Final Results

RNS Number : 2047J

Vianet Group PLC

10 June 2014

 



Press Release

10 June 2014

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 2014.

Financial highlights

·	Revenue for the year of £18.34 million (2013: £21.09 million)
·	Recurring revenues at 78% (2013: 71%)
·	Gross margin increased to 59% (2013: 51%)
·	Operating profit before amortisation of goodwill, share option and exceptional costs of £3.05 million (2013: £3.30 million)
·	Profit before tax of £1.6 million (2013: £1.8 million)
·	Final dividend of 4.00 pence per share giving a full year total of 5.70 pence per share (2013: 5.70 pence per share)
·	Vending profit of £0.35 million (2013: £0.05 million loss)
·	Fuel Solutions reduced losses by c£0.2 million to £0.2 million, and was profitable from August 2013 (excluding seasonality impact of December)

Operational highlights

·	2,067 new vending units (2013: 475) with Q1 2015 pipeline for 1,200 new units
·	416 new beer monitoring installations(2013: 864), of which 296 were higher value iDraughtTM (2013: 828)
·	Leisure margins improved by 15% as a result of product mix and efficiencies
·	Several major customer contract extensions including Enterprise Inns, Heineken, Charles Wells and Daniel Thwaites
·	Balanced outcome for beer flow monitoring in the Government's planned Statutory Code for Pub Companies announced last week

Commenting on the final results, James Dickson, Chairman of Vianet Group plc, said: "I am pleased to report that good progress has been made across the Group's businesses, and by focussing resources on the growth opportunities that we have been developing over the last few years, the positive momentum has helped offset the detrimental effect of the proposed Statutory Code.  

"The uncertainty of the past several years is about to be lifted as the Government last week published a balanced response to the Pub Company consultation, although we suspect that its implementation will remain a customer distraction for some time.  However, the Group is confident that the on-going high growth Vending opportunities, higher margin activity, and further efficiencies provide an encouraging outlook for 2015.  The Group's markets, products, customers and people are now in place to deliver earnings growth and there is a solid foundation for future profitability."

- Ends -

An audio cast of the final results presentation given by James Dickson, Chairman, Stewart Darling, Chief Executive, and Mark Foster, Chief Financial Officer, was released this morning at 07.00hrs on Tuesday, 10 June 2014 on the Group's website www.vianetplc.com  with the link also being distributed by Abchurch Communications and Cenkos Securities plc. 

Enquiries:

Vianet Group plc
James Dickson, 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 / Alistair de Kare-Silver [e-mail]	Tel: [phone] www.abchurch-group.com

Chairman's Statement

I am pleased to report that during the period, Vianet has focussed resources on the growth opportunities that we have been developing over the last few years.

In particular, whilst modest at this stage, the opportunity for high growth and good profitability exists in our Vending division, as shown by the progress during the year where the vending telemetry business produced operating profit of £0.35 million (2013: £0.05 million loss).

We have reduced, or cut substantially, those parts of our business which are considered low growth or low margin whilst re-calibrating our beer flow monitoring operations to mitigate against external market pressures and we continue to develop more innovative solutions for our core pub industry clients.  During the period, these changes have held back turnover and operating profit but Vianet is a stronger company as a result.

Last week the Government published a long-awaited response to the consultation on its proposed Statutory Code for Pub Companies.  In essence, the Government plans to legislate to put the existing voluntary code onto a statutory footing which, for beer flow monitoring, is a continuance of our existing operating procedures.  The Board is pleased that the uncertainty of the past several years is now being lifted and considers this a satisfactory outcome although we suspect that the legislative implementation of the wider Statutory Code may remain a distraction for our customers for a period of time yet.

Although this uncertainty and further pub closures remained a detrimental factor on financial performance during FY 2014, the Board is confident that the ongoing focus on developing the Vending division, together with change programs in our beer flow monitoring and fuel businesses, are now proving beneficial and provide an encouraging outlook for 2015.

Against this improving backdrop and the strength of recurring income, the Board is proposing to maintain the final dividend at 4.00 pence which would give a total dividend for the year of 5.70 pence.

Subject to approval from shareholders at the Annual General Meeting, to be held on 15 July 2014, the final dividend will be paid on 1 August 2014 to shareholders on the register as at 20 June 2014.
 

Results

Full year pre-exceptional operating profit, before amortisation and share based payments, of £3.05 million (2013: £3.3 million) was in line with the revised market expectations following Vianet's trading update on 9 October 2013.

Revenue for the year was £18.34 million (2013: £21.09 million) with the decline primarily due to the full year impact of withdrawing from lower margin work in the Leisure and Fuel Solutions divisions and a reduced number of new installations in the UK pub market.

Several successful contract extensions, both in the Group's beer monitoring and vending sectors, ensured that the level of contractual and recurring revenues remained at over 70% of Group revenue.

The Group's overall operating gross margins of 59% (2013: 51%) benefitted from an improved product mix and reductions in the cost base across the business.

Group profit before taxation amounted to £1.56 million (2013: £1.82 million) and was impacted by £0.71 million of exceptional costs incurred in responding to the Government's proposed statutory code for pub companies, the cost base reduction programme, and further rationalisation of the Group structure.

Basic earnings per share post-exceptional costs (pre-deferred tax asset recognition) decreased to 5.79 pence from 7.12 pence in 2013.

Corporate Governance

Vianet has successfully addressed significant challenges and opportunities in its marketplaces over the past year or so.  The Group's culture, values and frameworks, whereby everyone at Vianet collectively and individually always 'seeks to do the right thing' has been fundamental in gaining support and strengthening our position, whether dealing with customers, politicians, suppliers or other stakeholders.

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 solutions for customers.

Board

The Board has been transformed over the period and is functioning well.  The transfer of Chief Executive Officer's responsibilities to Stewart Darling has gone to plan with Stewart now fully focussed on Vianet's key growth opportunity in the Vending Solutions division, together with iDraught USA, and the management and development of the Group's substantial UK beer flow monitoring business.

To enable this focus to be effective, the Board felt it important that, in addition to the Chairman's role, I should retain executive responsibility for Fuel Solutions, as well as dealing with the Government's Proposed Statutory Code.  During the period there has also been increased time invested in improving communication with institutional and private investors.

Chris Williams, independent Non-Executive Director, was appointed Chairman of the Audit Committee.  Chris was formerly Strategic Development Director with the Whitbread Beer Company, and joined the Board in May 2013.

In February 2014, Mike McGoun was appointed to the Board as its third independent Non-Executive Director.  Having developed and sold listed technology businesses, Mike brings a wealth of experience whilst also improving the balance of the Board.

Stewart Gilliland, who joined the Board prior to flotation, became our senior independent Non-Executive Director in April 2013 and is Chairman of the Remuneration Committee.  Stewart's other board memberships include Mitchells & Butler, C&C and Nature's Way.

All three of our Non-Executive Directors are members of the Audit, Remuneration and Nominations board sub-committees.

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.

Outlook

Whilst trading in the pub sector will remain challenging despite a satisfactory introduction of a Statutory Code, Vianet has made good progress and prospects are encouraging, particularly for telemetry solutions for the coffee vending market.  The benefits of the actions taken to reduce costs are being realised and further efficiency initiatives are being implemented.

·     The UK beer flow monitoring business has been recalibrated to sustain its strong earnings from long term contracts and to ensure it continues to deliver relevant solutions.

·     Vending Solutions has delivered strong profits growth and has made excellent progress in developing significant new sales opportunities with major global customers.  The prospects are good and there is real focus on developing our capability to ensure we take advantage of our leading position in coffee vending, and of our contactless payment solutions for vending.

·     The Fuel Solutions division is now totally self-contained and I am confident that the efficiency program, together with a stronger forecourt services pipeline and new opportunities for recurring income contracts in fuel management solutions, will ensure a profitable outcome for this division in 2014/15.

The Group's markets, products, customers and people are now in place to deliver earnings growth from all of these areas, which should finally demonstrate the benefits from our diversification and in doing so also expand the future strategic options for Vianet.

James W Dickson

Chairman

10 June 2014

Chief Executive Officer's Statement (Including Chairman's Review of Fuel Solutions)

Vianet's aim is to build a business that is durable for the long term through providing customers with solutions which unlock value in their business and ultimately lead to increased profitability.

Vianet brings disruptive technologies which compel customers to think differently about their markets, customers and operations.  Achieving sustainable success in our chosen markets is fundamentally about having an appetite for change and a commitment to constant renewal in all that we do.

Philosophy and approach

The Group's success is rooted in three core strengths: providing customer solutions which create a platform to make better business decisions; working collaboratively with customers to identify innovations which will drive a material shift in business performance; and developing and retaining great talent in an organisation that is focused on those things that add value.

The Group has also established long-term relationships with major blue-chip customers across the UK and Continental Europe and is using these strong relationship development skills to build alliances with partners and customers in the USA.  These relationships give us a deep understanding of what our customers want, and enable us to stay focused on identifying and providing solutions that best meet their needs.  We also recognise that many of our solutions are 'disruptive' in the sense that they compel customers to change the way they do things in order to improve business performance.

Because we understand our customers, we know that the main reason they choose our solutions is to make better decisions that will result in enhanced business performance.  Our task is to ensure that we identify and develop the very best solutions at a level of cost that drives a compelling return on investment and short to medium term payback for the customer and value for our shareholders.

In a fast-changing and complex environment we believe it is the combination of these three strengths that gives us the edge over competitors, and our continued focus and investment in them provides us with a durable source of value and competitive advantage.

Leisure Solutions

The Leisure Solutions division (excluding US) achieved an operating profit pre-amortisation and exceptional costs of £4.7 million.
 

Core beer monitoring / Machine Insite

Whilst the uncertainty over the Government's Proposed Statutory Code had an adverse  impact on pub industry confidence and expenditure, modest progress was still made in the adoption of the higher value iDraught^TM product and service with 296 additional sites gained during the year.  However, this was more than offset by an acceleration and increase in the number of in pub disposals which exceeded approximately 1,500 in the year.  Whilst there has been increased iDraught^TM penetration and good progress in gaining new contracts to monitor gaming machines in the pub sector, these were not enough to offset the revenue loss arising from pub disposals and closures.

Following extensive contract negotiations, the Board was delighted that Enterprise Inns agreed a four year contract extension for the provision of beer monitoring services and the opportunity to pilot our second generation gaming machine solution to determine its potential.

The Group commenced commercial trials of our iDraught^TM solutions for four managed pub retailers to determine how best to unlock the value being lost through not optimising draught beer dispense.  Initial results have been positive and, whilst this is a new capability and toolset for the managed sector, the Board is optimistic about the potential for progress this year.

Overall, the Board remains confident that the outlook for further growth in the higher value iDraught^TM product and service remains promising with many pub retailers now conducting extensive evaluations, however timing of adoption is difficult to predict.

Vianet Americas Inc.

Vianet Americas has made progress in securing pilot trials with national multiple retailers across the USA and continues to operate an effective strategic alliance with Micro Matic USA for nationwide iDraught^TM installation, service and sales support.

The total loss for the year was £0.35 million and, as announced at the time of the Group's final results in June 2013, a review of the business was undertaken in February 2014.  This resulted in a decision to focus on a few significant pilots and create a cost structure to support this initiative.

By the end of the summer 2014, the Board should have a good understanding of the scale of opportunity for iDraught^TM and be in a position to confirm our strategy for Vianet Americas.

Vending Solutions

The Vending Telemetry business made good progress in H2 resulting in a full year profit of £0.35 million.  This progress can be attributed to the alignment of our vending proposition with key strategic drivers in the marketplace and securing contracts with key blue chip customers, whom we identified as thought leaders and winners in the vending market, with particular emphasis on quality coffee and cashless payment systems.

Consumer demand for quality coffee is driving growth in the market with key retailers aiming to create a consumer experience in vending that is now commonly found in High Streets throughout the UK and Continental Europe.  Delivering this level of experience requires that quality and machine availability are maintained to the highest possible standard, both of which require real time data and alerts.  Combined with the platform to create and implement shared business models, the market is now opening up to new participants and exciting growth opportunities.

Cash only payment has long been an inhibitor of consumption and the consumer experience in the vending industry.  The evolution and growth of cashless payment solutions provides a material opportunity to change this dynamic and attract more consumers to the vending space.

For retailers adopting and deploying cashless payment solutions, the benefits are immediate in terms of sales growth and reduced operating cost which in turn drive increased adoption.  The Board expects that our cashless payment solutions portfolio and significant experience developed in this new and dynamic space could offer material growth opportunities for the Group in years to come.

Vianet Fuel Solutions ("VFS")

The Group's Fuel Solutions Division ("VFS") made progress during the period as it benefitted from a reduced cost base and higher margin activity, achieving reduced losses compared with the prior period and is now trading profitably into 2014/15.

Turnover of £4.2 million was down £0.6 million as a direct result of the full year effect of the decision taken to exit lower margin Liquefied Petroleum Gas ("LPG") work in 2013.

The cost base rationalisation and focus on higher margin activity resulted in margins improving to 24% (2013: 21%).

VFS losses for the full year were £0.19 million (2013: £0.35 million loss).  However, it is encouraging that, with the exception of seasonal losses in December, the division has traded profitably for the past nine months.

As the market's only end-to-end provider of fuel asset management solutions and services, VFS has been gaining incremental new business with existing customers.

Additionally, the VFS Clearview wet stock analysis, margin management solutions, together with specialised Facilities and Compliance Management solutions has created a leading suite of web-based tools.  The market response to this capability has been very positive with new business being gained with partners such as Midlands Co-op, Lincolnshire Co-op, Intake, Brobot, Penny Petroleum, ML Richardson, and post year end, Henderson Group with sixty sites in Northern Ireland, and opportunities being created with major supermarket groups.

Whilst the Group's long term strategic partnership with BigOil, the Petrol Retailer Association's vehicle, is in its early days, there has been good groundwork completed in establishing the foundations for future growth.  This should provide VFS with direct access to members who control approximately 3,500 independent forecourts.

VFS is well placed to expand its long term relationships with national operators whilst building a robust and exclusive distribution of its products to the independent sector.

Strategy for Growth

The Group's strategic intent remains to extend its solution development and support services in 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 solutions which drive compelling and sustainable returns on investment and, in turn, cement a profitable long term trading relationship with Vianet.

Value innovation and solutions that drive value to the customer are key drivers for our people together with delivery being executed with focus and discipline.

Utilising the solid financial platform provided by the core beer monitoring business, the Group has invested in acquiring and developing its product set in the following areas:

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

•      Machine to machine transmission technology and cutting edge data capture that are both battle tested and have the potential for application across multiple sectors of which vending telemetry is an outstanding example.

Outlook

The Board believes that the right team is in place with the competencies, skills and behaviours aligned to delivering success in the various industries in which we operate.

Responding to the increasing demands of dealing with international blue chip customers, the Group continues to attract and develop high calibre individuals to take the business forward, particularly in sales and delivery execution.

Whilst Vianet's traditional beer monitoring business may remain under pressure during the general market decline, iDraught^TM in the UK, and vending telemetry and cashless payment, and gaming machine telemetry are poised to drive the growth of the Group.

The Group believes that by focusing on growth areas and rigorous cost management of our legacy business, Vianet will deliver the desired benefits and performance for customers and good returns for shareholders.  In what has continued to be a challenging business environment, the Group has continued to make good underlying progress and build a solid foundation which positions Vianet for future profitable growth.

Stewart Darling

Chief Executive Officer

10 June 2014

Financial Review

Group trading result

The Group now reports its results in the distinct segments of Leisure (including US), Vending, Technology and Fuel.  The current year saw positive growth in Vending, reduced losses moving into ongoing profit in Fuel, solid performance in Machine Insite within Leisure, and the expected losses in the US.  However positive momentum has been more than offset by the continued challenges in the core beer market coming from the uncertainty of the proposed Statutory Code together with pub company disposal plans being accelerated beyond market expectation.  In addition, the Group has continued with an ongoing cost rationalisation program, maintained margins, invested for growth, and added key people where needed.

This backdrop has led to the results achieved for 2013/14, with some good underlying progress that gives us confidence as the Group enters the new financial year.

Total revenue for the year was £18.34 million (2013: £21.09 million). Operating profit (before amortisation of intangible assets, share based payments, and exceptional items) amounted to £3.05 million (2013: £3.3 million) in line with the Trading Update announced in October 2013.  The results are after absorbing the reduced losses in the Fuel Division which has traded profitably since August 2013 (bar the seasonality of December 2013), and Vianet America's £0.4 million of losses, the combined impact of which is c£0.6 million.

Blended recurring revenues for the Group are slightly ahead of last year at 78% (2013: 71%), core beer remaining robust at 82% and Fuel Solutions maintaining a level of around 40%.

Exceptional costs of £0.7 million (2013: net £0.7 million) principally relate to significant staff changes and reductions during the year as we position Vianet for growth with the right management in place.  That transition incurred the bulk of these exceptional costs, together with Statutory Code and lobbying costs, resulting in Group operating profit (pre intangible asset amortisation and share based payments) of £2.3 million (2013: £2.5 million).

Divisional performance

The Leisure division, consisting of the core beer monitoring business (including US), and gaming machine monitoring achieved revenue of £12.45 million (2013: £14.5 million) and achieved gross margins pre the cost of data management of 69% (2013: 60%), impacted by cost rationalisation programme.  The core beer monitoring business delivered 416 (2013: 864) new installations of which 296 (2013: 828) were the higher priced iDraught^TM systems (although the previous period had the benefit of a major roll out with Spirit Group), as well as 120 traditional Brulines beer monitoring systems.  The active installation base after pub company disposals, change of use and uplifted systems is approximately 16,400 (2013: 17,600) systems.

The pub market has faced well documented challenges with the proposed delay in the announcement of the Statutory Code implementation for the tenanted sector.  This significantly impacted both growth of new core beer monitoring sales which can be seen from the iDraught^TM sales numbers as well as impacting pub company disposal plans which saw a net c1,200 reduction in the estate to 16,400.  Despite this background the core beer monitoring business remains resilient with several major customers such as Enterprise Inns, Heineken, Charles Wells and Daniel Thwaites extending their contracts, and iDraught^TM, which is currently 16.6% (2013: 14%) of the installation base, extending its footprint.

The final part of the Leisure division is Machine Insite brand which contributed a robust c£0.2 million (2012: £0.2 million) this year.

Vending made significant progress in the year with unit sales of 2,067 (2013: 475).  This helped improve turnover to £1.5 million (2013: £0.9 million) and a pre-exceptional and amortisation profit of £0.35 million (2013: loss £0.05 million). Vending is now well positioned for growth as outlined in the Chief Executive Officer's statement.  The configured units in the field increased to c12,000 (2013: c10,000) resulting in a revenue mix this year of c70% recurring (2013: c85%).

The Fuel Solutions division made some significant steps forward this year having removed distracting product segments such as LPG which accounted for £0.6 million of the turnover difference, turnover being £4.2 million (2013: £4.8 million).  While not at the pace desired, the division delivered reduced losses before exceptional items and amortisation of £0.2 million (£2013: 0.3 million) with enhanced margins of c24% (2013: c21%). Since August 2013 (barring the seasonal month of December 2013), the division was in profit of £0.03 million pre-exceptional and amortisation with improving margins and increasing recurring income. The developments referred to in the Chairman's report for the forthcoming financial year inject a belief that the division will be in profit for 2015.

Overall Group results

Group results overall, before amortisation of intangible assets, share based payments, option costs, and exceptional costs, were a profit of £3.05 million as compared to £3.3 million at March 2013.

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

	FY 2014 £'000	FY 2013 £'000
Revenue	18,335	21,085
Gross Profit	10,778	10,810
	(59%)	(51%)
Operating Profit pre amortisation, share based payments and exceptional costs	3,048	3,265
PBT post exceptional costs	1,563	1,820
PBT pre exceptional costs	2,272	2,558

Divisional Performance

FY 2014	£'000 Leisure	£'000 Vending	£'000 Technology	£'000 Fuel Solutions	£'000 Corporate	£'000 Total
Revenue	12,451	1,509	187	4,188	-	18,335
Gross Profit	8,678	1,004	101	995	-	10,778
	(70%)	(67%)	(54%)	(24%)	-	(59%)
Operating profit/(loss) pre amortisation, share based payments and exceptional costs	4,264	353	(139)	(190)	(1,240)	3,048

Taxation

The Group has continued to utilise available tax losses during the year resulting in no tax being paid and a refund of £0.11 million being received.  The Group continues to utilise the tax losses available.  This year the tax line includes a deferred tax asset provision of £1.6 million (2013: £nil) based on the losses available.

Earnings per share

Earnings per share has been impacted by the recognition of a deferred tax assets provision realising the losses carried by the Group.  This has increased the overall basic earnings per share for the year ended 31 March 2014 before exceptional costs which amounted to 14.23 pence as compared to 9.84 pence at March 2013.

The underlying earnings per share pre the deferred tax asset provision and exceptional items is 8.42 pence compared to 9.84 pence at March 2013.  Fully diluted earnings per share (before exceptional costs), which takes account of all outstanding share options, amounted to 8.40 pence which compares to 9.79 pence last year.

Balance sheet and cash flow

The Group carries a consistently strong balance sheet.

The Group generated operating cash flow at £1.6 million (2013: £4.6 million) impacted by the level of advance customer payments of 2013 not being repeated in 2014.  The challenging core beer market has led to the weaker cash generation than would have otherwise been enjoyed given the uncertainty of the proposed Statutory Code and more aggressive pub company disposal programmes coupled with a full year of US costs.  Overall the Leisure business continued to be a healthy generator of cash at c£4.0 million continuing to help fund the Corporate and Technology segments, US operations and the reduced losses of the Fuel division.

In addition to the above, the funds generated in the year were utilised to invest in the Group's technology through research & development, service borrowings and fund dividends.  At the year-end, the Group had borrowings of £2.4 million (2013: borrowings of £3.0 million), however net debt is marginally higher than last year.

The balance sheet and cash generating capacity of the Leisure division remains robust with Vending and Fuel now starting to contribute, giving the Board confidence to pursue the growth opportunities that exist.

Mark H Foster

Chief Financial Officer

10 June 2014

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2014

		Before Exceptional 2013 £000	Exceptional 2013 £000	Total 2013 £000	Total 2012 £000
	Note
Continuing operations
Revenue		18,335	-	18,335	21,085
Cost of sales		(7,557)	-	(7,557)	(10,275)
Gross profit		10,778	-	10,778	10,810
Administration and other operating expenses		(7,730)	(709)	(8,439)	(8,283)
Operating profit pre amortisation and share based payments		3,048	(709)	2,339	2,527
Intangible asset amortisation		(734)	-	(734)	(591)
Share based payments		10	-	10	(52)
Operating profit post amortisation and share based payments		2,324	(709)	1,615	1,884
Finance costs		(52)	-	(52)	(64)
Profit before taxation		2,272	(709)	1,563	1,820
Income tax expense	1	1,570	-	1,570	110
Profit after tax and total comprehensive income for the year attributable to the owners of the parent		3,842	(709)	3,133	1,930
Earnings per share
- Basic	3	14.23p	(2.63)p	11.60p	7.12p
- Diluted	3	14.21p	(2.62)p	11.59p	7.08p

Consolidated Balance Sheet

at 31 March 2014

				2014 £000	2013 £000
Assets
Non-current assets
Goodwill				17,723	17,723
Other intangible assets				2,486	2,179
Property, plant and equipment				3,700	3,812
Investments				-	533
Total non-current assets				23,909	24,247
Current assets
Inventories				1,851	1,875
Trade and other receivables				3,835	3,661
Tax asset				1,443	140
Cash and cash equivalents				183	1,196
				7,312	6,872
Total assets				31,221	31,119
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables				3,841	4,548
Borrowings				1,183	899
Tax liabilities				-	-
				5,024	5,447
Non-current liabilities
Borrowings				1,245	2,146
Deferred tax				-	157
				1,245	2,303
Equity attributable to owners of the parent
Share capital				2,827	2,827
Share premium account				11,182	11,182
Share based payment reserve				293	345
Own shares				(1,381)	(1,381)
Merger reserve				310	310
Retained profit				11,721	10,086
Total equity				24,952	23,369
Total equity and liabilities				31,221	31,119

Consolidated Statement of Changes in Equity

for the year ended 31 March 2014

	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 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
At 1 April 2013	2,827	11,182	(1,381)	345	310	10,086	23,369
Dividends	-	-	-	-	-	(1,540)	(1,540)
Share based payments	-	-	-	(10)	-	-	(10)
Share option forfeitures	-	-	-	(42)	-	42	-
Transactions with owners	-	-	-	(52)	-	(1,498)	(1,550)
Profit and total comprehensive income for the year	-	-	-	-	-	3,133	3,133
Total comprehensive income less owners transactions	-	-	-	(52)	-	1,635	1,583
At 31 March 2014	2,827	11,182	(1,381)	293	310	11,721	24,952

Consolidated Cash Flow Statement

for the year ended 31 March 2014

		2013 £000	2013 £000
Cash flows from operating activities
Profit for the year		3,133	1,930
Adjustments for
Interest payable		52	64
Income tax expense		(1,570)	(110)
Amortisation of intangible assets		734	591
Depreciation		522	410
Profit on disposal of investment		(90)	-
Payment of deferred consideration		(20)	(18)
Loss on sale of property, plant and equipment		26	19
Share based payments		(10)	52
Operating cash flows before changes in working capital and provisions		2,777	2,938
Change in inventories		24	28
Change in receivables		(174)	496
Change in payables		(1,020)	1,166
		(1,170)	1,690
Cash generated from operations		1,607	4,628
Income taxes refunded		110	183
Net cash generated from operating activities		1,717	4,811
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment		19	18
Proceeds on disposal of investment		623	-
Purchases of property, plant and equipment		(455)	(597)
Purchases of intangible assets		(708)	(856)
Disposal of intangible assets		-	76
Net cash used in investing activities		(521)	(1,359)
Cash flows from financing activities
Interest payable		(52)	(64)
Issue of share capital		-	10
Purchase of own shares		-	(361)
Proceeds from disposal of own shares		-	67
Repayments of borrowings		(900)	(435)
New borrowings		-	1,500
Dividends paid	2	(1,540)	(1,547)
Net cash used in financing activities		(2,492)	(830)
Net (decrease)/increase in cash and cash equivalents		(1,296)	2,622
Cash and cash equivalents at beginning of period		1,196	(1,426)
Cash and cash equivalents at end of period		(100)	1,196

Notes to the financial statements

1. Taxation

Analysis of credit in period

	2014 £000	2013 £000
Current tax expense/(credit)
- UK corporation tax on profits of the period	-	-
- Amounts in respect of prior periods	30	(110)
	30	(110)
Deferred tax credit:
- Temporary differences	(1,600)	-
Income tax credit	(1,570)	(110)

Reconciliation of effective tax rate

The tax for the period is lower (2013 lower) than the standard rate of corporation tax in the UK (23%/24%).  The differences are explained below:

	2014 £000	2014 £000
Profit before taxation - Continuing operations	1,563	1,820
Profit before taxation multiplied by rate of corporation tax in the UK of 23% (2013: 24%)	359	437
Effects of:
Other expenses not deductible for tax purposes	(66)	38
Amortisation of intangibles	159	149
Utilisation of losses	(806)	(691)
Losses recognised	(1,531)	-
Adjustments for prior years	30	(110)
Research and development	(167)	(486)
Movement on losses not recognised	452	553
Total tax (credit)/expense	(1,570)	(110)

2. Ordinary dividends

	2013 £000	2012 £000
Final dividend for the year ended 31 March 2013 of 4.0p (year ended 31 March 2012: 4.00p)	1,082	1,089
Interim dividend paid in respect of the year of 1.70p (2013: 1.70p)	458	458
Amounts recognised as distributions to equity holders	1,540	1,547

In addition, the directors are proposing a final dividend in respect of the year ended 31 March 2014 of 4.00p per share. If approved by shareholders, it will be paid on 1 August 2014 to shareholders who are on the register of members on 20 June 2014. Total dividend payable 5.70p (2013: 5.70p).

3. Earnings per share

Earnings per share has been impacted by a deferred tax asset provision realising the losses carried by the Group. This has increased the overall basic earnings per share for the year ended 31 March 2014 before exceptional costs amounted to 14.23 pence compared to 9.84 pence at March 2013.

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders (£3,133k) by the weighted average number of ordinary shares outstanding during the period.

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

The table below shows the earnings pre the impact of the deferred tax asset.

	2014			2013
	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	1,563	5.79p	5.78p	1,930	7.12p	7.08p

	2014 Number	2013 Number
Weighted average number of ordinary shares	26,993,694	27,098,352
Dilutive effect of share options	34,575	172,940
Diluted weighted average number of ordinary shares	27,028,269	27,271,292

4. Exceptional items

	2014 £000	2013 £000
Corporate restructuring and transitional costs	709	738
	709	738

This year has seen an unusually high level of exceptional costs, the primary background being a transition of people and management (30 staff left between January 2013 and March 2014) to ensure we have the succession and calibre of people on board to deliver the strategic aims and aspirations of the Group.  This, coupled with the long overdue rationalisation of the group structure of 18 companies into a tax efficient 4 company base allowing the access to over £16m of tax losses, as well as the adverse impacts of the Statutory Code costs to ensure we do our utmost to achieve a fair outcome, has impacted one off costs at an unusually higher level, not expected to be seen again.

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 2014 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 2013 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 15 July 2014 at 11.30am, at the offices of Grant Thornton UK LLP, No 1 Whitehall Riverside, Leeds, LS1 4BN.

- Ends -

 

END

 

 

FR EAXKNEESLEFF