Final Results

RNS Number : 7192G

Vianet Group PLC

11 June 2013

 



Press Release

11 June 2013

Vianet Group plc

("Vianet" or "the Group")

Final Results

Vianet Group plc (AIM:VNET), the leading provider of real time monitoring systems and data management services for the leisure, vending and forecourt services sectors, is pleased toannounce its final results for the year ended 31 March 2013.

Highlights

·	Revenue for the year of £21.09 million (2012: £22.98 million)
·	Recurring revenues remained steady at 71% (2012: 70%)
·	Gross margins stable at 51% (2012: 53%)
·	Operating profit before amortisation of intangibles, share option and exceptional costs of £3.3 million (2012: £3.9 million)
·	Profit before tax of £1.8 million (2012: £2.3 million)
·	Final dividend of 4.00 pence per share giving a full year total of 5.70 pence per share (2012: 5.67 pence per share)
·	864 new installations, of which 828 were higher value iDraughtTM
·	Vianet Fuel Solutions ("VFS") reduced losses by £0.6 million
·	Group administrative costs on a pre-exceptional basis successfully reduced by £0.8 million

Since year end

·	Sale of Universe Group plc shareholding raising £0.6 million for a gain on investment of £90,000
·	Strategic partnership established with BigOil, the Petrol Retailer Association's vehicle, providing VFS with direct access to members and prospects with approximately 3,500 independent forecourts
·	Commenced activity on Gulf contract for VFS forecourt services

Commenting on the preliminary results, James Dickson, Executive Chairman of Vianet Group plc, said: "We announced on 22 February 2013 that our results for the year would not match original market expectations due to a combination of contract delays, further pressure in the Leisure sector and the impact of increased investment in the US beer monitoring operation. The operating profit achieved has in fact slightly exceeded the revised forecasts and we remain pleased with much of our underlying performance and the impact of cost reduction programmes.  We believe that we should make good progress in 2013/14 and, as a reflection of that and the continued strong cash generation of the Group, we have maintained our progressive dividend policy." 

Enquiries:

Vianet Group plc
James Dickson, Executive Chairman	Tel: [phone]
[e-mail]	www.vianetplc.com

Cenkos Securities plc
Stephen Keys / Camilla Hume	Tel: [phone]
	www.cenkos.com

Media enquiries:

Abchurch Communications
Sarah Hollins / Joanne Shears  [e-mail]	Tel: [phone] www.abchurch-group.com

Chairman's Statement

As Stewart Darling was only appointed Chief Executive at the start of the current financial year the Board felt it sensible that for this preliminary report alone, the Chief Executive's statement will be consolidated with this, my first Chairman's statement.

During the period under review, good operational progress has been made in developing the Group's key businesses across various markets, including the national launch of iDraughtTM USA.  A combination of increased investment in the US, delays to new contracts and pressure in the leisure sector had a detrimental impact on financial performance.  

The Board is encouraged by recent contract wins in the UK and the improved outlook for 2014. However, the Board is conscious that uncertainty around the Government's proposed Statutory Code for Pub Companies may lead to delays in new orders elsewhere.  The actions taken to reduce costs, particularly in the Fuel Solutions business, are also now coming through to operating profits and further cost reduction initiatives are being implemented across the Group.  It is against this backdrop and the continued strong cash generation that the Board is maintaining the dividend.

Results

Full year pre-exceptional operating profit, before amortisation and share based payments, of £3.3 million (2012: £3.9 million) was broadly in line with the revised market expectations following February's trading update. 

Revenue for the year of £21.09 million (2012: £22.98 million) was down 8.2%, in the main due to exiting lower margin work in the Leisure and Fuel Solutions divisions, and reduced new installations in the Vending segment.   Largely as a result of exiting lower margin compliance cellar inspection activity in the period the revenue in the Leisure division was down 7% at £16.27 million (2012: £17.53 million).

The level of contractual and recurring revenues remains consistent at just over 70% of Group revenue and the recent contract extensions, both in the Group's beer monitoring and vending sectors are expected to ensure that this level of contractual business remains steady in the current financial year.

The Group's overall operating gross margins remained stable at 51% (2012: 53%) and it is pleasing to note that gross margins, net of direct core product and engineering costs, remain at over 60% (2012: 60%) in the Leisure division which was achieved through improved product mix and the reduction in the cost base.

Costs associated with the decision taken in the Fuel Solutions division to exit lower margin Liquefied Petroleum Gas ("LPG") work and the re-launch of its ClearView wet stock management solutions, resulted in a reduction in this division's margins to 21% (2012: 22%).

Group profit before taxation amounted to £1.82 million compared to £2.34 million in 2012. Basic earnings per share post-exceptional costs decreased to 7.12 pence from 8.00 pence in 2012.

Dividend

Despite the trading performance in the year not matching original expectations, the Board remains confident of the longer term prospects for the Group and is therefore maintaining its progressive dividend policy.  The Board is recommending the payment of a final dividend of 4.00 pence per share in respect of the year ended 31 March 2013.

Together with the interim dividend of 1.70 pence per share paid in January 2013, this makes a total dividend of 5.70 pence per share, slightly ahead of the 5.67 pence per share paid in respect of the year ended 31 March 2012.

Subject to approval from shareholders at the Annual General Meeting, to be held on 16 July 2013, the final dividend will be paid on 2 August 2013 to shareholders on the register as at 21 June 2013.

Board, senior management and corporate governance

The culture and values of the Group help to ensure that everyone at Vianet collectively and individually always 'seeks to do the right thing' and this tone is set from the Board down through the extended leadership team to all staff using the Group's development and review frameworks.

Living and breathing 'doing the right thing' not only underpins Vianet's ethos and corporate governance, but also the reputation for integrity and transparency which is a key component of the Group's customer solutions. 

 
On 15 January 2013 the Group announced a series of Board changes which help position the Group for the next stage of its development across key markets, whilst further reducing the business dependence on myself, and allowing scope for increased focus on proactive investor communication.

At the end of the year James Newman retired as Non-Executive Chairman and the Board would like to thank him for his contribution to the business over the past seven years.  Having led Vianet as its CEO since 2003, I have in turn moved to the position of Executive Chairman.  Stewart Darling, who has held the role of Chief Operating Officer since 2009, with primary responsibility for the core beer monitoring and vending operations, became CEO.

The transfer of CEO responsibilities to Stewart is going smoothly and will be completed with the handover of executive responsibilities for Vianet Americas towards the end of June, and Fuel Solutions later in the calendar year.

The Group recently announced the appointment of Chris Williams as a new independent Non-Executive Director.  Chris will enhance the knowledge and expertise of the Board as Vianet develops its businesses across UK and international markets.

During the year it is the Board's intention to appoint a further independent Non-Executive Director with a technology background to complement the business needs, whilst also improving the balance of the Board.

Following Stewart's promotion, Steve Alton who joined the Group from BT in 2011, has been promoted to the role of Managing Director of Vianet Limited with responsibility for the Leisure division comprising core beer, vending and technology activities.

Responding to the increasing demands of dealing with international blue chip customers, the Group continues to attract and develop high calibre individuals to ensure that the organisational structure is populated with leaders who can take the business forward, particularly in sales and delivery execution.

This series of Board and senior management changes reflects the transformation of Vianet and the strategic changes that have been implemented to enable Vianet to become a growing provider of data management services across a number of sectors.  

I would like to thank all of my Board colleagues, senior management and staff for their continued efforts and commitment on behalf of the Group over the past year.

Strategy and Business Development

The Group's strategic intent remains to extend its data collection, management and support services presence in its selected sectors where there is considerable technical and operational overlap, and to respond to new opportunities as they arise.

There is absolute focus on working in partnership with key customers to introduce product sets which will provide the customer with a compelling and sustainable return on investment and, in turn, cement a profitable long term trading relationship with Vianet.

Utilising the solid financial platform provided by its core beer monitoring business, the Group has made a series of prudent investments in acquiring and developing its product set in the following areas:

·   Next generation beer monitoring technology for the wider licensed trade;

·   Battle tested, cutting edge data capture and machine to machine transmission technology with potential for application across multiple sectors;

·     Market-leading end-to-end vending management solutions; and

·   A unique 'one stop shop' forecourt product suite and distribution for fuel asset management solutions.

The Group provides solutions for complex customer demands and has established an impressive reputation for its robust and innovative technology, as well as the quality of its support to blue chip customers who demand continuous world class service and data accuracy, and the capacity to provide this level of service to smaller companies as well.

Having transformed the shape of the business, the management and staff are now focussed on successfully exploiting the significant organic growth opportunities which the Board anticipates will transform the earnings of the Group.

Leisure Solutions

The Leisure Solutions division achieved an operating profit pre-amortisation and exceptional costs of £4.68 million.  Amortisation, exceptional and financial costs totalled £0.27 million. 

Core Beer Monitoring

The re-launch of iDraught^TM, the Group's bar management solution, to drive profit and quality and the introduction of the Group's Nucleus Smart Tills™ EPOS system were received very positively by customers, many of whom have been carrying out extensive evaluations of iDraught^TM on new sites and as a replacement for standard legacy Brulines Beer Monitoring systems.  

Following a strong period of trading in H1, during which the Group secured contract renewals with several high profile customers, Vianet's core beer monitoring business traded less strongly in H2.  This was due to delays to several anticipated iDraughtTM installation programmes and a reduced contribution from traditional beer monitoring solutions as a result of bottom end pub disposals and the uncertainty that accompanies the disposal process.  In addition, there have been less favourable rates at the point of contract renewals as a result of customers transferring some non-core, lower margin support services back in-house. Whilst there has been increased iDraught^TM penetration and good progress in gaining new contracts to monitor gaming machines in the pub sector, this has not been enough to offset these issues. 

Nevertheless, overall installation progress was encouraging despite some initial delays to programmes.  In total there were 864 new beer monitoring installations, of which 828 were higher value iDraught^TM.  iDraught^TM is gaining penetration across the on-premise draught beer market and now accounts for almost fifteen per cent of Leisure Solutions' beer monitoring installation base. 

Several major contract extensions, including the introduction of iDraught^TM, have been secured with customers such as Enterprise Inns, Punch Taverns, and Marstons.  Nucleus Smart Tills^TM has gained good sales traction with almost 500 installations. 

The Board remains confident that the outlook for further growth in the higher value iDraughtTM product and service remains promising with many pub retailers conducting extensive evaluations.  Overall, the Board does not expect significant further erosion in the number of the Group's installations, currently at approximately 17,500 sites.

Government's proposed Statutory Code for Pub companies

On 22 April 2013 the Secretary of State for Business, Vince Cable, released a draft consultation document (the "Consultation Document") for a Statutory Code for Pub Companies regarding their dealing with tenants. Contained within the Consultation Document are provisions for controlling the application of beer flow monitoring for managing compliance with contracted beer purchase obligations.

The Group believes these proposals are unjust and that they are not based upon fact or any substantiated evidence.  As such the Board intends to formally respond to the Secretary of State to reject the proposals regarding beer flow monitoring and to support the continued legal use of beer monitoring products and services. 

The reason given by the Consultation Document for proposing a limitation on the use of beer flow monitoring product is that it is considered 'controversial' by certain parties who have made unproven accusations against our technology.  

Vianet's service has been subject to legal scrutiny by the court of law on many occasions and has never been shown to be unfit for purpose and accordingly as a Board, we are extremely disappointed and frustrated by the proposals contained within the Consultation Document.

Supported by strong legal advice from leading counsel we will be responding to the Consultation Document in order to robustly defend the Group's beer monitoring product.  We will respond by 14 June 2013 when the Consultation period is due to end.  Although, at this stage, the Consultation Document only contains proposals the Board believes that if these proposals were to be implemented into legislation they would likely have a detrimental effect on the Company's business and therefore the Board is prepared to challenge these proposals as forcibly as necessary to prevent them being enacted into legislation.   It is somewhat ironic that the measures proposed by the government will reduce transparency in the landlord - lessee relationship, increase the risk to HMRC tax revenues, and undermine beer quality for drinkers.

The Board looks forward to the Government exercising proper due diligence and reviewing the facts and evidence in this consultation and anticipates that if it does so, the proposals will be amended satisfactorily.

Vianet Americas Inc.

As announced in the Interim Results in December 2012, the Group has identified an opportunity to accelerate iDraughtTM investment in the USA and extend the Vianet Americas Inc. footprint beyond the Colorado on-premise beer market. 

Vianet Americas' roll out delivery capability has advanced significantly, having established a USA team and formed a strategic alliance with Micro Matic USA for nationwide iDraughtTM installation, service and sales support.

Following several months of set-up activity, the first phase of a full USA launch commenced in February with initial installations on both full commercial and pilot contracts across ten states with several national USA retail chains, who between them control over 2,000 bars. 

The initial results have been encouraging and the second phase of the launch took place at the National Restaurant Association convention in Chicago on 16-19 May 2013.

A loss of over £0.3 million was recorded compared to the small profit originally expected with the Colorado-only business, reflecting the increased start-up costs of the enlarged opportunity.  By March 2014, the Group will have a good understanding of the likely scale of the opportunity and be in a position confirm our intentions for the USA.

Vending Solutions

The Vending Telemetry business continued to trade at around breakeven in H2, although the breakthrough in revenue and profitability from an expected significant order will now not materialise until late 2013/14 at the earliest.  Progress in finalising this contract has been held back further by merger and acquisition activity in this customer's sector.

Performance of the Group's Touch & Pay^TM cashless and contactless payment solutions, which were used successfully by Coca Cola and VISA at London 2012 Olympic Games, has also been constrained by delays in gaining extension approvals.

Operating loss was £0.05 million pre-amortisation, share based payments and exceptional costs, with amortisation and exceptional costs being £0.20 million.  Further initiatives reduced costs during the year to the point where the business will trade at breakeven whilst we await the delivery of the new contracts.

Vending Solutions now offers the full end-to-end product set for vending telemetry, comprising Touch & Pay™ contactless payment solution, Vitel™ data capture and transmission telemetry and VendExpert™ management software.  These products allow customers to achieve significant cost savings and sales uplift.

Contactless payment is extremely well-suited to the vending sector as it allows customers to pay for low-value items by presenting their bank card or near field communication ("NFC") enabled mobile phone to a special reader fitted on the front of the vending machine, helping to reduce the time it takes to pay.  The growth of contactless-enabled cards in circulation in the UK has been substantial, with 32 million contactless-enabled cards currently in circulation (source: UK Card Authority).  The Group's technology is at the forefront of these developments as we work with large brand owners and vending operators in our aim to become the clear market leader in the provision of telemetry solutions for the global vending market.

Vianet Fuel Solutions ("VFS")

The Group's Fuel Solutions division continues to benefit from a reduced cost base and some new business gains.  Whilst H2 was loss-making, arising from poor trading in December/January and delays to two significant contracts which have now commenced in April, the business did trade at just over breakeven in Q4.

VFS losses were £0.35 million for the full year (as well as £0.35 million exceptional costs), and whilst this is almost £0.6 million better than the previous year, the loss was higher than anticipated primarily due to timing issues relating to new contract activity, which will now be carried forward and benefit the current year.

VFS also exited the non-contributing LPG market which allowed further cost rationalisation.   The Board is pleased to report that VFS is gaining new business as the market's only end-to-end solution for forecourt operators.  The start to the current year with the improved cost base indicates that VFS will trade positively in 2014.

VFS continues to benefit from its five year contract extension with Morrisons Supermarkets plc ("Morrisons") to provide Facilities and Compliance Management solutions for its estate of over 300 petrol forecourts and 12 distribution centre fuel depots as Morrisons grows its fuel and convenience footprint.

Fuel Solutions now has the only fully integrated 'one-stop-shop' for leading fuel asset management products and services.  This has been a key facilitator in securing the Group's long term strategic partnership with BigOil, the Petrol Retailer Association's vehicle, providing VFS with direct access to members and prospects who control approximately 3,500 independent forecourts.  

VFS now hosts the revamped Big Oil portal which has been enhanced with our class leading suite of wet stock analysis tools and the creation of a Margin Management toolbox linking daily Platt's prices to the real-time recording of sales, inventory levels and deliveries to create a suite of web-based tools including real time profit reporting.

The initial response has been very positive and positions VFS well to build a robust and exclusive distribution of its products to the independent sector

Vianet Technology Solutions

Technology Solutions supports and manages the R&D requirement for the Leisure and Fuel divisions together with Group infrastructure.  Additionally, utilising the Group's data management expertise is also succeeding in taking its leading data capture and transmission technology to newer markets.  Securing relationships with Costa Coffee and Autotime are two such examples of the Group's potential to deliver solutions to new markets.

Summary and outlook

Within the Leisure division, the re-launch of iDraught™ has been successful with increased penetration achieved within the on-premise draught beer market.  Further gains are expected in the current year.

The Group's Vending Solutions business has made excellent progress in developing significant new sales opportunities with major global customers, and although frustrated by delays we remain confident that deeper relationships will develop into significant traction and contract wins.

The Fuel Solutions division has completed its creation of a 'one-stop' solution for the industry and, having cut costs during the last year, is expected to contribute positively to Group profits in the current year.

 
Having successfully completed a significant period of development and change the Group has moved successfully beyond being a one product company operating in the tenanted pub market, now having the competencies and technology base to benefit from the continued growth in data services globally.   The Board looks forward to the future with confidence as all of the divisions within the Group move towards achieving growth and demonstrate the success of our diversification strategy:

·     The core Leisure Solutions business already provides visibility of strong earnings and is expected to deliver organic growth as it continues to gain traction for iDraught^TM, Nucleus Smart Tills™ and Machine Insite across the wider licensed on trade market. Although in the early stages the recent national launch of the iDraughtTM in the US has the potential to significantly enhance the medium term growth prospects.

·     The Vending Solutions business is now trading at break even and is expected to move into strong profit as and when new contracts are realised.

·     Fuel Solutions is now trading close to breakeven and the current sales pipeline should take the division into profit this year. 

·     The Technology Solutions team has identified horizontal market sales opportunities which should allow it to move towards being cost neutral in the medium term. 

The Group has transformed the shape of the business over the past few years and whilst there remain short term challenges and economic conditions remain challenging, the markets, products, customers and people are now in place to deliver earnings growth for the Group.

James Dickson

Executive Chairman

11 June 2013

Financial Review

Group trading result

Following the transition from the previous financial year into the distinct Leisure (consisting of core beer, Vending and Technology segments) and Fuel divisions, the integration process continued during the current year, with an on-going cost rationalisation programme which will continue into the new financial year.

The general economic climate is well documented, continues to be very challenging and has impacted both the pub and leisure marketplaces, as well as the fuel sector.  Despite this background there has been some good underlying progress in all segments which provides a good platform moving into the new financial year.

Total revenue for the year was £21.09 million (2012: £22.98 million).  Operating profit (before amortisation of intangible assets, share based payments, and exceptional items) amounted to £3.3 million (2012: £3.9 million). The results are shown after absorbing much reduced losses in the Fuel Division, Vianet America's new company set up and further investment as well as some Leisure division customers taking some periphery support functions in house.  The combined impact of these factors is estimated at approximately £1.3 million.

Blended recurring revenues for the Group are slightly ahead of last year at 71% (2012: 70%), with continued divisional results across all Leisure at 80%, core beer remaining robust at 82% and Fuel Solutions improved to over 40% from near 20% last year.

Exceptional costs of £0.7 million (2012: net £0.5 million) principally relate to the cost of staff rationalisation, fuel product rationalisation and associated exit costs and US set up costs, resulting in Group operating profit (pre intangible asset amortisation and share based payments) of £2.5 million (2012: £3.4 million).

Divisional performance

The Leisure division achieved revenue of £16.27 million (2012: £17.53 million) and achieved gross margins pre the cost of data management of 60%, in line with last year.  The core business delivered 864 (2012: 538) installations of which 828 (2012: 487) were the higher value iDraught^TM systems, as well as 36 beer monitoring systems.  The active installation base after pub company disposals, change of use and uplifted systems is approximately 17,600 (2012: 18,500) systems.  Additionally, 483 Nucleus Smart Tills were added (2012: 300).  The pub market has continued to face well documented challenges which will continue but the further growth in iDraught^TM penetration in the UK and move into the US enables the Board to be confident about iDraught^TM growth, which currently accounts for around 14% of the installation base.

Vending made some solid progress in terms of product development and cost rationalisation offsetting the slower than desired growth in unit sales and revenue.  The Chairman's report refers to the impact of major delayed contracts, while other customers have rationalised their estates in light of the economic backdrop.  As a result, Vending delivered 475 (2012: 2,576) additional units in the year, the installation base now being near 10,000 configured units in the field.  Despite the lower number of installations, the recurring revenue base of over 85% this year coupled with lower cost base allowed a near break-even result for Vending.  The market opportunities that we have identified and the products that the Group offers position Vianet well to achieve growth in this space and the Board's confidence in attaining the aspirations in this field is unabated.

The Technology division continues to support the Leisure and Fuel divisions with its Research and Development, in addition to the infrastructure requirements of the Group as well as having its own income streams.

The final part of the Leisure division is the Machine Insite brand which contributed approximately £0.2 million (2012: £0.1 million) this year and growth is further expected in the new financial year.

The Fuel Solutions division operated as one company this year offering a range of key products and services to the forecourt industry.  The transition and product offering has taken longer than desired to bed in, and also resulted in the exit from providing an LPG service which was cost and margin prohibitive.  Nevertheless, the division delivered a much reduced loss in the period under review. The division contributed £4.8 million (2012: £5.4 million) in revenue and consistent gross margins of 21% which are set to grow following the exit from the LPG market.   This resulted in a considerably lower loss for the year before exceptional costs of £0.3 million (2012: £0.9 million) with final quarter trading just in profit.  The developments referred to in the Chairman's report for the forthcoming financial year underpin the Board's belief that the division will be profitable for 2014.

Overall Group results

Group results, before amortisation of intangible assets, share based payments, option costs, and exceptional costs, were an operating profit of £3.3 million as compared to £3.9 million at March 2012. These results are stated after absorbing the reduced Fuel losses, US investment costs, and loss to customers of some periphery services to in house as referred to above of £1.3 million, as well as an improved cost base yielding a year on year reduction in operating expenses of approximately £0.8 million, as previously expected.  The results are in line with the Trading Update issued in February 2013.

The table below shows the performance of the Group (under IFRS), pre and post exceptional costs, as follows:

	FY 2013 £'000	FY 2012 £'000
Revenue	21,085	22,975
Gross profit	10,810	12,235
	(51%)	(53%)
Operating profit pre amortisation, share based payments and exceptional costs	3,265	3,896
PBT post exceptional costs	1,820	2,341
PBT pre-exceptional costs	2,558	3,080

Divisional performance FY 2013

	Leisure Division
	£'000 Core	£'000 Vending	£'000 Tech	£'000 Fuel	£'000 Corp	£'000 Total
Revenue	14,490	907	873	4,815	-	21,085
Gross Profit	8,753	641	397	1,019	-	10,810
	(60%)	(71%)	(46%)	(21%)	-	(51%)
Operating profit/(loss) pre amortisation, share based payments and exceptional costs	4,682	(48)	(230)	(345)	(794)	3,265

Earnings per share

Basic earnings per share for the year ended 31 March 2013 before exceptional costs amounted to 9.84 pence compared to 9.93 pence at March 2012.  Fully diluted earnings per share (before exceptional costs), which takes account of all dilutive share options, amounted to 9.79 pence which compares to 9.83 pence last year.

Taxation

The Group has attained a tax credit this year driven by the Group's use of historically-acquired losses.  The credit of £0.11 million (2012: charge £0.08 million) relates to overprovision in prior periods along with enhanced allowances for research and development expenditure.

Balance sheet and cash flow

The Group's balance sheet remains healthy with a good working capital base supported by the good cash generative trading performance in the year.

Operationally, the Group generated cash flow of £4.6 million (2012: £1.8 million) impacted by rationalised operating expenses, customer up-front payments and generally improved customer collections. The Leisure business continued to be a healthy generator of cash at over £6.0 million helping to fund the Corporate and Technology segments, US investment and reduced losses in fuel.

In addition to the above, the funds generated in the year were utilised to invest in technology through Research and Development, service borrowings, purchase own shares and fund dividends. During the year, the Group converted the core element of the overdraft to a two year £1.5 million term loan.  At the year end, the Group had net borrowings of £3.0 million (2012: net borrowings of £3.4 million), having completed the repayment of the five year £1.7 million term loan supporting the Nucleus Data acquisition of 2008.

The balance sheet and cash generating capacity of the Leisure division remains robust, Fuel is stepping forward, and as such, the Board expects to be able to capture some of the organic growth opportunities that exist.

Mark H Foster

Finance Director

11 June 2013

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2013

		Before Exceptional 2013 £000	Exceptional 2013 £000	Total 2013 £000	Total 2012 £000
	Note
Continuing operations
Revenue		21,085	-	21,085	22,975
Cost of sales		(10,275)	-	(10,275)	(10,740)
Gross profit		10,810	-	10,810	12,235
Administration and other operating expenses		(7,545)	(738)	(8,283)	(8,828)
Operating profit pre amortisation and share based payments		3,265	(738)	2,527	3,407
Intangible asset amortisation		(591)	-	(591)	(952)
Share based payments		(52)	-	(52)	(57)
Operating profit post amortisation and share based payments		2,622	(738)	1,884	2,398
Finance income		-	-	-	5
Finance costs		(64)	-	(64)	(62)
Profit before taxation		2,558	(738)	1,820	2,341
Income tax expense	1	110	-	110	(82)
Profit after tax and total comprehensive income for the year attributable to the owners of the parent		2,668	(738)	1,930	2,259
Earnings per share
- Basic	3	9.84p	(2.72)p	7.12p	8.00p
- Diluted	3	9.79p	(2.71)p	7.08p	7.90p

Consolidated Balance Sheet

at 31 March 2013

				2013 £000	2012 £000
Assets
Non-current assets
Goodwill				17,723	17,723
Other intangible assets				2,179	1,990
Property, plant and equipment				3,812	3,662
Investments				533	533
Total non-current assets				24,247	23,908
Current assets
Inventories				1,875	1,903
Trade and other receivables				3,661	4,157
Tax asset				140	213
Cash and cash equivalents				1,196	105
				6,872	6,378
Total assets				31,119	30,286
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables				4,548	3,400
Borrowings				899	1,985
Tax liabilities				-	-
				5,447	5,385
Non-current liabilities
Borrowings				2,146	1,526
Deferred tax				157	157
				2,303	1,683
Equity attributable to owners of the parent
Share capital				2,827	2,825
Share premium account				11,182	11,174
Share based payment reserve				345	333
Own shares				(1,381)	(1,154)
Merger reserve				310	310
Retained profit				10,086	9,730
Total equity				23,369	23,218
Total equity and liabilities				31,119	30,286

Consolidated Statement of Changes in Equity

for the year ended 31 March 2013

	Share capital	Share premium account	Own shares	Share based payment reserve	Merger reserve	Retained profit	Total
	£000	£000	£000	£000	£'000	£000	£000
At 1 April 2011	2,825	11,174	(1,154)	276	310	9,008	22,439
Dividends	-	-	-	-	-	(1,537)	(1,537)
Share based payments	-	-	-	57	-	-	57
Transactions with owners	-	-	-	57	-	(1,537)	(1,480)
Profit and total comprehensive income for the year	-	-	-	-	-	2,259	2,259
Total comprehensive income less owners transactions	-	-	-	57	-	722	779
At 31 March 2012	2,825	11,174	(1,154)	333	310	9,730	23,218
At 1 April 2012	2,825	11,174	(1,154)	333	310	9,730	23,218
Dividends	-	-	-	-	-	(1,547)	(1,547)
Issue of shares	2	8	-	-	-	-	10
Exercised options re own shares	-	-	134	(3)	-	(64)	67
Purchase of own shares	-	-	(361)	-	-	-	(361)
Share based payments	-	-	-	52	-	-	52
Share option forfeitures	-	-	-	(37)	-	37	-
Transactions with owners	2	8	(227)	12	-	(1,574)	(1,779)
Profit and total comprehensive income for the year	-	-	-	-	-	1,930	1,930
Total comprehensive income less owners transactions	2	8	(227)	12	-	356	151
At 31 March 2013	2,827	11,182	(1,381)	345	310	10,086	23,369

Consolidated Cash Flow Statement

for the year ended 31 March 2013

		2013 £000	2012 £000
Cash flows from operating activities
Profit for the year		1,930	2,259
Adjustments for
Interest receivable		-	(5)
Interest payable		64	62
Income tax expense		(110)	82
Amortisation of intangible assets		591	701
Impairment		-	250
Depreciation		410	448
Exceptional item		-	(808)
Payment of deferred consideration		(18)	(12)
Loss on sale of property, plant and equipment		19	8
Share based payments		52	57
Operating cash flows before changes in working capital and provisions		2,938	3,042
Change in inventories		28	797
Change in receivables		496	517
Change in payables		1,166	(2,368)
Change in provisions		-	(164)
		1,690	(1,218)
Cash generated from operations		4,628	1,824
Income taxes refunded		183	-
Income taxes paid		-	(853)
Net cash generated from operating activities		4,811	971
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment		18	21
Purchases of property, plant and equipment		(597)	(495)
Purchases of intangible assets		(856)	(740)
Disposal of intangible assets		76	-
Purchase of subsidiary undertakings		-	(377)
Cash acquired with subsidiary		-	39
Net cash used in investing activities		(1,359)	(1,552)
Cash flows from financing activities
Interest payable		(64)	(62)
Interest received		-	5
Issue of share capital		10	-
Purchase of own shares		(361)	-
Proceeds from disposal of own shares		67	-
Repayments of borrowings		(435)	(511)
New borrowings		1,500	-
Dividends paid	2	(1,547)	(1,537)
Net cash used in financing activities		(830)	(2,105)
Net increase/(decrease) in cash and cash equivalents		2,622	(2,686)
Cash and cash equivalents at beginning of period		(1,426)	1,260
Cash and cash equivalents at end of period		1,196	(1,426)

Notes to the financial statements

1. Taxation

Analysis of (credit)/charge in period

	2013 £000	2012 £000
Current tax (credit)/expense
- UK corporation tax on profits of the period	-	298
- Amounts in respect of prior periods	(110)	10
	(110)	308
Deferred tax expense:
- Temporary differences	-	(226)
Income tax (credit)/expense	(110)	82

Reconciliation of effective tax rate

The tax for the period is lower (2012 lower) than the standard rate of corporation tax in the UK (24%/26%).  The differences are explained below:

	2013 £000	2012 £000
Profit before taxation - Continuing operations	1,820	2,341
Profit before taxation multiplied by rate of corporation tax in the UK of 24% (2012: 26%)	437	609
Effects of:
Other expenses not deductible for tax purposes	38	21
Amortisation of intangibles	149	36
Utilisation of losses	(691)	-
Adjustments for prior years	(110)	10
Research and development	(486)	(247)
Amortisation of intangibles	-	(547)
Movement on losses not recognised	553	200
Total tax (credit)/expense	(110)	82

2. Ordinary dividends

	2013 £000	2012 £000
Final dividend for the year ended 31 March 2012 of 4.0p (year ended 31 March 2011: 3.98p)	1,089	1,083
Interim dividend paid in respect of the year of 1.70p (2012: 1.67p)	458	454
Amounts recognised as distributions to equity holders	1,547	1,537

In addition, the directors are proposing a final dividend in respect of the year ended 31 March 2013 of 4.00p per share. If approved by shareholders, it will be paid on 2 August 2013 to shareholders who are on the register of members on 21 June 2013. Total dividend payable 5.70p (2012: 5.67p).

3. Earnings per share

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders 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. 

Reconciliations of the earnings and weighted average number of shares used in the calculations are set out below.

	2013			2012
	Earnings £000	Basic earnings per share	Diluted earnings per share	Earnings £000	Basic earnings per share	Diluted earnings per share
Profit attributable to equity shareholders	1,930	7.12p	7.08p	2,259	8.00p	7.90p

	2013 Number	2012 Number
Weighted average number of ordinary shares	27,098,352	28,248,164
Dilutive effect of share options	172,940	330,000
Diluted weighted average number of ordinary shares	27,271,292	28,578,164

4. Exceptional items

	2013 £000	2012 £000
Deferred consideration release	-	(808)
Corporate restructuring and transitional costs	738	1,297
	738	489

Exceptional items include subsidiary office closure costs, group people restructuring costs, business segment closure costs and new company start up costs.

5. Basis of preparation

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined in Sections 434 and 435 of the Companies Act 2006.

The consolidated statement of comprehensive income, the consolidated statement of changes in equity, the consolidated balance sheet and the consolidated cash flow statement have been extracted from the Group's financial statements for the year ended 31 March 2013 upon which the auditors opinion is unqualified and does not include any statement under section 498(2) or 498(3) of the Companies Act 2006. Those financial statements have not yet been delivered to the Registrar.

The statutory accounts for the year ended 31 March 2012 have been delivered to the registrar, contained an unqualified audit report and did not include a statement under section s248(2) or s498(3) of the Companies Act 2006.

The audited accounts will be posted to all shareholders in due course and will be available on request by contacting the Company Secretary at the Company's Registered Office.

6. Annual General Meeting

The Annual General Meeting will be held on 16 July 2013 at 9am, at the offices of Vianet Group plc, One Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR.

- Ends -

 

END

 

 

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