Final Results

RNS Number : 1889H

Vianet Group PLC

06 June 2017

 

Press Release

6 June 2017

Vianet Group plc

("Vianet" or the "Group")

Final Results

Vianet Group plc (AIM: VNET), the international provider of actionable data and business insight through devices connected to its Internet of Things platform, is pleased to announce its final results for the year ended 31 March 2017.

Financial highlights (continuing operations)

·    Revenue for the year of £14.26 million (2016: £14.29 million)

·    Recurring revenues across the two divisions remains strong at 85% (2016: 83%) as did overall gross margin at c 70%

·    Operating profit pre-amortisation of intangibles, share options and exceptional costs up 9.9% to £3.32 million (2016: £3.02 million)

·     Profit before taxation was £1.45 million post exceptional items (2016: £1.85 million)

·     Operating cash generation up 14.9% to £3.93 million (2016: £3.42 million)

·     Net cash increased by 71.6% to £3.45 million (£2.01 million)

·     Basic earnings per share (before tax) and post-exceptional costs at 5.30 pence (2016: 6.79 pence)

·    Final dividend of 4.00 pence per share proposed giving a full year total of 5.70 pence per share (2016: 5.70 pence)

Operational highlights

·    Smart Zones Division (including former Leisure Division) resilient with new device connections driven by 380 new drinks monitoring system installations (2016: 455)

·    Smart Zones sign new six year contract extension with Greene King

·   Smart Machines Division (including former Vending Division) added 5,092 new connected devices (2016: 5,284)

·    Smart Machines adjusted operating profit up 19.1% to £0.89 million (2016: £0.75 million)

·    Smart Zones adjusted operating profit up 5.5% to £4.82 million (2016: £4.57 million)

Commenting on the final results, James Dickson, Chairman of Vianet Group plc, said:
"Encouraging progress has been made across our business, which has benefitted from the focus on exploiting growth opportunities in both the Smart Machines and Smart Zones Divisions.   With over 300 customers including several global blue chip companies and more than 250,000 devices connected to our Internet of Things platform, our experience and knowledge combine to form a powerful technology and insight capability.     As the Internet of Things evolves and businesses increasingly seek more data and insight on everything from asset performance to process automation, we believe Vianet is well placed to grow its position in this rapidly developing area.

The Group's financial resources are underpinned by high levels of recurring income.  This combined with our strong cash flow and balance sheet gives scope for investment in expansion and for selective acquisitions.   The Board remains confident that Vianet's long term strategy is the right one, and that, within the parameters of its control and influence, the Group is well positioned to deliver earnings growth and expand future strategic options."

- Ends -

An audio cast of the full year results presentation given by Stewart Darling (Chief Executive) and Mark Foster (Chief Finance Officer), was released this morning, Tuesday, 6 June 2017 at 07.00hrs on the Group's website www.vianetplc.com with the link also being distributed by Yellow Jersey PR.

Enquiries:

Vianet Group plc
James Dickson, Chairman Stewart Darling, CEO Mark Foster, CFO	Tel: [phone] www.vianetplc.com
Cenkos Securities plc
Stephen Keys / Camilla Hume	Tel: [phone]
	www.cenkos.com

Media enquiries:

Yellow Jersey PR
Sarah Hollins [e-mail]	Tel: [phone] www.yellowjerseypr.com

Who we are

Vianet Group is a leading provider of actionable management information and business insight created through combining data from our smart Internet of Things ('IOT') solutions and external information sources.

Servicing over 300 customers across the world and rendering live data to our IOT platform from over 250,000 connected machines daily, Vianet is one of the largest business to business (b2b) connected solutions providers in Europe with established long term relationships with blue chip customers and growing recurring revenues which are over 85% of our total revenues.

Vianet's game-changing smart technologies have been repositioned to describe our capabilities more accurately and recognise the wider opportunities.

In our Smart Machines Division we connect a single data gathering device with its own on-board communication capability to a customer's asset or system.  The device then sends data back via our IOT platform to cloud based servers.  The technology was originally developed for automated retailing machines, however the flexibility and functionality of the device means the technology can be applied to practically any machine which has the capability to output data.  The device is also used to connect our contactless payment solution and communicate payment terms to our cloud based payment services providers where that application is also required.

The Smart Zones Division is where we connect multiple data gathering devices into one or more systems or assets with the data from those devices being communicated back to our IOT platform and cloud based servers via a single 3G communications hub.  The technology was originally developed for flow monitoring devices, temperature sensors, and asset management in drinks retailing but practically any data gathering device with a digital output could be connected to the communications hub where required such as gaming machines, utilities management and EPOS.

In both divisions the data collected is then structured and rendered through mobile applications and web interfaces to provide actionable data that supports operational and commercial decision making. Data is also structured in specific data sets and often combined with external data to deliver business insight for senior level decision makers.

With a successful track record of connecting business assets via our smart devices and rendering the asset performance data to our website and mobile applications, our growth strategy will leverage this core capability in existing markets including the Leisure and Vending sectors, as well as new markets as they are identified.

The business insight and actionable data Vianet provides to customers is focused on improving customer business process performance, asset management and utilisation and service efficiency where there is both scale and a transformational opportunity.  By providing new insights to customers we empower them to make better decisions that drive real business change.

These new insights support customer problem solving by:

·    Predicting a future asset performance to increase utilisation and significantly reduce servicing costs;

·    Identifying previously unknown trends, inefficiencies, and wasted resources; and

·    Building new procedures, revenue streams, automation services, and incorp-orating these into the customers' existing processes.

Building on our proven track record of converting IOT into actionable data and solutions for b2b markets, our mission is to become the recognised leader in delivering actionable management information and unparalleled insight that is game-changing for customers in our chosen markets.

We aim to achieve this through:

·    Combining our ability to connect customer assets via our smart devices and IOT platform with powerful data analytics tools to deliver critical insight and information;

·     Continuously striving to be a business that is passionate about developing innovative and game changing solutions by employing talented people focused on transforming business performance;

·    Driving our financial performance through long term contracts with recurring high cash margin and scalable annuity streams.

 

Chairman's Statement

Performance

Encouraging progress has been made across our business, which has benefitted from the focus on exploiting growth opportunities in the Smart Machines Division and optimising performance in the Smart Zones Division.  

Group turnover from continuing operations was £14.26 million (2016: £14.29 million) whilst adjusted operating profit was up by 9.9% at £3.32 million. Group profit before taxation representing profit from continuing operations, amounted to £1.45 million post exceptional items (2016: £1.85 million).

Increased exceptional costs from continuing operations of £0.96 million (2016: £0.55 million) relate principally to US litigation costs and office rationalisation.  As outlined in our interim statement, the Group successfully defended itself in the US courts against certain claims asserted by third parties.  This matter is now closed and no further costs will arise in connection with this situation.  Additionally we closed our Bolton distribution and warehousing depot incurring office rationalisation costs.

Basic pre-tax earnings per share, post-exceptional costs and deferred tax asset movement, reduced to 5.30 pence from 6.79 pence in 2016.  Adversely impacted by high exceptional costs and share based payments the basic EPS after tax was 3.77 pence compared to 4.76 pence in 2016.

Given the solid underlying performance, high quality recurring income and the strong prospects for the Group, the Board is proposing to maintain the final dividend at 4.00 pence which, if approved by shareholders, would give a total dividend for the year of 5.70 pence (2016: 5.70 pence).  Subject to approval from shareholders at the Annual General Meeting, to be held on 29 June 2017, the final dividend will be paid on 28 July 2017 to shareholders on the register as at 16 June 2017.

Board and Staff

We continue to evaluate the Board's composition to ensure it remains effective and contains the optimum balance of experience and independence to support our operations and our growth agenda.

The Group has an experienced management team which is focused on delivering the objectives set in line with the identified strong growth opportunities and developing new applications for Vianet's IOT expertise and technology.

In delivering leading Big Data capability for our customers, the Group continues to be engaged in large development projects and change programmes and it is pleasing that our people continue to respond with their usual enthusiasm, demonstrating commitment which continues to build the Group's good reputation with customers.

I would again like to thank all staff, senior management, and my Board colleagues, for their continued efforts and commitment in driving the Group forward over the past year.

Outlook

The Group is making good progress through its focus on strong growth opportunities and, against this background, there has been good momentum continuing into the new financial year.

•      Our Smart Zones business area, which includes drinks flow monitoring and gaming machine monitoring, continues to evolve and innovate to deliver relevant solutions in a changing business environment both to sustain existing earnings performance from the extension of long term contracts whilst also developing new recurring income streams.  Although the backdrop to trading in the pub industry may remain challenging, the rate of pub closures seems to be diminishing and prospects for increasing the number of connected devices are encouraging.

•       The Smart Machines division has seen exciting growth opportunities in vending in the UK and Europe and we believe it should deliver strong growth having made good progress in developing significant new sales opportunities with major global customers in these geographies.  There is a concerted focus on developing our capability and accelerating growth to take advantage of our leading position in coffee device and contactless payment device connectivity where we expect sales momentum to continue to grow.

•      The Group's financial resources are underpinned by high levels of recurring income and strong cash flow.  This cash generation and strong balance sheet gives scope for investment in expansion and for selective acquisitions.

The Board remains confident that Vianet's long term strategy is the right one and that, within the parameters of its control and influence, the Group is well positioned to deliver earnings growth and expand the future strategic options for Vianet.

Chief Executive's Report

Vianet continues to deliver real value for its customers by providing actionable information and business insight with the power to drive real business change.

We currently operate two business divisions: Smart Zones (historically beer monitoring and machine management services) and Smart Machines (currently comprises vending machine telemetry and contactless payment solutions).  With over 300 customers including several global blue chip companies and more than 250,000 devices connected to our Internet of Things (IOT) platform, our experience and knowledge combine to form a powerful technology and insight capability that, we believe, few competitors in our markets can match.

As the IOT evolves and businesses seek more data and insight on everything from asset performance to process automation, we believe Vianet is well placed to grow its position in this rapidly developing area.  Material value creation for customers will be driven by data and insight which can improve informed decision making leading to real business change.  At the same time, we recognise that enablement capability, such as hardware and connectivity, still has a significant role to play. Whilst we may not always connect to our customers' assets using our Smart devices, our IOT platform has evolved so that our connectivity capability is device-agnostic.  It is the gathering of information about customer asset performance which enables the creation of powerful data and insight and this, we believe, will drive sustained growth over the coming years.

As a business that focusses on delivering business insight through data captured via our IOT platform and third party sources, we have resisted the distraction of developing all the other enablement technologies necessary to create the overall solution.  Therefore our strategy is to build partnerships with leading providers and partners whose core business capability encompasses these activities such as our new contactless payment solution, delivered in partnership with Elavon and Creditcall, and external hardware providers.

To accelerate the Group's growth strategy our legacy infrastructure is being migrated quickly to an agile cloud based technology environment, which also enables us to generate new data analytics and corresponding revenue streams.  The Group is investing £1.5 million in FY2018 year to achieve this goal and allow us to exploit the power of cloud-based data and deliver a significant step forward in business capability and competence which will enable us to take a materially different approach to engaging with our customers.

Operating Review
 

Smart Zones

Our legacy core business of drinks monitoring/services for the UK Leisure sector remains resilient with high gross margins and strong cash generation.

The combination of improved recurring revenues from long term contract extensions and ad-hoc support activity, combined with 278 iDraught™ sales, resulted in a largely stable income stream for the period under review despite the continued headwinds of pub disposals.

Despite these pub disposals, our Smart Zones connected device base remains robust with over 230,000 devices in c 14,500 premises.  The data sent from these devices forms the core of the information and insight delivered to customers via our website and mobile applications.

Whilst we focus on strengthening our recurring income streams, pub companies are also adapting to the changing landscape through different strategies such as developing managed estates from high performing or strategically located properties and creating franchised models with increased operating performance potential and greater transparency.  We expect these different strategies to be beneficial to our business as the pub companies seek to improve retailing capability and quality standards and will likely be targeting investment expenditure on that basis.

Whilst the overall pub sector rate of pub disposals appears to be slowing and is reduced versus the prior year, (2017: 940 and 2016: 1,100) the resulting impact was a net reduction of 616 licenced premises in our installation base over the financial year with a consequential impact on operating contribution.

Commercial trials of our latest version of Smart Zones technology have been successful in terms of the results delivered and corresponding operating performance improvement. The challenge for the business in the coming year is to build growth on the back of this success and we are optimistic over progress.

Vianet Americas Inc.

Vianet Americas, which is contained within the Smart Zones Division, has made progress both in sales and operating performance, with reduced losses which should close towards breakeven in 2017/18.

Market analysis clearly indicates that Vianet's iDraught™ solution is substantially ahead of all competitors in the USA, and this advantage, combined with our strategic alliance with Micro Matic USA for nationwide installation, service and sales support places us in a strong position to keep growing. Whilst the pace of delivery of results is slower than anticipated, the Board recognises that the USA market is significant in size and a good opportunity for the Group given the relatively modest level of investment required.

Overall, the Board remains cautiously confident for the prospects of further growth in the Smart Zones Division.

Smart Machines 

Smart Machines connections grew in the year and combined with increasing traction for our contactless payment solution was the background to the division delivering good progress in the period. This progress is principally attributed to the development of business capability which is exploiting powerful strategic drivers in the quality out of home coffee market, growth of contactless payment, and securing of vending contracts with major blue chip customers whose businesses are growing.  The impact of all the above factors gave a divisional operating profit growth of 19.1%, on a like for like basis (see Financial Review Smart Machines section).

The successful implementation of our growth strategy is particularly encouraging when the impact of Smart Machines estate rationalisation is factored in, which is an inevitable outcome of installing our solution.

The market opportunity remains extensive even when limited to the immediately addressable market projections of 300,000 vending machines rather than all vending machines across Europe. As technology adoption evolves, it is anticipated that the addressable market will grow to nearly 1 million vending machines with Vianet being at the forefront to grow with the market.

Our contactless payment solution, supported by leading industry partners Elavon and CreditCall, has given further impetus to providing a solution to the Smart Machines market where traditional cash-only payments have long been an inhibitor of vending-related consumption, usage and customer experience. We believe the evolution and growth of contactless payment solutions provides a material opportunity to change this dynamic and attract more consumers to the vending vertical.

We expect that Vianet's contactless payment solution and significant experience developed in this new and dynamic space will provide exciting growth opportunities in years to come.

R&D Investment

The Group continues to invest in development activity and is accelerating this activity using some of the funds from the sale of the Fuel Division in January 2016.  This development will broadly cover enhancements to the customer experience, revenue generating reporting insights from our new platforms which allows us to leverage new revenue streams, make necessary infrastructure investment and move away from legacy systems and software to an agile cloud-based technology environment.  

This accelerated investment is expected to cost an additional £900k on top of the 'normal' development activity of £500k - £600k per annum.

The Board believes this further investment in enhancing our core Big Data and technology capability will enable the Group to improve the quality of existing recurring revenue stream and to generate substantial new growth opportunities.

Looking Forward

In our Smart Zones Division, and in particular for our drinks flow monitoring area, the industry headwinds associated with soaring business rates, national living wage and rapidly rising input costs, will likely result in some pressure from pub closures and disposals, and reduced investment expenditure.  However the Board does expect this to be offset by continued growth in iDraught™ installations as well as results from other revenue and efficiency initiatives. 

Our Smart Machines Division continues to enjoy great traction in the marketplace particularly in the quality coffee segment where consumption growth is being driven by rampant consumer demand. With the addition of our new contactless payment solution and rapid adoption of technology by brand owners and machine operators, the division is in good health and poised for further growth.

Focusing on delivering even greater value to customers through world class strategic insight and actionable data, together with rigorous cost management of Vianet's legacy business and service provision, should deliver the desired benefits and performance for customers and shareholders alike. The Group has continued to make good underlying progress in a challenging environment and built a solid foundation, which positions Vianet well for future profitable growth, the execution of its strategy and broadening its reach into new areas and markets.

Financial Review

Turnover of £14.26 million was broadly flat year on year where growth in Smart Machines was offset by the headwinds in the pub market place, particularly gaming machine monitoring, which held back Smart Zones.

Growing Profitability

Group operating profits, before amortisation of intangible assets, share based payments, option costs, and exceptional costs, were up 9.9% to a profit of £3.32 million (FY2016: £3.02 million)

Gross margin remained healthy year on year at c 70% with the average operating profitability per connected device having grown 10.6% year on year.  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.

This KPI seeks to demonstrate the robustness of the profitability achieved per connected device at each reporting date.

Recurring Revenue

Blended recurring revenues across the two divisions was a healthy 85% (2016: 83%), reflecting growth in Smart Machines connected device estate and the ongoing contract renewals in Smart Zones.

The average recurring revenue per connected device has grown 1.7% year on year.

Performance Summary

The table below shows the performance of the Group;

	FY2017	FY2016	Change %
Revenue	£14.26m	£14.29m	(0.2)
Operating profit(a)	£3.32m	£3.02m	9.9
Operating Profit	£2.35m	£2.58m	(8.9)
Profit before tax(b)	£2.41m	£2.28m	5.7
Profit before tax	£1.45m	£1.89m	(23.3)
Basic EPS(c)	7.30p	6.38p	14.4
Dividend per share	5.70p	5.70p	-
Net cash(d)	£3.45m	£2.01m	71.6

(a) Pre-exceptional items, share based payments and amortisation on a continuing basis

(b) Pre-exceptional items, on a continuing basis

(c) Profit after tax pre-exceptional items, on a continuing basis

(d) Cash at bank after deduction of bank loans

Exceptional Items

	FY2017 '£000	FY2016 '£000
US legal costs	388	297
Office rationalisation	495	-
VFS disposal	(102)	382
Other items	83	282
Total	864	961

Other items in exceptional costs have reduced year on year by £199k. Current year costs are predominately related to US litigation (as referred to in the Chairman's Statement) and the closure of the Bolton warehouse and distribution centre where activities were centralised to our head office.  This rationalisation covers termination of lease, staff exit and stock rationalisation costs.  The US litigation matter was concluded successfully and no future costs will arise in respect of this.

Dividend

The Board is proposing to maintain the final dividend at 4.00 pence which, if approved by shareholders, would give a total dividend for the year of 5.70 pence (2016: 5.70 pence).

On a profit after tax basis, dividend cover has remained at c 0.66 in 2017.  We expect the cover to improve as a result of our anticipated growth in profits and a substantial reduction in exceptional costs in FY2018.

Cash

Cash generation from operating activities remains strong and continues to grow through a combination of profit per device and robust working capital management.  The resulting net cash position improved in the year, after servicing the three year term loan that ceases in July 2017 and the mortgage on the head office freehold property.  Cash was principally used to service R&D investment, dividend payment and servicing of borrowings leaving an inflow of £0.9 million (2016: £0.2 million pre disposal proceeds from discontinued operations).

At the year end, the Group had borrowings of £1.10 million (2016: £1.59 million), and net cash of £3.45 million (2016: £2.01 million).

Divisional Performance

Currently the Smart Zones Division principally consists of the core beer monitoring business (including the US) and gaming machine monitoring.

Smart Zones

The Smart Zones Division has performed satisfactorily, particularly against what is a challenging pub market landscape that resulted in a net estate reduction of c 600 sites (2016: c 630) to c 14,300 (2016: c 14,900) in the UK and Europe.

	FY2017	FY2016	Change %
Turnover	£11.93m	£12.05m	(1.0)
Operating profit(a)	£4.82m	£4.57m	5.5
Total connected devices	230,489	236,272	(2.4)
New Installation sales	380	455	(16.5)
YE Net premises	c14,500	c15,100	(4.0)
iDraught penetration(b)	24.7%	22.5%

(a) Pre-exceptional items, share based payments and amortisation

(b) UK and Europe only

Smart Zones recurring revenues remain robust at 89% with recurring revenue per device having increased 1.9% being a reflection of the strength of revenue stream across the mix of customer base.

Average adjusted operating profit per device has increased c 3.3% benefitting from new unit sales and continuing overhead rationalisation offsetting the effect of pub disposals. 

Smart Machines

The Smart Machines Division currently consists of the telemetry and contactless payment monitoring business predominantly in the Vending sector.

Smart Machines has made progress in the year with good growth in total number of connected devices as shown in the table below with new contactless connections being 282 ahead of FY2016.  Growth during the year is also reflected in the device estate figures.

	FY2017	FY2016	Change %
Turnover	£2.33m	£2.18m	6.9
Operating profit (a)	£0.89m	£0.75m	19.1
New Telemetry connections	4,275	4,736	(9.7)
New Contactless connections	817	535	52.7
YE Net  estate	c20,000	c16,000	25.0

(a) Pre-exceptional items, share based payments and amortisation on a continuing basis.

Recurring revenues, driven by ongoing growth in the number of connected devices, grew to 64% of turnover (2016: c 55%).

Average recurring revenue per device has decreased 9.5% principally due to lower pricing associated with a significant roll out in one of our largest customers. Importantly, this same growth in connected devices is however providing scale and driving improved profitability per device.

Average adjusted operating profit per device has increased 33.6% due to increased sales activity set against a relatively fixed overhead

Technology

During FY 2017 Technology and Stores were a mainstream cost centre servicing both divisions of the Group (historically this has been absorbed throughout the Divisions).

Taxation

The Group has continued to utilise available tax losses during the year resulting in no tax being paid (2016: £nil). The Group will continue to utilise the available tax losses carried forward into FY2018. In the financial year under review, the tax line includes a deferred tax charge of £0.42 million (2016: £0.55 million) recognising the impact of the tax losses available and being utilised.

Earnings per share

Earnings per share has been impacted by the recognition of the deferred tax assets provision referred to above, realising the losses carried by the Group and the unwinding of that provision in FY2014.

The underlying profit before tax from continued operations pre-exceptional items earnings per share is 8.83 pence for FY2017 compared to 8.41 pence for FY2016. Underlying fully diluted earnings per share (before exceptional costs), which takes account of all outstanding share options, amounted to 8.79 pence in FY2017 which compares to 8.37 pence for FY2016.

Basic EPS was 3.77 pence compared to 4.76 pence in 2016.

Balance sheet and cash flow

The Group balance sheet remains strong.  The Group generated operating cash flow of £3.93 million (2016: £3.42 million) an increase of 14.9%, with positive working capital movement. Despite the headwinds in Smart Zones' core beer market and losses in the US, albeit reduced, the division had a healthy operational cash generation of c £5.5 million (2016: £5.1 million).

The cash generated in FY2017 was utilised to invest in the Group's technology through research and development, to service borrowings and to fund dividends.  At the year end, the Group had borrowings of £1.10 million (2016: £1.59 million), and net cash of £ 3.45 million (2016: £2.01 million).

The balance sheet and cash generating capacity of Vianet provides a solid platform to pursue the significant growth opportunities that the Board has identified in order to generate increased shareholder value.

 

Consolidated Statement of Comprehensive Income

for the year ended 31 March 2017

		Before Exceptional 2017 £000	Exceptional 2017 £000	Total 2017 £000	Total 2016 £000
	Note
Continuing operations
Revenue		14,263	-	14,263	14,290
Cost of sales		(4,327)	-	(4,327)	(4,279)
Gross profit		9,936	-	9,936	10,011
Administration and other operating expenses		(6,621)	(964)	(7,585)	(7,433)
Operating profit pre amortisation and share based payments from continuing operations		3,315	(964)	2,351	2,578
Intangible asset amortisation		(693)	-	(693)	(661)
Share based payments		(206)	-	(206)	(28)
Operating profit post amortisation and share based payments		2,416	(964)	1,452	1,889
Net finance costs		(5)	-	(5)	(44)
Profit from continuing operations before tax		2,411	(964)	1,447	1,845
Income tax expense	1	(417)	-	(417)	(553)
Profit from continuing operations		1,994	(964)	1,030	1,292
Profit/(loss) from discontinued operations:		-	100	100	(275)
Profit and other comprehensive income for the year		1,994	(864)	1,130	1,017
Earnings per share
Total
- Basic	8			4.14p	3.74p
- Diluted	8			4.12p	3.72p
Continuing Operations
- Basic	8			3.77p	4.76p
- Diluted	8			3.76p	4.73p
Discontinued Operations
- Basic	8			0.37p	(1.02)p
- Diluted	8			0.36p	(1.01)p

 

Consolidated Balance Sheet

at 31 March 2017

				2017 £000	2016 £000
Assets
Non-current assets
Goodwill				15,503	15,503
Other intangible assets				2,000	1,982
Property, plant and equipment				3,069	3,143
Total non-current assets				20,572	20,628
Current assets
Inventories				1,308	1,810
Trade and other receivables				2,708	3,564
Tax asset				460	482
Cash and cash equivalents				4,549	3,605
				9,025	9,461
Total assets				29,597	30,089
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables				3,728	4,016
Borrowings				325	489
Provisions				62	-
				4,115	4,505
Non-current liabilities
Borrowings				778	1,103
Provisions				48	-
Deferred tax				395	-
				1,221	1,103
Equity attributable to owners of the parent
Share capital				2,843	2,843
Share premium account				11,287	11,287
Share based payment reserve				418	217
Own shares				(1,221)	(1,221)
Merger reserve				310	310
Retained profit				10,624	11,045
Total equity				24,261	24,481
Total equity and liabilities				29,597	30,089

 

Consolidated Statement of Changes in Equity

for the year ended 31 March 2016

	Share capital	Share premium account	Own shares	Share based payment reserve	Merger reserve	Retained profit	Total
At 1 April 2015	2,831	11,198	(1,381)	209	310	11,601	24,768
Dividends	-	-	-	-	-	(1,549)	(1,549)
Issue of shares	12	89	-	-	-	-	101
Share based payments	-	-	-	43	-	-	43
Share option forfeitures	-	-	-	(35)	-	35	-
Exercise of options	-	-	160	-	-	(59)	101
Transactions with owners	12	89	160	8	-	(1,573)	(1,304)
Profit and total comprehensive income for the year	-	-	-	-	-	1,017	1,017
Total comprehensive income less owners transactions	12	89	160	8	-	(556)	(287)
At 31 March 2016	2,843	11,287	(1,221)	217	310	11,045	24,481
At 1 April 2016	2,843	11,287	(1,221)	217	310	11,045	24,481
Dividends	-	-	-	-	-	(1,557)	(1,557)
Share based payments	-	-	-	207	-	-	207
Share option forfeitures	-	-	-	(6)	-	6	-
Transactions with owners	-	-	-	201	-	(1,551)	(1,350)
Profit and total comprehensive income for the year	-	-	-	-	-	1,130	1,130
Total comprehensive income less owners transactions	-	-	-	201	-	(421)	(220)
At 31 March 2017	2,843	11,287	(1,221)	418	310	10,624	24,261

 

Consolidated Cash Flow Statement

for the year ended 31 March 2017

	Note	2017 £000	2016 £000
Cash flows from operating activities
Profit for the year		1,130	1,017
Adjustments for
Net interest payable		5	44
Income tax expense		417	553
Amortisation of intangible assets		693	818
Depreciation		348	449
Payment of deferred consideration		-	(22)
(Profit)/Loss on sale of property, plant and equipment and businesses		(50)	(207)
Share based payments		207	43
Operating cash flows before changes in working capital and provisions		2,750	2,695
Change in inventories		502	(34)
Change in receivables		857	(338)
Change in payables		(289)	1,099
Change in provisions		110	-
		1,180	727
Cash generated from operations		3,930	3,422
Net cash generated from operating activities		3,930	3,422
Cash flows from investing activities
Proceeds on disposal of subsidiary division		100	3,400
Cash disposed with subsidiary		-	(90)
Purchases of property, plant and equipment		(325)	(383)
Purchases of intangible assets		(711)	(855)
Net cash used in investing activities		(936)	2,072
Cash flows from financing activities
Net interest payable		(5)	(44)
Issue of share capital		-	101
Share options exercised		-	100
Repayments of borrowings		(488)	(486)
Dividends paid	2	(1,557)	(1,549)
Net cash used in financing activities		(2,050)	(1,878)
Net increase/(decrease) in cash and cash equivalents		944	3,616
Cash and cash equivalents at beginning of period		3,605	(11)
Cash and cash equivalents at end of period		4,549	3,605

 

Notes to the financial statements

1. Taxation

Analysis of charge in period

	2017 £000	2016 £000
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	427	553
- Amendment re-recognition of losses	(10)	-
Income tax charge	417	553

Reconciliation of effective tax rate

The tax for the 2017 period is higher (2016 was higher) than the standard rate of corporation tax in the UK (2016: 20% and 2015: 20%). The differences are explained below:

	2017 £000	2016 £000
Profit before taxation - Continuing and discontinuing operations	1,547	1,570
Profit before taxation multiplied by rate of corporation tax in the UK of 20% (2016:20%)	309	314
Effects of:
Other expenses not deductible for tax purposes	25	(38)
Amortisation of intangibles	125	120
Movement on losses	266	440
Adjustments for prior years	(10)	-
Research and development	(298)	(283)
Total tax charge	417	553

2. Ordinary dividends

	2017 £000	2016 £000
Final dividend for the year ended 31 March 2016 of 4.0p (year ended 31 March 2015: 4.0p)	1,092	1,087
Interim dividend paid in respect of the year of 1.70p (2015: 1.70p)	465	462
Amounts recognised as distributions to equity holders	1,557	1,549

In addition, the directors are proposing a final dividend in respect of the year ended 31 March 2017 of 4.0p per share. If approved by shareholders, it will be paid on 28 July 2017 to shareholders who are on the register of members on 17 June 2017. Total dividend payable 5.70p (2016: 5.70p).

3. Earnings per share

Earnings per share has been impacted by the reduction in deferred tax asset. After adjustment for the lower tax charge, the overall basic earnings per share for the year ended 31 March 2017 before exceptional costs reduced to 7.30 pence compared to 7.28 pence at March 2016.

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders (£1,130k) by the weighted average number of ordinary shares outstanding during the period.

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

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

	2017			2016
	Earnings £000	Basic earnings per share	Diluted earnings per share	Earnings £000	Basic earnings per share	Diluted earnings per share
Post-tax profit attributable to equity shareholders	1,130	4.14p	4.12p	1,017	3.74p	3.72p
Pre-tax profit attributable to equity shareholders	1,547	5.67p	5.64p	1,570	5.78p	5.75p
Of which is attributable to continuing operations	1,447	5.30p	5.28p	1,845	6.79p	6.76p
Pre-tax, pre-exceptional profit attributable to equity shareholders	2,411	8.83p	8.79p	2,284	8.41p	8.36p
Post-tax, pre-exceptional profit attributable to equity shareholders	1,994	7.30p	7.27p	1,978	7.28p	7.24p

	2017 Number	2016 Number
Weighted average number of ordinary shares	27,302,694	27,168,095
Dilutive effect of share options	114,063	141,814
Diluted weighted average number of ordinary shares	27,416,757	27,309,090

4. Exceptional items

	2017 £000	2016 £000
US litigation	388	297
Bolton rationalisation	495	-
Corporate restructuring and transitional costs	83	282
Disposal of VFS subsidiary	(102)	382
	864	961

Corporate restructuring and transitional costs have reduced year on year, the primary background being the transition of people and management to ensure we have the succession and calibre of people on board to deliver the strategic aims and aspirations of the Group.

Disposal of VFS subsidiary at 31 January 2016 relates to all costs incurred in disposing of the subsidiary offset by the proceeds from the sale ie loss on sale.

For details behind the US litigation costs, see the Chairman's statement.

5. Basis of preparation

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

It has been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards (IFRS) adopted for use in the European Union, including IFRIC interpretations issued by the International Accounting Standards Board, and in accordance with the AIM rules and is not therefore in full compliance with IFRS. The principal accounting policies of the Group have remained unchanged from those set out in the Group's 2016 annual report. The financial statements have been prepared under the historical cost convention with the exception of certain items which are required to be measured at fair value

The financial information for the period ended 31 March 2017 was approved by the Board on 5 June 2017 and has been extracted from the Group's financial statements upon which the auditor's opinion is unmodified and does not include a statement under section 498(2) or (3) of the Companies Act 2006.   The statutory accounts for the year ended 31 March 2017 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on our website vianetplc.com and on request by contacting the Company Secretary at the Company's Registered Office.  In due course, they will be delivered to the Registrar of Companies.

The statutory accounts for the year ended 31 March 2016 have been delivered to the Registrar of Companies.

6. Annual General Meeting

The Annual General Meeting will be held on 29 June 2017 at 11.30am, at the offices of Grant Thornton UK LLP, No 1 Whitehall Riverside, Leeds, LS1 4BN.

 

END

 

 

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