Source - LSE Regulatory
RNS Number : 8589B
Vianet Group PLC
15 June 2021
 

15 June 2021

Vianet Group plc

 

("Vianet", "Company" or "the Group")

 

Final Results

 

Resilient financial performance in a challenging period with a solid platform to support growth

 

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 2021.

 

Financial highlights

 

·    Revenue fell 48% to £8.37m (FY2020: £16.28m) reflecting impact of COVID-19.

·    Recurring revenues remained strong at 89% (FY2020: 92%).

·    Gross margin remained robust at c. 60% (FY2020: c. 68%).

·    Adjusted operating loss, pre-exceptional costs, amortisation and share based payments, limited to £0.69m (FY2020: £4.03m profit) reflecting proactive response to severe impact of C19 on the Group's markets.

·    Profit before taxation was a loss of £2.82m (FY2020: £2.40m profit), principally due to the impact of the pandemic and continued intangible amortisation of R&D costs.

·    Basic earnings per share was negative 6.75p (FY2020: 8.56p positive).

·    We ended the year with net borrowings of £2.66m (2020: £0.95m) and a gross cash balance of £1.89m (FY2020: £1.73m).  The Group has a further £1.5m available in its overdraft facility.

·    The Board considers it would not be appropriate to pay a final dividend as it is prudent to conserve cash until the trading recovery has gathered more momentum.

 

Divisional highlights

 

·    Smart Machines adjusted operating profit of £1.1m (FY2020: £1.53m).

·    Smart Machines added 7,200 new connected devices (FY2020: 12,059), impacted by pandemic restrictions, city centre office closures, and some customers taking a business decision to rationalise their estates.

·    Smart Machines continuing to create strong growth opportunities across UK and Europe. 

·    Smart Zones set to recover as a result of improving growth prospects both in the UK pub market and the US hospitality market, as well as gaining revenue momentum from its market and retail data insight services.

 

Commenting, James Dickson, Chairman of Vianet Group plc, said:

"The pandemic has provided Vianet with an opportunity to re-energise the organisation, underline our credentials and worth to customers, re-set our technology roadmap, and exit the storm in a strong position.

"As a business dependent on the hospitality and leisure sectors, the pandemic has been a challenging period for the Company. Despite this, we have navigated the challenges well, focusing on preserving cash and maintaining strong relations with our customers. Thanks to the success of these measures, plus the roll out of the vaccines and the easing of restrictions, the Company is coming out of the lockdown phases strongly and in a position to capitalise upon the excellent growth opportunities available, with normal trading in the UK across both divisions expected to return during H2 2022.

"In our Smart Machines division, unattended machines have been operating throughout the pandemic in sites for essential workers, with a material increase in the use of contactless payments. We fully expect this trend to continue post lockdown and, as such, we envisage further demand for remote connection to unattended retail assets. Although sales of new connected devices fell during the period, we have invested in our sales, commercial and marketing capability as well as in the product roadmap and we now have a pipeline of promising growth opportunities across the UK and Europe.

"Our Smart Zones division is set to recover in line with the UK pub and US hospitality markets, as well as gaining revenue momentum from its market and retail data insight services. As we exit the lockdown phases, our draught beer insights remain highly valuable for customers to understand trading performance and patterns and aid decision-making. We have already received orders and enquiries for installations of new systems, as well as exploring new services designed to help clients during these uncertain times.

"The ongoing investment in cloud infrastructure and mobile technology will also help to develop existing revenues and provide the scalability, flexibility and speed to support rapid growth in existing and potential new verticals. This investment has already proven successful in improving the speed at which we are able to execute elements of our growth plan. With the implementation of protective measures, implemented early in the pandemic, supported by the growing demand for IOT and the processing and understanding of customers' data, we remain confident in the Company's long-term strategy for growth and delivering value to shareholders.

"We look forward to updating the market on our further progress in due course."

 

- Ends -

 

An online analyst briefing, given by James Dickson, Chairman, 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 & Interim CEO

Mark Foster, CFO

Tel: +44 (0) 1642 358 800

www.vianetplc.com

 

Cenkos Securities plc

 

Stephen Keys / Camilla Hume

Tel: +44 (0) 20 7397 8900

www.cenkos.com 

 

Media enquiries:

Yellow Jersey PR

 

Sarah Hollins

Henry Wilkinson  

vianet@yellowjerseypr.com

         Tel: +44 (0)7764 947 137

         Tel: +44 (0)7951 402 336

www.yellowjerseypr.com

 

  

Chairman's Statement

Introduction

Last year I provided a comprehensive update on our proactive response to the global Coronavirus ("C19") pandemic. This year my emphasis is on our results and the Group's encouraging prospects.

From the very outset of C19, our goal has been to safeguard employees and support our customers whilst preserving cash to ensure continuity and ongoing investment in the business, so that we were strongly positioned for the recovery phase.

It has been a difficult time for any business with a reliance on the hospitality and leisure sectors, and last year we reported without fully appreciating the severity and duration of the restrictions that would be required to navigate the country through the pandemic.

The proactive measures we took early on in the pandemic, such as reducing fees to support our customers, has allowed us to retain close relations with them which we believe has put us in good stead as the country emerges from restrictions.

The obligatory going concern evaluation is provided in the accompanying Report of the Directors and I can confirm that the Group has adequate resources to support its growth plans for the foreseeable future. 

As a result of our proactive response, I am pleased to report that the Group has come through the pandemic successfully and is well positioned to capitalise as the country continues to recover from the pandemic and to take advantage of the excellent growth opportunities available.

Results

Given the extreme challenges in the economic environment over the last 18 months, the focus for this update will be how we addressed the issues around the pandemic and how we have emerged as a stronger, more relevant and forward-looking business. Comparative financial information is presented only for reporting purposes.

The closure of the hospitality sector and many city centre offices resulted in revenue declining by 48% to £8.37m (FY2020: £16.28m). This has been particularly frustrating following increased momentum through FY2020 with growth opportunities in Smart Machines and resilience in Smart Zones. 

Prudent cost management resulted in an adjusted operating loss of £0.69m (FY2020: £4.03m profit) which was materially better than we had anticipated at the outset of C19.  Group loss before taxation was £2.82m (FY2020: £2.40m profit).

Exceptional items of £0.34m (FY2020: Negligible) were largely related to a divisional disposal, C19 measures and staff rationalisation costs.

Basic earnings per share was negative 6.75p (FY2020: 8.56p positive).

A £3.5m Coronavirus Business Interruption Loan ("CBIL") was taken on 26 May 2020 to provide support against a prolonged recovery period.  We ended the year with net borrowings of £2.66m (2020: £0.95m) and a gross cash balance of £1.89m (FY2020: £1.73m).  The Group has a further £1.5m available in its overdraft facility.

We have conservatively modelled our FY2022 cash forecasts which, when combined with the measures already taken, leave the Directors confident that the Group has sufficient funding to support business cash requirements and ongoing investment in growth for a period significantly beyond the next 12 months.

Dividend

We anticipate a continuation of improved trading in the coming months, with the general health and economic outlook being more reassuring, although the timing of a return to normal economic conditions still remains uncertain.  During FY2022, the Group will continue to invest in its exciting growth opportunities, complete the repayment of the Vendman acquisition loan, and begin the repayment of the CBIL facility.

Given this background and circumstances, the Board considers it would not be appropriate to pay a dividend in respect of the year ended 31 March 2021.

The Board recognises that this is a significant decision and that dividends are an important part of shareholder returns. Provided that recent good progress on trading continues, it fully expects to be is a position to resume payment of dividends for FY2022.

Board Changes and Staff

The Board's composition and effectiveness is constantly evaluated to ensure the optimum balance of experience and independence to support the business.

As announced on 8 December 2020, Stewart Darling stepped down as CEO and left the Group at the end of March 2021. Having held the role of CEO prior to Stewart, it was a simple transition for me to assume an Executive role again and presented an opportunity to make changes to the operational structure of the Group, and it is pleasing that the management team is now cohesive and fully engaged. The Board will keep the operational and Board structure under regular review but, at the current time, no immediate changes are anticipated.

In an age where change is frequent, the support of our people has been our greatest asset.  Despite almost 60% of our 155 employees being on some form of furlough during the period, everyone continued to engage with their usual enthusiasm, commitment, and openness, helping underpin the Group's excellent reputation with customers.

I am extremely proud of how our executive team and employees have stepped up to the mark during this difficult year and I thank them and my Board colleagues for their ongoing commitment in taking the Group forward. 

Conclusion and Outlook

Prior to C19 pandemic the Group had been experiencing encouraging momentum and performance across both divisions.

Although FY2021 has been a temporary setback, it has provided us with a window of opportunity to refocus, reorganise, and progress our product development plans.  We have also continued to invest in our marketing, sales, and commercial teams.  

The success of the UK vaccine programme and further easing of restrictions, together with an encouraging start to FY2022, gives us the belief that we should see both divisions return to more normal levels of trading in the UK during H2 2022. We anticipate that the performance of our European business will pick up soon after.

The Group remains in good shape to resume strong earnings growth by leveraging the solid momentum that was building prior to C19 and delivering 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. 

·    Through C19, 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 continue to accelerate post lockdown, increasing the requirement for remote connection to unattended retail assets.

·    We have made a significant investment in additional sales, commercial and marketing capability while increasing investment in the product roadmap to accelerate growth in the above areas and new verticals. There has been extra focus on developing our capability and accelerating growth from our leading position in coffee device and contactless payment device connectivity, where we expect sales momentum will continue to grow.

·    New vertical opportunities in the UK and internationally have emerged for our contactless payment and telemetry solutions in fuel retail forecourts and franchise kitchens with good results from field trials.

·    Ongoing 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 programmes through FY2022, benefitting from our current infrastructure investment. This will allow the division to recover its profit contribution taking advantage of improving growth prospects both in the UK pub market and the US hospitality market, as well as gaining revenue momentum from its market and retail data insight services.

·    Draught beer insights continue to be vital for our customers in order to better understand tenant and lessee trading performance and patterns during the C19 exit phase. We have already received orders and enquiries for installations of new systems, some of which are already live.

·    Our Smart Zones product roadmap development will bring new features and functionality generating increased customer interest. These include automated line cleaning manager, automated till variance alerts, market data provision, and interface with labour management.

·    The Group has high levels of contracted recurring income and will return to strong cash flow. The Group's capacity for operational cash generation and resilient balance sheet gives scope for further investment to accelerate Smart Machines expansion and develop new verticals.

The Board remains resolutely confident in Vianet's long-term growth strategy to deliver earnings growth and the expansion of future strategic options for Vianet as we emerge from C19.

The Board's absolute focus remains on emerging from this global crisis in a strong position to take advantage of its exciting growth opportunities, whilst maintaining the health, well-being and safety of our employees and customers.

James Dickson                                                                                 

Chairman                                                             

15 June 2021

 

 

Strategic Report

There is nothing like a crisis to create a common sense of purpose and provide an opportunity to demonstrate leadership.  From the very outset of C19, we have worked with our customers and managed cash prudently to ensure business continuity and to facilitate the essential ongoing investment in the business. This has meant that the Group is well positioned for the C19 recovery. 

Our core strategy centres on IOT and the collection and processing of customers' asset data, to drive improved operating performance for businesses, machine owners, operators and brand owners.

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. Combining this with our leading-edge contactless payment capability to support sales growth in unattended retail machines, we expect to strengthen our position in this rapidly developing area. 

Hardware and software remain critical components in enabling remote assets to be connected. Our IOT platform has evolved to support much greater flexibility of device connection and data connectivity so that it is now possible to connect a range of business-critical third-party devices beyond the verticals we currently supply.

Our ability to collaborate with customers to identify compelling end-to-end solutions to address business opportunities will position us to drive sustained business growth over the coming years.

FY2021 has been challenging, however the Group has made a step change investment in sales and marketing capability, and technology. This has accelerated our ability to execute certain key elements of our growth plan, including launching our market data insights, strengthening our customer relationships and helping secure new business in existing and potential new verticals, such as fuel retail forecourts and industrial kitchens using our contactless payment and telemetry solutions.

Smart Machines

Conversion of opportunities in this space is accelerating following a significant increase in our sales, commercial and marketing capabilities during the financial year.

This will further enhance the pace of the roll out of our contactless payment solution, driving increased machine utilisation and sales for customers, who benefit from reduced cost of cash handling, improved cash flow and an assured payment.

The trend towards non-cash transactions is growing significantly with contactless payments giving a fast, easy and secure transaction in a world where fewer people are carrying cash.  The impact of C19 and our 'dirty cash' campaign have given further impetus to the trend (https://vianetplc.com/wp-content/uploads/2021/06/NIVO_Doublespread_COVID_19.05.pdf). 

We are encouraged by the impact of our investment in the sales team and the opportunities in new verticals using contactless as the lead generator, which enhances our route to market and distribution opportunities with operators and machine suppliers.

Smart Zones

Through C19 we have been proactive in supporting our hospitality sector customers who have been severely impacted by prolonged closures and restrictions. We temporarily reduced contract terms and modified data feeds to help our clients understand trading under a wide range of differing and fluid regional C19 hospitality restrictions.   During C19 our reporting has shifted from weekly compliance for operations level towards daily insights for C-level.

As the government measures are eased further and the hospitality sector reopens, the insights and analytics we provide will be especially valuable, helping to target support, optimise revenue, and minimise costs.

We are seeing an increased level of interest in new analytics and insights, aided by a new reporting suite to support management decision-making, and are exploring an exciting range of new services specifically designed to help clients during these unprecedented times.

Operating Review

 

Smart Zones

The closure of the hospitality sector resulted in a material fall in turnover, with only 61 (FY2020: 151) new site installations, but our proactive reduction in monthly charges benefitted our customers and resulted in the division being able to return a modest profit before exceptional costs, amortisation and share based payments.

Technology upgrades to our 4th Generation IOT hubs was completed in 137 pubs (FY2020: 2,519) with a further c. 900 to be completed in FY2022. 

It is difficult to assess the full extent of UK pub re-openings in FY2022 whilst social distancing restrictions are still in place.  Work from home guidance and the 2m rule has put extreme pressure on the viability of city centre pubs, with many deciding not to re-open whilst the rule is still in place and instead waiting until offices return after the summer holiday period. The average community-based leased and tenanted pubs are faring better and are opening sooner. At end of May 2021, some 83% of pubs, which the division services, had re-opened.

We have identified 723 permanent pub closures in our UK installation base which, with 61 new installations, gives a net reduction of 662 sites (FY2020: 838). The precise picture will become clear when restrictions are fully lifted and city centre offices re-open, but our estimate is that in UK and Europe, we have 10,940 installed sites (FY2020: c. 11,600), of which 440 pubs have been inactive since C19 restrictions began, leaving c. 10,500 currently active.  There are a further c. 300 installations in the US, giving a total active base of c. 10,800, with a further 440 to be confirmed as more normal pub trading resumes.

The disruption to the hospitality sector has seen significant challenges but has in turn provided opportunities for wider engagement with our customers and the acceleration of our product roadmap. In addition to ongoing compliance information, our customers are seeking trading data to improve decision-making during the exit phase. There is an increasing desire to enhance their digital capabilities to improve efficiency and enable frictionless delivery from back of house to front of house and on to consumers.

Our Smart Zones connected device base remains significant with c. 170,000 devices in the active estate. Gathering more granular data from our 4th Generation IOT hubs, together with our increasingly sophisticated reporting capabilities delivered via our website and mobile applications, is delivering growth in our insight and analytics sales with one multi-year contract signed and several others under negotiation.  This is particularly relevant for the provision of retail data for brewers. We are now contracted with the Oxford Partnership to deliver ground-breaking insight that will support consumer-level decision-making in respect of beer brands. We have also seen increased traction for insight data that will show growth into FY2022.

As C19 restrictions are lifted there will be increased focus on operational and retail performance to drive value from pubs; this will be particularly so for customers who are now owned by private equity.  This plays to the strength of our operational analytics and retail insights capability, and the positive C-level exposure gained during C19.

Vianet Americas' revenues were down 68% to c. £130k (FY2020: c. £400k) as hospitality customers, and in particular AMC Theatres, were until recently severely restricted due to C19.  This resulted in a £200k loss compared to breakeven in FY2020. All but a few customer sites have now re-opened and our monthly billing is expected to recover to more normal levels by the end of H1 FY2022.

Despite the challenging year, the quality of our blue-chip installation base and competitive advantage of our solution provides a platform to build scale in the world's largest bar chain market by securing a new national customer and by executing on the partnership opportunities which have been identified.

C19 had a material impact on the division's results, but the underlying combination of a strong recurring revenue, long-term contracts, proactive cost control, and margin management enabled the Group to maintain modest profit contribution in the year.

Overall, the Board remains confident that when we are more freed from C19, the Smart Zones division will return to previous levels of performance, whilst delivering growth from the managed pub sector and its data insight services.

Smart Machines 

The revenue impact on our Smart Machines division was less pronounced as approximately 70% of machines remained active due to many unattended retail assets being installed in sites occupied by essential workers.  Whilst the division did not escape the impact of C19, it made good progress delivering an acceptable sales and profit performance in difficult circumstances.

We are seeing an increase in demand and usage of our contactless payment solution, rather than 'dirty' coins, and anticipate that this will continue to accelerate further from a growing business requirement and industry trend for telemetry and contactless payment solutions.

There is increasing recognition from vending operators that the use of cash by consumers continues to decline, and that the ability to manage efficiently and effectively is being materially inhibited by the pricing inflexibility of cash and the continued reliance on frequent and costly machine visits.

We remain extremely well placed to help our customers unlock the value of our technology as the leading end-to-end product provider and we see a material opportunity to drive growth in the unattended retail market by delivering market-leading analytics and insight in the unattended retail premium coffee, snack and can channels.

Smart Machines divisional turnover was £4.42m (FY2020: £5.22m), resulting in an operating profit of £1.1m (FY2020: £1.53m) before exceptional costs, amortisation and share based payments.

Whilst the majority of sales remained Capex in the year, the trend from Capex to an Opex annuity only model had the short-term impact of reducing FY2021 turnover by £0.30m and profit by £0.15m. There will be a significant long-term benefit for future recurring income streams and the visibility of profits as typically, the Opex model will deliver 1.3 x the profit of a Capex model over the life of a contract.

Customers will choose whichever revenue model is appropriate to them and we are well placed to support all options but strategically we have sought to drive more annuity income sales, to improve the quality and visibility of earnings. We recognise however that we must retain the flexibility in our business model to ensure we meet different customer requirements.

Overall recurring revenues increased to 86% (FY2020: 80%).

Total Smart Machine device connections grew by just over 7,200 (FY2020: 12,059). Whilst new sales were impacted by C19 restrictions, the existing installation base was also impacted as some customers took a business decision to rationalise their estates. New unit sales offset the increase in redundant machines, resulting in our overall device installations remaining flat at c. 38,000.

The market opportunity is significant. Whilst there is a total European vending machine park of over 3 million machines, the immediately addressable European market is c. 880,000 machines, of which c. 300,000 are in the UK. The classification 'immediately addressable' refers to machines which are capable of data output for telemetry and are also in organisations with the scale to implement and benefit from an end-to-end solution.   Whilst there is no readily available data on competitor share, we estimate that the total penetration of the c. 880,000 immediately addressable European vending machine park is only c. 8%, of which Vianet have c. 38,000, giving a market share of just over 50%.  Over FY2022 and FY2023, the division's growth initiatives aim to deliver in excess of 50,000 new vending connections.

As technology adoption evolves, contactless transaction limits increase 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 our technology and the corresponding opportunity.

Our contactless payment solution is supported by leading industry partners Elavon and NMI, and has been enhanced by establishing our PCI Master Merchant service. This allows us to speed up the on-boarding of customers for payment capability and provide a more cost-effective reconciliation and payment service.

Contactless payment remains a very attractive solution in a marketplace where traditional cash-only payments have long been an inhibitor of vending-related usage, consumption, and customer experience. We believe the evolution and growth of contactless payment solutions will materially change this dynamic and attract more consumers to the vending vertical.

The prospects for our Smart Machines business are extremely positive and in the longer term have likely been enhanced by C19. Vianet's data analytics and insight from unattended retailing assets and evolving contactless payment solution will continue to provide exciting growth opportunities.

R&D Investment

Through FY2021 the Group continued to invest in the development and delivery of its product roadmap and operational capabilities. Development has ranged from SmartVend product and 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, we began the gradual migration from legacy systems and software to a cloud-based environment. We have now migrated all our Smart Machines customers and expect to migrate Smart Zones division in FY2022. In the short-term, monthly costs will increase as we lift Smart Zones to the cloud, however, it will provide significant benefits in terms of security, speed of processing, reliability, scalability, business continuity and long-term cost management. All being important as we drive the growth agenda in our connectivity and data critical activities.

Towards the end of FY2021 we launched our new Smart Academy online training portal to further enhance our customer proposition and provide improved access to training and development for our employees.

The Board believes this further investment in our core data management capability and IOT technology will enhance the Group's ability to improve the quality of the existing recurring revenue streams and to generate substantial new growth.

Looking Forward

C19 has had a significant impact on Vianet, our customers and economies, as it has on many businesses and people.  Against this backdrop we have used the time to refocus and ensure we are strongly placed to prosper as our markets emerge from the pandemic.   

The business will benefit from its proven track record of converting data into analytics and insight that drive better decision-making for customers, improving asset utilisation and increased profitability.

Smart Machines will leverage its strong portfolio of products and services.  This combined with significant investment in commercial resource will add further momentum. Cloud and mobile capability will continue to transform the customer experience facilitating rapid scalable growth in existing and new vertical markets.

Our contactless payment solution is well positioned for strong growth with the recent introduction of our PCI Master Merchant scheme, the declining use of cash by consumers and rapid adoption of technology by brand owners and machine operators.

Smart Zones will aim to recover previous levels of performance and seek to enhance existing income streams and unlock further opportunities for enhanced analytics and insight. Continued Private Equity pub company ownership is expected to drive greater focus on operating and retail performance.

The combination of our high-calibre, energised team, robust strategy, and strong earnings visibility earnings provides a real platform for growth as we help our customers make better decisions about their assets.

James Dickson                                                                                 

Chairman           

15 June 2021

 

Financial Review

Group operating loss, pre-exceptional costs, amortisation and share based payments was £0.69m (FY2020: £4.03m profit).

Despite the challenges of the pandemic, gross margin remained robust at c. 60% (FY2020: c. 68%).

The Board has considered going concern and concluded the Company has sufficient cash and reserves to get through the 12 months post the signing date of the annual report and accounts. Going concern is covered in more detail in the Report of the Directors.

Turnover

Turnover was significantly impacted by the challenges presented, particularly to the country's hospitality sector by the pandemic. Group turnover was £8.37m (FY2020: £16.28m.)  The Smart Zones division was severely impacted, with a smaller reduction in Smart Machines.

Recurring Revenue

Revenue remained contracted and recurring.

Recurring revenue is measured by taking full year revenue from service packs, licenses, rentals and technology upgrades, as per Note 3.

Consolidated recurring revenue, despite the much-reduced turnover, across the two divisions remained robust at 89% (FY2020: 92%). This was sustained by contracted temporary variation to terms to support our customers through the pandemic in both divisions and also in continuing to see new contactless sales.

C19 negatively impacted Smart Zones, which saw the average recurring revenue per connected device decrease to £35.35 (FY2020: £59.18).

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

Profit Before Tax was a loss of £2.82m (FY2020: £2.40m profit), principally due to the impact of the pandemic and continued intangible amortisation of R&D costs in the year. The table below shows the performance of the Group;

 

FY2021

FY2020

Change %

Revenue

£8.37m

£16.28m

(48.6)

Operating (loss)/profit(a)

(£0.69m)

£4.03m

(117.1)

 

 

 

 

 

 

 

 

(Loss)/Profit after tax

(£2.82m)

£2.43m

(216.0)

Basic EPS

(6.75p)

8.56p

(213.9)

Dividend per share

0p

1.70p

(100.0)

Net debt (b)

£2.66m

£0.95m

(180.0)

 

a)     Pre-exceptional items, share based payments and amortisation - refer to Note 27

b)     Refer to note 26

Exceptionals

 

FY2021

'£000

FY2020

'£000

 

 

 

 

People and office rationalisation

154

415

Network obsolescence costs

8

50

Contingent

consideration release

 

-

 

(1,086)

Loan impairment

-

200

Corporate Activity

-

311

Other items

181

109

Total

343

(1)

 

Exceptional items largely comprised staff rationalisation costs and the disposal of leasehold operational office in Stockport, associated with the Vendman acquisition.

Dividend

Due to C19 the Board has not proposed a final or interim dividend in the year (FY2020: 1.70 pence).

Dividend cover has not been calculated due to the dividend being suspended due to C19 (FY2019: c. 1.56).

Cash

Net cash generation pre-working capital movements was an outflow of £0.34m (FY2020: £3.72m), impacted by the hospitality closure during the pandemic and the resultant losses.

Relatively strong working capital management and measures, implemented to manage the impact of the pandemic, saw working capital generation of £1.39m (FY2020: £0.49m) and meant that, after working capital movements, there was an operational cash generation of £1.05m versus £4.21m last year. 

The cash generated was principally used to service varied terms for our customers particularly in Smart Zones to support them during C19, investment in our sales capability in Smart Machines and continued investment in R&D and servicing of borrowings which recommenced in H2. This, together with the addition of a £3.5m CBIL, resulted in an overall cash inflow of £1.51m (FY2020: £0.42m outflow).

At the year-end, the Group had gross cash of £1.89m (FY2020: £1.73m), borrowings of £4.57m (FY2020: £1.33m), including the CBIL facility, with net debt of £2.66m (FY2020: £0.95m).

C19

C19 has impacted our business during the year as reported throughout. The performance, however, in the year was much better than anticipated at the outset of the pandemic.  With the cash and facilities we have, plus the business plan the Group has in place as the country emerges from C19 restrictions, we believe we have solid cash runway forecasts well into 2022, which will underpin our business strategy and allow us to return to our growth plans. 

The going concern section of the Report of the Directors makes reference to C19 but, based on known factors, the actions taken and the funding secured, we are well placed to emerge from C19 successfully and exit with momentum.

Divisional Performance

Currently, the Smart Zones division principally consists of the core beer monitoring and insight business services (including the US).

Smart Zones

 

FY2020

FY2020

Change %

Turnover

£3.95m

£11.06m

(188.8)

Operating profit(a)

£0.50m

£4.57m

(526.0)

(Loss)/Profit before tax

(£0.02m)

£3.75m

(897.9)

Total connected devices

173,580

186,554

(7.47)

New Installation sales

61

151

(147.5)

YE Net premises(b)

c10,800

c11,900

(9.24)

iDraught penetration(b)

29.5%

26.6%

9.8

 

 

 

 

a)     Pre-exceptional items, share based payments and amortisation

b)     UK, USA and Europe only

 

Smart Zones turnover reduced as a result of proactively providing short term pricing support to customers to mitigate the impact of national and regional lockdowns in the hospitality sector. There were no changes to the revenue recognition policies, as disclosed in the Accounting Policies, as a result of these temporary contract variations. The above variations related to the pro-forma billing amounts being reduced to align with the reduced usage until minimum levels of activity returned on hospitality re-opening, resulting in a return to normal levels of billing. 

Turnover mix is shown below with recurring revenue being 92% (2020: 98%).

Recurring revenue per device has naturally been impacted by C19 and so is reported at a much lower distorted level of £21.06 (FY2020: £58.00).

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 in the year is reported at a much lower distorted level of £2.90 (FY2020: £19.39), reflecting the impact of C19.

Given the extreme impact forced upon the hospitality sector resulting for C19, the Smart Zones division has performed resiliently against a challenging backdrop.  The net estate at the year-end was c. 10,940 sites (UK & Europe) versus last year's c. 11,600 (excluding the US), the reduction stemming from disposals and C19 impact which may not yet be fully washed through.

Despite this we were able to maintain a small Smart Zones operating profit at £0.50m (FY2020: £4.57m).

Smart Machines

The Smart Machines division consists of telemetry insights and monitoring, and contactless payment predominantly in the unattended vending retail and coffee sector, as well as ERP and mobile connectivity services.   

 

FY2021

FY2020

Change %

Turnover

£4.42m

£5.22m

(18.1)

Operating profit (a)

£1.11m

£1.53m

(37.8)

Profit before tax (b)

£0.69m

£2.09m

(202.9)

 

 

 

 

New Telemetry connections

2,311

3,111

(34.6)

New Contactless connections

4,904

8,948

(82.5)

YE Net estate (c)

C38,000

C38,000

0.0

 

 

 

 

a)     Pre-exceptional items, share based payments and amortisation on a continuing basis.

b)     FY2020 includes £1.09m of contingent consideration release (2021: £nil)

c)     Excludes circa 180,000 Vendman connections. 


Turnover mix is shown in the chart below. Recurring revenues were 86% of turnover (FY2020: c. 80%) impacted by year-on-year revenue mix and some support given largely during lockdown 1 in H1.

Despite the challenges of the pandemic, in particular on office city centre closures, new contactless connections in our Smart Machines division continued to be achieved with 4,904 new contactless devices, compared to 8,948 last year. The estate figures reflect the net movement shown above which also includes some customers refining their estates in light of the pandemic.

Average recurring revenue per device was £101.34 (FY2020: £64.40) principally due to income from the Vendman division now being reported within the one entity of Smart Machines, alongside support terms offered in H1 lockdown 1. 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 £29.34 (FY2020: £40.32) impacted by support terms given in H1 as well as increased investment in commercial sales resource throughout the year and some legacy Vendman customer issues that needed attention. 

Taxation

The Group has continued to utilise available tax losses during the year, resulting in no tax being paid (FY2020: £nil). The Group will continue to utilise the available tax losses carried forward into FY2022 which will have been enhanced due to the results posted for the year. In the financial year under review, the tax line includes a deferred tax credit of £0.87m (FY2020: £0.03m) recognising the impact of the tax losses available and being utilised. See note 20 for further detail on the deferred tax asset.

Earnings per share

Basic EPS was a loss of 6.75 pence compared to 8.56 pence positive EPS in 2020. This backward step is due to the pandemic.

Balance sheet and cash flow

The Group balance sheet remains resilient despite the impact of the pandemic and addition of the CBIL facility.

The Group generated operating cash flow of £1.05m (FY2020: £4.22m).

The cash generated was used to continue the Group's technology plans and to service borrowings.

At the year-end, the Group had borrowings of £4.57m (FY2020: £1.33m excluding overdraft), including the CBIL facility, with net debt of £2.66m (FY2020: £0.95m).

Our resilient balance sheet and capacity to generate cash provides the Company with a solid base to emerge from C19 and move back to pursuing the significant growth opportunities that have been identified.

Business risk

The Board and senior management review business risk two to three times per year.  Naturally, C19 and its impact pushed the ramifications of that to the top of the list and we covered a lot of that in last years' Report and Accounts and the pathway out of C19 has been well documented. The Directors had considered the areas of potential risk in assessing the Group's prospects. On the basis of their review, and having considered various factors such as market conditions, pathway from C19, supply chain impacts, financial plans and facilities, they believe that the business is of sound financial footing and has a forward-looking sustainable operating future. In particular, they note that the business has achieved an acceptable result in the year despite noting the extreme C19 conditions within which it operated and its impact of the sectors we currently serve, set against overall market confidence in liquidity and credit.

In addition to C19, other principle risks are covered in the Report of the Directors, but 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 uncommon 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.

·    Short-term supply chain strains in the semi-conductor market.

Key Performance Indicators

 

 

Actual

Actual

 

Target

2021

2020

Percentage of revenue from recurring income streams1

80%

89%

92%

Gross Margin2

70%

61%

68%

Employee Turnover3

2%

2.29%

2.1%

 

Notes to KPIs

1 Percentage of revenue from recurring income streams = recurring income streams as a percentage of all income streams. Group trading companies aim to increase shareholder value through growth in revenue, linked to profitability (see Gross Margin below). Source data is taken from management information. The recurring contractual nature of the company's income stream has led to continued improvement in performance versus target. The achievement of this target depends on the mix of new hardware sales versus on going recurring revenue.

2 Gross Margin = Gross profit as a percentage of revenue. Group trading companies aim to generate sufficient profit for both distribution to shareholders and re-investment in the company, as measured by Gross Margin. Source data

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 and Development reports.  In addition to normal employee turnover, the figure also includes employees leaving as a result of business rationalisation activity.


Mark Foster

Chief Financial Officer

15 June 2021

 

  

Consolidated Statement of Comprehensive Income for the year ended 31 March 2021

 

 

 

 

 

 

 

 

Before Exceptional

2021

£000

 

 

 

 

 

 

 Exceptional   2021

£000

 

 

 

 

 

Total

 2021

£000

 

 

 

 

 

Before Exceptional   2020

£000

 

 

 

 

 

Exceptional    2020

£000

 

 

 

 

 

Total

  2020

£000

 

Note

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

 

Revenue

 

8,369

-

8,369

16,282

-

16,282

Cost of sales

 

(3,307)

-

(3,307)

(5,164)

-

(5,164)

 

 

 

 

 

 

 

 

Gross profit

 

5,062

-

5,062

11,118

-

11,118

 

 

 

 

 

 

 

 

Administration and other operating expenses

 

 

(5,749)

 

(343)

 

(6,092)

 

(7,088)

 

1

 

(7,087)

 

 

 

 

 

 

 

 

Operating (loss)/profit pre amortisation and share based payments

 

 

(687)

 

(343)

 

(1,030)

 

4,030

 

1

 

4,031

 

 

 

 

 

 

 

 

Intangible asset amortisation

 

(1,669)

-

(1,669)

-

(1,390)

Share based payments

 

(73)

-

(73)

(125)

-

(125)

 

 

 

 

 

 

 

 

Total administrative expenses

 

(7,491)

(343)

(7,834)

(8,603)

1

(8,602)

Operating (loss)/profit

 

 

(2,429)

 

(343)

 

(2,772)

 

2,515

 

1

 

2,516

 

 

 

 

 

 

 

 

Net finance costs

 

(50)

-

(50)

(113)

-

(113)

 

 

 

 

 

 

 

 

 

 

(Loss)/Profit before tax

 

 

 

(2,479)

 

 

(343)

 

 

(2,822)

 

 

2,402

 

 

1

 

 

2,403

 

 

 

 

 

 

 

 

Income tax credit

1

867

-

867

28

-

28

 

 

 

 

 

 

 

 

(Loss)/Profit and other comprehensive income for the year

 

 

(1,612)

 

(343)

 

(1,955)

 

2,430

 

1

 

2,431

Earnings per share

 

 

 

 

 

 

 

Total

 

 

 

 

 

 

 

- Basic

3

 

 

(6.75)p

 

 

8.56p

 

 

 

 

 

 

 

 

- Diluted

3

 

 

(6.75)p

 

 

8.47p

 

 

Consolidated Balance Sheet at 31 March 2021

 

 

 

 

2021

£000

2020

£000          

 As restated

Assets

 

 

 

 

 

Non-current assets

 

 

 

 

 

Goodwill

 

 

 

17,856

17,856

Other intangible assets

 

 

 

6,184

5,505

Property, plant and equipment

 

 

 

3,391

3,795

Deferred tax asset

 

 

 

236

-

Total non-current assets

 

 

 

27,667

27,156

Current assets

 

 

 

 

 

Inventories

 

 

 

1,431

1,491

Trade and other receivables

 

 

 

2,758

3,544

Cash and cash equivalents

 

 

 

1,894

1,728

 

 

 

 

6,083

6,763

Total assets

 

 

 

33,750

33,919

Equity and liabilities

 

 

 

 

 

Liabilities

 

 

 

 

 

Current liabilities

 

 

 

 

 

Trade and other payables

 

 

 

3,257

2,710

Leases

 

 

 

53

64

Borrowings

 

 

 

1,265

2,011

 

 

 

 

4,575

4,785

Non-current liabilities

 

 

 

 

 

Other payables

 

 

 

86

117

Leases

 

 

 

-

35

Borrowings

 

 

 

3,290

670

Deferred tax liability

 

 

 

-

631

 

 

 

 

3,376

1,453

 

 

 

 

 

 

Equity attributable to owners of the parent

 

 

 

 

 

Share capital

 

 

 

2,895

2,895

Share premium account

 

 

 

11,709

11,709

Share based payment reserve

 

 

 

437

364

Merger reserve

 

 

 

310

310

Retained profit

 

 

 

10,448

12,403

Total equity

 

 

 

25,799

27,681

 

 

 

 

 

 

Total equity and liabilities

 

 

 

33,750

33,919

 



Consolidated Statement of Changes in Equity for the year ended 31 March 2021

 

 

Share capital

Share premium

account

 

 

Own

shares

Share

based

payment

reserve

 

 

Merger

reserve

Retained profit

Total

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

 

 

 

 

 

 

 

 

At 1 April 2020

2,895

11,709

-

364

310

12,403

27,681

Share based payments

-

-

-

73

-

-

73

Transactions with owners

 

-

 

-

 

-

 

73

 

-

 

-

 

73

Loss and total comprehensive income for the year

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

 

(1,955)

 

 

(1,955)

Total comprehensive income less owners transactions

-

-

-

73

-

(1,955)

(1,882)

 

 

 

 

 

 

 

 

At 31 March 2021

2,895

11,709

-

437

310

10,448

25,799

 



Consolidated Cash Flow Statement for the year ended 31 March 2021

 

 

Note

2021

£000

2020

£000

Cash flows from operating activities

 

 

 

(Loss)/Profit for the year

 

(1,955)

2,431

Adjustments for

 

 

 

Net interest payable

 

50

113

Income tax credit

 

(867)

(28)

Amortisation of intangible assets

 

1,669

1,390

Depreciation

 

563

674

Contingent consideration release

 

-

(1,088)

Loss on impairment of property, plant and equipment and businesses

 

126

3

Goodwill write off

 

-

119

Share based payments

 

73

125

Tax payment in respect of LTIP

 

-

(17)

Operating cash flows before changes in working capital and provisions

 

(341)

3,722

Change in inventories

 

60

178

Change in receivables

 

786

125

Change in payables

 

547

191

 

 

1,393

494

Cash generated from operations

 

1,052

4,216

Net cash generated from operating activities

 

1,052

4,216

Cash flows from investing activities

 

 

 

Purchases of property, plant and equipment

 

(268)

(730)

Capitalisation of development costs

 

(2,312)

(1,941)

Purchases of intangible assets

 

(36)

(79)

Net cash used in investing activities

 

(2,616)

(2,750)

Cash flows from financing activities

 

 

 

Net interest payable

 

(50)

(113)

Repayment of leases

 

(64)

(141)

Issue of share capital

 

-

200

New Borrowing

 

3,540

-

Disposal of own shares

 

-

988

Payment of contingent consideration

 

(31)

(552)

Repayments of borrowings

 

(319)

(661)

Dividends paid

 

-

(1,604)

Net cash from/(used in) financing activities

 

3,076

(1,343)

Net increase/(decrease) in cash and cash equivalents

 

1,512

(417)

Cash and cash equivalents at beginning of period

 

381

798

Cash and cash equivalents at end of period

 

1,893

381

 

 

Reconciliation to the cash balance in the Consolidated Balance Sheet

Cash balance as per consolidated balance sheet

 

1,893

1,728

Bank overdrafts

 

-

(1,347)

Balance per statement of cash flows

 

1,893

381

 

 

Notes to the financial statements

 

1. Taxation

Analysis of credit in period

 

2021

£000

2020

£000

Current tax expense

 

 

- Amounts in respect of the current year

-

-

- Amounts in respect of prior periods

-

-

 

-

-

 

 

 

Deferred tax credit:

 

 

- Amounts in respect of the current year

(846)

(9)

- Amendment re-recognition of losses

(21)

(19)

 

 

 

Income tax credit

(867)

(28)

 

Reconciliation of effective tax rate

The tax for the 2021 period is lower (2020 was lower) than the standard rate of corporation tax in the UK (2021: 19% and 2020: 19%). The differences are explained below:

 

 

2021

£000

2020

£000

(Loss)/Profit before taxation

- Continuing operations

(2,822)

2,403

 

 

 

(Loss)/Profit before taxation multiplied by rate of corporation tax in the UK of 19% (2020: 19%)

(536)

457

Effects of:

 

 

Other expenses not deductible for tax purposes

15

132

Non taxable income

16

(205)

Amortisation of intangibles

254

201

Movement on losses

82

46

Adjustments for prior years

(21)

(19)

Research and development

(677)

(640)

Total tax credit

(867)

(28)

 

2. Ordinary dividends

 

2021

£000

2020

£000

Final dividend for the year ended 31 March 2020 of nil (year ended 31 March 2019: 4.0p)

-

1,123

Interim dividend paid in respect of the year of nil (2020: 1.70p)

-

481

Amounts recognised as distributions to equity holders

-

1,604

 

In addition, the directors are not proposing a final dividend in respect of the year ended 31 March 2021. Total dividend payable nil (2020: 1.70p).

 

3. Earnings per share

Earnings per share for the year ended 31 March 2021 was (6.75p) (2020: 8.56p positive).

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders (Loss £1,955k) 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.

 

2021

2020

 

 

Loss

£000

Basic earnings per share (p)

Diluted earnings per share (p)

Earnings

£000

Basic earnings per share (p)

Diluted earnings per share (p)

 

Post-tax profit attributable to equity shareholders

(1,955)

(6.75)

(6.75)

2,431

8.56

8.47

 

 

 

 

 

 

 

 

 

 

2021

Number

2020

Number

Weighted average number of ordinary shares                        

28,953,414

28,410,348

Dilutive effect of share options

-

281,866

Diluted weighted average number of ordinary shares

28,953,414

28,692,214

                   

 

4. Exceptional items

 

2021

£000

2020

£000

Corporate activity and acquisition costs

-

311

Disposal costs

101

-

Corporate restructuring and transitional costs

154

415

Contingent consideration release

-

(1,086)

Network obsolesce costs

8

50

Loan impairment

-

200

Other

80

109

 

343

(1)

 

Corporate activity and acquisition costs relate to fees paid to corporate advisors in respect of prospective acquisitions and corporate evaluations.

 

Disposal costs relate to the exit of the Stockport property lease, disposal of associated leasehold improvements and associated costs.

 

Staff transitional costs relate to the transition of people and management to ensure we have to succession and calibre of people on board to deliver the strategic aims and aspirations of the Group.

 

The loan impairment reflects the Directors view of recoverability of a loan made to a business of strategic interest which was impacted by COVID-19.

 

The contingent consideration release refers to the acquisition of Vendman Systems Limited to where a proportion of the consideration was based upon results of the company for two years post acquisition. This balance has now been fair valued at the year end with the change in fair value recognised through the income statement as the deferred period has now closed.

 

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, International Accounting Standards and Interpretations (collectively 'IFRS') in conformity with the requirements of Companies act 2006. 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 2020 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 2021 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 2020 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 2021 and 31 March 2020 did not contain a statement under s498 (1) to (4) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2021 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.

 

6. Annual General Meeting

 

The Annual General Meeting will be held on 13 July 2021 at 11.00am, at the offices of Vianet Group plc, One Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR.

 

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