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Vianet Group PLC  -  VNET   

Interim Results

Released 07:00 04-Dec-2018

RNS Number : 2951J
Vianet Group PLC
04 December 2018
 

 

 

Press release                                                                                                                                     4 December 2018

 

Vianet Group plc

 

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

 

Interim Results

 

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 interim results for the six months ended 30 September 2018.

 

Financial summary (including Vendman)

 

Revenue increase of 14.43% to £7.68 million (H1 2018: £6.71 million)

Recurring revenues at 88% (H1 2018: 90%)

Adjusted operating profit(a) up 5.93% to £1.80 million (H1 2018: £1.70 million)

Operating profit post exceptional items up 28.67% to £1.69 million (H1 2018: £1.32 million)

Profit before tax up 10.46% to £0.99 million (H1 2018: £0.90 million)

Basic earnings per share up 36.16% at 3.05p (H1 2018: 2.24p), including a tax adjustment charge of 0.51p

Operational cash generation(b) of £0.72 million (H1 2018: £1.25 million)

Net debt(c) of £1.00 million (H1 2018: net cash £2.72 million)

Interim dividend of 1.70p (H1 2018: 1.70p)

 

Divisional highlights

 

Smart Machines (including Vendman) growth continues with 5,427 new unit sales (H1 2018: 2,395 units) exceeding FY 2018 by over 900 units

Smart Machines adjusted operating profit(a) of £0.68 million, growth of 42.71% (H1 2018: £0.47 million), unadjusted profit £0.50 million (H1 2018: £0.16 million)

Smart Zones adjusted operating profit(a) of £2.13 million (H1 2018: £2.27 million), unadjusted profit £1.95 million (H1 2018: £1.95 million)

Vianet Americas reduced losses to £0.03 million (H1 2018: £0.07 million)

 

Post H1 period end

 

Ei Group plc contract renewal including technology upgrade for further 24 months

                Notes

a)        Adjusted operating profit is profit before exceptional costs, amortisation, interest and share based payments

b)        Operational cash generation is pre LTIP taxation of £0.50m

c)        Net debt impacted by both the drawdown of a £2.00m term loan for the Vendman acquisition and strategic investments in the technology stack, annuity model and stock.

 

 

 

Commenting on the interim results, James Dickson, Chairman of Vianet Group plc, said:

"I am pleased to report that the Group's IOT platform investment and focus on growth areas has resulted in a 6% year on year increase in operating profit for the six months to 30 September 2018.  In addition, the Group's high level of recurring revenue has been further strengthened by growth in the Smart Machines division, and the overall prospects for the second half look increasingly assured.

 

Vianet's medium to long term prospects are exciting as we increasingly demonstrate that our strategy of leveraging the power of our cutting-edge technology to bring valuable business insight to our customers is the right one.  Whilst growth and profitability are influenced by the challenging backdrop to the UK pub sector, the Group has excellent prospects in Smart Machines and the wider hospitality sector for Smart Zones.

 

Recent investment in our cloud based IOT platform and new data analytics will accelerate Vianet's growth plans from existing customers and sectors, as well as new industry verticals.   We have a solid financial platform for further expansion and development.  The Board is confident that the Group is capable of delivering sustained growth."

- Ends -

An audio cast of the interim results presentation, given by Stewart Darling (Chief Executive) and Mark Foster (Chief Finance Officer), was released this morning, Tuesday, 4 December 2018 at 07.00 hrs and is available on the Group's website, www.vianetplc.com.

 

An analyst briefing will be held today at 09.30hrs at Cenkos, 6-8 Tokenhouse Yard, London EC2R 7AS.

 

Enquiries:

Vianet Group plc

 

James Dickson, Chairman

Stewart Darling, CEO

Mark Foster, CFO

Tel: +44 (0) 1642 358 800

 

www.vianetplc.com

 

Cenkos Securities plc

 

Stephen Keys / Camilla Hume

Tel: +44 (0) 20 7397 8900

 

www.cenkos.com 

Media enquiries:

Yellow Jersey PR

 

Sarah Hollins

Henry Wilkinson

vianet@yellowjerseypr.com

             Tel: +44 (0)7764 947 137

             Tel: +44 (0)7951 402336

www.yellowjerseypr.com

 

Chairman's Statement

 

I am pleased to report that the Group's IOT platform investment and focus on growth areas has resulted in a 6% increase in operating profit for the six months to 30 September 2018, compared to the same period last year.  In addition, the Group's high level of recurring revenue has been further strengthened by growth in the Smart Machines division.

 

The Smart Machines division adjusted operating profit was up over 42% to £0.68 million (H1 2018: £0.47 million) helped by a strong year on year increase in the number of connected devices deployed.  There was particularly good progress with the integration of Vendman, and early stage success in transforming approximately 200,000 Vendman mobile connections to higher value Smart Machines connections, is validating our strategy and opening up attractive cross selling opportunities.    

 

Helped by investment in Pubco data analytics capability and its increased automation of transactional processes, adjusted operating profit in the Smart Zones division remained stable at £2.13 million (H1 2018: £2.27 million).  This performance was achieved despite challenging market conditions for our customers, sales pipeline delays due to Pubco corporate activity and our managed compliance service being held back by the UK beer supply chain being adversely impacted by the Europe wide shortage of CO2 gas over the summer months.  Vianet Americas added a further 32 new sites helping to reduce H1 year on year adjusted operating losses to £0.03 million (H1 2018: £0.07 million).

 

Results

Turnover of £7.68 million (H1 2018: £6.71 million) was up 14.43% helped by the strategic acquisition of Vendman although held back both by pub closures in Smart Zones and the short term impact of our focus on transitioning from capital sales to annuity streams in Smart Machines.  Whilst this shift from capital to annuity sales holds back short term revenues and profits, it provides future earnings visibility and is more profitable over the life of the contracts.  

 

The Group's operating profit post exceptional items was up 28.6% to £1.69 million (H1 2018: £1.32 million) whilst profit before taxation increased 10.5% to £0.99 million (H1 2018: £0.90 million).                                                                                                                                                          

Group earnings per share grew 36.1% to 3.05 pence (H1 2018: 2.24 pence).

 

 

 

Dividend

 

Reflecting the Board's continued confidence in the Group's growth plans, we are pleased to maintain the interim dividend at 1.70 pence per share (H1 2018: 1.70 pence per share), payable on 30 January 2019 to shareholders on the register at 14 December 2018.  A final dividend of 4.00 pence per share was paid in respect of the year ended 31 March 2018 on 28 July 2018.

 

Outlook

 

The Board believes that Vianet's medium to long term prospects are exciting as we are increasingly demonstrating that our strategy of leveraging the power of our cutting edge technology platform to bring valuable business insight to our customers is the right one. 

 

Whilst growth and profitability are influenced by the challenging backdrop to the UK pub sector, the Group has excellent prospects both in Smart Machines and the wider hospitality sector for Smart Zones and the Board is confident that the management team can deliver long term growth.

 

Smart Machines growth prospects look increasingly assured particularly following the acquisition of Vendman.  Additionally, the transition in this division's revenues towards a significantly greater level of annuity, provides improved visibility and quality of future earnings.

 

As we expand the iDraughtTM footprint, develop new revenues from data analytics to the wider hospitality sector and deliver efficiencies from increased automation in our Smart Zone division, we are optimistic that the division's contribution can be sustained despite the challenges faced in its existing customers' core market of UK pub retailing.

 

Underpinned by high levels of recurring revenue, underlying Group cash flow is strong, despite our significant investment in this transitional year, and we have a solid financial platform to facilitate further expansion and development.

 

The Board remains confident that the Group is capable of delivering consistent and sustained growth, within the parameters of its influence and control.

 

James Dickson                                                                                 

Chairman                                                             

4 December 2018

 

Chief Executive and Chief Financial Officer Review

 

Underlying trading for the six months to 30 September 2018 has seen improvement as compared to the same period last year.  The Group's strategy to drive sales of Smart Machines connected devices and contactless payment services has materially progressed, albeit progress was partially offset by the continued impact of pub disposals for Smart Zones.  The Board's strategic decision to transition to an annuity revenue model in Smart Machines has underpinned this acceleration in device connections, and despite the impact on revenue in the short term, it will be significantly more profitable for the business over the life of our contracts.  The proportion of recurring revenue has continued at high levels and reduced exceptional costs of £0.11 million (H1 2018: £0.39 million) were in line with our expectations and principally relate to costs associated with network obsolescence and staff transitional costs.

 

In 2017 we embarked upon a substantial project named NEO to develop a new Internet of Things and Data Analytics platform with the aim of transforming how we do business with customers through the provision of new connected device capability and insight-led capabilities that support significantly improved decision making.  This project, with a £2.1 million investment to date, will replace all legacy technology in the Smart Zones business whilst enabling rapid prototyping and innovation capabilities in a platform that can scale at pace to support business growth.  The technology is rolling out successfully to customers, and will underpin and support future growth plans.   

 

As anticipated, the operational cash generation was down at £0.72 million (H1 2018: £1.25 million) before one off taxation relating to the issue of LTIP shares.  The key impacts on cash generation were:

NEO technology platform investment of £0.9 million;

Transition to annuity stream from our traditional capex model in Smart Machines reduced turnover by £0.5 million with a margin and cash impact of £0.25 million;  

Supply chain stock on hand increased by £0.5 million to ensure we have sufficient stock on hand to meet demand and to secure key components impacted by worldwide component pressures; and

One off PAYE taxation of £0.49 million associated with the LTIP award.  The post PAYE deduction award was satisfied by the transfer of shares from the Employee Benefit Trust to participants.

 

As a result of these movements, our normal dividend payments and additional bank facilities to acquire Vendman, the Group had an overall net debt position of £1.00 million at the half year compared to £2.72 million net cash last year.

 

The Group's underlying cash generation remains strong with £1.91 million (before working capital movements and one off LTIP taxation) compared to £1.50 million in the same period last year, which represents a £0.4 million (27.4%) year on year growth.  The second half is expected to be stronger as NEO technology investment tails off, supply chain stock working capital movement stabilises, and one off LTIP PAYE tax is not repeated.

 

Smart Machines

 

Smart Machines had a strong increase in the number of device connections and contactless payment sales with more devices being sold in the first half of this financial year than the whole of FY2018.   

 

Helped by the addition of Vendman the top line revenue growth increased by 120% even though over 60% of device sales were on an annuity only basis.  Whilst our upfront cash receipts will be reduced, the annuity model will be more profitable over the life of contracts and provides for a clearer projection of business performance as it lessens the impact of variable capital sales. 

 

The major contract roll out with a leading global coffee supplier is currently achieving a lower rate of device deployment than anticipated due to their delays in implementing a large-scale IT project.  Whilst this slower pace has been frustrating, we are encouraged that action is being taken and a higher rate of deployment is being achieved recently against what remains a significant roll out plan.

 

Vendman growth to £2.57 million turnover and £0.34 million operating profit in the Group's first year of ownership is validating our strategic growth plans for our portfolio of market leading solutions for unattended retail.  During H1 Vendman contributed £1.38 million in turnover and £0.22 million in operating profit.

 

Additionally, the division is creating significant cross selling opportunities with a larger market for the sale of IOT connectivity and real-time data, accelerated rollout of contactless payment technology and new opportunities for its ERP and mobile platform capability.

 

Momentum into H2 2019 has been encouraging and it is anticipated that Smart Machines growth in connected devices and contactless payment will continue and significantly enhance future earnings growth.

Smart Zones

 

The underlying performance of the Group's core beer monitoring business remained relatively stable over the period with further new sales of iDraughtTM which now account for approximately 27% of the Group's beer monitoring base by number of installations.

 

Over the period, Smart Zones slowed down by corporate activity amongst large customers secured 44 new beer monitoring installations (H1 2018: 119).  Pub disposals resulted in a net reduction of circa 350 sites for the division to approximately 12,600 sites.

 

Our continued confidence in the future growth prospects for iDraughtTM in the UK, is driven by recent commitments for technology upgrades in existing major customers and installations for new customers.  In addition, our investment in new technology and the migration of data and services to the cloud has significantly increased the opportunity for Smart Zones to capture data from a wider array of sources for our customers and roll-out enhanced insight and data services.  

 

In the US, the roll out of iDraughtTM has increased the installation base to 279 sites.  The increase in installation base combined with a refined cost base contributed to a £0.39 million reduction in losses and we expect the loss position to narrow further as we drive improved sales traction in major publicly listed businesses.

 

Looking forward

 

The Group's significant investment in our cloud based IOT platform, new data analytics and insight based capabilities will accelerate Vianet's growth plans by developing higher quality revenue streams from existing customers and sectors, whilst making our cutting-edge end-to-end capability highly relevant to other industry sectors.

 

We believe that this strategic approach combined with our focus on the Smart machines market, will allow the Group to capitalise on the transformational opportunities that the combination of connected devices, predictive analytics and insight will offer in the coming years.

                                                                                                                                                   

Stewart Darling

Chief Executive

Mark Foster

Chief Financial Officer                                                         

4 December 2018

 

 

 

 

Consolidated Statement of Comprehensive Income

For the six months ended 30 September 2018

 

 

 

Before Exceptional

6 months

Exceptional

6 months

Total Unaudited

6 months

 

Before

Exceptional

6 months

 

 

Exceptional

6 months

Unaudited

6 months

Audited

Year

 

 

Ended

Ended

Ended

Ended

Ended

Ended

Ended

 

 

30 Sept

30 Sept

30 Sept

30 Sept

30 Sept

30 Sept

31 March

 

 

2018

2018

2018

2017

2017

2017

2018

 

Note

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

 

 

 

Revenue

3

7,683

-

7,683

6,714

-

6,714

14,561

Cost of sales

 

(2,465)

-

(2,465)

(2,016)

-

(2,016)

(4,381)

Gross profit

 

5,218

-

5,218

4,698

-

4,698

10,180

Administration and other operating expenses

4

 

 

(3,414)

 

 

(112)

 

 

(3,526)

 

 

(2,995)

 

 

(388)

 

 

(3,383)

 

 

(7,097)

Operating profit pre amortisation and share based payments

3

 

 

 

1,804

 

 

 

(112)

 

 

 

1,692

 

 

 

1,703

 

 

 

(388)

 

 

 

1,315

 

 

 

3,083

Intangible asset amortisation

 

 

(597)

 

-

 

(597)

 

(344)

 

-

 

(344)

 

(865)

Share based payments

 

 

(68)

 

-

 

(68)

 

(73)

 

-

 

(73)

 

(142)

Operating profit post amortisation and share based payments

 

 

 

 

1,139

 

 

 

(112)

 

 

 

1,027

 

 

 

1,286

 

 

 

(388)

 

 

 

898

 

 

 

2,076

Net finance (costs)/income

 

 

(34)

 

-

 

(34)

 

1

 

-

 

1

 

(28)

Profit from continuing operations before tax

 

 

 

 

1,105

 

 

 

(112)

 

 

 

993

 

 

 

1,287

 

 

 

(388)

 

 

 

899

 

 

 

2,048

Income tax expense

5

(144)

-

(144)

(287)

-

(287)

(239)

Profit and other comprehensive income for the year

3

 

 

961

 

 

(112)

 

 

849

 

 

1,000

 

 

(388)

 

 

612

 

 

1,809

 

 

 

 

 

 

 

 

 

Earnings per share

 

 

 

 

 

 

 

 

Continuing Operations

 

 

 

 

 

 

 

 

- Basic

6

 

 

3.05p

 

 

2.24p

6.55p

- Diluted

6

 

 

3.02p

 

 

2.23p

6.54p

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Balance Sheet

At 30 September 2018

 

 

Unaudited

As at

30 Sept

2018

Unaudited

As at

30 Sept

 2017

Audited

As at

31 March 2018

 

 

£'000

£'000

£'000

Assets

 

 

 

 

Non-current assets

 

 

 

 

Intangible assets

 

22,847

17,946

22,504

Property, plant and equipment

 

3,371

3,078

3,166

Total non-current assets

 

26,218

21,024

25,670

Current assets

 

 

 

 

Inventories

 

1,556

1,012

1,086

Trade and other receivables

 

3,799

2,995

3,246

Deferred tax asset

 

247

173

391

Cash and cash equivalents

 

2,592

3,864

4,324

 

 

8,194

8,044

9,047

 

 

 

 

 

Total assets

 

34,412

29,068

34,717

 

 

 

 

 

Equity and liabilities

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

 

4,267

3,578

4,436

Borrowings

 

1,926

443

1,062

 

 

6,193

4,021

5,498

 

 

 

 

 

Non-current liabilities

 

 

 

 

Other payables

 

1,339

-

1,339

Borrowings

 

1,665

699

1,994

Deferred tax

 

874

395

872

 

 

3,878

1,094

4,205

 

 

 

 

 

Equity attributable to owners of the parent

 

 

 

 

Share capital

 

2,874

2,843

2,872

Share premium account

 

11,530

11,287

11,519

Share based payment reserve

 

252

466

483

Own shares

 

(754)

(1,115)

(1,114)

Merger reserve

 

310

310

310

Retained profit

 

10,129

10,162

10,944

Total equity

 

24,341

23,953

25,014

 

 

 

 

 

Total equity and liabilities

 

34,412

29,068

34,717

 

 

 

 

 

 

 

 

Summarised Consolidated Cash Flow Statement

For the six months ended 30 September 2018

 

 

Unaudited

6 months

Unaudited

6 months

Audited

Year

 

 

Ended

Ended

Ended

 

 

30 Sept

30 Sept

31 March

 

 

2018

2017

2018

 

 

£'000

£'000

£'000

Cash flows from operating activities

 

 

 

 

Profit for the period

 

                  849

612

1,809

Adjustments for

 

 

 

 

Net Interest payable/(received)

 

34

(1)

28

Income tax expense

 

144

287

239

Amortisation of intangible assets

 

597

344

865

Depreciation

 

215

177

378

Loss on sale of property, plant and equipment

 

4

7

62

Share-based payments expense

 

68

73

142

Tax payment in respect of LTIP

 

(495)

-

-

Operating profit before changes in

working capital and provisions

 

 

1,416

 

1,499

 

3,523

Change in inventories

 

(468)

296

219

Change in receivables

 

(554)

(288)

(537)

Change in payables

 

(169)

(149)

(126)

Change in provisions

 

-

(110)

(105)

 

 

(1,191)

(251)

(549)

Net cash from operating activities

 

225

1,248

2,974

Cash flows from investing activities

 

 

 

 

Purchase of subsidiary

 

-

-

(1,917)

Purchases of property, plant and equipment

 

(424)

(193)

(398)

Purchase of intangible assets

 

(940)

(788)

(1,610)

Net cash used in investing activities

 

(1,364)

(981)

(3,925)

Cash flows from financing activities

 

 

 

 

Net Interest receivable/(payable)

 

(34)

1

(28)

Issue of share capital

 

13

-

261

Share options exercised

 

-

103

103

New bank loans

 

-

-

2,000

Repayments of borrowings

 

(329)

(245)

(450)

Dividends paid

 

(1,108)

(1,096)

(1,562)

Net cash used in financing activities

 

(1,458)

(1,237)

324

 

 

 

 

 

Net decrease in cash and cash equivalents

 

(2,597)

(970)

(627)

 

 

 

 

 

Cash and cash equivalents at beginning of period

 

3,922

4,549

4,549

 

 

 

 

 

Cash and cash equivalents at end of period

 

1,325

3,579

3,922

 

Statement of changes in equity

 

Six months ended 30 September 2018

 

 

Share

capital

Share

premium

account

Share based payment reserve

Own shares

Merger

reserve

Retained profit

Total

 

£000

£000

£000

£000

£000

£000

£000

At 1 April 2018

2,872

11,519

483

(1,114)

310

10,944

25,014

Dividends

-

-

-

-

-

(1,108)

(1,108)

Issue of shares

2

11

-

-

-

-

13

Share based payment

-

-

68

-

-

-

68

LTIP exercise

-

-

(299)

360

-

(556)

(495)

Transactions with owners

2

11

(231)

360

-

(1,664)

(1,522)

Profit and total comprehensive income for the period

-

-

-

-

-

849

849

Total comprehensive income less owners transactions

2

11

(231)

360

-

(815)

(673)

At 30 September 2018

2,874

11,530

252

(754)

310

10,129

24,341

 

Six months ended 30 September 2017

 

 

Share

capital

Share

premium

account

Share based payment reserve

Own shares

Merger

reserve

Retained profit

Total

 

£000

£000

£000

£000

£000

£000

£000

At 1 April 2017

2,843

11,287

418

(1,221)

310

10,624

24,261

Dividends

-

-

-

-

-

(1,096)

(1,096)

Share based payment

-

-

73

-

-

-

73

Share option forfeitures

-

-

(26)

-

-

26

-

Exercise of options

-

-

1

106

-

(4)

103

Transactions with owners

-

-

48

106

-

(1,074)

(920)

Profit and total comprehensive income for the period

-

-

-

-

-

612

612

Total comprehensive income less owners transactions

-

-

48

106

-

(462)

(308)

At 30 September 2017

2,843

11,287

466

(1,115)

310

10,162

23,953

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12 months ended 31 March 2018

 

 

Share

capital

Share

premium

account

Share based payment reserve

Own shares

Merger

reserve

Retained profit

Total

 

£000

£000

£000

£000

£000

£000

£000

At 1 April 2017

2,843

11,287

418

(1,221)

310

10,624

24,261

Dividends

-

-

-

-

-

(1,562)

(1,562)

Issue of shares

29

232

(50)

-

-

50

261

Share based payment

-

-

115

-

-

27

142

Exercise of options

-

-

-

107

-

(4)

103

Transactions with owners

29

232

65

107

-

(1,489)

(1,056)

Profit and total comprehensive income for the year

-

-

-

-

-

1,809

1,809

Total comprehensive income less owners transactions

29

232

65

107

-

320

753

At 31 March 2018

2,872

11,519

483

(1,114)

310

10,944

25,014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 Notes to the interim report

 

1.            Statutory information

 

The interim financial statements are unaudited and do not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. The auditor's review report on the interim financial information for the six months ended 30 September 2018 is set out on page 16.

 

The financial information for the year ended 31 March 2018 has been derived from the published statutory accounts. A copy of the full accounts for that period, on which the auditor issued an unmodified report that did not contain statements under 498(2) or (3) of the Companies Act 2006, has been delivered to the Registrar of Companies.

 

These interim financial statements will be posted to all shareholders and are available from the registered office at One Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR or from our website at www.vianetplc.com/investors

 

 

2.            Basis of preparation

 

This consolidated half yearly financial information for the half year ended 30 September 2018 has been prepared applying the accounting policies and presentation that were applied in the preparation of the Group's published consolidated financial statements for the year ended 31 March 2018, subject to the adoption of IFRS 15 "Revenue from Contracts with Customers" and IFRS 9 "Financial Instruments". The directors have concluded that the adoption of these accounting standards has not had a material impact on the financial statements. The Group's accounting policies are based on the recognition and measurement principles of International Financial Reporting Standards as adopted by the EU.

 

The financial information contained in the interim report has not been reviewed or audited and does not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006 and does not include all of the information and disclosures required for complete financial statements. 

 

3.            Segmental information

                                                                                                                                            

An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses. The segment operating results are regularly reviewed by the Chief Operating Decision Maker to make decisions about resources to be allocated to the segment and assess its performance. Vianet Group is analysed into to two trading segments (defined below) being Smart Zones (mainly adopted in the leisure sector, including US (particularly in pubs and gaming)) and Smart Machines (mainly adopted in the vending sector (particularly in vending machines)) supported by Corporate/Technology costs.

The products/services offered by each operating segment are:

Smart Zones: design, product development, sale and rental of fluid monitoring equipment, data insights and related services

Smart Machines: design product development, sale and rental of machine monitoring equipment, data insights and related services.

Corporate/Technology: Centralised Group overheads along with technology related costs for the Group

 

The inter-segment sales are immaterial. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated assets and liabilities comprise items such as cash and cash equivalents, certain intangible assets, taxation, and borrowings. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one period.

The asset base of the Vianet Group plc cannot be split across Smart Zones, Smart Machines or Technology, so has been allocated to Smart Zones.

 

The segmental results for the six months ended 30 September 2018 are as follows:

 

 

 

Continuing Operations

 

 

 

 

Smart Zones

 

 

Smart Machines

 

 

Corporate/Technology

 

 

 

Total

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Total revenue

 

 

5,360

2,323

-

7,683

 

 

 

 

 

 

 

Profit/(loss) before amortisation, share based payments and exceptional costs

 

 

 

2,126

 

675

 

(997)

 

1,804

 

 

 

 

 

 

 

Pre-exceptional segment result

 

 

2,018

542

(1,421)

1,139

Exceptional costs

 

 

(52)

(14)

(46)

(112)

Post exceptional segment result

 

 

1,966

528

(1,467)

1,027

Finance income

 

 

-

-

11

11

Finance costs

 

 

(17)

(28)

-

(45)

Profit/(loss) before taxation

 

 

1,949

500

(1,456)

993

Taxation

 

 

 

 

 

(144)

Profit for the year from continuing operations

 

 

 

 

 

849

 

 

 

 

 

 

 

 

 

 

 

 

 

Smart Zones

 

 

Smart Machines

 

 

Corporate/Technology

 

 

 

Total

 

 

 

£'000

£'000

£'000

£'000

Segment assets

 

 

27,570

3,905

2,935

34,410

Total assets

 

 

27,570

3,905

2,935

34,410

Segment liabilities

 

 

9,010

-

1,061

10,071

Total liabilities

 

 

9,010

-

1,061

10,071

 

 

 

 

 

 

 

 

 

Notes to the interim report (continued)

 

The segmental results for the six months ended 30 September 2017 are as follows:

 

 

 

Continuing Operations

 

 

 

 

Smart Zones

 

 

Smart Machines

 

 

Corporate/Technology

 

 

 

Total

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Total revenue

 

 

5,662

1,052

-

6,714

 

 

 

 

 

 

 

Profit/(loss) before amortisation, share based payments and exceptional costs

 

 

 

2,270

 

473

 

(1,040)

 

1,703

 

 

 

 

 

 

 

Pre-exceptional segment result

 

 

2,185

318

(1,217)

1,286

Exceptional costs

 

 

(229)

(161)

2

(388)

Post exceptional segment result

 

 

1,956

157

(1,215)

898

Finance income

 

 

-

-

7

7

Finance costs

 

 

(6)

-

-

(6)

Profit/(loss) before taxation

 

 

1,950

157

(1,208)

899

Taxation

 

 

 

 

 

(287)

Profit for the year from continuing operations

 

 

 

 

 

612

 

 

 

 

 

 

 

 

 

 

 

 

 

Smart Zones

 

 

Smart Machines

 

 

Corporate/Technology

 

 

 

Total

 

 

 

£'000

£'000

£'000

£'000

Segment assets

 

 

24,888

-

4,180

29,068

Total assets

 

 

24,888

-

4,180

29,068

Segment liabilities

 

 

4,384

-

731

5,115

Total liabilities

 

 

4,384

-

731

5,115

 

 

 

 

 

 

 

 

 

 

 

Notes to the interim report (continued)

 

The segmental results for the 12 months ended 31 March 2018 are as follows:

 

 

 

Continuing Operations

 

 

 

 

Smart Zones

 

 

Smart Machines

 

 

Corporate/Technology

 

 

 

Total

 

 

 

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

Total revenue

 

 

11,445

3,116

-

14,561

 

 

 

 

 

 

 

Profit/(loss) before amortisation, share based payments and exceptional costs

 

 

 

4,531

 

1,070

 

(1,980)

 

3,621

 

 

 

 

 

 

 

Pre-exceptional segment result

 

 

4,350

595

(2,331)

2,614

Exceptional costs

 

 

(283)

(211)

(44)

(538)

Post exceptional segment result

 

 

4,067

384

(2,375)

2,076

Finance income

 

 

-

-

17

17

Finance costs

 

 

(17)

(28)

-

(45)

Profit/(loss) before taxation

 

 

4,050

356

(2,358)

2,048

Taxation

 

 

 

 

 

(239)

Profit for the year from continuing operations

 

 

 

 

 

1,809

 

 

 

 

 

 

 

 

 

 

 

 

 

Smart Zones

 

 

Smart Machines

 

 

Corporate/Technology

 

 

 

Total

 

 

 

£'000

£'000

£'000

£'000

Segment assets

 

 

25,883

4,083

4,751

34,717

Total assets

 

 

25,883

4,083

4,751

34,717

Segment liabilities

 

 

8,606

-

1,097

9,703

Total liabilities

 

 

8,606

-

1,097

9,703

 

 

 

 

 

 

 

 

 

 

 

Notes to the interim report (continued)

 

4.            Exceptional items

 

 

 

6 months

6 months

Year

 

 

Ended

Ended

Ended

 

 

30 Sept

30 Sept

31 March

 

 

2018

2017

2018

 

 

£'000

£'000

£'000

 

 

 

 

 

Exceptional costs

 

               112

388

538

 

 

112

388

538

 

 

Exceptional costs principally relate to employee transition costs and network obsolescence costs.

 

5.            Tax

 

 

The charge for tax is based on the profit for the period and comprises:

 

 

 

6 months

6 months

Year

 

 

Ended

Ended

Ended

 

 

30 Sept

30 Sept

31 March

 

 

2018

2017

2018

 

 

£'000

£'000

£'000

 

 

 

 

 

United Kingdom corporation tax

 

144

287

239

 

 

The tax charge reflects the utilisation of brought forward trading losses, which had previously been recognised as a deferred tax asset, against the taxable profit for the period within Vianet Limited

 

6.            Earnings per share 

 

Earnings per share has been impacted by the reversal of a deferred tax asset provision realised in previous years.

 

Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders (£849k) 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.

 

 

30 September 2018

30 September 2017

 

Earnings

 

 

£000

Basic earnings per share

Diluted earnings per share

Earnings

 

 

£000

Basic earnings per share

Diluted earnings per share

Pre-tax profit attributable to equity shareholders

993

3.56p

3.53p

899

3.29p

3.27p

Post-tax profit attributable to equity shareholders

849

3.05p

3.02p

612

2.24p

2.23p

Pre-tax, pre-exceptional profit attributable to equity shareholders

1,105

3.97p

3.93p

1,287

4.71p

4.68p

Post-tax, pre-exceptional profit attributable to equity shareholders

961

3.45p

3.42p

1,000

3.66p

3.64p

 

 

 

 

30 Sept

2018

Number

30 Sept

2017

Number

Weighted average number of ordinary shares

27,867,264

27,302,694

Dilutive effect of share options

246,112

184,041

Diluted weighted average number of ordinary shares

28,113,376

27,486,735

 

 

 

INDEPENDENT REVIEW REPORT TO VIANET GROUP PLC

 

Introduction

We have been engaged by the company to review the financial information in the half-yearly financial report for the six months ended 30 September 2018 which comprises the consolidated statement of comprehensive income, the consolidated balance sheet, the summarised consolidated cash flow statement, the statement of changes in equity and the related explanatory notes. We have read the other information contained in the half yearly financial report which comprises only the Chairman's Statement, and the Chief Executive and Chief Financial Officer Review and considered whether they contain any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, 'Review of Interim Financial Information performed by the Independent Auditor of the Entity'. Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed.

 

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly financial report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

 

As disclosed in note 2, the annual financial statements of the group are prepared in accordance with IFRSs as adopted by the European Union using the historic cost convention. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in note 2.

 

Our responsibility

Our responsibility is to express to the company a conclusion on the financial information in the half-yearly financial report based on our review.

 

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

 

 

 

 

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 September 2018 is not prepared, in all material respects, in accordance with the basis of accounting described in note 2.

 

 

Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants

Leeds
4 December 2018

 


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