainty associated with
any forecasts and their duration, which could cast some doubt on
our cash position beyond the minimum 12 months currently forecast
from date of signing, pre any further action we may seek to take
which is referenced.
6. Annual General Meeting
The Annual General Meeting will be held on 30 June 2020 at
11.00am, at the offices of Vianet Group plc, One Surtees Way,
Surtees Business Park, Stockton on Tees, TS18 3HR, but will be a
closed meeting due to COVID-19.
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 rns@lseg.com or visit www.rns.com.
END
FR EAEKFEAPEEAA
(END) Dow Jones Newswires
June 02, 2020 02:00 ET (06:00 GMT)
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