Final Results

RNS Number : 7205O

Vianet Group PLC

14 June 2022

 

14 June 2022

Vianet Group plc

("Vianet", "Company" or "the Group")

Final Results

Momentum gathers towards a return to pre-pandemic trading levels around mid-year FY2023

Vianet Group plc (AIM: VNET), the international provider of actionable data and business insight through devices connected to its Internet of Things platform ("IOT"), is pleased to announce its final results for the year ended 31 March 2022.

Financial highlights

· Revenue increased 58% to £13.22m (FY2021: £8.37m) being 81.2% of pre-pandemic levels .

· Recurring revenues remained strong at 88% (FY2021: 89%).

· Gross margin increased slightly to c. 65% (FY2021: c. 60%).

· Adjusted operating profit, pre-exceptional costs, amortisation and share based payments, of £2.36m (FY2021: £0.69m loss).

· Profit before taxation was a loss of £0.17m (FY2021: £2.82m loss)

· Basic earnings per share was 0.65p positive (FY2021: 6.75p negative).

· At the year-end, net borrowings were £3.00m (2021: £2.66m) and the Company had a gross cash balance of £1.58m (FY2021: £1.89m).

· The Board considers it would not be appropriate to pay a final dividend as it is prudent to conserve cash until the trading has returned to pre-pandemic performance levels.

Divisional highlights

· Smart Machines adjusted operating profit of £1.82m (FY2021: £1.1m), representing a 19% increase on pre-pandemic FY2020 of £1.53m.

· Smart Machines added 12,895 new connected devices (FY2021: 7, 215 ), 6.9% ahead of pre-pandemic levels despite the backdrop of the slow recovery from C19 restrictions.

· Post period end our SmartContact Pro all-in-one contactless and telemetry wins vending industry award as best payment system and launch of SmartVend in H1 2023 strengthens Smart Machines offering.

· Smart Zones revenue increase to £7.83m (FY2021: £3.95m), as the hospitality sector recovery gained momentum in Q2 FY2022.

· Smart Zones net installation based held at 10,100 as ongoing investment and a pipeline of new installations offset a slowing rate of hospitality sector closures.

All references to alternative performance measures are explained and reconciled as noted in the Financial Review section below.

Commenting, James Dickson, Chairman of Vianet Group plc, said:

"Despite the unprecedented challenges of the COVID-19 pandemic, particularly on the hospitality and leisure industry since early 2020, I am pleased to report that the proactive measures we implemented together with the dedication and hard work of our staff have wielded excellent results.

"Our focus over the last year has been on prudent cash management, further strengthening our relations with customers and strategic investment in sales and technology to support the Board's growth initiatives. These efforts now place the Company on a good footing as we put the pandemic behind us.

"The business has recovered strongly, with revenue increasing to over 81% of pre-pandemic levels. The initiatives to ensure that relations with customers are maintained has also proven fruitful, with new connections and recurring revenues remaining high over the period. Although pressures regarding global semi-conductor supply chains and uncertainty from the conflict in Ukraine remain, we are confident that our sales will continue to grow and that we will return to pre-pandemic levels around the mid-year FY2023.

"We are delighted that, in our Smart Machines division, we reported a 6.9% increase of new connected devices compared to pre-pandemic levels. With the growing trend towards non-cash transactions and following our investment into the division, we have seen Smart Machines increasingly converting opportunities available to it. Having secured two significant recent contract wins and with the launch of SmartVend solution expected in H1 2023, we are confident that the division will continue to grow strongly. We continue to invest in growth and innovation and were delighted that against international competition our SmartContact Pro all-in-one contactless and telemetry solution won best payment system at last week's vending industry awards ceremony where we also won best supplier website.

"Our Smart Zones division has emerged from the pandemic with a strong H2 rebound, delivering strong revenues of £7.83m. We have been encouraged by the slowing of pub closures in the UK and we now feel we have the base from which to grow our sites, notably across the UK and Europe. The pandemic has brought attention to existing and prospective customers on the inherent value of data to guide decision-making and enhance profitability and we feel that there remains a vast opportunity for Vianet to capture market share and grow revenues accordingly.

"With both divisions capitalising on new vertical opportunities and the Group on track to continue strong earnings growth, the Board is confident that Vianet will return to pre-pandemic levels of trading in FY2023 and double-digit growth in FY2024. While the pandemic has thrown its challenges our way, we feel that we have weathered the storm well and that we are now in a position to push forward and make up for lost time.

"We look forward to updating the market on our further progress in due course."

- Ends -

An analyst briefing given by James Dickson, Chairman and Interim Chief Executive Officer, and Mark Foster, Chief Financial Officer will be held today at 09.30hrs   at Cenkos,   6-8 Tokenhouse Yard, London EC2R 7AS or online   via Microsoft Teams . Please contact   [e-mail]   for details.

Enquiries:

Vianet Group plc
James Dickson, Chairman & Interim 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 Henry Wilkinson  [e-mail]	Tel: [phone]   Tel: [phone] www.yellowjerseypr.com

Chairman's Statement

Introduction

In last year's Annual Report and our H1 2022 report, I provided a comprehensive update on our proactive response to the global Coronavirus ("C19") pandemic. This year, the emphasis has shifted to the strength of our recovery and the clear sales and commercial momentum we have going into FY2023, which I expect will return us to pre-pandemic financial performance levels towards the end of H1 2023.

Encouragingly, strong H2 momentum resulted in FY2022 sales rebounding to £13.22m, which equates to 80% of FY2020 pre-pandemic levels. Adjusted operating profit of £2.36m compared to FY2021 loss of £0.7m, almost 60% of the pre-pandemic FY2020 performance. Whilst we note the uncertainty in global supply chains, the strong trading momentum that we have carried into H1 2023 gives us confidence that we have overcome the issues caused by the pandemic and, with the Group now returning to its pre-pandemic performance levels, we expect to deliver strong growth in both FY2023 and FY2024.

It has been a challenging time for any business with a reliance on the hospitality and leisure sectors or exposure to the pace of city centre office re-openings. This has now been compounded by the global semi-conductor supply chain pressures and the conflict in Ukraine. Notwithstanding these realities, we are confident that our sales will continue to grow, and the H1 2023 momentum will result in a return to pre-pandemic performance around the mid-year.

As a result of our proactive response to the pandemic, together with the investment made in technology and commercial resource, I am very pleased to report that the Group has delivered resilient results and is in a strong position to capitalise on the growing number of excellent growth opportunities.

Performance

Given the C19 impact, there is little merit in drawing too much of a comparison with FY2021 performance. While comparative figures are presented for reporting purposes alongside FY2020 for context, my comments will be restricted to the FY2022 performance.

The focus has been on cash management, customer engagement, and continued investment in sales and technology as we migrate towards a fully cloud-native environment to support growth. This approach allows us to build momentum and accelerate our Smart Machines growth plans whilst developing the Smart Zones contribution and commercialising data opportunities in new verticals. Whilst the gradual re-opening of the hospitality sector from Q2 2022 and the prolonged delay in return to more standard ways of work in city centre offices has held back performance; Group revenues rebounded to 81.2% of pre-pandemic levels at £13.22m (FY2021: £8.37m, FY2020: £16.28m).

Against a backdrop of delayed hospitality re-opening in H1 2022, and H2 2022 being impacted by the additional stock premium costs currently incurred to source microchips and inflationary pressures, the Group delivered an adjusted operating profit of £2.36m (FY2021: £0.69m loss, FY2020: £4.03m profit) being almost 60% of pre-pandemic performance. 

The Group had a loss before taxation of £0.17m (FY2021: £2.82m loss, FY2020: £2.43m profit) which is a material step forward from FY2021, with basic EPS rising to 0.65p this year compared to a loss of 6.75p for FY2021.

Net exceptional cost was £0.12m (FY2021: £0.34m, FY2020: negligible), primarily related to corporate opportunity activity and staff rationalisation net of a contingent consideration release.

Basic earnings per share was 0.65p (FY2021: 6.75p negative, FY2020: 8.56p positive).

A £3.5m Coronavirus Business Interruption Loan ("CBIL") was taken on 26 May 2020 to provide a buffer against a prolonged recovery period and facilitate investment in our commercial sales team and technology roadmap. We ended the year with net borrowings of £3.00m (FY2021: £2.66m, FY2020: £0.95m) and a gross cash balance of £1.58m (FY2021: £1.89m, FY2020: £1.73m).

Dividend

We are encouraged by the Group's FY2022 results and anticipate significantly improved trading in the coming months, but there remain uncertainties around semi-conductor supply, inflationary pressures and any prolonged impact of the Ukrainian War. The Group has completed repayment of the Vendman acquisition loan; however, we will continue with repayment of the CBIL facility and investment in the exciting growth opportunities.

Given this background, the Board considers it prudent to delay reinstating a dividend until we have returned to pre-pandemic performance levels and have a clear line of sight on returning to a more normal economic and supply chain backdrop.

The Board recognises this is a significant decision and that dividends are an important part of total shareholder returns. Subject to global microchip supply chain pressures abating, it fully intends to be in a position to resume payment of dividends in the next 12-18 months.

Board Changes and Staff

The Board's composition and effectiveness are continually evaluated to ensure the optimum balance of experience and independence to support the business and our growth ambitions.

Given the requirement to navigate the pandemic, re-energise the organisation, drive the recovery, and mitigate the impact of supply chain pressures, I have remained in the post as Interim CEO, having previously held the CEO role.

There has been the opportunity to make certain changes to the operational structure of the Group, and I am pleased to report that the management team continues to be energised, excited by the opportunities and working well.

Having served on the Board for nine years, non-executive director and chair of our audit committee, Chris Williams intends to retire at our next AGM in July, however he will remain until a suitable successor is found, and a further announcement will be made at that stage. I really appreciate the guidance, honest counsel, and diligent support that Chris has provided to the Board over the years, and we wish him well in retirement.

In the face of significant challenges over the past couple of years, the performance of our people has been tremendous, engaging with their usual enthusiasm, commitment, and openness. This underpins the Group's excellent reputation with customers, suppliers, and other stakeholders.

The recent annual engagement survey demonstrated further year-on-year progress in retaining our upper quartile position in the Best Companies evaluation and our position in Technology's 50 Best Companies to work for.

I am extremely proud and humbled by how our executive team and employees have stepped up during the last two years, and I thank them and my Board colleagues for their ongoing commitment to taking the Group forward. 

Conclusion and Outlook

We have had a robust recovery year, emerging strongly from the pandemic with a clear line of sight towards achieving pre-pandemic performance levels in FY2023, with excellent momentum and revenue growth opportunities across our business areas.

The past two years provided a unique opportunity to regroup, reorganise, and re-energise whilst progressing our product development plans and making significant investments in our marketing, sales, commercial, and customer experience teams. Notably, this was also an opportunity to demonstrate and underline the value of the Group's solutions and deepen stakeholder relationships, resulting in significant sales opportunities.

We have emerged out of C19 with a stronger platform, which will allow the Group to achieve pre-pandemic levels of performance early in H2 2023, with significant double-digit growth in FY2024.

The Group remains on track to resume strong earnings growth across the two divisions and new vertical opportunities. 

· Smart Machines already has the leading end-to-end product suite, which is being strengthened by new releases of our SmartVend solution. At the recent Vendies vending industry annual awards ceremony, Vianet won the awards for Best Supplier Website and for Best Payment System where our SmartContact Pro all-in-one contactless payment and telemetry solution prevailed over international competition. We have a high performing commercial team, long term contracts with major blue-chip customers, an established presence in the UK market, with a significant pipeline of opportunities for telemetry and contactless sales and data management in both the UK and Europe. The year saw a number of business gains, including 41 customers being onboarded and two significant contract wins, which underpin our growth plans.

· Smart Zones has a pipeline of new site installations in several leased and tenanted pub companies. Our investment in hardware and data science will enable further cost reductions, helping to drive the growth of our installation footprint and provide additional opportunities to develop revenue from data.

· Our investment in rapid prototyping has resulted in successful field trials and initial orders for our technology and services. We expect to see further growth prospects in sectors such as environmental, catering, forecourts and tank monitoring.

· Ongoing investment in cloud infrastructure and mobile technology will help develop existing revenues in Smart Zones and Smart Machines and provide the scalability, flexibility, and speed to support rapid growth in existing and potential new verticals.

· Our Smart Zones product roadmap and a developing technology partnership opportunity will bring new features and functionality which should generate increased customer interest and growth outside the UK leased and tenanted market.

· The Group has high levels of contracted recurring income and will continue to generate strong operating cash flow.

The Board is confident in the long-term growth strategy and that the Group is very well positioned to deliver earnings growth and expand its future strategic options.

In the meantime, the Board's absolute focus remains on sales growth and cash management, particularly with respect to stock premium costs, building on the results achieved to be in a strong position to take advantage of its exciting growth opportunities whilst maintaining the health, well-being and safety of our employees and customers.

James Dickson

Chairman

14 June 2022

Strategic Report

There is nothing like a crisis to create a shared sense of purpose and provide an opportunity to demonstrate leadership. The last two years have galvanised our people and business and improved our customer engagement.  From the very outset of C19 and the challenges of semi-conductor supply and stock premium costs, we have managed cash to ensure business continuity and enable ongoing investment, which has positioned the Group strongly to build on the solid results of FY2022. 

Our core strategy centres on IoT and the collection and processing of customers' asset data to deliver actionable analytics and insights that drive improved operating performance for businesses, machine owners, operators, and brand owners.

By connecting and analysing c. 215,000 connected assets today, Vianet can deliver insights and analytics that support better decision-making, enabling customers to improve their key asset utilisation and performance metrics.

Combined with a leading-edge contactless payment capability to support sales growth in unattended retail machines, Vianet continues to be well placed to strengthen its position in this rapidly developing area. 

While our focus is predominantly on delivering insight and analytics, both hardware and software remain critical components in enabling remote assets to be connected. Our IoT platform now supports much greater flexibility of device connection and data connectivity to the extent that it is possible to connect a range of business-critical third-party devices, and not just those we supply.

This is underpinned by our ability to collaborate with customers to identify compelling end-to-end solutions to address business opportunities. This combination of capabilities will enable us to drive sustained business growth over the coming years.

FY2022 has been challenging for many reasons, however, the Group has made excellent progress with a sustained investment in technology and sales and marketing capability. This has enabled us to execute key elements of our growth plan, including securing new and renewed contracts over several years and successfully launching our market data insights. Our strengthened customer relationships have helped secure new business in existing and new verticals such as retail, fuel forecourts and industrial kitchens, using our contactless payment and telemetry solutions.

Smart Machines

Conversion of opportunities is gathering pace following a step-change increase in sales, commercial and marketing capability in FY2021, which saw a c. 78% growth in connected device sales in FY2022.

The investments made and the contract wins will further accelerate the rollout of our contactless payment solution driving increased machine utilisation and sales for customers, who benefit from the reduced cost of cash handling, improved cash flow and assured payment.

The trend toward non-cash transactions is growing significantly, with contactless payments giving a fast, easy and secure transaction in a world where fewer people are carrying cash. The impact of C19 and our 'dirty cash' campaign gave further impetus to this trend. 

We are encouraged by the impact of our investment in the sales team, the results achieved, and the opportunities being progressed both in this space and in new verticals using contactless as the lead generator. Our route to market and distribution opportunities are enhanced by establishing a solid network and footprint with distributors and machine suppliers.

Smart Zones

It is well documented that through C19, we were very proactive in supporting our hospitality sector customers severely impacted by prolonged closures and restrictions. Enhanced insights and new reporting tools helped them make better-informed decisions, targeting support, optimising revenues, and minimising costs.

We are seeing an increased level of interest in new analytics and insights, aided by a new reporting suite to support management decision-making. We are exploring an exciting range of new services specifically designed to help clients during this unprecedented crisis.

Operating Review

Smart Zones

The Smart Zones division gathered momentum, emerging from C19 at a better than anticipated pace going into Q2 of FY2022. This resulted in revenues of c. £7.83m (FY2021: £3.95m, FY2020: £11.06m) being 70.8% of pre-pandemic performance and delivering a material step forward in profit performance.

Sales improved to 252 (FY2021: 61, FY2020: 121) new site installations, double that of the pre-pandemic year. Technology upgrades to our 4th Generation IoT hubs were completed in 1,053 pubs (FY2021: 137, FY2020: 2,519), with a handful still to be completed in FY2023. 

UK pub closures have been difficult to assess due to the pandemic, with prolonged temporary closures in city centres, which may only re-open with a full return to office-based working. The average community-based leased and tenanted pubs have fared better. 

Despite that, it is encouraging that the rate of pub closures slowed to 535 (FY2021: 723), which, with 252 (FY2021: 61) new installations, gives a net reduction of 357 sites (FY2021: 662 reductions, FY2020: 838 reductions). This underpins the belief that we are now seeing a base to build on our current estate of c. 10,100 sites (FY2021: 10,800, FY2020: c. 11,700) in the UK and Europe. There are a further c. 21 installations in the USA, giving a total active base of c. 10,121. 

The disruption to the hospitality sector during FY2021 was a significant challenge but provided opportunities for broader engagement with our customers and acceleration of our product roadmap. In addition to ongoing compliance information, our customers are increasingly seeking trading data to improve their decision-making, optimise revenues and minimise costs. There is also an increasing desire to embrace digital capability to enhance efficiency and enable more frictionless delivery from both back of house and front of house to consumers.

Our Smart Zones connected device base remains significant with c. 167,000 devices in the active estate. Evermore granular data from our 4^th Generation IoT hubs, together with our increasingly sophisticated reporting capability, delivered via our website and mobile applications, is resulting in growth in our insight and analytics sales. This is particularly relevant for the provision of retail data for Brewers. We are now contracted with the Oxford Partnership to deliver ground-breaking insight that will support consumer-level decision-making regarding beer brands, and we have seen increased traction for insight data that is expected to show further growth into FY2023.

The emergence from C19 will see an increased focus on operational and retail performance to drive value from pubs, particularly for customers who are now owned by private equity. This plays to the strength of our operational analytics and retail insights capability and the positive C-Level exposure we have recently seen.

Vianet Americas revenues were c. £178,000 (FY2021: £130,000, FY2020: c. £400,000). The pandemic acutely impacted the USA cinema market, leading to the loss of our key customer AMC Theatres during H2 2022 as they could no longer afford to fund our services. This resulted in a £182,000 loss (FY2021: £200,000 loss, FY2020: breakeven).

Whilst we have addressed the cost base to mitigate the AMC loss, a recent strategic review has identified interesting options which will significantly enhance the customer benefits from our SmartDraught solution and provide direct access to a large proportion of national retail chains in the USA. 

In addition, we were already re-engineering our product to reduce costs and enhance the solution and are in active dialogue with two national chains that have re-engaged since the pandemic. 

The opportunity for the Company remains significant in the world's largest single operator market, and FY2023 will be a definitive year for Vianet Americas as we commit to establishing a US profit centre.

Overall, the Board remains confident that the Smart Zones division will return to pre-pandemic performance levels in FY2023 whilst also delivering growth from the UK managed pub sector, USA, and its data insight services.

Smart Machines 

Smart Machines performed well in the year, with revenue and profit ahead of pre-pandemic levels. The division made good progress but did not escape the impact of C19, with major coffee brands and machine manufacturers being slow to emerge, whilst many UK operators were held back by the slow pace of office re-openings.

We continue to see an increase in demand and usage of our contactless payment solution, with two significant contract wins. We anticipate a further acceleration of a growing business requirement and industry trend for telemetry and contactless payment solutions.

There is increasing recognition from vending operators that the use of cash by consumers continues to decline. The ability to manage operations efficiently and effectively is being materially inhibited by the pricing inflexibility of cash, with the continued reliance on frequent and costly machine visits.

Our leading end-to-end product portfolio, enhanced by our launch of SmartVend, which will be complete in H1 2023, means we are extremely well placed to help our customers unlock the value our technology provides, fuelling growth.

There is a significant opportunity to drive growth in the unattended retail market by delivering market-leading analytics and insight into premium coffee and unattended retail snack & can channels from new device connections and the rollout of contactless payment capability.

The Smart Machines division's turnover was £5.38m (FY2021: £4.42m, FY2020: £5.22m), 3% ahead of pre-pandemic performance resulting in an operating profit of £1.82m (FY2021: £1.1m, FY2020: £1.53m), being 19.0% ahead of pre-pandemic performance.

Smart Machines' proportion of recurring revenues returned to near pre pandemic levels at 77% (FY2021: 86%, FY2020: 80%), reflecting the revenue mix being more toward capex this year due to a higher proportion of hardware sales. It should be noted that Group FY2022 recurring revenues of 88% were positively impacted by Smart Zones' revenue being over 90% due to limited new sales during the various lockdowns.

Total new device connections grew to 12,895 (FY2021: 7,215, FY2020: 12,059), 6.9% ahead of pre-pandemic performance. This was despite a backdrop of home working slowing the recovery of vending in city-centre offices, vending brands and manufacturing sectors being slow to recover, and many customers taking the opportunity to rationalise their estates. We were pleased with new unit sales, which increased our overall device installations to just over c. 48,000 (FY2021: c. 38,000, FY2020: c. 38,000), giving a c. 26% estate growth in the year.

The market opportunity for the Group is significant even when limited to the immediately addressable market of over 300,000 vending machines in the UK. It is estimated that the addressable market in mainland Europe is nearer 3 million devices, and there are 15 million machines worldwide, of which only 28% have any form of connectivity. As technology adoption evolves, contactless transaction limits are increased (now at £100), and the benefits of insight and analytics in the vending sector become more widely recognised, it is anticipated that more of the addressable market will embrace the corresponding opportunity.

Our contactless payment solution is supported by leading industry partners Elavon, Worldpay and NMI and has been enhanced by establishing our PCI Master Merchant service. This allows us to speed up the onboarding of customers for payment capability and provide a more cost-effective reconciliation and payment service to our customers.

Contactless payment remains a desirable solution in a market where traditional cash-only payments have long been an inhibitor of vending-related usage, consumption, and customer experience. We believe the evolution and growth of contactless payment solutions, together with the insight of our telemetry firmware, will materially change this dynamic and attract more consumers to the vending vertical.

In summary, the growth prospects for our Smart Machines business are extremely positive, and there is a clear line of sight toward doubling the business size by the end of FY2024.

R&D Investment

Through FY2022, the Group continued to invest in developing and delivering its product roadmap and operational capabilities. This has ranged from the SmartVend product roadmap and customer experience enhancements to revenue-generating analytics and insights from new platforms. This allows us to leverage new revenue streams and provide the ability to operate a cloud based self-service model.

Simultaneously, we began the gradual migration from legacy systems and software to a cloud-based environment which was completed in May 2022. Further product enhancement, a launch of SmartVend with the final phase being delivered in H1 FY2023, and the plan for a cloud-native environment will further boost the services we offer to both existing customers in existing verticals and new customers in new verticals.

The Board believes this further investment in our core data management capability and IoT technology will enhance the Group's ability to improve the quality of the existing recurring revenue streams and generate substantial new growth.

Looking Forward

C19 has had a significant impact on our stakeholders and economies internationally. In the year, the supply of semi-conductor and stock premium costs added to that impact and will still be present during FY2023.

We have acted during the period to ensure we are well placed to manage these challenges and deliver growth in our chosen markets. 

The business is strongly placed to benefit from its proven track record of converting data gathered from its IoT devices into analytics and insight that drive better decision-making for customers, improving asset utilisation and increasing profitability.

Smart Machines will continue to leverage its strong portfolio of products and services to existing customers across Europe, with significant investment in commercial resources adding further momentum.

Our cloud and mobile capability will continue to transform the customer experience and facilitate rapidly scalable growth in existing and new vertical markets.

Our contactless payment solution and our PCI Master Merchant scheme, combined with the declining use of cash by consumers and rapid technology adoption by brand owners and machine operators, positions this division for long-term solid year-on-year growth.

In FY2023, the Smart Zones division will deliver pre-pandemic performance, whilst unlocking further opportunities for stock management, enhanced analytics, and insight, which are expected to result in FY2024 growth across all UK pub sectors and the USA. Private Equity pub company ownership is expected to drive greater focus on operating and retail performance, where we are well placed to deliver value for customers. 

Whilst we cannot escape the impact of stock premium costs and inflationary pressures, we have an exciting sales pipeline and growth opportunities that will result in top-line recurring revenue growth for the foreseeable future.

Finally, our high-calibre, energised team, robust strategy, and strong earnings visibility provides a natural platform for growth as we expand our IoT capability and deliver data and insight applications that help our customers make better decisions about their assets.

James Dickson

Chairman

15 June 2021

 

Financial Review

Group operating profit, pre-exceptional costs, amortisation and share based payments was £2.36m (FY2021: £0.69m loss, FY2020: £4.03m profit), being almost 60% of pre-pandemic performance.

Despite some headwinds from the tail end of support terms for customers emerging from the pandemic and stock premium costs, solid management delivered robust gross margins at c. 65% (FY2021: 60%, FY2020: 68%).

As is required, the Board has considered "Going Concern" and concluded we have sufficient cash and reserves to get through the 12 months post the signing date of the statutory accounts with associated renewed bank facilities. Going Concern is covered in more detail in the Report of the Directors.

In this transitional year recovering from the impact of C19, operating profit per unit has returned to a profitable level of £10.99 per device being 61% of the pre-pandemic FY2020 of £17.96.

 This KPI 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.

Turnover

Turnover recovered well despite the tail end of supportive terms to customers, and brands and manufacturers still being impacted in the Smart Machines vertical by C19. Turnover significantly improved to £13.22m (2021: £8.37m, 2020: £16.28m) being c. 81% of pre-pandemic levels and demonstrating a healthy recovery in both operating verticals we currently serve.

Recurring Revenue

Group contracted recurring revenue base remains very robust and has been strengthened by several new 3-5 year contracts both from new customers and contract renewals. 

Recurring revenue is measured by taking full year revenue from service packs, licenses, rentals and technology upgrades, as per Note 3.

Consolidated recurring revenue across the two divisions remained robust at 88% (2021: 89%, 2020: 92%), being sustained by both new and renewed contracts and the tail end of contracted variation to terms to support our customers through the pandemic principally in Smart Zones.

The average recurring revenue per connected device has recovered to £54.02 (2021: £35.35, 2020: £59.18), being 91.3% of pre-pandemic levels.

This KPI is measured by taking full year recurring revenue and dividing by the total number of connected devices at the year end.

Performance Summary

PBT was a small loss of £0.17m (2021: £2.82m loss, 2020: £2.43m profit), being a material improvement from that of FY2021. This is principally due to the impact of the tail end of pandemic customer support measures in Smart Zones and some impact on brands and manufacturers in Smart Machines, together with amortisation being c. £0.5m higher than in FY2021, without which would have delivered a small PBT profit. The table below shows the performance of the Group;

	FY2022	FY2021	FY2020	Change
Revenue	£13.22m	£8.37m	£16.28m	57.9%
Operating profit/(loss)(a)	£2.36m	(£0.69m)	£4.03m
(Loss)/profit before tax	(£0.17m)	(£2.82m)	£2.43m
Basic EPS	0.65p	(6.75)p	8.56p
Dividend per share	0p	0p	1.70p
Net debt (b)	£3.00m	£2.66m	£0.95m	(12.8%)

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

b)  Refer to note 26

Exceptional Items

	FY2022 '£000	FY2021 '£000	FY2020 '£000
People and office rationalisation	61	154	415
Network obsolescence costs	5	8	50
Contingent consideration release	(76)	-	(1,086)
Loan impairment	-	-	200
Corporate Activity	127	-	311
Other items	4	182	109
Total	121	343	(1)

Largely comprising of staff rationalisation costs and corporate activity reviews.

Dividend

As noted in the Chairman's statement, the Board has delayed the re-introduction of a dividend in the year (2021: nil, 2020: 1.70 pence).

Dividend cover has not been calculated due to the dividend being delayed and a negative PBT. (2021: nil 2020: circa 1.56).

Cash

Net cash generation pre-working capital movements was an inflow of £2.74m (2021: £0.34m outflow, 2020: £3.72m inflow), impacted by the strong recovery in results.

Working capital was closely managed, noting the impact of semi-conductor supply and stock premium costs together with inflationary pressures, which delivered a contained and managed working capital generation outflow of £0.34m (2021: £1.39m inflow, 2020: £0.49m inflow) and has meant that after working capital movements there was an operational cash generation of £2.40m (2021: £1.05m, 2020: £4.22m) which is c. 57% of pre-pandemic levels. 

The cash generated was principally used to service varied terms for our customers particularly in Smart Zones and the tail end emergence from C19, full year investment in our sales capability in Smart Machines and continued investment in R&D and servicing of borrowings. This resulted in an overall cash outflow of £1.63m (2021: £1.51m inflow, 2020: £0.42m outflow noting 2021 benefitted from a £3.5m CBIL).

At the year end, pre-mortgage, CBIL and previous acquisition loans, the Group had gross cash of £1.58 million (2021: £1.89m, 2020: £1.73m) and net debt of £3.00 million (2021: £2.66m, 2020: £0.95m). 

C19

The pressures of C19 largely receded into H2 of the year, notwithstanding the lower pub estate and impact on brands and manufacturing in Smart Machines and was to a degree replaced by the stock premium cost impacts in the year of over £250,000. The performance, however, in the year was a strong recovery. With the cash and facilities we have and the expected business plans we have developed over three indicative years, we believe we have solid cash runway forecasts well into 2023, which will underpin our business strategy and allow for our growth plans. 

The going concern section of the report of the Directors makes reference to C19 and some challenges already trailed, but based on known factors, the actions taken, and the facilities secured, we are well placed to build upon this year's results with momentum.

Divisional Performance

Currently, the Smart Zones division principally consists of the core beer monitoring and insight business services (including the US).

Smart Zones

	FY2022	FY2021	FY2020
Turnover	£7.83m	£3.95m	£11.06m
Operating profit(a)	£2.99m	£0.50m	£4.57m
Profit/(loss) before tax	£2.23m	(£0.02m)	£3.75m
Connected devices	166,804	173,580	186,554
New site installations	252	61	151
YE Net premises(b)	c. 10,122	c. 10,800	c. 11,900
iDraught penetration(b)	30.2%	29.5%	26.6%

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

b)  UK, USA and Europe

Turnover mix is shown below with recurring revenue being 96% (2021: 92%, 2020: 98%).

Recurring revenue per device has improved as we emerged from C19 to £44.89 (2021: £21.06, 2020: £58.00) which is 77.4% of pre-pandemic levels.

Average operating profitability per device is measured by taking full year operating profit before amortisation, share based payments and exceptional items and dividing by the total number of connected devices at the year end.

The recovery has seen average adjusted operating profit per device in the year return to £17.93 (2021: £2.90, 2020: £19.39) which is 92.5% of pre-pandemic performance reflective of the cost management during the year.

The division has recovered well and ahead of what was expected at the outset of the year demonstrating both the customer engagement for the services we provided and the resilience of the revenue model. The net estate at the year-end was circa 10,100 sites (UK & Europe) versus last year's c. 10,500 (excluding USA), the reduction stemming from disposals and C19 impact.

Despite this, we were able to maintain a small Smart Zones operating profit of £2.99m (2021: £0.50m, 2020: £4.57m), which was 65.4% of pre-pandemic performance.

Smart Machines

The Smart Machines division consists of telemetry insights and monitoring, and contactless payment predominantly in the unattended vending retail and coffee sector, as well as ERP and mobile connectivity services.  

	FY2022	FY2021	FY2020
Turnover	£5.38m	£4.42m	£5.22m
Operating profit (a)	£1.82m	£1.11m	£1.53m
Profit before tax (b)	£1.59m	£0.69m	£2.09m
New Telemetry connections	2,275	2,311	3,111
New Contactless connections	10,620	4,904	8,948
YE Net estate (c)	c. 48,179	c. 38,000	c. 38,000

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

b)  FY2022 includes £0.76m of deferred consideration release (2021: £nil, 2020: £1.09m)

c)  Excludes circa 180,000 Vendman connections. 

Turnover mix is shown in the chart below. Recurring revenues were 77% of turnover (2021: 86%, 2020: c. 80%) reflecting the revenue mix being more capex sales this year.

Despite some hangover from the pandemic, in particular on office city centre re-opening pace and brands and manufacturers taking some time to fully recover, new contactless connections in our Smart Machines division continued to be achieved with 10,620 new contactless devices compared to 4,904 last year, 116.6% growth. The estate figures reflect the net movement shown above which also includes some customers refining their estates in light of the pandemic.

Average recurring revenue per device was £85.55 (2021: £101.34, 2020: £64.40), lower than last year but above pre-pandemic levels. This is a direct result of revenue mix where we had more bias towards capex sales in the year alongside some estate refinement which would impact recurring revenue overall levels. As stated previously, this is an evolving growth story, with overall turnover and profit growth trends being driven by increased penetration of our contactless solutions and so these measures will flex each year.

Profit per device improved to £37.73 (2021: £29.34, 2020: £40.32), being 93.6% of pre-pandemic performance. While overall profit is ahead of FY2020, it must be noted that we invested heavily in a new sales commercial team in FY2021 and as such FY2022 has the full year impact of that which did not exist in FY2020, hence the overall profit per device being lower, noting also some of the larger contracts won are at keener prices which does impact overall profitability. 

Taxation

The Group has continued to utilise available tax losses during the year resulting in no tax being paid (2021, £nil, 2020: £nil). The Group will continue to utilise the available tax losses carried forward into FY2022, which will have been modestly enhanced due to the small PBT loss posted for the year. In the financial year under review, the tax line includes a deferred tax credit of £0.15m (2021, £0.87m, 2020: £0.03m) recognising the impact of the tax losses available and being utilised. See note 20 for further detail on the deferred tax asset.

Earnings per share

Basic EPS was 0.65 pence (2021: 6.75p loss, 2020: 8.56p positive). This reflects the step forward in results.

Balance sheet and cash flow

The Group balance sheet remains resilient despite the impact of the pandemic and addition of the CBIL facility.

The Group generated operating cash flow pre working capital of £2.74m (2021: £0.34m outflow, 2020 £3.72m) being 69.4% of pre-pandemic performance.

Post working capital outflow of £0.34m (2021: £1.39m inflow, 2020: £0.49m inflow) the Group generated operating cash flow of £2.40m (2021: £1.05m, 2020: £4.22m) being 56.9% of pre-pandemic performance. Working capital was impacted by the stock premium costs we have referred to.

The cash generated was used to continue the Group's technology plans and to service borrowings.

At the year-end, the Group had borrowings of £4.58m (2021: £4.57m, 2020: £1.33m), including the CBIL facility and overdraft, with net debt of £3.00m (2021: £2.66m, 2020: £0.95 m). The Vendman acquisition loan of £2.0m was fully paid off in April 2022 which has reduced our outgoings by £125,000 per quarter.

Our resilient balance sheet and capacity to generate cash provides the Company with a solid base to build on the platform of FY2022 results to pursue the significant growth opportunities that have been identified.

Business risk

The Board and senior management review business risk two to three times per year. Naturally, over the last two years, C19 and its impact pushed the ramifications of that to the top of the list and we covered a lot of that in last years' Report and Accounts and the pathway out of C19 has been well documented. The Directors had considered the areas of potential risk in assessing the Group's prospects. On the basis of their review, and having considered various factors such as market conditions, stock supply and premium costs, emergence from C19, financial plans and approved bank facilities, they believe that the business is of sound financial footing and has a forward looking sustainable operating future. In particular, they note that the business has achieved a good recovery financially in the year despite noting some of the hurdles they have faced, set against overall market confidence in liquidity and credit.

In addition to previous C19 comments, the Directors consider that material business risks are limited to:

· The ongoing impact of well publicised headwinds in the pub retailing market.

· The potential for a cyber security breach where data security is compromised resulting in unauthorised access to information which is sensitive and/or proprietary to Vianet or its customers. This threat is in common with most technology businesses, however both short term and long-term mitigation plans are in place. Payment Card Industry Data Security Standard (PCI DSS - Level 1) highest level of compliance has already been achieved to support the Group's contactless payment solutions and by May 2022 all on premise servers are in the cloud.

· Supply chain strains in the semi-conductor market and stock premium costs.

Key performance indicators

		Actual	Actual	Actual
	Target	2022	2021	2020
Percentage of revenue from recurring income streams1	80%	88%	89%	92%
Gross Margin2	70%	65%	61%	68%
Employee Turnover3	2%	3.5%	2.29%	2.1%

Notes to KPIs

¹ Percentage of revenue from recurring income streams = recurring income streams as a percentage of all income streams. Group trading companies aim to increase shareholder value through growth in revenue, linked to profitability (see Gross Margin below). Source data is taken from management information. The recurring contractual nature of the Company's income stream has led to continued improvement in performance versus target. The achievement of this target depends on the mix of new hardware sales versus on going recurring revenue.

² Gross Margin = Gross profit as a percentage of revenue. Group trading companies aim to generate sufficient profit for both distribution to shareholders and re-investment in the Company, as measured by Gross Margin.

³ Employee Turnover = Gross trading companies aim to be seen as a good, attractive employer with positive values and career prospects, measured against internal People and Development reports. In addition to normal employee turnover, the figure also includes employees leaving as a result of business rationalisation activity.

Mark Foster

Chief Financial Officer

14 June 2022

Consolidated Statement of Comprehensive Income for the year ended 31 March 2022

		Before Exceptional 2022 £000	Exceptional   2022 £000	Total  2022 £000	Before Exceptional   2021 £000	Exceptional    2021 £000	Total   2021 £000
	Note
Continuing operations
Revenue		13,215	-	13,215	8,369	-	8,369
Cost of sales		(4,654)	-	(4,654)	(3,307)	-	(3,307)
Gross profit		8,561	-	8,561	5,062	-	5,062
Administration and other operating expenses		(6,198)	(121)	(6,319)	(5,749)	(343)	(6,092)
Operating profit/(loss) pre amortisation and share based payments		2,363	(121)	2,242	(687)	(343)	(1,030)
Intangible asset amortisation		(2,195)	-	(2,195)	(1,669)	-	(1,669)
Share based payments		(83)	-	(83)	(73)	-	(73)
Total administrative expenses		(8,476)	(121)	(8,597)	(7,491)	(343)	(7,834)
Operating profit/(loss)		85	(121)	(36)	(2,429)	(343)	(2,772)
Net finance costs		(138)	-	(138)	(50)	-	(50)
Loss before tax		(53)	(121)	(174)	(2,479)	(343)	(2,822)
Income tax credit	1	361	-	361	867	-	867
Profit/(loss) and other comprehensive income for the year		308	(121)	187	(1,612)	(343)	(1,955)
Earnings per share
Total
- Basic	3			0.65p			(6.75)p
- Diluted	3			0.64p			(6.75)p

Consolidated Balance Sheet at 31 March 2022

			2022 £000	As restated 2021 £000	As restated 2020 £000
Assets
Non-current assets
Goodwill			17,856	17,856	17,856
Other intangible assets			5,976	6,184	5,505
Property, plant and equipment			3,262	3,391	3,795
Deferred tax asset			386	26	-
Total non-current assets			27,480	27,457	27,156
Current assets
Inventories			1,573	1,431	1,491
Trade and other receivables			2,690	2,758	3,544
Cash and cash equivalents			1,583	1,894	1,728
			5,846	6,083	6,763
Total assets			33,326	33,540	33,919
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables			2,983	3,257	2,710
Leases			25	53	64
Borrowings			2,310	1,265	2,011
			5,318	4,575	4,785
Non-current liabilities
Other payables			-	86	117
Leases			-	-	35
Borrowings			2,273	3,290	670
Deferred tax liability			-	-	841
			2,273	3,376	1,663
Equity attributable to owners of the parent
Share capital			2,880	2,895	2,895
Share premium account			11,711	11,709	11,709
Capital redemption reserve			15	-	-
Share based payment reserve			499	437	364
Merger reserve			310	310	310
Retained profit			10,320	10,238	12,193
Total equity			25,735	25,589	27,471
Total equity and liabilities			33,326	33,540	33,919

Consolidated Statement of Changes in Equity for the year ended 31 March 2022

	Share capital	Share premium account	Share based payment reserve	Merger reserve	Capital Redemption Reserve	Retained profit	Total
At 1 April 2020 (as previously stated)	2,895	11,709	364	310	-	12,403	27,681
Prior year restatement (note 7)	-	-	-	-	-	(210)	(210)
At 1 April 2020 (restated)	2,895	11,709	364	310	0	12,193	27,471
Share based payments	-	-	73	-	-	-	73
Transactions with owners	-	-	73	-	-	-	(73)
Loss and total comprehensive income for the year	-	-	-	-	-	(1,955)	(1,955)
Total comprehensive income less owners transactions	-	-	73	-	-	(1,955)	(1,882)
At 31 March 2021 (as restated)	2,895	11,709	437	310	-	10,238	25,589
At 1 April 2021 (as restated)	2,895	11,709	437	310	-	10,238	25,589
Issue of shares	-	2	-	-	-	-	2
Cancellation of shares	(15)	-	-	-	15	(126)	(126)
Share based payments	-	-	83	-	-	-	83
Share option forfeitures	-	-	(21)	-	-	21	-
Transactions with owners	(15)	2	62	-	15	(105)	(41)
Profit and total comprehensive income for the year	-	-	-	-		187	187
Total comprehensive income less owners transactions	(15)	2	62	-	15	82	146
At 31 March 2022	2,880	11,711	499	310	15	10,320	25,735

Consolidated Cash Flow Statement for the year ended 31 March 2022

	Note	2022 £000	2021 £000
Cash flows from operating activities
Profit/(loss) for the year		187	(1,955)
Adjustments for
Net interest payable		138	50
Income tax credit		(361)	(867)
Amortisation of intangible assets		2,195	1,669
Depreciation		489	563
Contingent consideration release		(76)	-
Loss on impairment of property, plant and equipment and businesses		83	126
Share based payments		83	73
Operating cash flows before changes in working capital and provisions		2,738	(341)
Change in inventories		(142)	60
Change in receivables		68	786
Change in payables		(267)	547
		(341)	1,393
Cash generated from operations		2,397	1,052
Net cash generated from operating activities		2,397	1,052
Cash flows from investing activities
Purchases of property, plant and equipment		(465)	(268)
Capitalisation of development costs		(1,975)	(2,312)
Purchases of intangible assets		(12)	(36)
Proceeds from disposal of property, plant and equipment		22	-
Net cash used in investing activities		(2,430)	(2,616)
Cash flows from financing activities
Net interest payable		(138)	(50)
Repayment of leases		(28)	(64)
Issue of share capital		2	-
New Borrowings		-	3,540
Cancellation of shares		(126)	-
Payment of contingent consideration		(16)	(30)
Repayments of borrowings		(1,289)	(319)
Net cash (used in)/from financing activities		(1,595)	3,077
Net (decrease)/increase in cash and cash equivalents		(1,628)	1,513
Cash and cash equivalents at beginning of period		1,894	381
Cash and cash equivalents at end of period		266	1,894

Reconciliation to the cash balance in the Consolidated Balance Sheet

Cash balance as per consolidated balance sheet		1,583	1,894
Bank overdrafts		(1,317)	-
Balance per statement of cash flows		266	1,894

Notes to the financial statements

1. Taxation

Analysis of tax credit in period

	2022 £000	2021 £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	(390)	(846)
- Amendment re-recognition of losses	29	(21)
Income tax credit	(361)	(867)

Reconciliation of effective tax rate

The tax for the 2022 period is lower (2021 was lower) than the standard rate of corporation tax in the UK (2022: 19% and 2021: 19%). The differences are explained below:

	2022 £000	2021 £000
Loss before taxation - Continuing operations	(174)	(2,822)
Loss before taxation multiplied by rate of corporation tax in the UK of 19% (2021: 19%)	(33)	(536)
Effects of:
Other expenses not deductible for tax purposes	(20)	15
Non taxable income	(33)	16
Losses not provided for	129	82
Adjustments for prior years	29	(21)
Research and development	(488)	(492)
Other differences	55	69
Total tax credit	(361)	(867)

2. Ordinary dividends

	2022 £000	2021 £000
Final dividend for the year ended 31 March 2021 of nil (year ended 31 March 2020: nil)	-	-
Interim dividend paid in respect of the year of nil (2021: nil)	-	-
Amounts recognised as distributions to equity holders	-	-

In addition, the directors are not proposing a final dividend in respect of the year ended 31 March 2022. Total dividend payable nil (2021: nil).

3. Earnings per share

Earnings per share for the year ended 31 March 2022 was 0.65p (2021: loss (6.75p).

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders being a profit of £187,000 (2021: loss £1,955,000) by the weighted average number of ordinary shares outstanding during the period.

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

	2022			2021
	Earnings £000	Basic earnings per share	Diluted earnings per share	Earnings £000		Basic earnings per share		Diluted earnings per share
Post-tax profit/(loss) attributable to equity shareholders	187	0.65p	0.64p	(1,955)		(6.75)p		(6.75)p
					2022 Number		2021 Number
Weighted average number of ordinary shares					28,949,491		28,953,414
Dilutive effect of share options					380,517		-
Diluted weighted average number of ordinary shares					29,330,008		28,953,414

4. Exceptional items

	2022 £000	2021 £000
Corporate activity and acquisition costs	127	-
Disposal costs	-	101
Corporate restructuring and transitional costs	61	154
Contingent consideration release	(76)	-
Network obsolesce costs	5	8
Other	4	80
	121	343

Corporate activity and acquisition costs relate to fees paid to corporate advisors in respect of prospective acquisitions and corporate evaluations.

Disposal costs relate to the exit of the Stockport property lease, disposal of associated leasehold improvements and associated costs.

Staff transitional costs relate to the transition of people and management to ensure we have to succession and calibre of people on board to deliver the strategic aims and aspirations of the Group.

The contingent consideration release refers to the acquisition of Lookout Solutions Limited in 2011. This balance has now been fair valued at the year end with the change in fair value recognised through the income statement as the deferred period has now closed as at 31 March 2022.

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 UK adopted  International Accounting  Standards ('IFRS') in conformity with the requirements of Companies act 2006  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 2021 annual report. The financial statements have been prepared under the historical cost convention with the exception of certain items which are required to be measured at fair value.

This preliminary announcement does not constitute the Company's statutory accounts within the meaning of Section 434 of the Companies Act 2006. The results for the year ended 31 March 2022 have been extracted from the full accounts of the Group for that year which received an unqualified auditor's report and which have not yet been delivered to the Registrar of Companies.  The financial information for the year ended 31 March 2021 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditor on those filed accounts was unqualified.  The accounts for the year ended 31 March 2022 and 31 March 2021 did not contain a statement under s498 (1) to (4) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2022 will be posted to shareholders at least 21 days before the Annual General Meeting and made available on our website vianetplc.com and on request by contacting the Company Secretary at the Company's Registered Office.

The Directors have prepared this financial information on the fundamental assumption that the Group is a going concern and will continue to trade for at least 12 months following the date of approval of the financial information. In determining whether the Group's accounts should be prepared on a going concern basis the Directors have considered the factors likely to affect future performance.

6. Annual General Meeting

The Annual General Meeting will be held on 13 July 2022 at 11.00am, at the offices of Vianet Group plc, One Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR.

7. Prior period adjustment

A prior year adjustment has been made to restate deferred tax assets and opening reserves at 1st April 2020 (in the comparative period) to reflect the outcome of voluntary disclosures made to HMRC during 2022 in respect of previously disclosed tax losses relating to tax returns made between 2015 and 2020 that had not been picked up correctly historically, during tax review.

An issue was identified in relation to claims for third party subcontracted expenditure and EPW costs. The Group had treated 100% of the third party EPW costs and subcontracted expenditure as qualifying for R&D tax relief and had not applied, for both categories of expenditure, the statutory restriction to only include 65% of the qualifying costs within the claims. There was no restriction included on these costs in the R&D claims for the periods 31 March 2015 to 31 March 2020 inclusive. 

Therefore, the Group had overclaimed R&D tax relief for these periods. The Company's R&D claims have only impacted the quantum of its trading losses carried forward in each affected period. No trading losses have historically been surrendered for an R&D credit and the tax profile of the Group is such that it will still be loss making in each affected period, even when taking account of reduced R&D claims for these periods.

The adjustment to losses brought forward represents six years' worth of R&D claim adjustments, reflecting the full period that claims have inadvertently not applied the appropriate restriction. 

The Group did not surrender any of the brought forward trading losses for an R&D tax credit. Therefore, there is no underpaid tax because of this incorrect application of the R&D legislation and the Group have undertaken an exercise to model the impact on carried forward loses for all periods in question. Given there is no underpaid tax, the cumulative adjustments from FY15 to FY20 inclusive have been included as an amendment to the trading losses brought forward figure in the FY21 computation. Deferred Tax Asset recognition for past trading losses has historically been included and therefore, overstated. 

An adjustment has been made in the FY21 tax returns in respect of the above, though in terms of accounting presentation, this has been amended by way of a prior period adjustment to opening reserves in the comparative period. There is no impact on comparative profit or loss or cash flows.

The effects of the restatements are set out in the table below:

	Previously reported £000	As restated £000
Net deferred tax liability at 1 April 2020	(631)	(841)
Net deferred tax asset at 31 March 2021	236	26
Retained profit at 1 April 2020	12,403	12,193
Retained profit at 31 March 2021	10,548	10,238

8. Notes supporting statement of cashflows

	Borrowings due within one year £000	Borrowings due after one year £000	Total £000
Net debt as 1 April 2020	(664)*	(670)	(1,334)
Cash flows	(651)	(2,620)	(3,271)
Non cash-flows
-  Interest accruing in the period	50	-	50
Net debt at 31 March 2021	(1,265)	(3,290)	(4,555)
Cash flows	134	1,017	1,151
Non cash-flows
-  Interest accruing in the period	138	-	138
Net debt at 31 March 2022	(993)**	(2,273)	(3,266)

* The net debt as at 31 March 2020 for borrowing due within one year of £664,000 as stated here, does not agree to the Balance Sheet amount of £2,011,000, as this does not include the bank overdraft of £1,347,000 as at 31 March 2020.

** The net debt as at 31 March 2022 for borrowing due within one year of £993,000 as stated here, does not agree to the Balance Sheet amount of £2,310,000, as this does not include the bank overdraft of £1,317,000 as at 31 March 2022.

Cash and cash equivalents for the purpose of the statement of cash flows comprises

	2022 £000	2021 £000
Cash at bank available on demand	1,581	93
Short term deposits	-	1,800
Cash on hand	2	1
Adjusted net cash generation	1,583	1,894

No significant non-cash transactions from investing activities are noted.

Non- cash transactions from financing activities are shown in the reconciliation of liabilities from financing transactions in Note 8.

9. Alternative Performance Measures

In the reporting of financial information, the Directors have adopted the APMs "Adjusted operating (loss)/profit", "Adjusted operating cash generation", and "Adjusted net cash generation", (APMs were previously termed 'Non-GAAP measures'), which is not defined or specified under International Financial Reporting Standards (IFRS).

These measures are not defined by IFRS and therefore may not be directly comparable with other companies' APMS, including those in the Group's industry. APMs should be considered in addition to, and are not intended to be a substitute for, or superior to, IFRS measurements.

Purpose

The Directors believe that this APM assists in providing additional useful information on the underlying trends, performance and position of the Group. This APM is also used to enhance the comparability of information between reporting periods and business units, by adjusting for non-recurring or uncontrollable factors which affect IFRS measures, to aid the user in understanding the Group's performance.

Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and incentive setting purposes and this remains consistent with the prior year. Adjusted APMs are used by the Group in order to understand underlying performance and exclude items which distort compatibility, as well as being consistent with public broker forecasts and measures.

	2022 £000	2021 £000
Operating loss (IFRS measure)	(36)	(2,772)
Add back/(deduct):
Amortisation charge	2,195	1,669
Share based payment charge	83	73
Exceptional items charge	121	343
Adjusted operating profit/(loss)	2,363	(687)

	2022 £000	2021 £000
Operating cash generation (IFRS measure)	2,738	(341)
Add back:
LTIP tax payment	-	-
Adjusted operating cash generation	2,738	(341)

	2022 £000	2021 £000
Net cash generation (IFRS measure)	2,397	1,052
Add back:
LTIP tax payment	-	-
Adjusted net cash generation	2,397	1,052

10. Post balance sheet events

No post balance sheet events were noted.

 

END

 

 

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