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Vianet Group Plc LSE:VNET London Ordinary Share GB00B13YVN56 ORD 10P
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Vianet Group PLC Interim Results

08/12/2020 7:00am

UK Regulatory (RNS & others)


Vianet (LSE:VNET)
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From Nov 2020 to Feb 2021

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TIDMVNET

RNS Number : 8434H

Vianet Group PLC

08 December 2020

8 December 2020

Vianet Group plc

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

Interim Results

Vianet Group plc (AIM: VNET), the international provider of actionable data and business insight through devices connected to its Internet of Things platform ("IOT"), is pleased to announce its interim results for the six months ended 30 September 2020 ("H1 2021").

2020 has been a challenging year for many businesses and, as anticipated at the time of our Full Year ("FY2020") results announcement, the COVID-19 (C19) pandemic has had a significant impact on the financial performance of the Group. The reported results reflect the impact of lockdowns enforced by the Government and, accordingly, year-on-year comparisons should be read in that context.

Financial highlights

 
 
        *    Revenue of GBP4.07 million (H1 2020: GBP8.41 million) 
 *    Recurring revenues at 87% (H1 2020: 82%) 
 
 
        *    Adjusted operating loss(a) of GBP0.38 million (H1 
             2020: adjusted operating profit of GBP2.00 million) 
 
        *    Operating loss post exceptional items, 
             pre-amortisation and share-based payments of GBP0.52 
             million (H1 2020: GBP2.56 million profit) 
 
        *    Operational cash generation of GBP1.19 million (H1 
             2020: GBP2.44 million) 
 
        *    Basic loss per share at 4.86p (H1 2020: basic 
             earnings per share at 6.00p, including the impact of 
             the Vendman Systems Limited deferred consideration 
             release - see note 4) 
 
        *    Coronavirus Business Interruption Loan (CBIL) of 
             GBP3.5 million secured, resulting in gross debt of 
             GBP4.87 million (H1 2020: GBP1.67 million) 
 
        *    Net debt of GBP1.15 million (H1 2020: net debt 
             GBP1.18 million) 
 *    Interim dividend withdrawn (H1 2020: 1.70p) 
 
 

Divisional highlights

 
 
        *    Smart Machines growth slowed, with new unit sales at 
             3,212 (H1 2020: 7,634 units), of which contactless 
             payment sales at 2,152 units (H1 2020: 4,796 units) 
 
        *    Smart Machines adjusted operating profit(a) at 
             GBP0.55 million (H1 2020: GBP0.78 million) and 
             unadjusted profit of GBP0.38 million (H1 2020: 
             GBP1.47 million) 
 
        *    Smart Zones adjusted operating profit(a) at GBP0.13 
             million (H1 2020: GBP2.32 million), with unadjusted 
             loss GBP0.11 million (H1 2020: unadjusted profit 
             GBP2.02 million) 
 
        *    Smart Zones contract renewals with Star Pubs and Bars, 
             Admiral and Young's 
 
        *    Investment in new sales team helped Smart Machines 
             deliver over 20 new and re-signed contracts with 
             3-5-year terms 
 

a) Adjusted operating profit is profit before exceptional costs, amortisation, interest and share-based payments

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

" The period ended 30 September 2020 has been challenging for the Group as a result of the COVID-19 pandemic and the subsequent lockdowns and tier system restrictions forcing closures to the hospitality sector. Nevertheless, trading for the first six months of the financial year has been ahead of management's internal revised revenue and profit forecasts, which is testament to the hard work of our employees and the forward-thinking measures introduced by the Board and management to safeguard the business.

"While our Smart Zones division saw a dramatic reduction in demand for our services, given the overnight closure of pubs, we were able to engage with our customers as they seek data to understand the 'new normal' trading environment and to look to improve decision-making during the exit phase. We envisage this demand continuing as the hospitality sector returns to levels seen before the pandemic hit.

"Our Smart Machines division, which experienced reduced levels of activity as a result of the pandemic, has noted a rapid acceleration of the significant structural trend away from cash payments towards connected assets and contactless payment as customers seek to improve sales and operational performance. We believe the Group is well positioned to benefit from this growing trend.

"Group turnover of GBP4.07 million was credible given the C19 backdrop and in particular the closure of pubs. Both divisions reported an operating profit for H1 2021, helped principally from securing contract variations in Smart Zones, as well as the Smart Machines division continuing to trade profitably and gaining new sales throughout the period, as the new sales team hit the ground running post lockdown.

"From the outset of the pandemic, our intention was to manage our cash and come through C19 strongly and in better shape to take advantage of the significant opportunities available to the Group. Both sides of our business have benefitted immensely from prudent investment and have a healthy pipeline from which to grow. The proactive measures we took early in the pandemic to reduce fees to support our customers has allowed us to retain close relations with them and we believe this will put us in good stead as the impact of the pandemic subsides.

"As such, we are confident of the long-term success of the Group and we look forward to updating the market on our progress in due course."

- Ends -

An online analyst briefing, given by Mark Foster, Chief Financial Officer, Stewart Darling, Chief Executive Officer and James Dickson, Chairman will be held today at 09.30hrs via Microsoft Teams. Please contact vianet@yellowjerseypr.com for details.

Enquiries:

 
 Vianet Group plc 
 James Dickson, Chairman                Tel: +44 (0) 1642 358 
  Stewart Darling, CEO / Mark Foster,                     800 
  CFO                                       www.vianetplc.com 
 
   Cenkos Securities plc 
 Stephen Keys / Cameron MacRitchie       Tel: +44 (0) 20 7397 
                                                         8900 
                                               www.cenkos.com 
 

Media enquiries:

 
 Yellow Jersey PR 
 Sarah Hollins                           Tel: +44 (0)7764 947 
  Henry Wilkinson                                         137 
  vianet@yellowjerseypr.com              Tel: +44 (0)7951 402 
                                                          336 
                                       www.yellowjerseypr.com 
 

COVID-19 ("C19") report

Proactive Response to Management of C19

Our primary goal has been to safeguard employee health and wellbeing, whilst continuing to support our customers and maintaining the Group's solid financial position, with the aim of being strongly positioned for the C19 exit phase. This crisis has created a common sense of purpose and provided an opportunity to demonstrate leadership. I am pleased that our people, customers and suppliers have all responded positively and trading for the first six months of the financial year has been ahead of management's internal revised revenue and profit forecasts.

Commercial Approach

Our approach to supporting customers has continued to evolve as the C19 landscape has unfolded and has included, amongst other things:

-- Smart Zones customers signed up to letters of variation for the seven months to 30 October 2020, with those pubs not trading being billed at 30% of their normal weekly fees and those who were trading being billed at 70% of their normal weekly fees. This initiative was very well received by customers, as it provided the option to continue contracts at a reduced rate during shutdown rather than incur a more costly future reconnection charge.

The reduced billing for closed sites will continue until 31 March 2021, whilst a return to full billing for pubs which are trading, which was due to re-commence in November, will now resume on 3 December 2020.

-- In Smart Machines, we continue to see mixed trading impacts for customers. Some vending machines, including those for essential workers, are trading very well, whereas those in city centre offices have seen much reduced sales activity. Prior to the November lockdown, around 70% of machines had remained active and we have seen modest commercial growth. We continue to support customers in this division with initiatives as needed.

Government Assistance

-- As reported at the time of the FY2020 results, the Group secured a GBP3.5 million Coronavirus Business Interruption Loan ("CBIL") to provide a financial backstop should there be a prolonged recovery period. The capital repayment schedule deferment has been extended from 6 to 12 months, in line with the latest support measures from the Government. Our strategy is that the CBIL will be used for maintaining investment in growth rather than the day-to-day running of the business.

-- Vianet moved swiftly to utilise the Government's Job Retention scheme, with almost 60% of our 155 employees furloughed during the first national lockdown and mandatory closure of pubs, whilst the balance worked from home.

-- Following the re-opening of pubs on 4 July 2020 and an increase in vending operations, only a handful of people remained on flexible furlough at the end of H1 2021, as we constantly balanced resources to deal with the shifting impact of Government policy.

-- November's second national lockdown resulted in around 40% of our workforce being furloughed again whilst the hospitality sector was shut down.

Our People

-- We have supported our staff through these difficult and mentally challenging times. Microsoft Teams continues to be used extensively to maintain strong two-way communication across the business to ensure everyone is fully engaged and supported, regardless of status or role.

-- We recognise that this way of working is difficult for many and is often less productive and inspiring than our office environment. We were able to open our offices in June 2020 and move towards a full complement of staff utilising safe working arrangements and a C19 secure environment, including the monthly application of our 30-day Smart Shield sanitisation product.

C19 Exit Strategy

As anticipated at the time of the FY2020 report, the business impact of C19 has been markedly different in each of our divisions.

-- Smart Zones - the overnight closure of pubs meant that the full range of insight and analytics required to support compliance and retail services was temporarily no longer required by our customers. Notwithstanding this, the closure of pubs has provided opportunities for a wider engagement with our customers, as they seek data to understand the 'new normal' trading environment and to look to improve decision-making during the exit phase. There is also a demand to embrace digital capability to improve efficiency and frictionless delivery from both back of house and front of house to consumers.

-- Smart Machines - activity levels in our Smart Machines Division saw only marginal declines helped by many unattended retail assets being installed in sites where essential workers were still required. The C19 crisis is accelerating a continued and significant growing structural trend away from cash payments towards connected assets and contactless payment as customers seek to improve sales and operational performance. We remain well positioned to benefit from this shift in behaviour.

The C19 second wave, the most recent nationwide lockdown and subsequent Tier system restrictions has temporarily slowed our momentum. Whilst uncertainty remains, we are encouraged by the UK approval of a C19 vaccine for widespread use in the coming weeks. This news represents a significant milestone for so many businesses and gives us all real hope for a return to a more normal operating backdrop. Despite all the uncertainty we have been proactive in positioning the business to give ourselves the flexibility to react quickly to events as they unfurl during these unprecedented times.

Chairman's Statement

Performance

I continue to be impressed with how Vianet and its employees have responded to this crisis. I believe the actions implemented will ensure Vianet comes through the C19 exit phase with momentum to accelerate our growth plans in the Smart Machines division, whilst delivering a solid performance in the Smart Zones division.

The steps we took in advance of the second wave, together with current cash, available resources, cost management plans, and conservative forecasts point to a healthy cash runway into 2021 and well beyond a projected general recovery next summer, even in the event of a prolonged lockdown, tier restrictions and widespread pub closures during the winter.

Given the C19 backdrop, there is little merit in drawing too much from comparison with H1 2020 performance, so while comparative figures are presented for reporting purposes, my comments will be restricted to the H1 2021 performance only.

The performance achieved, albeit loss making, was much better than we had anticipated in the early weeks of the pandemic, with the pre-exceptional loss of GBP0.4 million materially less than our internal re-forecasted loss for the half year.

Turnover of GBP4.07 million (H1 2020: GBP8.41 million) was credible given the C19 backdrop and in particular the closure of pubs. Both divisions reported an operating profit for H1 2021, helped principally from securing contract variations in Smart Zones, as well as the Smart Machines division continuing to trade profitably and gaining new sales throughout the period, as the new sales team hit the ground running post lockdown.

The Group's adjusted operating loss, pre-exceptional costs, was GBP0.38 million (H1 2020: GBP2.00 million profit) and the loss post exceptional items was GBP0.14 million (H1 2020: GBP0.59 million profit). The pre-tax loss was GBP1.44 million (H1 2020: GBP1.77 million profit).

There was an exceptional cost of GBP0.14 million principally related to further costs associated with staff transition and C19 costs, whilst H1 2019 saw a net credit of GBP0.59 million arising from partial release of Vendman deferred consideration.

The Group's loss per share was 4.86 pence (H1 2019: earnings 6.00 pence).

The Smart Machines division adjusted operating profit was GBP0.55 million (H1 2020: GBP0.78 million). Post-lockdown the new sales team delivered over 20 new and re-signed contracts in the period.

Despite very challenging trading in the hospitality sector during the period, the Group's adjusted operating profit in the Smart Zones division was GBP0.13 million (H1 2019: GBP2.32 million) and was aided by increased demand for our data analytics capability, proactive cost management and new revenues from market insights. This performance was achieved despite the early closure of the sector and the continued discount support we have given our customers to help them through this challenging period.

Dividend

The ongoing level of uncertainty as to how the C19 recovery phase will develop, has led the Board to take a prudent view and withdraw the interim dividend for H1 2021 alongside the other measures we are taking to preserve the Company's strong liquidity, cash flow, and financial position through these uncertain times.

The Board will review this decision again later in the year once the outlook becomes clearer, and our goal remains to re-introduce dividends as soon as it is practical and prudent to do so.

Board Changes

Stewart Darling, CEO, has notified the Group of his intention to stand down from the Board, having been with the Company since 2008 and CEO since 2013.

During his time as CEO, Stewart led the business to five successive years of profit and turnover growth and helped transform Vianet into a technology business through developing IoT and data capabilities, which have driven solid commercial progress.

Stewart will leave the Group at the end of March 2021, following the completion of several initiatives that will continue to drive the future growth of the business and this timing will enable an orderly transition and a smooth handover. For the remainder of 2021, he has committed to providing independent support to the Smart Machines team as it pursues the exciting growth opportunities available in the unattended retail market.

A search for Stewart's successor will commence in due course. Meanwhile, having held the position of CEO prior to Stewart, I will assume the role of Interim Executive Chairman to ensure continuity of executive leadership and support for the management team through this transition.

While Stewart will remain close to the Group for the foreseeable future, I would like to take this opportunity to thank him personally for his hard work and dedication over the years. We wish him every success in his future endeavours.

Outlook

Prior to the first lockdown in March 2020, the momentum and performance of both divisions had been encouraging. My view is that the business will come through these challenging times stronger, leaner, and in even better shape to accelerate our digital capability and take advantage of the excellent growth opportunities.

-- Smart Machines is building momentum from strong growth opportunities here in the UK and across Europe. The division has won new, and renewed existing, contracts throughout the period, supported by the investment in sales resources we made during the period.

-- Smart Zones has a healthy pipeline, including several major customer technology upgrade programmes expected, subject to lockdown measures, to continue in Q4 2021. The division is already benefitting from previous infrastructure investment, enabling a rebuild of profitability, with growth opportunities in our hospitality markets and market data.

Notwithstanding the speed at which each of our major markets return to normal levels, my view is that the high levels of contracted recurring revenue will support a recovery in underlying Group cash flow. The Board remains confident in Vianet's long-term growth strategy and considers the Group to be well positioned to deliver earnings growth as the world recovers from the pandemic.

James Dickson

Chairman

8 December 2020

Chief Executive Officer and Chief Financial Officer Review

In his statement, the Chairman has provided a clear and detailed view of the challenging landscape in which we have had to operate in the first six months of the financial year. Whilst our Smart Machines division continued to perform at a good level, despite the impact of the pandemic, it has been a very challenging period for our hospitality industry customers and our Smart Zones division, given the impact of the lockdowns on pubs and restaurants.

Despite this, the underlying trading performance for the six months to 30 September 2020 has exceeded our initial internal estimates at the start of the pandemic and we are pleased with the outcome, considering the circumstances.

Our strategy of delivering added value insight and analytics by connecting customers to their assets has been reinforced by the challenges of C19 and positions our solutions strongly as we emerge from the effects of the pandemic. As we emerged from the first lockdown, Smart Zones was a critical provider of trading performance data to pub customers, which in turn has supported senior level decision making in respect of business support plans. Our ability to provide accurate trading and other performance data from pubs on a frequent basis has reinforced the value of the insight we provide to the industry and provides a platform for further support. Growth in contactless payment, driven by the perception of 'dirty cash', has accelerated the installation of contactless payment devices in unattended retail machines. In many cases, this is now viewed as a business survival issue.

At the same time, there is significantly greater focus by operators on reducing site visit frequency to reduce operating costs and mitigate the risk of contact between employees and customers. This underpins why Smart Machines' connected devices and contactless payment services continued to progress during lockdown and we have signed a substantial number of new contracts.

Our strategic approach to driving recurring revenue and profit growth remains unchanged and many of the fundamental drivers have been reinforced by the change in behaviour resulting from the pandemic. However, we do recognise that the hospitality industry is in unchartered territory where much will depend how the sector emerges from the impact of lockdown and how pub company customers will organise their businesses beyond this. Conversely, in our Smart Machines business, the trends which were driving the pace of adoption of telemetry and contactless payment have simply been reinforced by the impact of the pandemic.

Operational cash generation, post working capital, was a credible GBP1.19 million (H1 2020: GBP2.44 million) given the challenging trading performance in a pub sector closed for the first quarter and on reduced billing terms through the second quarter. The cash position was helped by close management of our costs and continuing payments by our customers. This is clearly an area that we will closely monitor and manage in the coming months as the C19 landscape unfolds. Whatever form that takes, we are confident that our cash trajectory is robust enough to see us through this crisis.

The Group had an overall net debt position of GBP1.15 million at the half year, compared to GBP1.18 million last year, with gross debt of GBP4.87 million (H1 2020: GBP1.67 million) taking account of the CBIL facility.

Smart Machines

Smart Machines sales of new telemetry and contactless device connections continued, with overall sales of 3,212 units (H1 2020: 7,634 units) of which contactless payment sales were 2,152 units (H1 2020: 4,796 units). Given the impact of C19 and the resulting lockdown period, this is a relatively strong performance given many city centre offices were closed.

Turnover was GBP2.04 million (H1 2020 GBP2.71 million), with over a third of unit sales being on an annuity only basis. Whilst this model reduces upfront cash receipts, it is more profitable over the life of contracts and generates significantly enhanced quality of earnings for the Group and provides a clearer projection of forward earnings due to a reduction in the impact of variable capital sales.

Since we emerged from the initial lockdown, industry recognition that contactless payment adoption will accelerate and operating overheads need to be reduced by visiting sites less frequently, has led to over 20 new contracts being signed.

Momentum into H2 2021 is encouraging despite the challenging landscape and we are confident that the Smart Machines growth opportunity in connected devices and contactless payment has been enhanced as a result of changing behaviour arising from the pandemic. Whilst we may experience short term challenges due to local or national lockdowns, the underlying opportunity remains strong and we are confident will enhance future earnings growth.

Smart Zones

The underlying performance of the Group's core beer monitoring business was significantly impacted by the national lockdown and closure of the hospitality sector between 20 March 2020 and 4 July 2020. This had a materially adverse impact on divisional turnover and profitability, with resulting reduction in Group turnover and profitability. Given the C19 backdrop and reduced billing to support customers through the crisis, which was warmly welcomed throughout the industry, we are satisfied with the result in the period.

Long-term contract renewals were signed with Star Pubs and Bars and Admiral, along with an annual renewal with Young's, and we managed to install 41 new systems in the period. Whatever shape the post-COVID world takes, we have been greatly encouraged by how our trading performance insights and other data analytics were embraced by customers during lockdown and as we emerged from it. We were able to rapidly redeploy our capabilities to support senior level decision making beyond that which we have done historically, giving us every confidence in the future growth prospects for iDraught(TM) in the UK. Furthermore, we have received continued commitments to technology upgrades from major customers. In addition, our investment in new technology and the migration of data and services to the cloud has significantly increased the opportunity for Smart Zones to capture data from a wider array of sources for our customers and roll-out enhanced insight and data services.

In the US, where the impact of lockdown has also widely impacted the hospitality industry, new sales stalled, and alongside the support package provided to customers resulted in our business in the US suffering a GBP0.16 millon loss in the period. As with all cinema chains, our largest US customer, AMC Theatres, has been affected by C19 closures and fragile consumer confidence, so it was encouraging to see that investors supported their recent fund-raising.

Looking Forward

We have been truly inspired and humbled in equal measure, by the response of all employees during this crisis, and the senior management team who, along with the Board, have helped steer a way through the many challenges that have confronted us. Our principal aim during the crisis has always been to come through it in the best possible shape, and with the critical drivers of our business capability intact. Whilst it is not yet over, we are confident that the opportunities for growth remain, particularly given how the crisis has changed and accelerated customer behaviour in our chosen markets.

We remain confident that the Group's significant investment in a cloud-based IoT platform, data analytics and insight led capabilities, which have underpinned our strategic approach, combined with a relentless focus on growing our presence in the Smart Machines marketplace, will continue to unlock transformational business opportunities. This will provide the foundation for strong growth in revenues and profitability as we emerge from the impact of this pandemic.

 
 Stewart Darling            Mark Foster 
  Chief Executive Officer    Chief Financial Officer 
 8 December 2020 
 

Consolidated Statement of Comprehensive Income

For the six months ended 30 September 2020

 
 
 
 
                                 Before                     Total         Before 
                            Exceptional   Exceptional   Unaudited    Exceptional    Exceptional   Unaudited     Audited 
                               6 months      6 months    6 months       6 months       6 months    6 months        Year 
                                  Ended         Ended       Ended          Ended          Ended       Ended       Ended 
                                30 Sept       30 Sept     30 Sept        30 Sept        30 Sept     30 Sept    31 March 
                                   2020          2020        2020           2019           2019        2019        2020 
                    Note        GBP'000       GBP'000     GBP'000        GBP'000        GBP'000     GBP'000     GBP'000 
 
 Continuing 
 operations 
 Revenue             3            4,066             -       4,066          8,408              -       8,408      16,282 
 Cost of sales                  (1,497)             -     (1,497)        (2,716)              -     (2,716)     (5,164) 
=================  =====  =============  ============  ==========  =============  =============  ==========  ========== 
 Gross profit                     2,569             -       2,569          5,692              -       5,692      11,118 
 Administration 
  and other 
  operating 
  expenses           4          (2,946)         (142)     (3,088)        (3,689)            585     (3,104)     (7,087) 
=================  =====  =============  ============  ==========  =============  =============  ==========  ========== 
 Operating 
  (loss)/profit 
  pre 
  amortisation 
  and share based 
  payments           3            (377)         (142)       (519)          2,003            585       2,588       4,031 
-----------------  -----  -------------  ------------  ----------  -------------  -------------  ----------  ---------- 
 Intangible asset 
  amortisation                    (837)             -       (837)          (696)              -       (696)     (1,390) 
 Share based 
  payments                         (48)             -        (48)           (68)              -        (68)       (125) 
=================  =====  =============  ============  ==========  =============  =============  ==========  ========== 
 Operating 
  (loss)/profit 
  post 
  amortisation 
  and share based 
  payments                      (1,262)         (142)     (1,404)          1,239            585       1,824       2,516 
 Net finance 
  costs                            (32)             -        (32)           (53)              -        (53)       (113) 
=================  =====  =============  ============  ==========  =============  =============  ==========  ========== 
 (Loss)/profit 
  from continuing 
  operations 
  before tax                    (1,294)         (142)     (1,436)          1,186            585       1,771       2,403 
 Income tax 
  expense            5               30             -          30           (82)              -        (82)          28 
-----------------  -----  -------------  ------------  ----------  -------------  -------------  ----------  ---------- 
 (Loss)/profit 
  and other 
  comprehensive 
  income for the 
  year               3          (1,264)         (142)     (1,406)          1,104            585       1,689       2,431 
-----------------  -----  -------------  ------------  ----------  -------------  -------------  ----------  ---------- 
 
 (Loss)/earnings 
 per share 
 Continuing 
 Operations 
 - Basic             6                                    (4.86p)                                     6.00p       8.56p 
 - Diluted           6                                    (4.83p)                                     5.97p       8.47p 
 
 
 

Consolidated Balance Sheet

At 30 September 2020

 
                                   Unaudited   Unaudited     Audited 
                                       As at       As at       As at 
                                     30 Sept     30 Sept    31 March 
                                        2020        2019        2020 
                                     GBP'000     GBP'000     GBP'000 
-------------------------------   ----------  ----------  ---------- 
 Assets 
 Non-current assets 
 Intangible assets                    23,708      23,037      23,361 
 Property, plant and equipment         3,610       3,852       3,795 
 Deferred Tax asset                      510         200         510 
 Total non-current assets             27,828      27,089      27,666 
================================  ==========  ==========  ========== 
 Current assets 
 Inventories                           1,519       1,365       1,491 
 Trade and other receivables           2,509       4,179       3,544 
 Cash and cash equivalents             3,721       1,836       1,728 
--------------------------------  ----------  ----------  ---------- 
                                       7,749       7,380       6,763 
 ===============================  ==========  ==========  ========== 
 
 Total assets                         35,577      34,469      34,429 
================================  ==========  ==========  ========== 
 
 Equity and liabilities 
 
 Liabilities 
 Current liabilities 
 Trade and other payables              3,098       4,027       2,710 
 Borrowings                            1,466       2,016       2,011 
 Leases                                   34           -          64 
                                       4,598       6,043       4,785 
 ===============================  ==========  ==========  ========== 
 
 Non-current liabilities 
 Other payables                          117         117         117 
 Borrowings                            3,408       1,002         670 
 Deferred tax                          1,111         941       1,141 
 Leases                                   20           -          35 
                                       4,656       2,060       1,963 
 -------------------------------  ----------  ----------  ---------- 
 
 Equity attributable to owners 
  of the parent 
 Share capital                         2,895       2,894       2,895 
 Share premium account                11,709      11,702      11,709 
 Share based payment reserve             412         306         364 
 Own shares                                -       (743)           - 
 Merger reserve                          310         310         310 
 Retained profit                      10,997      11,897      12,403 
--------------------------------  ----------  ----------  ---------- 
 Total equity                         26,323      26,366      27,681 
================================  ==========  ==========  ========== 
 
 Total equity and liabilities         35,577      34,469      34,429 
================================  ==========  ==========  ========== 
 
 

Summarised Consolidated Cash Flow Statement

For the six months ended 30 September 2020

 
                                            Unaudited           Unaudited    Audited 
                                             6 months            6 months       Year 
                                                Ended               Ended      Ended 
                                              30 Sept             30 Sept   31 March 
                                                 2020                2019       2020 
                                              GBP'000             GBP'000    GBP'000 
----------------------------------------   ----------  ------------------  --------- 
 Cash flows from operating activities 
 (Loss)/profit for the period                 (1,406)               1,689      2,431 
 Adjustments for 
 Net Interest payable                              32                  53        113 
 Income tax (credit)/expense                     (30)                  82       (28) 
 Amortisation of intangible assets                837                 696      1,390 
 Depreciation                                     309                 335        674 
 Deferred consideration release                     -               (920)    (1,088) 
 Loss on sale of property, plant 
  and equipment                                     7                   1          3 
 Goodwill write off                                 -                   -        119 
 Share-based payments expense                      48                  68        125 
 Tax payment in respect of LTIP                     -                (18)       (17) 
-----------------------------------------  ----------  ------------------  --------- 
 Operating (loss)/profit before 
  changes in 
  working capital and provisions                (203)               1,986      3,722 
 Change in inventories                           (28)                 304        178 
 Change in receivables                          1,035               (378)        125 
 Change in payables                               389                 523        191 
                                                1,396                 449        494 
 Net cash from operating activities             1,193               2,435      4,216 
-----------------------------------------  ----------  ------------------  --------- 
 Cash flows from investing activities 
 Purchases of property, plant and 
  equipment                                     (131)               (685)      (730) 
 Purchase of intangible assets                (1,185)               (882)    (2,020) 
 Net cash used in investing activities        (1,316)             (1,567)    (2,750) 
-----------------------------------------  ----------  ------------------  --------- 
 Cash flows from financing activities 
 Net Interest payable                            (32)                (53)      (113) 
 Issue of share capital                             -                 191        200 
 New leases                                         -                 229          - 
 Repayment of leases                             (45)                (75)      (141) 
 Repayments of borrowings                           -               (330)      (661) 
 New borrowings                                 3,540                   -          - 
 Payment of deferred consideration                  -                (22)      (552) 
 Dividends paid                                     -             (1,123)    (1,604) 
 Disposal of own shares                             -                   -        988 
 Net cash used in financing activities          3,463             (1,183)    (1,883) 
-----------------------------------------  ----------  ------------------  --------- 
 
 Net increase/(decrease) in cash 
  and cash equivalents                          3,340               (315)      (417) 
 
 Cash and cash equivalents at beginning 
  of period                                       381                 798        798 
 
 Cash and cash equivalents at end 
  of period                                     3,721                 483        381 
-----------------------------------------  ----------  ------------------  --------- 
 
 Reconciliation to the cash balance in the Consolidated Balance 
  Sheet 
 Cash balance as per consolidated 
  balance sheet                                 3,721               1,836      1,728 
 Bank overdrafts                                    -             (1,353)    (1,347) 
-----------------------------------------  ----------  ------------------  --------- 
 Balance per statement of cash 
  flows                                         3,721                 483        381 
-----------------------------------------  ----------  ------------------  --------- 
 

Statement of changes in equity

Six months ended 30 September 2020

 
                                                          Share 
                                               Share      based 
                                    Share    premium    payment                  Merger   Retained 
                                  capital    account    reserve   Own shares    reserve     profit     Total 
                                   GBP000     GBP000     GBP000       GBP000     GBP000     GBP000    GBP000 
 At 1 April 2020                    2,895     11,709        364            -        310     12,403    27,681 
 Share based payment                    -          -         48            -          -          -        48 
 Transactions with 
  owners                                -          -         48            -          -          -        48 
------------------------------  ---------  ---------  ---------  -----------  ---------  ---------  -------- 
 Loss and total comprehensive 
  income for the period                 -          -          -            -          -    (1,406)   (1,406) 
------------------------------  ---------  ---------  ---------  -----------  ---------  ---------  -------- 
 Total comprehensive 
  income less owners 
  transactions                          -          -         48            -          -    (1,406)   (1,358) 
 At 30 September 2020               2,895     11,709        412            -        310     10,997    26,323 
==============================  =========  =========  =========  ===========  =========  =========  ======== 
 

Six months ended 30 September 2019

 
                                                     Share 
                                          Share      based 
                               Share    premium    payment                  Merger   Retained 
                             capital    account    reserve   Own shares    reserve     profit     Total 
                              GBP000     GBP000     GBP000       GBP000     GBP000     GBP000    GBP000 
 At 1 April 2019               2,874     11,530        314        (754)        310     11,285    25,559 
 Dividends                         -          -          -            -          -    (1,123)   (1,123) 
 Issue of shares                  20        171          -            -          -          -       191 
 Share based payment               -          -         68            -          -          -        68 
 Share based forfeitures           -          -       (43)            -          -         43         - 
 LTIP exercise                     -          -       (33)           12          -          3      (18) 
 Transactions with 
  owners                          20        171        (8)           12          -    (1,077)     (882) 
-------------------------  ---------  ---------  ---------  -----------  ---------  ---------  -------- 
 Profit and total 
  comprehensive income 
  for the period                   -          -          -            -          -      1,689     1,689 
-------------------------  ---------  ---------  ---------  -----------  ---------  ---------  -------- 
 Total comprehensive 
  income less owners 
  transactions                    20        171        (8)           12          -        612       807 
 At 30 September 2019          2,894     11,701        306        (742)        310     11,897    26,366 
=========================  =========  =========  =========  ===========  =========  =========  ======== 
 

12 months ended 31 March 2020

 
                                                     Share 
                                          Share      based 
                               Share    premium    payment                  Merger   Retained 
                             capital    account    reserve   Own shares    reserve     profit     Total 
                              GBP000     GBP000     GBP000       GBP000     GBP000     GBP000    GBP000 
 At 1 April 2019               2,874     11,530        314        (754)        310     11,285    25,559 
 Dividends                         -          -          -            -          -    (1,604)   (1,604) 
 Issue of shares                  21        179          -            -          -          -       200 
 Share based payment               -          -        125            -          -          -       125 
 Share based forfeitures           -          -       (43)            -          -         43         - 
 LTIP exercise                     -          -       (32)           12          -          3      (17) 
 Disposal of own shares            -          -          -          232          -         83       315 
 Disposal of treasury 
  shares                           -          -          -          510          -        162       672 
 Transactions with 
  owners                          21        179         50          754          -    (1,313)     (309) 
-------------------------  ---------  ---------  ---------  -----------  ---------  ---------  -------- 
 Profit and total 
  comprehensive income 
  for the year                     -          -          -            -          -      2,431     2,431 
-------------------------  ---------  ---------  ---------  -----------  ---------  ---------  -------- 
 Total comprehensive 
  income less owners 
  transactions                    21        179         50          754          -      1,118     2,122 
 At 31 March 2020              2,895     11,709        364            -        310     12,403    27,681 
=========================  =========  =========  =========  ===========  =========  =========  ======== 
 
 

Notes to the interim report

   1.            Statutory information 

The interim financial statements are neither audited nor reviewed and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The financial information for the year ended 31 March 2020 has been derived from the published statutory accounts. A copy of the full accounts for that period, on which the auditor issued an unmodified report that did not contain statements under 498(2) or (3) of the Companies Act 2006, has been delivered to the Registrar of Companies.

These interim financial statements will be posted to all shareholders and are available from the registered office at One Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR or from our website at www.vianetplc.com/investors.

   2.            Basis of preparation 

This consolidated half yearly financial information for the half year ended 30 September 2020 has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 March 2020, except for the introduction of IFRS 16. IFRS 16 'Leases' replaced IAS 17 'Leases' and IFRIC4 'determining whether an arrangement contains a lease' and sets out the principles for the recognition, measurement, presentation and disclosure of leases and has been applied from 1 April 2019 using the modified retrospective approach. Under IFRS 16 the main difference for the Group is that certain leases where the Group is a lessee are recognised on the balance sheet, as both a right-of-use asset and a lease liability. Low value (defined as leases with an individual asset value of less than GBP5,000 at the date of initial recognition) and short-term leases (those with a term of 12 months or less) were excluded from these calculations under the practical expedients allowed in the standard. The right-of-use asset is depreciated in accordance with IAS 16 'Property, Plant and Equipment' and the liability is increased for the accumulation of interest and reduced by cash lease payments. There is no impact on cash flow.

The Directors have concluded that the adoption of these accounting standards has not had a material impact on the financial statements. The Group's accounting policies are based on the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU.

   3.            Segmental information 

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses. The segment operating results are regularly reviewed by the Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance. Vianet Group is analysed into to two trading segments (defined below) being Smart Zones (mainly adopted in the leisure sector, including US (particularly in pubs and gaming)) and Smart Machines (mainly adopted in the vending sector (particularly in vending machines)) supported by Corporate/Technology & stores costs.

The products/services offered by each operating segment are:

Smart Zones: Data insight & actionable data services, design, product development, sale and rental of fluid monitoring equipment.

Smart Machines: Data insight & actionable data services, design product development, sale and rental of machine monitoring equipment.

Corporate/Technology: Centralised Group overheads along with technology and stores related costs for the Group

The inter-segment sales are immaterial. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated assets and liabilities comprise items such as cash and cash equivalents, certain intangible assets, taxation, and borrowings. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one period.

The segmental results for the six months ended 30 September 2020 are as follows:

 
 
 
   Continuing Operations                   Smart     Smart Machines     Corporate/Technology 
                                           Zones                                                 Total 
                                         GBP'000            GBP'000                  GBP'000   GBP'000 
------------------------------------    --------  -----------------  -----------------------  -------- 
 
 Total revenue                             2,025              2,041                        -     4,066 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 
 Profit/(loss) before amortisation, 
  share based payments and 
  exceptional costs                          132                550                  (1,059)     (377) 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 
 Pre-exceptional segment 
  result                                    (76)                430                  (1,616)   (1,262) 
 Exceptional costs                          (12)               (39)                     (91)     (142) 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 Post exceptional segment 
  result                                    (88)                391                  (1,707)   (1,404) 
 Finance income                                -                  -                        1         1 
 Finance costs                              (19)               (14)                        -      (33) 
 (Loss)/profit before taxation             (107)                377                  (1,706)   (1,436) 
 Taxation                                                                                           30 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 Loss for the year from 
  continuing operations                                                                        (1,406) 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 
 
 
 
 
                            Smart     Smart Machines     Corporate/Technology 
                            Zones                                                 Total 
                          GBP'000            GBP'000                  GBP'000   GBP'000 
---------------------    --------  -----------------  -----------------------  -------- 
 Segment assets            29,089              4,083                    1,895    35,067 
 Unallocated assets             -                  -                      510       510 
-----------------------  --------  -----------------  -----------------------  -------- 
 Total assets              29,089              4,083                    2,405    35,577 
-----------------------  --------  -----------------  -----------------------  -------- 
 Segment liabilities        7,780                  -                      363     8,143 
 Unallocated assets             -                  -                    1,111     1,111 
-----------------------  --------  -----------------  -----------------------  -------- 
 Total liabilities          7,780                  -                    1,474     9,254 
-----------------------  --------  -----------------  -----------------------  -------- 
 
 

Notes to the interim report (continued)

The segmental results for the six months ended 30 September 2019 are as follows:

 
 
 
   Continuing Operations                   Smart     Smart Machines     Corporate/Technology 
                                           Zones                                                 Total 
                                         GBP'000            GBP'000                  GBP'000   GBP'000 
------------------------------------    --------  -----------------  -----------------------  -------- 
 
 Total revenue                             5,703              2,705                        -     8,408 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 
 Profit/(loss) before amortisation, 
  share based payments and 
  exceptional costs                        2,316                781                  (1,094)     2,003 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 
 Pre-exceptional segment 
  result                                   2,179                644                  (1,584)     1,239 
 Exceptional costs                         (119)                843                    (139)       585 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 Post exceptional segment 
  result                                   2,060              1,487                  (1,723)     1,824 
 Finance income                                -                  -                        8         8 
 Finance costs                              (39)               (22)                        -      (61) 
 Profit/(loss) before taxation             2,021              1,465                  (1,715)     1,771 
 Taxation                                                                                         (82) 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 Profit for the year from 
  continuing operations                                                                          1,689 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 
 
 
 
 
                            Smart     Smart Machines     Corporate/Technology 
                            Zones                                                 Total 
                          GBP'000            GBP'000                  GBP'000   GBP'000 
---------------------    --------  -----------------  -----------------------  -------- 
 Segment assets            28,279              4,083                    1,907    34,269 
 Unallocated assets             -                  -                      200       200 
-----------------------  --------  -----------------  -----------------------  -------- 
 Total assets              28,279              4,083                    2,107    34,469 
-----------------------  --------  -----------------  -----------------------  -------- 
 Segment liabilities        6,903                  -                      259     7,162 
 Unallocated assets             -                  -                      941       941 
-----------------------  --------  -----------------  -----------------------  -------- 
 Total liabilities          6,903                  -                    1,200     8,103 
-----------------------  --------  -----------------  -----------------------  -------- 
 
 

Notes to the interim report (continued)

The segmental results for the 12 months ended 31 March 2020 are as follows:

 
 
 
   Continuing Operations                   Smart     Smart Machines     Corporate/Technology 
                                           Zones                                                 Total 
                                         GBP'000            GBP'000                  GBP'000   GBP'000 
------------------------------------    --------  -----------------  -----------------------  -------- 
 
 Total revenue                            11,061              5,221                        -    16,282 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 
 Profit/(loss) before amortisation, 
  share based payments and 
  exceptional costs                        4,568              1,527                  (2,065)     4,030 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 
 Pre-exceptional segment 
  result                                   4,299              1,260                  (3,044)     2,515 
 Exceptional costs                         (462)                867                    (404)         1 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 Post exceptional segment 
  result                                   3,837              2,127                  (3,448)     2,516 
 Finance income                                -                  -                       13        13 
 Finance costs                              (86)               (40)                        -     (126) 
 Profit/(loss) before taxation             3,751              2,087                  (3,435)     2,403 
 Taxation                                                                                           28 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 Profit for the year from 
  continuing operations                                                                          2,431 
--------------------------------------  --------  -----------------  -----------------------  -------- 
 
 
 
 
 
                            Smart     Smart Machines     Corporate/Technology 
                            Zones                                                 Total 
                          GBP'000            GBP'000                  GBP'000   GBP'000 
---------------------    --------  -----------------  -----------------------  -------- 
 Segment assets            28,069              4,083                    1,767    33,919 
 Unallocated assets             -                  -                      510       510 
-----------------------  --------  -----------------  -----------------------  -------- 
 Total assets              28,069              4,083                    2,277    34,429 
-----------------------  --------  -----------------  -----------------------  -------- 
 Segment liabilities        5,291                  -                      316     5,607 
 Unallocated assets             -                  -                    1,141     1,141 
-----------------------  --------  -----------------  -----------------------  -------- 
 Total liabilities          5,291                  -                    1,457     6,748 
-----------------------  --------  -----------------  -----------------------  -------- 
 
 

Notes to the interim report (continued)

   4.            Exceptional items 
 
                                                      6 months   6 months       Year 
                                                         Ended      Ended      Ended 
                                                       30 Sept    30 Sept   31 March 
                                                          2020       2019       2020 
                                                       GBP'000    GBP'000    GBP'000 
 
 Corporate activity and acquisitions 
  costs                                                      -          -        311 
 Corporate restructuring and 
  transitional costs                                       59         297        415 
 Deferred consideration release                              -      (920)    (1,086) 
 COVID19 Costs                                             78           -          - 
 Network Obsolescence costs                                  -         33         50 
 Loan impairment                                             -          -        200 
 Other                                                       5          5        109 
                                                           142      (585)        (1) 
 -------------------------------------  ----------------------  ---------  --------- 
 

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

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

Coronavirus (COVID-19) costs directly relate to initial management time in the early weeks of the pandemic implementing the operational needs, customer engagement, and financial planning needed to ensure the business developed a pathway through COVID-19.

The deferred consideration release refers to the acquisition of Vendman Systems Limited where a proportion of the consideration was based upon results of the company for two years post acquisition. Within the year the final balance was paid and the change in fair value recognised through the income statement. The deferred period has now closed.

   5.            Tax 

The (credit)/charge for tax is based on the (loss)/profit for the period and comprises:

 
                                6 months   6 months       Year 
                                   Ended      Ended      Ended 
                                 30 Sept    30 Sept   31 March 
                                    2020       2019       2020 
                                 GBP'000    GBP'000    GBP'000 
 
 United Kingdom corporation 
  tax                               (30)         82       (28) 
-----------------------------  ---------  ---------  --------- 
 

The tax (credit)/charge reflects the utilisation of brought forward trading losses, which had previously been recognised as a deferred tax asset, against the taxable profit for the period within Vianet Limited

   6.            (Loss)/earnings per share 

Loss per share has been directly impacted by the impact of COVID-19 on our financial performance and as such is not a representative comparison to prior periods.

Earlier periods are influenced by the reversal of a deferred tax asset provision realised in previous years and the Vendman Systems Limited deferred consideration release referred to in note in 4. Exceptionals items above.

Basic loss per share are calculated by dividing the earnings attributable to ordinary shareholders (loss of GBP1,406k) by the weighted average number of ordinary shares outstanding during the period.

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

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

 
                                        30 September 2020                   30 September 2019 
                                (Loss)      Basic       Diluted     Earnings     Basic       Diluted 
                                            (loss)       (loss)                 earnings     earnings 
                                           per share    per share               per share    per share 
                                 GBP000                              GBP000 
 Pre-tax (loss)/profit 
  attributable to equity 
  shareholders                  (1,436)      (4.96p)      (4.93p)      1,771        6.29p        6.26p 
 Post-tax (loss)/profit 
  attributable to equity 
  shareholders                  (1,406)      (4.86p)      (4.83p)      1,689        6.00p        5.97p 
 Pre-tax, pre-exceptional 
  (loss)/profit attributable 
  to equity shareholders        (1,294)      (4.47p)      (4.44p)      1,186        4.21p        4.19p 
 Post-tax, pre-exceptional 
  (loss)/profit attributable 
  to equity shareholders        (1,264)      (4.37p)      (4.34p)      1,104        3.92p        3.90p 
 
 
                                                   30 Sept      30 Sept 
                                                      2020         2019 
                                                    Number       Number 
 Weighted average number of ordinary shares     28,953,414   28,149,205 
 Dilutive effect of share options                  172,967      123,338 
---------------------------------------------  -----------  ----------- 
 Diluted weighted average number of ordinary 
  shares                                        29,126,381   28,272,543 
---------------------------------------------  -----------  ----------- 
 

INDEPENDENT REVIEW REPORT TO VIANET GROUP PLC AND CHANGE OF AUDITORS

For H1 2021, we have chosen not to undertake an independent audit review which is an agreed standard approach.

We would like to place on record our thanks to Grant Thornton UK LLP (GTUK) for their support and help over a long association, but both parties now believe after 15 years a mutual change of auditors would be appropriate. GTUK have therefore resigned as auditors and the Company has appointed BDO LLP who will be undertaking the FY21 full year audit.

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END

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