TIDMVNET
RNS Number : 2643Q
Vianet Group PLC
05 June 2018
Press Release 5 June 2018
Vianet Group plc
("Vianet" or the "Group")
Final Results
Vianet Group plc (AIM: VNET), the international provider of
actionable data and business insight through devices connected to
its Internet of Things ("IOT") platform, is pleased to announce its
final results for the year ended 31 March 2018.
Financial highlights (continuing operations)
-- Revenue for the year of GBP14.56 million (2017: GBP14.26 million)
-- Smart Machines adjusted operating profit of GBP1.07 million,
including Vendman contribution of GBP0.12 million grew 20.1% from
GBP0.89 million (up 6.7% excluding Vendman)
-- Recurring revenues remain strong at 90% (2017: 85%) helped by
the Vendman acquisition in October 2017 and transition from capital
to annuity based sales in Smart Machines
-- Gross margin stable at 70% (2017: 70%)
-- Operating profit pre-amortisation of intangibles, share
options and exceptional costs up 9.2% to GBP3.62 million (2017:
GBP3.32 million)
-- Profit before taxation was up 41.5% to GBP2.05 million post
exceptional items (2017: GBP1.45 million)
-- Operating cash generation of GBP2.97million (2017: GBP3.93 million)
-- Net cash of GBP1.2 million (2017: GBP3.45 million) post acquisition of Vendman
-- Basic earnings per share (before tax) and post-exceptional
costs at 7.42 pence (2017: 5.30 pence)
-- Final dividend of 4.00 pence per share proposed giving a full
year total of 5.70 pence per share (2017: 5.70 pence)
Operational highlights
-- Acquisition of Vendman Systems Ltd, the UK's leading
unattended retail management software company for a total
consideration (including earn-out), of up to GBP4.25 million,
payable in cash
-- Smart Machines contract win for pan European and ANZ
operations of a leading international coffee company with roll out
commencing in 2018/19
-- Smart Zones Division resilient with 245 new drinks monitoring
system installed, offsetting some of the impact of pub closures
-- Smart Machines Division added 4,490 new connected devices
excluding Vendman (2017: 5,092) and increased underlying
profitability by 6.7%
-- GBP2.0 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 significant steps towards the delivery of its
earnings transformation plan and continues to benefit from its
focus on exploiting growth opportunities in the Smart Machines
division whilst optimising performance in the Smart Zones division.
The Group has a proven track record of converting data from its IOT
connected devices into actionable information and solutions for b2b
markets. We continue to develop and grow our working relationships
with our blue-chip customer base where contracted recurring
revenues now represent over 90% of turnover.
The acquisition of Vendman with c. 200,000 mobile connections
and roll out of the recently won global coffee contract, is
expected to be transformational for the Smart Machines division and
should drive significantly increased earnings for the Group in the
next few years.
The Group has high levels of recurring income, strong cash flow
and a healthy balance sheet, which means we are well placed for
further investment to accelerate Smart Machines expansion and for
selective acquisitions.
The Board is confident that the Group's long term strategy is
the right one and that it is positioned to deliver earnings growth
and expand future strategic options."
- 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, 5 June 2018 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, Chief Executive 800
Officer
Mark Foster, Chief Financial Officer www.vianetplc.com
Cenkos Securities plc
Stephen Keys / Camilla Hume Tel: +44 (0) 20 7397
8900
www.cenkos.com
Media enquiries:
Yellow Jersey PR
Sarah Hollins Tel: +44 (0)7764 947
Abena Affum 137
vianet@yellowjerseypr.com Tel: +44 (0)7555 159
808
www.yellowjerseypr.com
Chairman's Statement
Performance
The Group has made significant steps towards delivery of
earnings transformation and continues to benefit from the focus on
exploiting growth opportunities in the Smart Machines division
whilst optimising performance in the Smart Zones division.
Group turnover was GBP14.56 million (2017: GBP14.26 million)
whilst adjusted operating profit was up by 9.2% at GBP3.62 million.
Group profit before taxation amounted to GBP2.05 million post
exceptional items (2017: GBP1.45 million).
Exceptional costs of GBP0.54 million (2017: GBP0.96 million)
were down on the previous year and principally related to the
Vendman acquisition and staff rationalisation costs.
Basic pre-tax earnings per share, post-exceptional costs and
deferred tax asset movement, increased to 7.42 pence from 5.30
pence in 2017. Basic EPS after tax was 6.55 pence compared to 3.77
pence in 2017.
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 dividend for the year
of 5.70 pence (2017: 5.70 pence). Subject to approval from
shareholders at the Annual General Meeting, to be held on 28 June
2018, the final dividend will be paid on 27 July 2018 to
shareholders on the register as at 15 June 2018.
Board and Staff
We continue to evaluate the Board's composition to ensure it
remains effective and has the optimum balance of experience and
independence to support our operations and growth agenda.
To this end I was delighted to welcome Dave Coplin as a
Non-Executive Director. Dave, formerly Chief Envisioning Officer at
Microsoft, brings a wealth of experience and insight within the
technology space which will be an invaluable asset to the Group as
we execute our growth strategy in the Internet of Things and big
data areas.
Mike McGoun, whose valued contribution and support will be
missed, has chosen to retire from the Board at the time of the
Annual General Meeting.
The Group's experienced management team is focused on delivering
against the strong growth opportunities and new applications for
Vianet's IOT expertise and technology.
Our people continue to respond with their usual enthusiasm and
commitment, helping to build on the Group's excellent reputation
with customers as we deliver significant development and change
programmes.
I would once again like to thank all employees and my Board
colleagues, for their continued efforts and commitment in taking
the Group forward over the past year.
Outlook
The Group is in good shape to deliver strong earnings growth and
enters FY2019 with momentum and concerted focus on our exciting
growth opportunities.
-- Smart Machines' leading product suite and established
presence provides strong growth opportunities across UK and Europe,
having already developed significant new sales opportunities with
major global customers in this geography as evidenced by the major
global coffee company contract.
-- Together the Vendman acquisition and the global coffee
company contract roll out is expected to transform Smart Machines'
earnings over the next few years. There is a significant
opportunity to overlay c 200,000 Vendman mobile connections with
higher value Smart Machines connections and also to cross sell from
the portfolio to existing customers and vending operators
internationally.
-- There is a concerted focus on developing our capability and
accelerating growth to take advantage of our leading position in
coffee device and contactless payment device connectivity where
sales momentum will continue to grow.
-- Smart Zones is well equipped to defend existing earnings
performance and manage the decline in the UK pub market whilst
securing US expansion from existing customers.
-- The recent c GBP2.0 million investment in cloud
infrastructure and mobile technology will help sustain existing
revenues and facilitates growth in existing and potential new
verticals.
-- The Group has high levels of recurring income and strong cash
flow. This 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 strategy is
the right one and that the Group is well positioned to deliver
earnings growth and expand the future strategic options for
Vianet.
Chief Executive's Report
Vianet continues to deliver value for its customers by providing
actionable information and unparalleled insight with the power to
drive real business change.
We currently operate two business divisions: Smart Zones (drinks
monitoring and machine management services) and Smart Machines
(unattended retail machine telemetry and contactless payment
solutions and Vendman ERP software and mobile connectivity).
With over 300 customers including several global blue-chip
companies and more than 235,000 devices (excluding c 200,000
Vendman mobile connections) connected to our Internet of Things
('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 more data and insight on
everything from asset performance to process automation, Vianet is
well placed to grow its position in this rapidly developing area.
The data and insight generated via our connected devices and web
portal will deliver value for customers by materially improving
decision making that will drive real business change.
At the same time, hardware and connectivity still has a
significant role to play, and whilst we may not always connect to
customer assets using our smart devices, our IOT platform has
evolved so that our connectivity capability is agnostic and can
connect to any device. Gathering information on customer asset
performance enables the creation of powerful data and insight and
this will drive sustained growth over the coming years.
Whilst we focus on delivering actionable information business
insight using data captured via our IOT platform and third-party
sources, 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 Connor Solutions, a leading
electronics manufacturer in the North East of England.
In the last six months the Group has also taken some significant
steps forward as we strive to robustly execute key elements of our
strategic plan and secure new business.
We have been successful in a tender process with an existing
strategic customer for the supply of connected devices, actionable
data and insight data across multiple European countries plus
Australia and New Zealand. This contract with a global coffee
company is for an initial three years and demonstrates both the
global scalability of our IOT platform, and the competency in
delivering the information and insight that major customers require
to successfully manage their business.
Simultaneously, as part of our strategic intent we have sought
to reduce our dependency on a capital sales based model by evolving
our earnings streams, wherever possible, towards an annuity only
model where hardware is rented rather than purchased. This will
lead to increased quality of earnings in the long term, however, in
the short term it has adversely impacted both turnover and
profitability, accounting for just over GBP300,000 turnover on a
like for like basis compared to last year.
Just after the half year, the Group acquired Vendman Systems,
the leading UK provider of mobile and ERP solutions for the
unattended retail market. The reason for this acquisition is that
we believe the combination of Smart Machines and Vendman has a
compelling strategic, commercial and financial rationale in that it
will:
-- Establish a market leading portfolio of solutions for
unattended retail through the combination of expertise, products
and services;
-- Provide the combined commercial team with significant cross
selling opportunities for Vianet IOT connectivity and real-time
data and contactless payment technology to Vendman customers where
there are already c 200,000 mobile connections; and the sale of
Vendman ERP and mobile platform to Vianet customers;
-- Create an incremental big data revenue opportunity through
building market leading analytics and insight from combined data
sets;
-- Significantly enhance our route to market and distribution
opportunities across Continental Europe through establishing a
strong network and footprint.
To enable and accelerate our strategy we have also invested
almost GBP2 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 2018.
Operating Review
Smart Zones
Our legacy core business of drinks monitoring and services for
the UK Leisure sector experienced a moderate 6% decline in
operating profit but remains resilient with high gross margins and
strong cash generation. The challenging backdrop of industry
headwinds remains and this adversely impacts the operating
performance and financials of pub companies generally, our key
market in this division.
As result, the iDraught pipeline slowed a little on the previous
year as pub operators assess and adapt to these pressures which
include increasing business rates, the national living wage and the
rising cost of food and other goods and services.
Whilst we continue to make progress in the mid-sized Managed pub
businesses by demonstrating the value of our Smart Zone technology,
it is slower in the larger managed pub companies than originally
anticipated.
UK pub disposals have continued (2018: 1,420 and 2017: 940) with
the resulting impact being a net reduction of 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 c 219,000 devices in c 13,400
premises. The data sent from these devices forms the core of the
information and insight delivered to customers via our website and
mobile applications.
However the combination of strong recurring revenues from long
term contract extensions and ad-hoc support activity, combined with
195 iDraught(TM) sales failed to offset this increase in pub
closures, resulting in reduced income stream for the period under
review.
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 are hopeful
this will be a driver for increased traction.
The challenge and focus for the Smart Zones business in the
coming year is to deliver a stable performance despite the
headwinds which continue to dominate the UK pub market.
In our Vianet Americas business we have once again made progress
with more streamlined operations, and 60 new installations,
resulting in year on year operating losses being further reduced to
just over GBP100k with an expectation that these will further close
towards breakeven during FY2019.
The quality of our installation base is encouraging with
iDraught installed in 265 high quality blue chip operator sites
across the USA, including AMC Theatres our largest US customer,
which provides strong validation of the value provided by
iDraught.
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 delivery of results is slower than we would
wish, the Board recognises that given the relatively modest level
of investment required, a breakthrough in what is the world's
largest multiple operator market could be significant. Therefore
the Group continues to work hard to establish the iDraught
proposition in the USA.
Overall, the Board remains cautiously confident for the prospect
of the Smart Zones division returning to growth going forward.
Smart Machines
Smart Machines made good progress in the year as our deep
understanding of the key dynamics of the vending market, together
with a strategy aligned to securing agreements with major blue-chip
customers who have the scale to invest and the sophistication to
unlock the value of our Smart Machine technology, continues to fuel
growth.
The two specific areas of opportunity we continue to focus on
and increase traction in are premium coffee and contactless payment
solutions for snack and can vendors generally. We are much
encouraged by our further sales growth in both these areas and our
securing of vending contracts with major blue chip customers whose
businesses are growing. This resulted in Divisional profit growth
of 20.1% to GBP1.07 million in the year helped by a small
contribution of GBP0.12 million from Vendman.
Last year we adopted an annuity model approach to pricing to
strengthen recurring revenues and improve quality of earnings in
the medium to long term, thus reducing our dependency on the
fluctuating income of the capital sales model. This change
adversely impacted turnover in Smart Machines by around GBP300,000
in the year. This approach will result in higher quality income
streams and profits in the coming years. We have already seen our
recurring revenues grow to 74% of Smart machines income in the
year, an increase of 10% on last year.
Total Smart Machine connections grew by just over 4,400 devices
in the year helped by the highly encouraging rollout of our cloud
based contactless payment solution.
Our contactless payment solution, which is driving increased
sales of around 20% per unattended retail machine for our
customers, increased its own footprint by 113% in the year. This
strong traction in the market is unlocking further growth
opportunities, and is also particularly relevant to smaller snack
and can vendors where telemetry alone may not support unlocking the
level of value available in their operations.
During the year, Smart Machines won a large contract with a
strategic global coffee customer for the rollout of connected
coffee machines to a large part of its estate. This contract will
see us rollout 2, 3 and 4G devices to connect machines whilst
rendering data analytics and insight for the customer via our new
Project Neo portal.
Following on from the original deployments in its home country,
we are now working closely with the customer on the phased
deployment of this contract across ten further countries in Europe,
Australia and New Zealand
Our supply chain and data management capabilities have been
further strengthened by recent outsourcing of our device supply
chain to Connor Solutions, a renowned electronics manufacturer in
the North East of England. Combined with our new portal this will
allow us to increase quickly and effectively the installation of
many thousands of devices leading to a significant rise in the
number of connected machines globally.
Vendman with c 200,000 connected machines is well placed to
materially improve the operating and financial performance of the
Smart Machines in FY2019 and beyond. This includes significant
cross selling opportunities for the combined commercial team
through the sale of Vianet IOT connectivity and real-time data to
Vendman customers; the rollout of Vianet contactless payment
technology to Vendman customers; and the sale of Vendman ERP and
mobile platform to Vianet customers.
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, supported by leading industry
partners Elavon and CreditCall, has provided a very attractive
solution to the Smart Machines 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.
We expect that Vianet's contactless payment solution and
significant experience developed in this new and dynamic space will
provide exciting growth opportunities in years to come.
R&D Investment
The Group continues to invest in development activity as noted
above and accelerated this activity in the year. This development
has broadly covered enhancements to the customer experience,
revenue generating reporting insights from our new platforms which
allows us to leverage new revenue streams and necessary
infrastructure investment moving away from legacy systems and
software to an agile cloud based technology environment. The
accelerated investment of an additional c GBP800,000 on top of the
'normal' development activity range of GBP50,000 to GBP600,000 per
annum took the total investment in the cloud platform, analytics
and mobile technology to almost GBP2 million with further
investment expected in FY2019.
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 well placed and benefiting from its proven track
record of converting data gathered from its IOT connected devices
into actionable data and solutions for b2b markets.
In tandem, we continue to grow and develop strong working
relationships with blue chip customers where contracted recurring
revenues now represent well over 90% of turnover.
The acquisition of Vendman with c 200,000 mobile connections and
the rollout of the recently won global coffee contract is expected
to be transformational for the overall Smart Machines business and
should drive significantly increased earnings for the Group in the
next few years.
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 GBP2
million in new cloud and mobile capability, and the transformation
of legacy systems, will facilitate much increased growth in
existing and new vertical markets. The addition of our new
contactless payment solution and rapid adoption of technology by
brand owners and machine operators, positions this division for
strong underlying growth.
In our Smart Zones division, given well publicised industry
headwinds, we will continue to manage the decline in the UK pub
market whilst working to grow our iDraught footprint in the USA
through 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 business.
Financial Review
Turnover increased by 2.1% helped by the acquisition of Vendman
which offset a moderate decline in Smart Zones and the GBP0.3
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 90%
(2017: 85%), helped by the Vendman acquisition and the transition
from capital to annuity based sales in Smart Machines.
The average recurring revenue per connected device has grown
7.0% to GBP51.53 (2017: GBP48.18);
Performance Summary
Pre-exceptional cost PBT was up 7.3% at GBP2.59 million (2017:
GBP2.41 million), with PBT being up 41.5% at GBP2.05 (2017: GBP1.45
million). The table below shows the performance of the Group;
FY2018 FY2017 Change
%
Revenue GBP14.56m GBP14.26m 2.1
Operating profit(a) GBP3.62m GBP3.32m 9.2
Operating profit GBP3.08m GBP2.35m 31.1
Profit before
tax(b) GBP2.59m GBP2.41m 7.3
Profit before
tax GBP2.05m GBP1.45m 41.5
Basic EPS(c) 8.50p 7.30p 16.4
Dividend per share 5.70p 5.70p
Net cash(d) GBP1.20m GBP3.45m
a) Pre-exceptional items, share based payments and amortisation
b) Pre-exceptional items
c) Profit after tax pre-exceptional items
d) Cash at bank after deduction of bank loans including new loan
for the acquisition of Vendman Systems Limited
Exceptional Items
FY2018 FY2017
'GBP000 'GBP000
US legal costs - 388
People and office rationalisation 241 573
VFS disposal - (102)
Acquisition costs 231 -
Other items 66 5
----------------------------------- --------- ---------
Total 538 864
=================================== ========= =========
Current year costs predominately relate to Vendman Systems
Limited acquisition costs and staff rationalisation 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 (2017: 5.70 pence).
On a profit after tax basis, dividend cover has increased to c
1.16 (2017: c 0.66). We expect the cover to improve further in
FY2019 as a result of our anticipated growth in profits and
reduction in exceptional costs.
Cash
Net operational cash generation (including share based payments
and asset disposals) was GBP2.97 million (2017: GBP3.93 million).
The year on year cash generation and resulting net cash position
was adversely impacted by phasing of collections in FY2017
including one customer paying upfront, and the FY2018 acquisition
related costs associated with Vendman. Otherwise the like for like
cash generation was broadly in line.
The cash generation of GBP2.97 million was principally used to
service accelerated R&D investment, dividend payment and
servicing of new borrowings leaving an outflow of GBP0.6 million
(2017: GBP0.9 million inflow).
Factoring out the accelerated R&D spend and acquisition
costs the net cash flow position was within c GBP300k of last
year.
At the year end, pre mortgage and the acquisition loan, the
Group had net cash including overdraft of GBP3.92 million (2017:
GBP4.55 million), borrowings of GBP2.65 million (2017: GBP1.10
million), and net cash of GBP1.20 million (2017: GBP3.45 million)
impacted by the GBP2 million term loan associated with the Vendman
acquisition.
Divisional Performance
Currently the Smart Zones division principally consists of the
core beer monitoring business (including the US) and gaming machine
monitoring.
Smart Zones
FY2018 FY2017 Change
%
Turnover GBP11.45m GBP11.93m (4.1)
Operating profit(a) GBP4.53m GBP4.82m (5.8)
Total connected
devices 218,663 230,489 (5.1)
New Installation
sales 245 380 (35.5)
YE Net premises(b) c13,570 c14,500 (6.4)
iDraught penetration(b) 28.0% 25.8%
a) Pre-exceptional items, share based payments and amortisation
b) UK, USA and Europe only
Recurring revenue per device has increased 6.1% to GBP48.67
(2017: GBP45.89) 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
decreased c 1.1% to GBP16.70 (2017: GBP16.89) reflecting lower new
unit sales offset by continuing overhead rationalisation.
The Smart Zones division has performed fairly against a
continuing challenging pub market landscape that resulted in a net
estate reduction of c 1,175 sites (2017: c 600) to c 13,125 (2017:
14,300) in the UK and Europe.
Against this backdrop, Smart Zones delivered a credible
operating profit of GBP4.53 million (2017: GBP4.82 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.
FY2018 FY2017 Change %
Turnover GBP3.12m GBP2.33m 33.9
Operating profit (a) GBP1.07m GBP0.89m 20.2
New Telemetry connections 1,660 4,275 (61.2)
New Contactless connections 2,830 817 246.4
YE Net estate c 18,000 c20,000 (10.0)
a) Pre-exceptional items, share based payments and amortisation on a continuing basis.
b) Included in the above FY2018, Vendman contributed GBP1.18m in
turnover and GBP0.12m in operating profit
c) The net estate reduction in FY2018 reflects the vending
machine estate rationalisation (enabled by Smart Machines), the
loss of one midsized customer who sought exclusivity, and the new
device sales pipeline being impacted by two customers temporarily
delaying orders during their respective negotiations with Smart
Machines. One of these being the Vendman acquisition and the other
being the significant contract with a global coffee vendor.
d) Excludes c 200,000 Vendman connections.
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 2,013 ahead of
FY2017. Growth in the estate figures is reflected in the net
movement.
Average recurring revenue per device increased 15.9% to GBP86.25
(2017: GBP74.44) principally due to the improving mix of estate,
the increased penetration of contactless solutions, and the shift
towards annuity based revenue streams.
Average adjusted operating profit per device (above) has
increased 19.2% to GBP52.74 (2017: GBP44.26) 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 (2017: GBPnil). The Group
will continue to utilise the available tax losses carried forward
into FY2019. In the financial year under review, the tax line
includes a deferred tax charge of GBP0.24 million (2017: GBP0.42
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 before tax from continued operations
pre-exceptional items earnings per share is 9.36 pence for FY2018
compared to 8.83 pence for FY2017. Underlying fully diluted
earnings per share (before exceptional costs), which takes account
of all outstanding share options, amounted to 9.35 pence in FY2018
which compares to 8.79 pence for FY2017.
Basic EPS was 6.55 pence compared to 3.77 pence in 2017.
Balance sheet and cash flow
The Group balance sheet remains strong.
The Group generated operating cash flow of GBP2.97 million
(2017: GBP3.93 million) with FY2017 impacted by a customer paying a
five year contract up front, and FY2018 impacted by Vendman Systems
Limited acquisition costs. Despite the headwinds noted in the Smart
Zones above, the division itself had a healthy operational cash
generation of c GBP4.3 million (2017: GBP5.5 million).
The cash generated in FY2018 was utilised to invest in the
Group's accelerated technology plans through research and
development, to service borrowings, fund dividends and acquire
Vendman. At the year end, the Group had borrowings of GBP2.65
million (2017: GBP1.10 million), and net cash of GBP1.20 million
(2017: GBP3.45 million) impacted by the Vendman acquisition funded
by a GBP2.0 million 4 year term bank loan drawn down in October
2017
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.
Consolidated Statement of Comprehensive Income
for the year ended 31 March 2018
Before Exceptional Before
Exceptional 2018 Total Exceptional Exceptional Total
2018 GBP000 2018 2017 2017 2017
GBP000 GBP000 GBP000 GBP000 GBP000
Note
Continuing
operations
Revenue 14,561 - 14,561 14,263 - 14,263
Cost of sales (4,381) - (4,381) (4,327) - (4,327)
Gross profit 10,180 - 10,180 9,936 - 9,936
Administration
and other operating
expenses (6,559) (538) (7,097) (6,621) (964) (7,585)
Operating profit
pre amortisation
and share based
payments from
continuing
operations 3,621 (538) 3,083 3,315 (964) 2,351
Intangible
asset amortisation (865) - (865) (693) - (693)
Share based
payments (142) - (142) (206) - (206)
Operating profit
post amortisation
and share based
payments 2,614 (538) 2,076 2,416 (964) 1,452
Net finance
costs (28) - (28) (5) - (5)
Profit from
continuing
operations
before tax 2,586 (538) 2,048 2,411 (964) 1,447
Income tax
expense 1 (239) - (239) (417) - (417)
Profit from
continuing
operations 2,347 (538) 1,809 1,994 (964) 1,030
Profit/(loss)
from discontinued
operations: - - - - 100 100
Profit and
other comprehensive
income for
the year 2,347 (538) 1,809 1,994 (864) 1,130
Earnings per
share
Total
- Basic 8 6.55p 4.14p
- Diluted 8 6.54p 4.12p
---------------------- ----- -------------- -------------- ---------- -------------- -------------- ----------
Continuing
Operations
- Basic 8 6.55p 3.77p
- Diluted 8 6.54p 3.76p
---------------------- ----- -------------- -------------- ---------- -------------- -------------- ----------
Discontinued
Operations
- Basic 8 0.00p 0.37p
- Diluted 8 0.00p 0.36p
---------------------- ----- -------------- -------------- ---------- -------------- -------------- ----------
Consolidated Balance Sheet
at 31 March 2018
2018 2017
GBP000 GBP000
Assets
Non-current assets
Goodwill 17,975 15,503
Other intangible assets 4,529 2,000
Property, plant and equipment 3,166 3,069
Total non-current assets 25,670 20,572
---------------------------------- -------- --------
Current assets
Inventories 1,086 1,308
Trade and other receivables 3,246 2,708
Tax asset 391 460
Cash and cash equivalents 4,324 4,549
---------------------------------- -------- --------
9,047 9,025
------------------------------- -------- --------
Total assets 34,717 29,597
---------------------------------- -------- --------
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables 4,436 3,728
Borrowings 1,062 325
Provisions - 62
5,498 4,115
Non-current liabilities
Other payables 1,339 -
Borrowings 1,994 778
Provisions - 48
Deferred tax 872 395
4,205 1,221
------------------------------- -------- --------
Equity attributable to owners
of the parent
Share capital 2,872 2,843
Share premium account 11,519 11,287
Share based payment reserve 483 418
Own shares (1,114) (1,221)
Merger reserve 310 310
Retained profit 10,944 10,624
---------------------------------- -------- --------
Total equity 25,014 24,261
---------------------------------- -------- --------
Total equity and liabilities 34,717 29,597
---------------------------------- -------- --------
Consolidated Statement of Changes in Equity
for the year ended 31 March 2018
Share
Share based
Share premium Own payment Merger Retained
capital account shares reserve reserve profit Total
At 1 April 2016 2,843 11,287 (1,221) 217 310 11,045 24,481
Dividends - - - - - (1,557) (1,557)
Share based payments - - - 207 - - 207
Share option forfeitures - - - (6) - 6 -
Transactions with
owners - - - 201 - (1,551) (1,350)
------------------------- -------- -------- -------- -------- --------- --------- ---------
Profit and total
comprehensive
income for the
year - - - - - 1,130 1,130
Total comprehensive
income less owners
transactions - - - - - (421) (220)
------------------------- -------- -------- -------- -------- --------- --------- ---------
At 31 March 2017 2,843 11,287 (1,221) 418 310 10,624 24,261
------------------------- -------- -------- -------- -------- --------- --------- ---------
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 2017 2,872 11,519 (1,114) 483 310 10,944 25,014
------------------------- -------- -------- -------- -------- --------- --------- ---------
Consolidated Cash Flow Statement
for the year ended 31 March 2018
2018 2017
Note GBP000 GBP000
Cash flows from operating activities
Profit for the year 1,809 1,130
Adjustments for
Net interest payable 28 5
Income tax expense 239 417
Amortisation of intangible assets 865 693
Depreciation 378 348
(Profit)/Loss on sale of property,
plant and equipment and businesses 62 (50)
Share based payments 142 207
Operating cash flows before changes
in working capital and provisions 3,523 2,750
Change in inventories 219 502
Change in receivables (537) 857
Change in payables (126) (289)
Change in provisions (105) 110
(549) 1,180
Cash generated from operations 2,974 3,930
Net cash generated from operating
activities 2,974 3,930
---------------------------------------- ----- -------- --------
Cash flows from investing activities
Proceeds on disposal of subsidiary
division - 100
Purchase of subsidiary (1,917) -
Purchases of property, plant and
equipment (398) (325)
Purchases of intangible assets (1,610) (711)
Net cash used in investing activities (3,925) (936)
---------------------------------------- ----- -------- --------
Cash flows from financing activities
Net interest payable (28) (5)
Issue of share capital 261 -
Share options exercised 103 -
New bank loans 2,000 -
Repayments of borrowings (450) (488)
Dividends paid 2 (1,562) (1,557)
Net cash used in financing activities 324 (2,050)
---------------------------------------- ----- -------- --------
Net increase/(decrease) in cash
and cash equivalents (627) 944
Cash and cash equivalents at beginning
of period 4,549 3,605
---------------------------------------- ----- -------- --------
Cash and cash equivalents at end
of period 3,922 4,549
---------------------------------------- ----- -------- --------
Notes to the financial statements
1. Taxation
Analysis of charge in period
2018 2017
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 230 427
- Amendment re-recognition of losses 9 (10)
Income tax charge 239 417
------------------------------------------ -------- --------
Reconciliation of effective tax rate
The tax for the 2018 period is lower (2017 was higher) than the
standard rate of corporation tax in the UK (2018: 19% and 2017:
20%). The differences are explained below:
2018 2017
GBP000 GBP000
Profit before taxation
- Continuing and discontinuing operations 2,226 1,547
Profit before taxation multiplied by rate
of corporation tax in the UK of 19% (2017:20%) 423 309
Effects of:
Other expenses not deductible for tax purposes 35 25
Amortisation of intangibles 123 125
Movement on losses 120 266
Adjustments for prior years 9 (10)
Research and development (471) (298)
Total tax charge 239 417
------------------------------------------------- -------- --------
2. Ordinary dividends
2018 2017
GBP000 GBP000
Final dividend for the year ended 31 March
2017 of 4.0p (year ended 31 March 2016:
4.0p) 1,096 1,092
Interim dividend paid in respect of the
year of 1.70p (2017: 1.70p) 466 465
Amounts recognised as distributions to equity
holders 1,562 1,557
----------------------------------------------- -------- --------
In addition, the directors are proposing a final dividend in
respect of the year ended 31 March 2018 of 4.0p per share. If
approved by shareholders, it will be paid on 28 July 2018 to
shareholders who are on the register of members on 17 June 2018.
Total dividend payable 5.70p (2017: 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 2018 before exceptional costs increased to 8.50 pence
compared to 7.30 pence at March 2017.
Basic earnings per share are calculated by dividing the earnings
attributable to ordinary shareholders (GBP1,809,000) 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.
2018 2017
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 1,809 6.55p 6.54p 1,130 4.14p 4.12p
Pre-tax profit attributable
to equity shareholders 2,048 7.42p 7.40p 1,547 5.67p 5.64p
Of which is attributable
to continuing operations 2,048 7.42p 7.40p 1,447 5.30p 5.28p
Pre-tax, pre-exceptional
profit attributable
to equity shareholders 2,586 9.36p 9.35p 2,411 8.83p 8.79p
Post-tax, pre-exceptional
profit attributable
to equity shareholders 2,347 8.50p 8.48p 1,994 7.30p 7.27p
2018 2017
Number Number
Weighted average number of ordinary shares 27,613,719 27,302,694
Dilutive effect of share options 54,259 114,063
--------------------------------------------- ----------- -----------
Diluted weighted average number of ordinary
shares 27,667,978 27,443,757
--------------------------------------------- ----------- -----------
4. Exceptional items
2018 2017
GBP000 GBP000
US litigation - 388
Bolton rationalisation (19) 495
Acquisition costs 231 -
Corporate restructuring and transitional
costs 260 83
Other 66 -
Disposal of VFS subsidiary - (102)
538 864
------------------------------------------ -------- --------
Acquisition costs relate to the acquisition of Vendman Systems
Limited in October 2017.
Corporate restructuring and transitional costs relate to the
redundancy 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.
5. Basis of preparation
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined by
section 434 of the Companies Act 2006.
It has been prepared in accordance with the recognition and
measurement principles of International Financial Reporting
Standards (IFRS) adopted for use in the European Union, including
IFRIC interpretations issued by the International Accounting
Standards Board, and in accordance with the AIM rules and is not
therefore in full compliance with IFRS. The principal accounting
policies of the Group have remained unchanged from those set out in
the Group's 2017 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 financial information for the period ended 31 March 2018 was
approved by the Board on 4 June 2018 and 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 2018 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 2017 have
been delivered to the Registrar of Companies.
6. Annual General Meeting
The Annual General Meeting will be held on 28 June 2018 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 FIMMTMBMMTMP
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