LONDON (Alliance News) - Vianet Group PLC Tuesday reported a fall in pretax profit and revenue for the full-year, as uncertainty surrounding a new statutory code for pub tenants took its toll, coupled with withdrawing from "lower margin work."
The company, which designs and develops fluid monitoring equipment, posted pretax profit of GBPP1.6 million for the period ended March 31, down from GBP1.8 million a year earlier, as revenue fell to GBP18.3 million from GBP21.1 million a year ago.
Vianet, which provides real-time monitoring systems and data-management services, said profit was impacted by GBP700,000 of expectational costs incurred in responding to the UK government's proposed statutory code for pub companies which says that flow monitoring equipment may not be used to determine whether a tenant is complying with purchasing obligations, nor can it be used as evidence. Vianet also blamed the profit fall on "further rationalisation of the group structure" and a cost base reduction programme.
One of Vianet's products is iDraught which aims to improve pub and restaurant margins by tracking each and every pour of beer to identify over or under pouring. It also ensures drinks are served at the correct temperature to customers.
Vianet contested the proposed change and said it would be "unjust and would have both a profound impact on [its] business and have far reaching negative consequences generally." It also argued that the proposals relating to beer flow monitoring are not based on fact or substantial evidence.
Nonetheless, last week the government updated its proposals and outlined new statutory laws to protect publicans tied to large pub companies from unfairly inflated rents and excessive beer prices.
On the other hand, the drop in revenue was attributed to withdrawing from lower margin work in the leisure and fuel solutions divisions and a reduced number of new installations in the UK pub market.
However, Vianet said operating gross margin rose to 59% from 51% boosted by an improved product mix and reductions in the cost base across the business.
The company said although uncertainty over the UK government's proposed statutory code had an adverse affect on pub industry confidence and expenditure, modest progress was still made in the adoption of its higher value iDraught product and service, with 296 additional sites gained during the year.
However, Vianet said this was more than offset by an acceleration and increase in the number of pub disposals which exceeded around 1,5000 in the year.
"Whilst there has been increased iDraught penetration and good progress in gaining new contracts to monitor gaming machines in the pub sector, these were not enough to offset the revenue loss arising from pub disposals and closures," it said.
The company said it secured several contract extensions during the year, both in its beer monitoring and vending sector which ensures that the level of contractual and recurring revenues remained at over 70% of group revenue.
On the back of a mixed year the company maintained its final dividend at 4.00 pence, making a total dividend for the year of 5.70 pence unchanged from a year earlier.
Vianet shares were quoted down 3.5% at 79.16 pence Tuesday.
By Anthony Tshibangu; anthonytshibangu@alliancenews.com; @AnthonyAllNews
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Vianet Grp (VNET)