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LONDON (Alliance News) - Vianet Group PLC Wednesday warned that it now expects operating profit to be down this year due to the uncertainties created by proposed UK government regulations for pub companies that could hit its beer flow monitoring products.
It said installations of its iDraught product had fallen materially behind expectations, while an acceleration in pub closures that it also blamed on uncertainty over the proposals had hit installation of traditional beer monitoring products to almost 17,000 sites.
It said it it is now forecasting an operating profit excluding exceptional items of about GBP3 million for the fiscal year to the end of March 2014, down from GBP3.3 million last year.
However, it is still expecting strong cash flow and so expects to maintain both its interim and final dividends for the year.
It said its vending machine business is trading profitably and there are good prospects for further contract developments in the second half of the year, while its US business is also making progress and has made initial installations of the iDraught product with several national leisure chains in line with its expectations.
Trading at its fuel unit has continued to improve after a slow start in the first quarter, and is making progress towards breaking even in the second half.
The company makes products that control the flow of liquids like beer, petrol and coffee.
The UK government has proposed an effective ban on the use of flow monitoring equipment by
pub companies with more than 500 pubs, according to the company.
The government has said it is trying to protect pub tenants, which have seen huge rent increases in recent years and have increasingly complained of being unfairly treated by the big pub owners. One of the issues it is looking at is whether flow monitoring equipment is accurate enough to be used to determine whether a tenant is complying with purchasing obligations. In its initial proposals, it said flow monitoring equipment shouldn't be used to determine compliance.
"The board remains hopeful of a positive outcome in the final statutory code, however it remains cautious about the short term outlook for the group's core Leisure division, until the new provisions of the code are announced, particularly as the process may lead into the Christmas trading period," Vianet said in its statement.
Vianet shares were down 4.3% at 69.85 pence Wednesday morning.
By Steve McGrath; stevemcgrath@alliancenews.com; @SteveMcGrath1
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