Share Name Share Symbol Market Type Share ISIN Share Description
Vianet Group Plc LSE:VNET London Ordinary Share GB00B13YVN56 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  6.00 4.9% 128.50 126.00 131.00 128.50 125.00 125.00 32,747 08:01:54
Industry Sector Turnover (m) Profit (m) EPS - Basic PE Ratio Market Cap (m)
Support Services 15.7 2.7 8.9 14.5 37

Vianet Group PLC Final Results

04/06/2019 7:00am

UK Regulatory (RNS & others)


Vianet (LSE:VNET)
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RNS Number : 0036B

Vianet Group PLC

04 June 2019

 
 Press Release   4 June 2019 
 

Vianet Group plc

("Vianet" or the "Group")

Final Results

and Dividend Declaration

Vianet Group plc (AIM: VNET), the international provider of actionable data and business insight through devices connected to its Internet of Things ("IOT") platform, is pleased to announce its final results for the year ended 31 March 2019.

Financial highlights (continuing operations)

   --    Revenue increased 7.7% to GBP15.68 million (2018: GBP14.56 million) 

-- Recurring revenues remain strong at 94% (2018: 90%) helped by the Vendman acquisition in October 2017 and transition from capital to annuity based sales in Smart Machines

   --    Gross margin stable at 68% (2018: 70%) 

-- Operating profit pre-amortisation of intangibles, share options and exceptional costs up 6.4% to GBP3.85 million (2018: GBP3.62 million)

-- Profit before taxation was up 29.8% to GBP2.66 million post exceptional items (2018: GBP2.05 million) with profit after tax up 37.1% to GBP2.48 million (2018: GBP1.81 million)

-- Basic earnings per share (before tax) and post-exceptional costs at 8.87 pence (2018: 6.55 pence)

-- Final dividend of 4.00 pence per share proposed giving a full year total of 5.70 pence per share (2018: 5.70 pence)

Divisional highlights

-- Smart Machines adjusted operating profit of GBP1.41 million, including Vendman contribution of GBP0.42 million, grew 31.8% from GBP1.07 million

-- Smart Machines added 10,285 new connected devices (2018: 4,490) - helped by the highly encouraging roll-out of cloud-based contactless payment solutions

-- Smart Zones adjusted operating profit of GBP4.48 million (2018: GBP4.53 million) - a positive result given the headwinds in the UK pub sector

-- Smart Zones Technology upgrades in 1,901 pubs creating IOT hubs, with a further 2,497 in pipeline for 2019/20

-- GBP3.0 million investment in cloud and mobile technology to modernise the Smart Zones platform and support growth in the Smart Machines division

Commenting on the final results, James Dickson, Chairman of Vianet Group plc, said:

"Vianet has made very good progress towards delivery of earnings breakthrough and continues to benefit from the focus on exploiting growth opportunities in the Smart Machines division whilst managing performance back towards growth in the Smart Zones division. In the year, the historic Smart Zones contribution was broadly maintained whilst Smart Machines would have nearly doubled its operating profit had the Group not moved to an annuity-based

model for new sales.   As it was, reported profits rose by 31.8% to GBP1.41 million. 

"Smart Machines leading end-to-end product suite and established presence is continuing to create strong growth opportunities across the UK and Europe. The combined business capability and potential of Vianet and Vendman and the roll-out of the global coffee contract will be transformational for this division. In the coming years, Smart Zones will aim to maintain contribution from the UK pub market whilst taking advantage of growth prospects in the significant US hospitality sector.

"Our recent GBP3.0 million 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.

"The Group is in good shape to deliver strong earnings growth and enters FY2020 with solid momentum and focus on our exciting opportunities."

- Ends -

An audio cast of the full year results presentation given by Stewart Darling (Chief Executive) and Mark Foster (Chief Finance Officer), was released this morning, Tuesday, 4 June 2019 at 07.00hrs on the Group's website www.vianetplc.com with the link also being distributed by Yellow Jersey PR. An analyst briefing will be held today at 09.30hrs at Cenkos, 6-8 Tokenhouse Yard, London EC2R 7AS.

Enquiries:

 
 Vianet Group plc 
 James Dickson, Chairman             Tel: +44 (0) 1642 358 
  Stewart Darling, CEO                                 800 
  Mark Foster, 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 
 

Chairman's Statement

Performance

The Group has made very good progress towards delivery of earnings breakthrough and continues to benefit from the focus on exploiting growth opportunities in the Smart Machines division whilst managing performance back towards growth in the Smart Zones division.

Group turnover was GBP15.68 million (2018: GBP14.56 million) whilst adjusted operating profit was up by 6.4% at GBP3.85 million. Group profit before taxation was GBP2.66 million post exceptional items (2018: GBP2.05 million), with profit after tax up 37.1% to GBP2.48 million. Our Smart Machines division's move from capex to annuity only model had the short term impact of effectively reducing FY2019 turnover by GBP0.97 million and profit by some GBP0.5 million. However, there will be a significant benefit to future recurring incomes and visibility of profits.

There was an exceptional net credit of GBP0.22 million (2018: net cost GBP0.54 million) principally related to the Vendman acquisition deferred consideration release which was offset by staff rationalisation and network obsolescence costs. Whilst there has been a GBP0.53 million write back on the Vendman earn out provision, we are delighted with the progress and momentum against a stretching earn out which will be finalised at end H12020.

Basic pre-tax earnings per share was 8.87p (2018: 6.55p) with underlying earnings per share, pre deferred tax release growing 6.4% to 6.97p (2018: 6.55p).

Given the solid underlying performance, high quality recurring income and the strong prospects for the Group, the Board is proposing to maintain the final dividend at 4.00 pence which, if approved by shareholders, would give a total gross dividend for the year of 5.70 pence (2018: 5.70 pence). Subject to approval from shareholders at the Annual General Meeting, to be held on 26 June 2019, the final dividend will be paid on 26 July 2019 to shareholders on the register as at 14 June 2019.

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 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 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.

Outlook

The Group is in good shape to deliver strong earnings growth and enters FY2020 with solid momentum and focus 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.

-- The synergy and momentum resulting from the now integrated Vendman acquisition is exciting and together with full realisation of the global coffee company contract will transform Smart Machines' earnings over the next few years. Encouraging progress has been made on the significant opportunity to overlay circa 200,000 Vendman mobile connections with higher value Smart Machines connections and also to cross sell from the integrated portfolio to existing customers and vending operators internationally.

-- The Group is making further sales investment to accelerate growth in the areas above, with 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 circa GBP3.0 million 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 carry momentum from several major customer technology upgrade programs through FY2020 and will benefit greatly from our recent infrastructure investment. This will allow Smart Zones to maintain existing profit contribution whilst taking advantage of improving growth prospects both in the UK pub market and 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 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.

James Dickson

Chairman

Chief Executive's Report

Vianet delivers value to its customers by providing analytics and insight on asset utilisation and performance allowing more informed decision making and business change.

Whilst we currently operate two business divisions: Smart Zones (drinks monitoring and machine management services) and Smart Machines (unattended retail machine ERP and mobile software, telemetry and contactless payment solutions), the technological capability and expertise we have developed supports our market leading ability to connect to any asset with a digital output.

With over 300 customers including several global blue-chip companies with nearly 230,000 devices (excluding circa 200,000 Vendman mobile connections) connected to our IOT platform, our experience and knowledge combine to form a powerful technology and insight capability that, we believe, is unmatched by competitors in our markets.

As the IOT evolves and businesses seek to identify means of improving asset utilisation and performance, Vianet is well placed to grow its position in this rapidly developing area.

Whilst hardware and connectivity still has a significant role to play in enabling the connection to an asset, our IOT platform has evolved so that our connectivity capability is agnostic and can connect to any device. Therefore, we do not always need to connect to one of our own Smart Devices. Our ability to harvest data on customer asset performance enables the creation of powerful analytics and insight and this will drive sustained business growth over the coming years.

We have resisted the distraction of developing other enablement technologies necessary to create the overall solution. Instead, our strategic choice has been to build partnerships with leading providers and partners such as Elavon and Creditcall.

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.

We were delighted to win a tender process with an existing strategic Smart Machines customer for the supply of connected devices, analytics and insight data. Due to a significant IT project undertaken by the customer, this project will complete in June 2019 and we are confident of progress in the coming year.

Simultaneously, as part of our strategic intent to accelerate growth and improve revenue visibility, we have migrated from a largely capital sales based model to an annuity only model where hardware is effectively leased and not purchased. Whilst this will drive increased quality of earnings in the medium to long term, in the short term it has as expected adversely impacted both turnover and profitability, accounting for just over GBP967,000 turnover and circa GBP500,000 profit on a like for like basis when compared to last year.

With the integration of Vendman into the Group complete, progress is now being made towards improving the operating performance of the combined business. As a positive demonstration of this, Vendman contributed GBP0.42 million of adjusted operating profit in the year, underpinning our belief that the combination of Smart Machines and Vendman has a compelling strategic, commercial and financial rationale.

As well as establishing a market-leading portfolio of solutions for unattended retail through the combination of expertise, products and services, the acquisition of Vendman opened up significant cross-selling opportunities for Vianet IOT connectivity, real-time data and contactless payment technology. In the machine estate there are circa 200,000 vending machines, the vast majority of which are not connected via a real-time device. To date we have connected almost 6,000 (circa 3%) of these machines, which leaves significant conversion headroom that we will exploit in the coming year through increased investment in sales and commercial resource in the field.

At the same time, the presence of Vianet and Vendman in Continental Europe is enhancing our route to market and distribution opportunities through establishing a strong network and footprint with distributors and machine suppliers.

To enable and accelerate our strategy we have also invested nearly GBP3.0 million in new cloud and mobile technology that will allow us to scale quickly and effectively whilst engaging customers via new mobile applications and connectivity.

We aim to complete the substantial task of migrating all customers and data from our legacy platform to this new platform and capability in 2019.

Operating Review

Smart Zones

The performance of our drinks monitoring and support services solutions for the UK Hospitality sector was maintained year-on-year in respect of operating profit and remains resilient with high gross margins and strong cash generation.

In the period technology upgrades, creating IOT hubs, were completed in 1,901 pubs with a further 2,497 in the pipeline for FY2020. This progress in deploying new technology capability has delivered a healthy pipeline of installs for the next 18 months or so, all of which will help sustain the divisional contribution. However, our customers focus on this high level of activity together with the encouraging extensions to managed pub company commercial pilots resulted in only 88 new site installations.

UK pub disposals have continued but slowed (2019: 911 and 2018: 1,420) with the resulting impact being a net reduction of 823 (2018: 1,175) licenced premises in our installation base over the financial year with a consequential impact on operating contribution.

Despite these pub disposals, our Smart Zones connected device base remains significant with circa 202,000 devices in circa 12,600 premises in the UK and USA. The data sent from these devices forms the core of the insight and analytics delivered to customers via our website and mobile applications.

The combination of strong recurring revenues from long term contract extensions, robust cost base and margin management offset the lower turnover resulting from pub closures enabling the Group to maintain profit contribution year-on-year.

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. We expect these different strategies to be beneficial to our business as the pub companies seek to improve retailing capability and quality standards and will likely be targeting investment expenditure on that basis.

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.

In summary, Smart Zones is focussed on maintaining performance despite the UK pub market headwinds, and executing the roll-out of technology upgrades to give us a platform to provide new analytics and insight to customers.

In our Vianet Americas business we have made more progress with 43 new installations, resulting in year-on-year operating performance being effectively breakeven and an expectation of delivering a maiden profit during FY2020.

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 to secure a new large-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.

Whilst the pace of progress is slower than we would wish, we recognise that for a relatively modest level of investment in what is the world's largest multiple operator market, a breakthrough could be significant. Therefore, the Group remains committed to establishing a significant US profit centre.

Overall, the Board is confident that the Smart Zones division will maintain its existing profit contribution whilst also being positioned to benefit from the encouraging growth prospects in both the UK managed pub and US hospitality sectors.

Smart Machines

Smart Machines made great progress in the year as our strategy of securing agreements with significant industry players who have the scale to invest and the sophistication to unlock the value of our technology provides, continues to fuel growth.

With the acquisition of Vendman and the resulting access to new customers and markets, 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.

We are very much encouraged by the sales growth in these channels and our securing of vending contracts with major industry customers whose businesses are growing. This resulted in Divisional adjusted operating profit growth of 31.8% to GBP1.41 million in the year. Profit before tax however increased to GBP0.98 million (2018: GBP0.36 million). Whilst this was helped by a Vendman contribution of GBP0.42 million, it was a highly encouraging performance as the move from capex to annuity only model effectively reduced FY2019 profit by some GBP0.5 million.

Our approach is to build an annuity only income model to drive sales and strengthen recurring revenues, improving the quality and visibility of earnings in the medium to long term. Whilst a positive step for the business, this transition adversely impacted turnover in Smart Machines by around GBP967,000 in the year and also increased our upfront cash requirements. The approach will result in higher quality income streams and profits in the coming years and we have already seen our recurring revenues grow to 87% of Smart Machines income in the year, an increase of 13% on last year's figure of 74%.

Total Smart Machine connections grew by just under 10,300 devices in the year helped by the highly encouraging roll-out of our cloud based contactless payment solution.

The contactless payment solution, which is driving increased sales of around 20% per unattended retail machine for our customers, increased its own footprint by 140% in the year. This strong acceleration is also unlocking further growth opportunities through the provision of analytics and insight to machine operators who wish to unlock more value available from their assets and overall operations.

The strategic contract with a global coffee customer for the roll-out of connected coffee machines to a large part of its estate was slower than anticipated in the year due to software development the customer had to undertake to scale the program. We anticipate the roll-out will begin in the coming months and the phased deployment of this contract across ten further countries in Europe, Australia and New Zealand will gather pace.

From breakeven at acquisition Vendman contributed GBP0.42 million in the year as it took advantage of cross selling opportunities presented by IOT connectivity and real-time data to customers including the roll-out of Vianet contactless payment technology.

The market opportunity remains extensive even when limited to the immediately addressable market projections of 300,000 vending machines rather than all vending machines across mainland Europe. As technology adoption evolves, it is anticipated that the addressable market will grow to nearly 1 million vending machines with Vianet being at the forefront to grow with the market.

Our contactless payment solution, continues to be supported by leading industry partners Elavon and CreditCall. This will further evolve in the coming year when we introduce a master merchant capability 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 provides a material opportunity to change this dynamic and attract more consumers to the vending vertical.

In summary, we expect that Vianet's analytics and insight delivered from data harvested from unattended retailing assets and evolving contactless payment solution will provide exciting growth opportunities in years to come.

R&D Investment

The Group continues to invest in development activity with accelerated activity in the year. Development has broadly covered enhancements to customer experience. Revenue generating analytics and insights from new platforms allows 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 technology environment. The accelerated investment took the total investment to date in the cloud platform, analytics and mobile technology to almost GBP3.0 million.

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

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.

The combined business capability and potential of Vianet and Vendman and the rollout of the global coffee contract will be transformational for the overall Smart Machines business and should drive significantly increased earnings for the Group in the next few years. In tandem, we continue to grow and develop strong working relationships with significant industry players where contracted recurring revenues now represent 94% of turnover.

Whilst Smart Machines is already exploiting growth opportunities through its strong portfolio of products and services to existing customers across Europe, the recent investment of almost GBP3.0 million in new cloud and mobile capability, and the transformation of legacy systems, will facilitate rapidly scalable growth in existing and new vertical markets. Our contactless payment solution and introduction of a master merchant scheme, combined with rapid adoption of technology by brand owners and machine operators, positions this division for strong underlying growth.

The Smart Zones division will aim to maintain contribution from the UK pub market helped by new technology upgrades in existing customers, which will enhance existing income streams and unlock further opportunities for enhanced analytics and insight. In parallel, we are encouraged by managed operator growth prospects here and in the USA where we expect to expand our iDraught footprint through existing and new mid-size multiple operators.

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

Growing Profitability

Group operating profit, pre-exceptional costs, was up 6.4% to GBP3.85 million (FY2018: GBP3.62 million).

Gross margin remained healthy year-on-year at circa 68%.

The average operating profitability per connected device has grown 10.2% to GBP16.80 (2018: GBP15.24).

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 7.7% helped by the integration of Vendman which offset a moderate decline in Smart Zones and the GBP0.97 million revenue impact of the shift from capex to annuity model and vending estate rationalisation in Smart Machines.

Recurring Revenue

Blended recurring revenue across the two divisions was 94% (2018: 90%), helped by the Vendman integration and the transition from capital to annuity based sales in Smart Machines.

The average recurring revenue per connected device has grown 7.4% to GBP55.12 (2018: GBP51.31).

Performance Summary

PBT was up 3.9% at GBP2.13 (2018: GBP2.05 million). The table below shows the performance of the Group:

 
                       FY2019       FY2018      Change 
                                                 % 
 Revenue               GBP15.68m    GBP14.56m   7.7 
 Operating 
  profit(a)            GBP3.85m     GBP3.62m    6.4 
 Operating 
  profit               GBP4.08m     GBP3.08m    32.2 
 Operating 
  profit(b)            GBP3.55m     GBP3.08m    15.3 
 Profit before 
  tax(b)               GBP2.13m     GBP2.05m    3.9 
 Profit after           GBP2.48m    GBP1.81m    37.1 
  tax 
  Basic EPS(c)           6.97p       6.55p       6.4 
 Basic EPS 
  Dividend             8.87p        6.55p 
  per share             5.70p        5.70p      35.4 
 Net (debt)/cash(d)    GBP(1.20)m   GBP1.20m 
 
   a)    Pre-exceptional items, share based payments and amortisation 
   b)    Pre deferred consideration 
   c)    Profit after tax pre deferred consideration release 

d) Cash at bank after deduction of bank loans including loan for the acquisition of Vendman Systems Limited

Exceptionals

 
                            FY2019     FY2018 
                             'GBP000    'GBP000 
 
 People and 
  office rationalisation    163        260 
 Network obsolescence 
  costs                     107        43 
 Acquisition 
  costs                     -          231 
 Deferred consideration      (530)      - 
  release 
 Other items                38         4 
-------------------------  ---------  --------- 
 Total                      (222)      538 
=========================  =========  ========= 
 

Current year total relates to deferred consideration release in relation to the Vendman acquisition, offset by staff rationalisation costs and network obsolescence costs.

Dividend

The Board is proposing to maintain the final dividend at 4.00 pence which, if approved by shareholders, would give a total dividend for the year of 5.70 pence (2018: 5.70 pence).

On a profit after tax basis, dividend cover has increased to circa 1.56 (2018: circa 1.16), but on an underlying basis cover increased to 1.23. We expect the cover to improve further in FY2020 as a result of our anticipated growth in profits and reduction in exceptional costs.

Cash

Net cash generation pre working capital movements and LTIP taxation payments was GBP3.99 million (2018: GBP3.52 million), growth of 13.3% (including share based payments and asset disposals). This year we have invested GBP0.6 million in increased stock levels to fulfil annuity sales and secure supply chain stocks of key electronic components in a volatile world component market.

This, together with; the impact of a move away from Capex to annuity modelling; externally contracted investment in our new IOT platform; and the incorporation of the Vendman working capital metrics, has meant after working capital movements but before LTIP taxation payment an operational generation of GBP2.04 million versus GBP2.97 million last year. Operational generation post LTIP taxation payment was GBP1.54 million (2018: GBP2.97 million).

We reported at the half year that H2 would start to see an upturn in cash generation with less investment in stock and external contractors - the working capital position reduced to a GBP0.76 million impact in H2 compared to GBP1.19 million in H1, impacted mainly by creditor payments from H1 commitments. This was as forecast and as expected given the transition the business has been going through.

The cash generated was principally used to service accelerated R&D investment, dividend payment and servicing of new borrowings leaving an outflow of GBP3.12 million (2018: GBP0.6 million outflow). As expected, however, the H2 outflow was significantly reduced at GBP0.52 million compared to H1 of GBP2.60 million.

At the year-end, pre mortgage and the acquisition loan, the Group had net cash including overdraft of GBP0.80 million (2018: GBP3.92 million), borrowings of GBP1.99 million (2018: GBP2.65 million), and net debt of GBP1.20 million (2018: net cash GBP1.20 million) impacted by the GBP2 million term loan associated with the Vendman acquisition and cloud based platform investment. FY2020 should see an improved cash performance result.

Divisional Performance

Currently the Smart Zones division principally consists of the core beer monitoring business (including the US) and gaming machine monitoring.

Smart Zones

 
                     FY2019      FY2018      Change 
                                              % 
 Turnover            GBP11.00m   GBP11.45m   (3.9) 
 Operating 
  profit(a)          GBP4.48m    GBP4.53m    (1.1) 
 Profit              GBP4.06m    GBP4.05m    0.2 
  before 
  tax 
  Total connected     202,513     218,663     (7.4) 
   devices 
 New Installation 
  sales              88          245         (64.1) 
 YE Net 
  premises(b)        c12,600     c13,570     (7.1) 
 iDraught 
  penetration(b)     27.0%       28.0% 
 
 
   a)    Pre-exceptional items, share based payments and amortisation 
   b)    UK, USA and Europe only 

Recurring revenue per device has increased 8.9% to GBP52.99 (2018: GBP48.67) 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 8.0% to GBP18.03 (2018: GBP16.70) reflecting flat profitability against a lower estate size.

The Smart Zones division has performed fairly against a challenging pub market backdrop that resulted in a net estate reduction of 823 sites (2018: 1,175) to circa 12,300 (2018: 13,125) in the UK and Europe.

Against this backdrop, Smart Zones maintained its operating profit at GBP4.48 million (2018: GBP4.53 million).

Smart Machines

The Smart Machines division consists of telemetry and contactless monitoring predominantly in the vending sector, and includes six months of recently acquired Vendman.

 
                                FY2019      FY2018      Change 
                                                           % 
 Turnover (b)                   GBP4.68m    GBP3.12m    50.0 
 Operating profit (a, 
  b)                            GBP1.41m    GBP1.07m    31.8 
 Profit before tax              GBP0.98m    GBP0.36m    172.2 
  Vendman (d)                    GBP0.42m    GBP0.12m    250.0 
 New Telemetry connections      2,485       1,660       49.7 
 New Contactless connections    7,800       2,830       175.6 
 YE Net estate (c)              c27,000     c18,000     (10.0) 
 
 
   a)    Pre-exceptional items, share based payments and amortisation on a continuing basis. 

b) Included in the above FY2019, Vendman contributed GBP2.88m in turnover and GBP0.42m in operating profit

   c)    Excludes circa 200,000 Vendman connections. 

d) Vendman contribution is pre-exceptional items, share based payments and amortisation on a continuing basis, and included in the operating profit figure

Smart Machines continued to make progress in the year with growth in number of new connected devices, especially in contactless with new contactless connections being 4,970 ahead of FY2018. The estate figures reflect the net movement shown above.

Average recurring revenue per device decreased 12.9% to GBP71.11 (2018: GBP81.66) principally due to the mix of estate, with the shift towards annuity based revenue streams along with increased penetration of contactless solutions.

Average adjusted operating profit per device (above) has increased 4.4% to GBP52.13 (2018: GBP49.93) due to sales/revenue stream mix as noted above set against a relatively stable fixed cost base.

Taxation

The Group has continued to utilise available tax losses during the year resulting in no tax being paid (2018: GBPnil). The Group will continue to utilise the available tax losses carried forward into FY2020. In the financial year under review, the tax line includes a deferred tax charge of GBP0.18 million (2018: GBP0.24 million) recognising the impact of the tax losses available and being utilised.

Earnings per share

Earnings per share has been impacted by the recognition of the deferred tax assets provision referred to above, realising the losses carried by the Group and the unwinding of that provision since FY2014.

The underlying profit after tax from continued operations pre deferred consideration release earnings per share is 6.97 pence for FY2019 compared to 6.55 pence for FY2018.

Basic EPS was 8.87 pence compared to 6.55 pence in 2018.

Balance sheet and cash flow

The Group balance sheet remains strong.

The Group generated operating cash flow (pre LTIP tax payment) of GBP2.04 million (2018: GBP2.97 million) with FY2019 impacted by the continued shift to annuity revenue streams and stock investment as well as external contractor investment in our cloud based platform.

The cash generated in FY2019 was utilised to invest in the Group's accelerated technology plans through research and development, to service borrowings and to fund dividend. At the year-end, the Group had borrowings of GBP1.99 million (2018: GBP2.65 million), and net debt of GBP1.20 million (2018: net cash GBP1.20 million), which was forecast to occur given the transition the Group is going through.

The balance sheet and cash generating capacity of Vianet provides a continued strong base to pursue the significant growth opportunities that the Board has identified in order to generate increased shareholder value.

Mark Foster

Chief Financial Officer

Consolidated Statement of Comprehensive Income for the year ended 31 March 2019

 
 
 
 
 
 
                                        Before     Exceptional                      Before 
                                   Exceptional            2019       Total     Exceptional     Exceptional       Total 
                                          2019          GBP000        2019            2018            2018        2018 
                                        GBP000                      GBP000          GBP000          GBP000      GBP000 
                      Note 
 
 Continuing 
  operations 
 Revenue                                15,683               -      15,683          14,561               -      14,561 
 Cost of 
  sales                                (5,023)               -     (5,023)         (4,381)               -     (4,381) 
 
 Gross 
  profit                                10,660               -      10,660          10,180               -      10,180 
 
 Administration 
  and other 
  operating 
  expenses                             (6,805)             222     (6,583)         (6,559)           (538)     (7,097) 
 
 Operating 
  profit 
  pre amortisation 
  and share 
  based 
  payments 
  from continuing 
  operations                             3,855             222       4,077           3,621           (538)       3,083 
 
 Intangible 
  asset 
  amortisation                         (1,192)               -     (1,192)           (865)               -       (865) 
 Share 
  based 
  payments                               (132)               -       (132)           (142)               -       (142) 
-------------------  -----  ------------------  --------------  ----------  --------------  --------------  ---------- 
 
 Total 
  administrative 
  expenses                             (8,129)             222     (7,907)         (7,566)           (538)     (8,104) 
 Operating 
  profit                                 2,531             222       2,753           2,614           (538)       2,076 
-------------------  -----  ------------------  --------------  ----------  --------------  --------------  ---------- 
 
 Net finance 
  costs                                   (95)               -        (95)            (28)               -        (28) 
 
 
 
   Profit 
   from continuing 
   operations 
   before 
   tax                                   2,436             222       2,658           2,586           (538)       2,048 
 
 Income 
  tax expense          1                 (178)               -       (178)           (239)               -       (239) 
 
 Profit 
  and other 
  comprehensive 
  income 
  for the 
  year                                   2,258             222       2,480           2,347           (538)       1,809 
 Earnings 
  per share 
 Total 
 - Basic               8                                             8.87p                                       6.55p 
 
 - Diluted             8                                             8.80p                                       6.54p 
-------------------  -----  ------------------  --------------  ----------  --------------  --------------  ---------- 
 
 Continuing 
  Operations 
 - Basic               8                                             8.87p                                       6.55p 
 
 - Diluted             8                                             8.80p                                       6.54p 
-------------------  -----  ------------------  --------------  ----------  --------------  --------------  ---------- 
 
 

Consolidated Balance Sheet at 31 March 2019

 
                                        2019      2018 
                                      GBP000    GBP000 
 Assets 
 Non-current assets 
 Goodwill                             17,975    17,975 
 Other intangible assets               4,875     4,529 
 Property, plant and equipment         3,503     3,166 
 Deferred tax asset                      313       391 
 Total non-current assets             26,666    26,061 
----------------------------------  --------  -------- 
 Current assets 
 Inventories                           1,670     1,086 
 Trade and other receivables           3,669     3,246 
 Cash and cash equivalents             1,788     4,324 
----------------------------------  --------  -------- 
                                       7,127     8,656 
   -------------------------------  --------  -------- 
 Total assets                         33,793    34,717 
----------------------------------  --------  -------- 
 Equity and liabilities 
 Liabilities 
 Current liabilities 
 Trade and other payables              4,138     4,416 
 Borrowings                            1,652     1,062 
 Tax                                       -        20 
                                       5,790     5,498 
 Non-current liabilities 
 Other payables                          139     1,339 
 Borrowings                            1,333     1,994 
 Deferred tax                            972       872 
                                       2,444     4,205 
   -------------------------------  --------  -------- 
 
 Equity attributable to owners 
  of the parent 
 Share capital                         2,874     2,872 
 Share premium account                11,530    11,519 
 Share based payment reserve             314       483 
 Own shares                            (754)   (1,114) 
 Merger reserve                          310       310 
 Retained profit                      11,285    10,944 
----------------------------------  --------  -------- 
 Total equity                         25,559    25,014 
----------------------------------  --------  -------- 
 
 Total equity and liabilities         33,793    34,717 
----------------------------------  --------  -------- 
 

Consolidated Statement of Changes in Equity for the year ended 31 March 2019

 
                                                            Share 
                                        Share               based 
                              Share   premium       Own   payment     Merger   Retained 
                            capital   account    shares   reserve    reserve     profit      Total 
At 1 April 2017               2,843    11,287   (1,221)       418        310     10,624     24,261 
Dividends                         -         -         -         -          -    (1,562)    (1,562) 
Issue of shares                  29       232         -      (50)          -         50        261 
Share based payments              -         -         -       115          -         27        142 
Exercise of options               -         -       107         -          -        (4)        103 
Transactions with 
 owners                          29       232       107        65          -    (1,489)    (1,056) 
-------------------------  --------  --------  --------  --------  ---------  ---------  --------- 
Profit and total 
 comprehensive 
 income for the 
 year                             -         -         -         -          -      1,809      1,809 
-------------------------  --------  --------  --------  --------  ---------  ---------  --------- 
Total comprehensive 
 income less owners 
 transactions                    29       232       107        65          -        320        753 
-------------------------  --------  --------  --------  --------  ---------  ---------  --------- 
 
At 31 March 2018              2,872    11,519   (1,114)       483        310     10,944     25,014 
-------------------------  --------  --------  --------  --------  ---------  ---------  --------- 
 
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 
-------------------------  --------  --------  --------  --------  ---------  ---------  --------- 
 

Consolidated Cash Flow Statement for the year ended 31 March 2019

 
                                                        2019      2018 
                                              Note    GBP000    GBP000 
 Cash flows from operating activities 
 Profit for the year                                   2,480     1,809 
 Adjustments for 
 Net interest payable                                     95        28 
 Income tax expense                                      178       239 
 Amortisation of intangible assets                     1,192       865 
 Depreciation                                            450       379 
 Payment of deferred consideration                      (21)         - 
 Deferred consideration release                        (530)         - 
 Loss on sale of property, plant 
  and equipment                                           14        61 
 Share based payments                                    132       142 
 Tax payment in respect of LTIP                        (495)         - 
 Operating cash flows before changes 
  in working capital and provisions                    3,495     3,523 
 Change in inventories                                 (583)       219 
 Change in receivables                                 (423)     (537) 
 Change in payables                                    (948)     (126) 
 Change in provisions                                      -     (105) 
                                                     (1,954)     (549) 
 Cash generated from operations                        1,541     2,974 
 Net cash generated from operating 
  activities                                           1,541     2,974 
-------------------------------------------  -----  --------  -------- 
 Cash flows from investing activities 
 Purchase of subsidiary                                    -   (1,855) 
 Cash acquired with subsidiary                             -      (62) 
 Purchases of property, plant and 
  equipment                                            (801)     (398) 
 Purchases of intangible assets                      (1,538)   (1,610) 
 Net cash used in investing activities               (2,339)   (3,925) 
-------------------------------------------  -----  --------  -------- 
 Cash flows from financing activities 
 Net interest payable                                   (95)      (28) 
 Issue of share capital                                   13       262 
 Share options exercised                                   -       102 
 New bank loans                                            -     2,000 
 Repayments of borrowings                              (659)     (450) 
 Dividends paid                                2     (1,585)   (1,562) 
 Net cash used in financing activities               (2,326)       324 
-------------------------------------------  -----  --------  -------- 
 Net decrease in cash and cash equivalents           (3,124)     (627) 
 Cash and cash equivalents at beginning 
  of period                                            3,922     4,549 
-------------------------------------------  -----  --------  -------- 
 Cash and cash equivalents at end 
  of period                                              798     3,922 
-------------------------------------------  -----  --------  -------- 
 

Reconciliation to the cash balance in the Consolidated Balance Sheet

 
 Cash balance as per consolidated 
  balance sheet                          1,788   4,324 
 Bank overdrafts                         (990)   (402) 
--------------------------------------  ------  ------ 
 Balance per statement of cash flows       798   3,922 
--------------------------------------  ------  ------ 
 

Notes to the financial statements

1. Taxation

Analysis of charge in period

 
                                                2019      2018 
                                              GBP000    GBP000 
 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        174       230 
 - Amendment re-recognition of losses              4         9 
 
 Income tax charge                               178       239 
------------------------------------------  --------  -------- 
 

Reconciliation of effective tax rate

The tax for the 2019 period is lower (2018 was lower) than the standard rate of corporation tax in the UK (2019: 19% and 2018: 19%). The differences are explained below:

 
                                                      2019      2018 
                                                    GBP000    GBP000 
 Profit before taxation 
  - Continuing and discontinuing operations          2,658     2,226 
 
 Profit before taxation multiplied by rate 
  of corporation tax in the UK of 19% (2018: 
  19%)                                                 505       423 
 Effects of: 
 Other expenses not deductible for tax purposes         44        35 
 Non taxable income                                  (101)         - 
 Amortisation of intangibles                           189       123 
 Movement on losses                                     55       120 
 Adjustments for prior years                             4         9 
 Research and development                            (518)     (471) 
 Total tax charge                                      178       239 
------------------------------------------------  --------  -------- 
 

2. Ordinary dividends

 
                                                     2019      2018 
                                                   GBP000    GBP000 
 Final dividend for the year ended 31 March 
  2018 of 4.0p (year ended 31 March 2017: 
  4.0p)                                             1,108     1,096 
 Interim dividend paid in respect of the 
  year of 1.70p (2018: 1.70p)                         477       466 
 Amounts recognised as distributions to equity 
  holders                                           1,585     1,562 
-----------------------------------------------  --------  -------- 
 

In addition, the directors are proposing a final dividend in respect of the year ended 31 March 2019 of 4.0p per share. If approved by shareholders, it will be paid on 26 July 2019 to shareholders who are on the register of members on 14 June 2019. Total dividend payable 5.70p (2018: 5.70p).

3. Earnings per share

Earnings per share has been impacted by the release of a deferred tax asset provision. After adjustment for the lower tax charge, the overall basic earnings per share for the year ended 31 March 2019 before exceptional costs increased to 8.08 pence compared to 8.50 pence at March 2018.

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders (GBP2,480k) by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share are calculated on the basis of profit for the year after tax divided by the weighted average number of shares in issue in the year plus the weighted average number of shares which would be issued if all the options granted were exercised.

The table below shows the earnings pre and post the impact of the movement in the deferred tax asset.

 
                                                 2019                                 2018 
                                  Earnings     Basic       Diluted     Earnings     Basic       Diluted 
                                              earnings     earnings                earnings     earnings 
                                              per share    per share               per share    per share 
                                   GBP000                               GBP000 
 Post-tax profit attributable 
  to equity shareholders             2,480        8.87p        8.80p      1,809        6.55p        6.54p 
 Pre-tax profit attributable 
  to equity shareholders             2,658        9.51p        9.43p      2,048        7.42p        7.40p 
 Pre-tax, pre-exceptional 
  profit attributable 
  to equity shareholders             2,436        8.71p        8.65p      2,586        9.36p        9.35p 
 Post-tax, pre-exceptional 
  profit attributable 
  to equity shareholders             2,258        8.08p        8.01p      2,347        8.50p        8.48p 
 Post-tax profit, pre-deferred 
  consideration release 
  attributable to equity 
  shareholders                       1,950        6.97p        6.92p      1,809        6.55p        6.54p 
 Pre-tax profit, pre-deferred 
  consideration release 
  attributable to equity 
  shareholders                       2,128        7.61p        7.55p      2,048        7.42p        7.40p 
 
 
                                                      2019         2018 
                                                    Number       Number 
 Weighted average number of ordinary shares     27,959,532   27,613,719 
 Dilutive effect of share options                  216,908       54,259 
---------------------------------------------  -----------  ----------- 
 Diluted weighted average number of ordinary 
  shares                                        28,176,440   27,667,978 
---------------------------------------------  -----------  ----------- 
 

4. Exceptional items

 
                                                2019      2018 
                                              GBP000    GBP000 
 Bolton rationalisation                            -      (19) 
 Acquisition costs                                29       231 
 Corporate restructuring and transitional 
  costs                                          163       260 
 Deferred consideration release                (530)         - 
 Network obsolesce costs                         107        43 
 Other                                             9        23 
 
                                               (222)       538 
------------------------------------------  --------  -------- 
 

Acquisition costs relate to fees paid to corporate advisors in respect of prospective acquisitions.

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 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

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.

t 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 IFRS15 and IFRS9, the principal accounting policies of the Group have remained unchanged from those set out in the Group's 2018 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

The audit of the statutory accounts of Vianet Group plc for the year ended 31 March 2019 is not yet complete. These accounts will be finalised on the basis of the financial information presented by the Directors in this preliminary announcement. The comparative information has been extracted from the Group's financial statements upon which the auditor's opinion is unmodified and does not include a statement under section 498(2) or (3) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2019 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. In due course, they will be delivered to the Registrar of Companies

The statutory accounts for the year ended 31 March 2018 have been delivered to the Registrar of Companies.

6. Annual General Meeting

The Annual General Meeting will be held on 26 June 2019 at 11.00am, at the offices of Grant Thornton UK LLP, No 1 Whitehall Riverside, Leeds, LS1 4BN.

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 EANKDEAFNEFF

(END) Dow Jones Newswires

June 04, 2019 02:00 ET (06:00 GMT)

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