TIDMVNET
RNS Number : 8589B
Vianet Group PLC
15 June 2021
15 June 2021
Vianet Group plc
("Vianet", "Company" or "the Group")
Final Results
Resilient financial performance in a challenging period with a
solid platform to support growth
Vianet Group plc (AIM: VNET), the international provider of
actionable data and business insight through devices connected to
its Internet of Things platform ("IOT"), is pleased to announce its
final results for the year ended 31 March 2021.
Financial highlights
-- Revenue fell 48% to GBP8.37m (FY2020: GBP16.28m) reflecting impact of COVID-19.
-- Recurring revenues remained strong at 89% (FY2020: 92%).
-- Gross margin remained robust at c. 60% (FY2020: c. 68%).
-- Adjusted operating loss, pre-exceptional costs, amortisation
and share based payments, limited to GBP0.69m (FY2020: GBP4.03m
profit) reflecting proactive response to severe impact of C19 on
the Group's markets.
-- Profit before taxation was a loss of GBP2.82m (FY2020:
GBP2.40m profit), principally due to the impact of the pandemic and
continued intangible amortisation of R&D costs.
-- Basic earnings per share was negative 6.75p (FY2020: 8.56p positive).
-- We ended the year with net borrowings of GBP2.66m (2020:
GBP0.95m) and a gross cash balance of GBP1.89m (FY2020: GBP1.73m).
The Group has a further GBP1.5m available in its overdraft
facility.
-- The Board considers it would not be appropriate to pay a
final dividend as it is prudent to conserve cash until the trading
recovery has gathered more momentum.
Divisional highlights
-- Smart Machines adjusted operating profit of GBP1.1m (FY2020: GBP1.53m).
-- Smart Machines added 7,200 new connected devices (FY2020:
12,059), impacted by pandemic restrictions, city centre office
closures, and some customers taking a business decision to
rationalise their estates.
-- Smart Machines continuing to create strong growth opportunities across UK and Europe.
-- Smart Zones set to recover as a result of improving growth
prospects both in the UK pub market and the US hospitality market,
as well as gaining revenue momentum from its market and retail data
insight services.
Commenting, James Dickson, Chairman of Vianet Group plc,
said:
"The pandemic has provided Vianet with an opportunity to
re-energise the organisation, underline our credentials and worth
to customers, re-set our technology roadmap, and exit the storm in
a strong position.
"As a business dependent on the hospitality and leisure sectors,
the pandemic has been a challenging period for the Company. Despite
this, we have navigated the challenges well, focusing on preserving
cash and maintaining strong relations with our customers. Thanks to
the success of these measures, plus the roll out of the vaccines
and the easing of restrictions, the Company is coming out of the
lockdown phases strongly and in a position to capitalise upon the
excellent growth opportunities available, with normal trading in
the UK across both divisions expected to return during H2 2022.
"In our Smart Machines division, unattended machines have been
operating throughout the pandemic in sites for essential workers,
with a material increase in the use of contactless payments. We
fully expect this trend to continue post lockdown and, as such, we
envisage further demand for remote connection to unattended retail
assets. Although sales of new connected devices fell during the
period, we have invested in our sales, commercial and marketing
capability as well as in the product roadmap and we now have a
pipeline of promising growth opportunities across the UK and
Europe.
"Our Smart Zones division is set to recover in line with the UK
pub and US hospitality markets, as well as gaining revenue momentum
from its market and retail data insight services. As we exit the
lockdown phases, our draught beer insights remain highly valuable
for customers to understand trading performance and patterns and
aid decision-making. We have already received orders and enquiries
for installations of new systems, as well as exploring new services
designed to help clients during these uncertain times.
"The ongoing investment in cloud infrastructure and mobile
technology will also help to develop existing revenues and provide
the scalability, flexibility and speed to support rapid growth in
existing and potential new verticals. This investment has already
proven successful in improving the speed at which we are able to
execute elements of our growth plan. With the implementation of
protective measures, implemented early in the pandemic, supported
by the growing demand for IOT and the processing and understanding
of customers' data, we remain confident in the Company's long-term
strategy for growth and delivering value to shareholders.
"We look forward to updating the market on our further progress
in due course."
- Ends -
An online analyst briefing, given by James Dickson, Chairman,
and Mark Foster, Chief Financial Officer, will be held today at
09.30hrs via Microsoft Teams. Please contact
vianet@yellowjerseypr.com for details.
Enquiries:
Vianet Group plc
James Dickson, Chairman & Interim Tel: +44 (0) 1642 358
CEO 800
Mark Foster, CFO 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
Henry Wilkinson 137
vianet@yellowjerseypr.com Tel: +44 (0)7951 402
336
www.yellowjerseypr.com
Chairman's Statement
Introduction
Last year I provided a comprehensive update on our proactive
response to the global Coronavirus ("C19") pandemic. This year my
emphasis is on our results and the Group's encouraging
prospects.
From the very outset of C19, our goal has been to safeguard
employees and support our customers whilst preserving cash to
ensure continuity and ongoing investment in the business, so that
we were strongly positioned for the recovery phase.
It has been a difficult time for any business with a reliance on
the hospitality and leisure sectors, and last year we reported
without fully appreciating the severity and duration of the
restrictions that would be required to navigate the country through
the pandemic.
The proactive measures we took early on in the pandemic, such as
reducing fees to support our customers, has allowed us to retain
close relations with them which we believe has put us in good stead
as the country emerges from restrictions.
The obligatory going concern evaluation is provided in the
accompanying Report of the Directors and I can confirm that the
Group has adequate resources to support its growth plans for the
foreseeable future.
As a result of our proactive response, I am pleased to report
that the Group has come through the pandemic successfully and is
well positioned to capitalise as the country continues to recover
from the pandemic and to take advantage of the excellent growth
opportunities available.
Results
Given the extreme challenges in the economic environment over
the last 18 months, the focus for this update will be how we
addressed the issues around the pandemic and how we have emerged as
a stronger, more relevant and forward-looking business. Comparative
financial information is presented only for reporting purposes.
The closure of the hospitality sector and many city centre
offices resulted in revenue declining by 48% to GBP8.37m (FY2020:
GBP16.28m). This has been particularly frustrating following
increased momentum through FY2020 with growth opportunities in
Smart Machines and resilience in Smart Zones.
Prudent cost management resulted in an adjusted operating loss
of GBP0.69m (FY2020: GBP4.03m profit) which was materially better
than we had anticipated at the outset of C19. Group loss before
taxation was GBP2.82m (FY2020: GBP2.40m profit).
Exceptional items of GBP0.34m (FY2020: Negligible) were largely
related to a divisional disposal, C19 measures and staff
rationalisation costs.
Basic earnings per share was negative 6.75p (FY2020: 8.56p
positive).
A GBP3.5m Coronavirus Business Interruption Loan ("CBIL") was
taken on 26 May 2020 to provide support against a prolonged
recovery period. We ended the year with net borrowings of GBP2.66m
(2020: GBP0.95m) and a gross cash balance of GBP1.89m (FY2020:
GBP1.73m). The Group has a further GBP1.5m available in its
overdraft facility.
We have conservatively modelled our FY2022 cash forecasts which,
when combined with the measures already taken, leave the Directors
confident that the Group has sufficient funding to support business
cash requirements and ongoing investment in growth for a period
significantly beyond the next 12 months.
Dividend
We anticipate a continuation of improved trading in the coming
months, with the general health and economic outlook being more
reassuring, although the timing of a return to normal economic
conditions still remains uncertain. During FY2022, the Group will
continue to invest in its exciting growth opportunities, complete
the repayment of the Vendman acquisition loan, and begin the
repayment of the CBIL facility.
Given this background and circumstances, the Board considers it
would not be appropriate to pay a dividend in respect of the year
ended 31 March 2021.
The Board recognises that this is a significant decision and
that dividends are an important part of shareholder returns.
Provided that recent good progress on trading continues, it fully
expects to be is a position to resume payment of dividends for
FY2022.
Board Changes and Staff
The Board's composition and effectiveness is constantly
evaluated to ensure the optimum balance of experience and
independence to support the business.
As announced on 8 December 2020, Stewart Darling stepped down as
CEO and left the Group at the end of March 2021. Having held the
role of CEO prior to Stewart, it was a simple transition for me to
assume an Executive role again and presented an opportunity to make
changes to the operational structure of the Group, and it is
pleasing that the management team is now cohesive and fully
engaged. The Board will keep the operational and Board structure
under regular review but, at the current time, no immediate changes
are anticipated.
In an age where change is frequent, the support of our people
has been our greatest asset. Despite almost 60% of our 155
employees being on some form of furlough during the period,
everyone continued to engage with their usual enthusiasm,
commitment, and openness, helping underpin the Group's excellent
reputation with customers.
I am extremely proud of how our executive team and employees
have stepped up to the mark during this difficult year and I thank
them and my Board colleagues for their ongoing commitment in taking
the Group forward.
Conclusion and Outlook
Prior to C19 pandemic the Group had been experiencing
encouraging momentum and performance across both divisions.
Although FY2021 has been a temporary setback, it has provided us
with a window of opportunity to refocus, reorganise, and progress
our product development plans. We have also continued to invest in
our marketing, sales, and commercial teams.
The success of the UK vaccine programme and further easing of
restrictions, together with an encouraging start to FY2022, gives
us the belief that we should see both divisions return to more
normal levels of trading in the UK during H2 2022. We anticipate
that the performance of our European business will pick up soon
after.
The Group remains in good shape to resume strong earnings growth
by leveraging the solid momentum that was building prior to C19 and
delivering on our exciting growth opportunities.
-- Smart Machines' leading end-to-end product suite and
established presence is continuing to create strong growth
opportunities across UK and Europe, having already gained long-term
contracts with major global and national customers, coupled with
the opportunities from the now integrated business and estate of
Vendman.
-- Through C19, unattended machines have been operating in sites
for essential workers, with a material increase in the use of
contactless payments. We strongly believe that the trend away from
cash payments will continue to accelerate post lockdown, increasing
the requirement for remote connection to unattended retail
assets.
-- We have made a significant investment in additional sales,
commercial and marketing capability while increasing investment in
the product roadmap to accelerate growth in the above areas and new
verticals. There has been extra focus on developing our capability
and accelerating growth from our leading position in coffee device
and contactless payment device connectivity, where we expect sales
momentum will continue to grow.
-- New vertical opportunities in the UK and internationally have
emerged for our contactless payment and telemetry solutions in fuel
retail forecourts and franchise kitchens with good results from
field trials.
-- Ongoing investment in cloud infrastructure and mobile
technology will help develop existing revenues in both Smart Zones
and Smart Machines and also provide the scalability, flexibility
and speed to support rapid growth in existing and potential new
verticals.
-- Smart Zones will continue to complete the customer technology
upgrade programmes through FY2022, benefitting from our current
infrastructure investment. This will allow the division to recover
its profit contribution taking advantage of improving growth
prospects both in the UK pub market and the US hospitality market,
as well as gaining revenue momentum from its market and retail data
insight services.
-- Draught beer insights continue to be vital for our customers
in order to better understand tenant and lessee trading performance
and patterns during the C19 exit phase. We have already received
orders and enquiries for installations of new systems, some of
which are already live.
-- Our Smart Zones product roadmap development will bring new
features and functionality generating increased customer interest.
These include automated line cleaning manager, automated till
variance alerts, market data provision, and interface with labour
management.
-- The Group has high levels of contracted recurring income and
will return to strong cash flow. The Group's capacity for
operational cash generation and resilient balance sheet gives scope
for further investment to accelerate Smart Machines expansion and
develop new verticals.
The Board remains resolutely confident in Vianet's long-term
growth strategy to deliver earnings growth and the expansion of
future strategic options for Vianet as we emerge from C19.
The Board's absolute focus remains on emerging from this global
crisis in a strong position to take advantage of its exciting
growth opportunities, whilst maintaining the health, well-being and
safety of our employees and customers.
James Dickson
Chairman
15 June 2021
Strategic Report
There is nothing like a crisis to create a common sense of
purpose and provide an opportunity to demonstrate leadership. From
the very outset of C19, we have worked with our customers and
managed cash prudently to ensure business continuity and to
facilitate the essential ongoing investment in the business. This
has meant that the Group is well positioned for the C19
recovery.
Our core strategy centres on IOT and the collection and
processing of customers' asset data, to drive improved operating
performance for businesses, machine owners, operators and brand
owners.
By connecting and analysing an increasing number of remote
assets, Vianet is able to deliver insights and analytics that
support better decision-making, enabling customers to improve their
key asset utilisation and performance metrics. Combining this with
our leading-edge contactless payment capability to support sales
growth in unattended retail machines, we expect to strengthen our
position in this rapidly developing area.
Hardware and software remain critical components in enabling
remote assets to be connected. Our IOT platform has evolved to
support much greater flexibility of device connection and data
connectivity so that it is now possible to connect a range of
business-critical third-party devices beyond the verticals we
currently supply.
Our ability to collaborate with customers to identify compelling
end-to-end solutions to address business opportunities will
position us to drive sustained business growth over the coming
years.
FY2021 has been challenging, however the Group has made a step
change investment in sales and marketing capability, and
technology. This has accelerated our ability to execute certain key
elements of our growth plan, including launching our market data
insights, strengthening our customer relationships and helping
secure new business in existing and potential new verticals, such
as fuel retail forecourts and industrial kitchens using our
contactless payment and telemetry solutions.
Smart Machines
Conversion of opportunities in this space is accelerating
following a significant increase in our sales, commercial and
marketing capabilities during the financial year.
This will further enhance the pace of the roll out of our
contactless payment solution, driving increased machine utilisation
and sales for customers, who benefit from reduced cost of cash
handling, improved cash flow and an assured payment.
The trend towards non-cash transactions is growing significantly
with contactless payments giving a fast, easy and secure
transaction in a world where fewer people are carrying cash. The
impact of C19 and our 'dirty cash' campaign have given further
impetus to the trend (
https://vianetplc.com/wp-content/uploads/2021/06/NIVO_Doublespread_COVID_19.05.pdf
).
We are encouraged by the impact of our investment in the sales
team and the opportunities in new verticals using contactless as
the lead generator, which enhances our route to market and
distribution opportunities with operators and machine
suppliers.
Smart Zones
Through C19 we have been proactive in supporting our hospitality
sector customers who have been severely impacted by prolonged
closures and restrictions. We temporarily reduced contract terms
and modified data feeds to help our clients understand trading
under a wide range of differing and fluid regional C19 hospitality
restrictions. During C19 our reporting has shifted from weekly
compliance for operations level towards daily insights for
C-level.
As the government measures are eased further and the hospitality
sector reopens, the insights and analytics we provide will be
especially valuable, helping to target support, optimise revenue,
and minimise costs.
We are seeing an increased level of interest in new analytics
and insights, aided by a new reporting suite to support management
decision-making, and are exploring an exciting range of new
services specifically designed to help clients during these
unprecedented times.
Operating Review
Smart Zones
The closure of the hospitality sector resulted in a material
fall in turnover, with only 61 (FY2020: 151) new site
installations, but our proactive reduction in monthly charges
benefitted our customers and resulted in the division being able to
return a modest profit before exceptional costs, amortisation and
share based payments.
Technology upgrades to our 4(th) Generation IOT hubs was
completed in 137 pubs (FY2020: 2,519) with a further c. 900 to be
completed in FY2022.
It is difficult to assess the full extent of UK pub re-openings
in FY2022 whilst social distancing restrictions are still in place.
Work from home guidance and the 2m rule has put extreme pressure on
the viability of city centre pubs, with many deciding not to
re-open whilst the rule is still in place and instead waiting until
offices return after the summer holiday period. The average
community-based leased and tenanted pubs are faring better and are
opening sooner. At end of May 2021, some 83% of pubs, which the
division services, had re-opened.
We have identified 723 permanent pub closures in our UK
installation base which, with 61 new installations, gives a net
reduction of 662 sites (FY2020: 838). The precise picture will
become clear when restrictions are fully lifted and city centre
offices re-open, but our estimate is that in UK and Europe, we have
10,940 installed sites (FY2020: c. 11,600), of which 440 pubs have
been inactive since C19 restrictions began, leaving c. 10,500
currently active. There are a further c. 300 installations in the
US, giving a total active base of c. 10,800, with a further 440 to
be confirmed as more normal pub trading resumes.
The disruption to the hospitality sector has seen significant
challenges but has in turn provided opportunities for wider
engagement with our customers and the acceleration of our product
roadmap. In addition to ongoing compliance information, our
customers are seeking trading data to improve decision-making
during the exit phase. There is an increasing desire to enhance
their digital capabilities to improve efficiency and enable
frictionless delivery from back of house to front of house and on
to consumers.
Our Smart Zones connected device base remains significant with
c. 170,000 devices in the active estate. Gathering more granular
data from our 4(th) Generation IOT hubs, together with our
increasingly sophisticated reporting capabilities delivered via our
website and mobile applications, is delivering growth in our
insight and analytics sales with one multi-year contract signed and
several others under negotiation. This is particularly relevant for
the provision of retail data for brewers. We are now contracted
with the Oxford Partnership to deliver ground-breaking insight that
will support consumer-level decision-making in respect of beer
brands. We have also seen increased traction for insight data that
will show growth into FY2022.
As C19 restrictions are lifted there will be increased focus on
operational and retail performance to drive value from pubs; this
will be particularly so for customers who are now owned by private
equity. This plays to the strength of our operational analytics and
retail insights capability, and the positive C-level exposure
gained during C19.
Vianet Americas' revenues were down 68% to c. GBP130k (FY2020:
c. GBP400k) as hospitality customers, and in particular AMC
Theatres, were until recently severely restricted due to C19. This
resulted in a GBP200k loss compared to breakeven in FY2020. All but
a few customer sites have now re-opened and our monthly billing is
expected to recover to more normal levels by the end of H1
FY2022.
Despite the challenging year, the quality of our blue-chip
installation base and competitive advantage of our solution
provides a platform to build scale in the world's largest bar chain
market by securing a new national customer and by executing on the
partnership opportunities which have been identified.
C19 had a material impact on the division's results, but the
underlying combination of a strong recurring revenue, long-term
contracts, proactive cost control, and margin management enabled
the Group to maintain modest profit contribution in the year.
Overall, the Board remains confident that when we are more freed
from C19, the Smart Zones division will return to previous levels
of performance, whilst delivering growth from the managed pub
sector and its data insight services.
Smart Machines
The revenue impact on our Smart Machines division was less
pronounced as approximately 70% of machines remained active due to
many unattended retail assets being installed in sites occupied by
essential workers. Whilst the division did not escape the impact of
C19, it made good progress delivering an acceptable sales and
profit performance in difficult circumstances.
We are seeing an increase in demand and usage of our contactless
payment solution, rather than 'dirty' coins, and anticipate that
this will continue to accelerate further from a growing business
requirement and industry trend for telemetry and contactless
payment solutions.
There is increasing recognition from vending operators that the
use of cash by consumers continues to decline, and that the ability
to manage efficiently and effectively is being materially inhibited
by the pricing inflexibility of cash and the continued reliance on
frequent and costly machine visits.
We remain extremely well placed to help our customers unlock the
value of our technology as the leading end-to-end product provider
and we see a material opportunity to drive growth in the unattended
retail market by delivering market-leading analytics and insight in
the unattended retail premium coffee, snack and can channels.
Smart Machines divisional turnover was GBP4.42m (FY2020:
GBP5.22m), resulting in an operating profit of GBP1.1m (FY2020:
GBP1.53m) before exceptional costs, amortisation and share based
payments.
Whilst the majority of sales remained Capex in the year, the
trend from Capex to an Opex annuity only model had the short-term
impact of reducing FY2021 turnover by GBP0.30m and profit by
GBP0.15m. There will be a significant long-term benefit for future
recurring income streams and the visibility of profits as
typically, the Opex model will deliver 1.3 x the profit of a Capex
model over the life of a contract.
Customers will choose whichever revenue model is appropriate to
them and we are well placed to support all options but
strategically we have sought to drive more annuity income sales, to
improve the quality and visibility of earnings. We recognise
however that we must retain the flexibility in our business model
to ensure we meet different customer requirements.
Overall recurring revenues increased to 86% (FY2020: 80%).
Total Smart Machine device connections grew by just over 7,200
(FY2020: 12,059). Whilst new sales were impacted by C19
restrictions, the existing installation base was also impacted as
some customers took a business decision to rationalise their
estates. New unit sales offset the increase in redundant machines,
resulting in our overall device installations remaining flat at c.
38,000.
The market opportunity is significant. Whilst there is a total
European vending machine park of over 3 million machines, the
immediately addressable European market is c. 880,000 machines, of
which c. 300,000 are in the UK. The classification 'immediately
addressable' refers to machines which are capable of data output
for telemetry and are also in organisations with the scale to
implement and benefit from an end-to-end solution. Whilst there is
no readily available data on competitor share, we estimate that the
total penetration of the c. 880,000 immediately addressable
European vending machine park is only c. 8%, of which Vianet have
c. 38,000, giving a market share of just over 50%. Over FY2022 and
FY2023, the division's growth initiatives aim to deliver in excess
of 50,000 new vending connections.
As technology adoption evolves, contactless transaction limits
increase and the benefits of insight and analytics in the vending
sector become more widely recognised, it is anticipated that more
of the addressable market will embrace our technology and the
corresponding opportunity.
Our contactless payment solution is supported by leading
industry partners Elavon and NMI, and has been enhanced by
establishing our PCI Master Merchant service. This allows us to
speed up the on-boarding of customers for payment capability and
provide a more cost-effective reconciliation and payment
service.
Contactless payment remains a very attractive solution in a
marketplace where traditional cash-only payments have long been an
inhibitor of vending-related usage, consumption, and customer
experience. We believe the evolution and growth of contactless
payment solutions will materially change this dynamic and attract
more consumers to the vending vertical.
The prospects for our Smart Machines business are extremely
positive and in the longer term have likely been enhanced by C19.
Vianet's data analytics and insight from unattended retailing
assets and evolving contactless payment solution will continue to
provide exciting growth opportunities.
R&D Investment
Through FY2021 the Group continued to invest in the development
and delivery of its product roadmap and operational capabilities.
Development has ranged from SmartVend product and customer
experience enhancements through to revenue generating analytics and
insights from new platforms which allow us to leverage new revenue
streams and provide the ability to operate a cloud based
self-service model.
Simultaneously, we began the gradual migration from legacy
systems and software to a cloud-based environment. We have now
migrated all our Smart Machines customers and expect to migrate
Smart Zones division in FY2022. In the short-term, monthly costs
will increase as we lift Smart Zones to the cloud, however, it will
provide significant benefits in terms of security, speed of
processing, reliability, scalability, business continuity and
long-term cost management. All being important as we drive the
growth agenda in our connectivity and data critical activities.
Towards the end of FY2021 we launched our new Smart Academy
online training portal to further enhance our customer proposition
and provide improved access to training and development for our
employees.
The Board believes this further investment in our core data
management capability and IOT technology will enhance the Group's
ability to improve the quality of the existing recurring revenue
streams and to generate substantial new growth.
Looking Forward
C19 has had a significant impact on Vianet, our customers and
economies, as it has on many businesses and people. Against this
backdrop we have used the time to refocus and ensure we are
strongly placed to prosper as our markets emerge from the
pandemic.
The business will benefit from its proven track record of
converting data into analytics and insight that drive better
decision-making for customers, improving asset utilisation and
increased profitability.
Smart Machines will leverage its strong portfolio of products
and services. This combined with significant investment in
commercial resource will add further momentum. Cloud and mobile
capability will continue to transform the customer experience
facilitating rapid scalable growth in existing and new vertical
markets.
Our contactless payment solution is well positioned for strong
growth with the recent introduction of our PCI Master Merchant
scheme, the declining use of cash by consumers and rapid adoption
of technology by brand owners and machine operators.
Smart Zones will aim to recover previous levels of performance
and seek to enhance existing income streams and unlock further
opportunities for enhanced analytics and insight. Continued Private
Equity pub company ownership is expected to drive greater focus on
operating and retail performance.
The combination of our high-calibre, energised team, robust
strategy, and strong earnings visibility earnings provides a real
platform for growth as we help our customers make better decisions
about their assets.
James Dickson
Chairman
15 June 2021
Financial Review
Group operating loss, pre-exceptional costs, amortisation and
share based payments was GBP0.69m (FY2020: GBP4.03m profit).
Despite the challenges of the pandemic, gross margin remained
robust at c. 60% (FY2020: c. 68%).
The Board has considered going concern and concluded the Company
has sufficient cash and reserves to get through the 12 months post
the signing date of the annual report and accounts. Going concern
is covered in more detail in the Report of the Directors.
Turnover
Turnover was significantly impacted by the challenges presented,
particularly to the country's hospitality sector by the pandemic.
Group turnover was GBP8.37m (FY2020: GBP16.28m.) The Smart Zones
division was severely impacted, with a smaller reduction in Smart
Machines.
Recurring Revenue
Revenue remained contracted and recurring.
Recurring revenue is measured by taking full year revenue from
service packs, licenses, rentals and technology upgrades, as per
Note 3.
Consolidated recurring revenue, despite the much-reduced
turnover, across the two divisions remained robust at 89% (FY2020:
92%). This was sustained by contracted temporary variation to terms
to support our customers through the pandemic in both divisions and
also in continuing to see new contactless sales.
C19 negatively impacted Smart Zones, which saw the average
recurring revenue per connected device decrease to GBP35.35
(FY2020: GBP59.18).
This KPI is measured by taking full year recurring revenue and
dividing by the total number of connected devices at the year
end.
Performance Summary
Profit Before Tax was a loss of GBP2.82m (FY2020: GBP2.40m
profit), principally due to the impact of the pandemic and
continued intangible amortisation of R&D costs in the year. The
table below shows the performance of the Group;
FY2021 FY2020 Change
%
Revenue GBP8.37m GBP16.28m (48.6)
Operating
(loss)/profit(a) (GBP0.69m) GBP4.03m (117.1)
(Loss)/Profit
after
tax (GBP2.82m) GBP2.43m (216.0)
Basic
EPS (6.75p) 8.56p (213.9)
Dividend
per share 0p 1.70p (100.0)
Net debt
(b) GBP2.66m GBP0.95m (180.0)
a) Pre-exceptional items, share based payments and amortisation - refer to Note 27
b) Refer to note 26
Exceptionals
FY2021 FY2020
'GBP000 'GBP000
People and
office rationalisation 154 415
Network obsolescence
costs 8 50
Contingent
consideration
release - (1,086)
Loan impairment - 200
Corporate Activity - 311
Other items 181 109
------------------------- --------- ----------
Total 343 (1)
========================= ========= ==========
Exceptional items largely comprised staff rationalisation costs
and the disposal of leasehold operational office in Stockport,
associated with the Vendman acquisition.
Dividend
Due to C19 the Board has not proposed a final or interim
dividend in the year (FY2020: 1.70 pence).
Dividend cover has not been calculated due to the dividend being
suspended due to C19 (FY2019: c. 1.56).
Cash
Net cash generation pre-working capital movements was an outflow
of GBP0.34m (FY2020: GBP3.72m), impacted by the hospitality closure
during the pandemic and the resultant losses.
Relatively strong working capital management and measures,
implemented to manage the impact of the pandemic, saw working
capital generation of GBP1.39m (FY2020: GBP0.49m) and meant that,
after working capital movements, there was an operational cash
generation of GBP1.05m versus GBP4.21m last year.
The cash generated was principally used to service varied terms
for our customers particularly in Smart Zones to support them
during C19, investment in our sales capability in Smart Machines
and continued investment in R&D and servicing of borrowings
which recommenced in H2. This, together with the addition of a
GBP3.5m CBIL, resulted in an overall cash inflow of GBP1.51m
(FY2020: GBP0.42m outflow).
At the year-end, the Group had gross cash of GBP1.89m (FY2020:
GBP1.73m), borrowings of GBP4.57m (FY2020: GBP1.33m), including the
CBIL facility, with net debt of GBP2.66m (FY2020: GBP0.95m).
C19
C19 has impacted our business during the year as reported
throughout. The performance, however, in the year was much better
than anticipated at the outset of the pandemic. With the cash and
facilities we have, plus the business plan the Group has in place
as the country emerges from C19 restrictions, we believe we have
solid cash runway forecasts well into 2022, which will underpin our
business strategy and allow us to return to our growth plans.
The going concern section of the Report of the Directors makes
reference to C19 but, based on known factors, the actions taken and
the funding secured, we are well placed to emerge from C19
successfully and exit with momentum.
Divisional Performance
Currently, the Smart Zones division principally consists of the
core beer monitoring and insight business services (including the
US).
Smart Zones
FY2020 FY2020 Change
%
Turnover GBP3.95m GBP11.06m (188.8)
Operating
profit(a) GBP0.50m GBP4.57m (526.0)
(Loss)/Profit
before
tax (GBP0.02m) GBP3.75m (897.9)
Total
connected
devices 173,580 186,554 (7.47)
New Installation
sales 61 151 (147.5)
YE Net
premises(b) c10,800 c11,900 (9.24)
iDraught
penetration(b) 29.5% 26.6% 9.8
a) Pre-exceptional items, share based payments and amortisation
b) UK, USA and Europe only
Smart Zones turnover reduced as a result of proactively
providing short term pricing support to customers to mitigate the
impact of national and regional lockdowns in the hospitality
sector. There were no changes to the revenue recognition policies,
as disclosed in the Accounting Policies, as a result of these
temporary contract variations. The above variations related to the
pro-forma billing amounts being reduced to align with the reduced
usage until minimum levels of activity returned on hospitality
re-opening, resulting in a return to normal levels of billing.
Turnover mix is shown below with recurring revenue being 92%
(2020: 98%).
Recurring revenue per device has naturally been impacted by C19
and so is reported at a much lower distorted level of GBP21.06
(FY2020: GBP58.00).
Average operating profitability per device is measured by taking
full year operating profit before amortisation, share based
payments and exceptional items and dividing by the total number of
connected devices at the year end.
Average adjusted operating profit per device in the year is
reported at a much lower distorted level of GBP2.90 (FY2020:
GBP19.39), reflecting the impact of C19.
Given the extreme impact forced upon the hospitality sector
resulting for C19, the Smart Zones division has performed
resiliently against a challenging backdrop. The net estate at the
year-end was c. 10,940 sites (UK & Europe) versus last year's
c. 11,600 (excluding the US), the reduction stemming from disposals
and C19 impact which may not yet be fully washed through.
Despite this we were able to maintain a small Smart Zones
operating profit at GBP0.50m (FY2020: GBP4.57m).
Smart Machines
The Smart Machines division consists of telemetry insights and
monitoring, and contactless payment predominantly in the unattended
vending retail and coffee sector, as well as ERP and mobile
connectivity services.
FY2021 FY2020 Change
%
Turnover GBP4.42m GBP5.22m (18.1)
Operating
profit
(a) GBP1.11m GBP1.53m (37.8)
Profit
before
tax (b) GBP0.69m GBP2.09m (202.9)
New Telemetry
connections 2,311 3,111 (34.6)
New Contactless
connections 4,904 8,948 (82.5)
YE Net
estate
(c) C38,000 C38,000 0.0
a) Pre-exceptional items, share based payments and amortisation on a continuing basis.
b) FY2020 includes GBP1.09m of contingent consideration release (2021: GBPnil)
c) Excludes circa 180,000 Vendman connections.
Turnover mix is shown in the chart below. Recurring revenues
were 86% of turnover (FY2020: c. 80%) impacted by year-on-year
revenue mix and some support given largely during lockdown 1 in
H1.
Despite the challenges of the pandemic, in particular on office
city centre closures, new contactless connections in our Smart
Machines division continued to be achieved with 4,904 new
contactless devices, compared to 8,948 last year. The estate
figures reflect the net movement shown above which also includes
some customers refining their estates in light of the pandemic.
Average recurring revenue per device was GBP101.34 (FY2020:
GBP64.40) principally due to income from the Vendman division now
being reported within the one entity of Smart Machines, alongside
support terms offered in H1 lockdown 1. As stated previously, we
consider this to be an evolving growth story, with overall turnover
and profit growth trends being driven by increased penetration of
our contactless solutions.
There was a reduction in profit per device to GBP29.34 (FY2020:
GBP40.32) impacted by support terms given in H1 as well as
increased investment in commercial sales resource throughout the
year and some legacy Vendman customer issues that needed
attention.
Taxation
The Group has continued to utilise available tax losses during
the year, resulting in no tax being paid (FY2020: GBPnil). The
Group will continue to utilise the available tax losses carried
forward into FY2022 which will have been enhanced due to the
results posted for the year. In the financial year under review,
the tax line includes a deferred tax credit of GBP0.87m (FY2020:
GBP0.03m) recognising the impact of the tax losses available and
being utilised. See note 20 for further detail on the deferred tax
asset.
Earnings per share
Basic EPS was a loss of 6.75 pence compared to 8.56 pence
positive EPS in 2020. This backward step is due to the
pandemic.
Balance sheet and cash flow
The Group balance sheet remains resilient despite the impact of
the pandemic and addition of the CBIL facility.
The Group generated operating cash flow of GBP1.05m (FY2020:
GBP4.22m).
The cash generated was used to continue the Group's technology
plans and to service borrowings.
At the year-end, the Group had borrowings of GBP4.57m (FY2020:
GBP1.33m excluding overdraft), including the CBIL facility, with
net debt of GBP2.66m (FY2020: GBP0.95m).
Our resilient balance sheet and capacity to generate cash
provides the Company with a solid base to emerge from C19 and move
back to pursuing the significant growth opportunities that have
been identified.
Business risk
The Board and senior management review business risk two to
three times per year. Naturally, C19 and its impact pushed the
ramifications of that to the top of the list and we covered a lot
of that in last years' Report and Accounts and the pathway out of
C19 has been well documented. The Directors had considered the
areas of potential risk in assessing the Group's prospects. On the
basis of their review, and having considered various factors such
as market conditions, pathway from C19, supply chain impacts,
financial plans and facilities, they believe that the business is
of sound financial footing and has a forward-looking sustainable
operating future. In particular, they note that the business has
achieved an acceptable result in the year despite noting the
extreme C19 conditions within which it operated and its impact of
the sectors we currently serve, set against overall market
confidence in liquidity and credit.
In addition to C19, other principle risks are covered in the
Report of the Directors, but the Directors consider that material
business risks are limited to:
-- The ongoing impact of well publicised headwinds in the pub retailing market.
-- The potential for a cyber security breach where data security
is compromised, resulting in unauthorised access to information
which is sensitive and/or proprietary to Vianet or its customers.
This threat is uncommon with most technology businesses, however
both short-term and long-term mitigation plans are in place.
Payment Card Industry Data Security Standard (PCI DSS - Level 1)
highest level of compliance has already been achieved to support
the Group's contactless payment solutions.
-- Short-term supply chain strains in the semi-conductor market.
Key Performance Indicators
Actual Actual
Target 2021 2020
------- ------- -------
Percentage
of revenue
from recurring
income streams
(1) 80% 89% 92%
------- ------- -------
Gross Margin
(2) 70% 61% 68%
------- ------- -------
Employee Turnover
(3) 2% 2.29% 2.1%
------- ------- -------
Notes to KPIs
(1) Percentage of revenue from recurring income streams =
recurring income streams as a percentage of all income streams.
Group trading companies aim to increase shareholder value through
growth in revenue, linked to profitability (see Gross Margin
below). Source data is taken from management information. The
recurring contractual nature of the company's income stream has led
to continued improvement in performance versus target. The
achievement of this target depends on the mix of new hardware sales
versus on going recurring revenue.
(2) Gross Margin = Gross profit as a percentage of revenue.
Group trading companies aim to generate sufficient profit for both
distribution to shareholders and re-investment in the company, as
measured by Gross Margin. Source data
(3) Employee Turnover = Group trading companies aim to be seen
as a good, attractive employer with positive values and career
prospects, measured against internal People and Development
reports. In addition to normal employee turnover, the figure also
includes employees leaving as a result of business rationalisation
activity.
Mark Foster
Chief Financial Officer
15 June 2021
Consolidated Statement of Comprehensive Income for the year
ended 31 March 2021
Before Exceptional Before
Exceptional 2021 Total Exceptional Exceptional Total
2021 GBP000 2021 2020 2020 2020
GBP000 GBP000 GBP000 GBP000 GBP000
Note
Continuing
operations
Revenue 8,369 - 8,369 16,282 - 16,282
Cost of
sales (3,307) - (3,307) (5,164) - (5,164)
Gross profit 5,062 - 5,062 11,118 - 11,118
Administration
and other
operating
expenses (5,749) (343) (6,092) (7,088) 1 (7,087)
Operating
(loss)/profit
pre amortisation
and share
based payments (687) (343) (1,030) 4,030 1 4,031
Intangible
asset amortisation (1,669) - (1,669) (1,390) - (1,390)
Share based
payments (73) - (73) (125) - (125)
---------------------- ----- -------------- -------------- ---------- -------------- -------------- ----------
Total administrative
expenses (7,491) (343) (7,834) (8,603) 1 (8,602)
Operating
(loss)/profit (2,429) (343) (2,772) 2,515 1 2,516
---------------------- ----- -------------- -------------- ---------- -------------- -------------- ----------
Net finance
costs (50) - (50) (113) - (113)
(Loss)/Profit
before
tax (2,479) (343) (2,822) 2,402 1 2,403
Income
tax credit 1 867 - 867 28 - 28
(Loss)/Profit
and other
comprehensive
income
for the
year (1,612) (343) (1,955) 2,430 1 2,431
Earnings
per share
Total
- Basic 3 (6.75)p 8.56p
- Diluted 3 (6.75)p 8.47p
---------------------- ----- -------------- -------------- ---------- -------------- -------------- ----------
Consolidated Balance Sheet at 31 March 2021
2021 2020
GBP000 GBP000
As restated
Assets
Non-current assets
Goodwill 17,856 17,856
Other intangible assets 6,184 5,505
Property, plant and equipment 3,391 3,795
Deferred tax asset 236 -
Total non-current assets 27,667 27,156
---------------------------------- -------- -------------
Current assets
Inventories 1,431 1,491
Trade and other receivables 2,758 3,544
Cash and cash equivalents 1,894 1,728
---------------------------------- -------- -------------
6,083 6,763
------------------------------- -------- -------------
Total assets 33,750 33,919
---------------------------------- -------- -------------
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables 3,257 2,710
Leases 53 64
Borrowings 1,265 2,011
4,575 4,785
Non-current liabilities
Other payables 86 117
Leases - 35
Borrowings 3,290 670
Deferred tax liability - 631
3,376 1,453
------------------------------- -------- -------------
Equity attributable to owners
of the parent
Share capital 2,895 2,895
Share premium account 11,709 11,709
Share based payment reserve 437 364
Merger reserve 310 310
Retained profit 10,448 12,403
---------------------------------- -------- -------------
Total equity 25,799 27,681
---------------------------------- -------- -------------
Total equity and liabilities 33,750 33,919
---------------------------------- -------- -------------
Consolidated Statement of Changes in Equity for the year ended
31 March 2021
Share
Share based
Share premium Own payment Merger Retained
capital account shares reserve reserve profit Total
At 1 April 2019 2,874 11,530 (754) 314 310 11,285 25,559
Dividends - - - - - (1,604) (1,604)
Issue of shares 21 179 - - - - 200
Share based payments - - - 125 - - 125
Share option forfeitures - - - (43) - 43 -
LTIP exercise - - 12 (32) - 3 (17)
Disposal of own
shares - - 232 - - 83 315
Disposal of treasury
shares - - 510 - - 162 672
Transactions with
owners 21 179 754 50 - (1,313) (309)
------------------------- -------- -------- -------- -------- --------- --------- ---------
Profit and total
comprehensive
income for the
year - - - - - 2,431 2,431
------------------------- -------- -------- -------- -------- --------- --------- ---------
Total comprehensive
income less owners
transactions 21 179 754 50 - 1,118 2,122
------------------------- -------- -------- -------- -------- --------- --------- ---------
At 31 March 2020 2,895 11,709 - 364 310 12,403 27,681
------------------------- -------- -------- -------- -------- --------- --------- ---------
At 1 April 2020 2,895 11,709 - 364 310 12,403 27,681
-------- -------- -------- -------- --------- --------- ---------
Share based payments - - - 73 - - 73
Transactions with
owners - - - 73 - - 73
------------------------- -------- -------- -------- -------- --------- --------- ---------
Loss and total
comprehensive
income for the
year - - - - - (1,955) (1,955)
------------------------- -------- -------- -------- -------- --------- --------- ---------
Total comprehensive
income less owners
transactions - - - 73 - (1,955) (1,882)
-------------------------
At 31 March 2021 2,895 11,709 - 437 310 10,448 25,799
------------------------- -------- -------- -------- -------- --------- --------- ---------
Consolidated Cash Flow Statement for the year ended 31 March
2021
2021 2020
Note GBP000 GBP000
Cash flows from operating activities
(Loss)/Profit for the year (1,955) 2,431
Adjustments for
Net interest payable 50 113
Income tax credit (867) (28)
Amortisation of intangible assets 1,669 1,390
Depreciation 563 674
Contingent consideration release - (1,088)
Loss on impairment of property,
plant and equipment and businesses 126 3
Goodwill write off - 119
Share based payments 73 125
Tax payment in respect of LTIP - (17)
Operating cash flows before changes
in working capital and provisions (341) 3,722
Change in inventories 60 178
Change in receivables 786 125
Change in payables 547 191
1,393 494
Cash generated from operations 1,052 4,216
Net cash generated from operating
activities 1,052 4,216
------------------------------------------------ -------- --------
Cash flows from investing activities
Purchases of property, plant and
equipment (268) (730)
Capitalisation of development costs (2,312) (1,941)
Purchases of intangible assets (36) (79)
Net cash used in investing activities (2,616) (2,750)
------------------------------------------------ -------- --------
Cash flows from financing activities
Net interest payable (50) (113)
Repayment of leases (64) (141)
Issue of share capital - 200
New Borrowing 3,540 -
Disposal of own shares - 988
Payment of contingent consideration (31) (552)
Repayments of borrowings (319) (661)
Dividends paid - (1,604)
Net cash from/(used in) financing
activities 3,076 (1,343)
------------------------------------------------ -------- --------
Net increase/(decrease) in cash
and cash equivalents 1,512 (417)
Cash and cash equivalents at beginning
of period 381 798
------------------------------------------------ -------- --------
Cash and cash equivalents at end
of period 1,893 381
------------------------------------------------ -------- --------
Reconciliation to the cash balance in the Consolidated Balance
Sheet
Cash balance as per consolidated
balance sheet 1,893 1,728
Bank overdrafts - (1,347)
-------------------------------------- ------ --------
Balance per statement of cash flows 1,893 381
-------------------------------------- ------ --------
Notes to the financial statements
1. Taxation
Analysis of credit in period
2021 2020
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 (846) (9)
- Amendment re-recognition of losses (21) (19)
Income tax credit (867) (28)
------------------------------------------ -------- --------
Reconciliation of effective tax rate
The tax for the 2021 period is lower (2020 was lower) than the
standard rate of corporation tax in the UK (2021: 19% and 2020:
19%). The differences are explained below:
2021 2020
GBP000 GBP000
(Loss)/Profit before taxation
- Continuing operations (2,822) 2,403
(Loss)/Profit before taxation multiplied
by rate of corporation tax in the UK of
19% (2020: 19%) (536) 457
Effects of:
Other expenses not deductible for tax purposes 15 132
Non taxable income 16 (205)
Amortisation of intangibles 254 201
Movement on losses 82 46
Adjustments for prior years (21) (19)
Research and development (677) (640)
Total tax credit (867) (28)
------------------------------------------------ -------- --------
2. Ordinary dividends
2021 2020
GBP000 GBP000
Final dividend for the year ended 31 March
2020 of nil (year ended 31 March 2019: 4.0p) - 1,123
Interim dividend paid in respect of the
year of nil (2020: 1.70p) - 481
Amounts recognised as distributions to equity
holders - 1,604
----------------------------------------------- --------- --------
In addition, the directors are not proposing a final dividend in
respect of the year ended 31 March 2021. Total dividend payable nil
(2020: 1.70p).
3. Earnings per share
Earnings per share for the year ended 31 March 2021 was (6.75p)
(2020: 8.56p positive).
Basic earnings per share are calculated by dividing the earnings
attributable to ordinary shareholders (Loss GBP1,955k) by the
weighted average number of ordinary shares outstanding during the
period.
Diluted earnings per share are calculated on the basis of profit
for the year after tax divided by the weighted average number of
shares in issue in the year plus the weighted average number of
shares which would be issued if all the options granted were
exercised.
2021 2020
Loss Basic Diluted Earnings Basic Diluted
GBP000 earnings earnings GBP000 earnings earnings
per share per share per share per share
(p) (p) (p) (p)
Post-tax profit attributable
to equity shareholders (1,955) (6.75) (6.75) 2,431 8.56 8.47
2021 2020
Number Number
Weighted average number of ordinary shares 28,953,414 28,410,348
Dilutive effect of share options - 281,866
------------------------------------------------------------------ ----------- --------------------------
Diluted weighted average number of ordinary
shares 28,953,414 28,692,214
------------------------------------------------------------------ ----------- --------------------------
4. Exceptional items
2021 2020
GBP000 GBP000
Corporate activity and acquisition costs - 311
Disposal costs 101 -
Corporate restructuring and transitional
costs 154 415
Contingent consideration release - (1,086)
Network obsolesce costs 8 50
Loan impairment - 200
Other 80 109
343 (1)
------------------------------------------ -------- --------
Corporate activity and acquisition costs relate to fees paid to
corporate advisors in respect of prospective acquisitions and
corporate evaluations.
Disposal costs relate to the exit of the Stockport property
lease, disposal of associated leasehold improvements and associated
costs.
Staff transitional costs relate to the transition of people and
management to ensure we have to succession and calibre of people on
board to deliver the strategic aims and aspirations of the
Group.
The loan impairment reflects the Directors view of
recoverability of a loan made to a business of strategic interest
which was impacted by COVID-19.
The contingent consideration release refers to the acquisition
of Vendman Systems Limited to where a proportion of the
consideration was based upon results of the company for two years
post acquisition. This balance has now been fair valued at the year
end with the change in fair value recognised through the income
statement as the deferred period has now closed.
5. Basis of preparation
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined by
section 434 of the Companies Act 2006.
It has been prepared in accordance with the recognition and
measurement principles of International Financial Reporting
Standards, International Accounting Standards and Interpretations
(collectively 'IFRS') in conformity with the requirements of
Companies act 2006. Except for the adoption of IFRS 16, the
principal accounting policies of the Group have remained unchanged
from those set out in the Group's 2020 annual report. The financial
statements have been prepared under the historical cost convention
with the exception of certain items which are required to be
measured at fair value.
This preliminary announcement does not constitute the Company's
statutory accounts within the meaning of Section 434 of the
Companies Act 2006. The results for the year ended 31 March 2021
have been extracted from the full accounts of the Group for that
year which received an unqualified auditor's report and which have
not yet been delivered to the Registrar of Companies. The financial
information for the year ended 31 March 2020 is derived from the
statutory accounts for that year, which have been delivered to the
Registrar of Companies. The report of the auditor on those filed
accounts was unqualified. The accounts for the year ended 31 March
2021 and 31 March 2020 did not contain a statement under s498 (1)
to (4) of the Companies Act 2006. The statutory accounts for the
year ended 31 March 2021 will be posted to shareholders at least 21
days before the Annual General Meeting and made available on our
website vianetplc.com and on request by contacting the Company
Secretary at the Company's Registered Office.
The Directors have prepared this financial information on the
fundamental assumption that the Group is a going concern and will
continue to trade for at least 12 months following the date of
approval of the financial information. In determining whether the
Group's accounts should be prepared on a going concern basis the
Directors have considered the factors likely to affect future
performance.
6. Annual General Meeting
The Annual General Meeting will be held on 13 July 2021 at
11.00am, at the offices of Vianet Group plc, One Surtees Way,
Surtees Business Park, Stockton on Tees, TS18 3HR.
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