Vianet Grp Regulatory News (VNET)

Vianet Group plc

("Vianet" or "the Group")

Interim Results

Vianet Group plc (AIM:VNET), the leading provider of real time monitoring systems and data management services for the leisure, vending, and forecourt services sectors, is pleased to announce its interim results for the six months ended 30 September 2013.

Financial summary

Operational highlights

Commenting on the interim results, James Dickson, Executive Chairman of Vianet Group plc, said: "The Board is pleased with the operational progress that has been made across all of the Group's businesses during the period, although the uncertainty surrounding the Government's proposed Statutory Code for Pub Companies has held back our beer flow monitoring performance.

"Assuming that a satisfactory outcome from the revised Statutory Code is announced in the second half of the current financial year, the Board remains optimistic for the growth prospects of Vianet's flagship iDraught™ product in the medium to longer term as well as for the other parts of the Group, which are already seeing improved performance. I believe the Group has the right products and structure in place to secure additional blue chip customers and grow income across all divisions."

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An audio cast of the interim results presentation given by James Dickson, Executive Chairman, Stewart Darling, Chief Executive, and Mark Foster, Chief Financial Officer, was released this morning at 07.00hrs on Tuesday, 3 December 2013 on the Group's website www.vianetplc.com with the link also being distributed by Abchurch Communications.

Enquiries:

Media enquiries:

Chairman's Statement

Against a backdrop of continued uncertainty relating to the Government's proposed Statutory Code for pub companies, the Board draws some comfort from the Group's performance for the six months to 30 September 2013. This performance demonstrates the resilience of Vianet's recurring revenue streams, particularly within the Leisure division, as well as the improved performance of the Fuel Solutions division.

The Board is pleased to report that progress is being made in Vianet's newer businesses, including telemetry solutions for the coffee vending market. The Vending division is trading profitably and the Board believes there are good prospects for further contract developments. The Group's start-up operation in the USA also continues to make positive progress, with the performance of initial installations of iDraught™ with several national leisure chains meeting expectations in both full commercial and pilot contracts.

Trading in the Group's Fuel Solutions division has also continued to improve despite a slow start in Q1, making solid progress towards trading sustainably at breakeven level during H2 2013.

As announced at the AGM in July 2013, the Board remains highly conscious of the uncertainty surrounding the Government's proposed Statutory Code for pub companies and the adverse impact that the proposals for controlling beer flow monitoring contained therein may have on the Group's core leisure business.

In the UK pub sector this has led to an overall slowdown in beer flow monitoring capital expenditure, leading to a significant shortfall in the anticipated number of new installations of Vianet's iDraught™ for this year. This uncertainty has also accelerated the number of pub closures and disposals in the tenanted sector with a consequent reduction in the traditional beer monitoring installations to almost 17,000 sites at the half year, compared to approximately 17,600 sites at 31 March 2013.

As previously stated, the Group has submitted its comprehensive response, which is available at www.vianetplc.com/investors, to the consultation conducted by the Department of Business, Innovation and Skills, and has followed up with active engagement with MPs and other stakeholders to ensure that the factual evidence and arguments are being properly considered. The Board is pleased with the response it has so far received from this dialogue.

Results

Turnover for the first half amounted to £9.01 million (H1 2013: £11.19 million) impacted by the Company's exit from lower margin activity in the Fuel Solutions division, as well as slow iDraught™ sales and pub closures driven by the uncertainty in the pub sector resulting from the proposed Statutory Code.

The Group's Vending division further consolidated its performance and is now trading profitably despite continued delays to commencing a new major contract, as well as the impact of estate rationalisation in one of its largest customers.

Although H1 turnover in the Fuel Solutions Division was down 19.5% year-on-year, due in part to the withdrawal from lower margin Liquid Petroleum Gas ("LPG") maintenance operations, this division continued to reduce losses. The Board is encouraged that a monthly profit was achieved in August and September 2013, although we do recognise the need for continued focus on developing the recurring revenue base.

Group gross margin has increased from 52.0% in H1 2013 to 57.5% this year due in part to on-going initiatives which have reduced overall direct costs by approximately £0.44 million year on year.

The Group's profit before amortisation, share based payments and exceptional items amounted to £1.30 million (H1 2013: £1.87 million). This shortfall is a direct result of iDraught™ sales being held back, pub disposals and increased investment in the USA but was partially offset by improved performance in Vending and Fuel Solutions. Profit before taxation amounted to £0.57 million (H1 2013: £1.26 million).

Group earnings per share before exceptional costs amounted to 3.37 pence (H1 2013: 5.26 pence).

Dividend

Reflecting its confidence in the Group's medium term prospects and the strength of its cash flow, the Board is pleased to maintain the interim dividend at 1.70 pence per share (H2 2013: 1.70 pence per share), payable on 31 January 2014 to shareholders on the register as at 13 December 2013. A final dividend of 4.00 pence per share was paid in respect of the year ended 31 March 2013 on 2 August 2013.

Outlook

The Board is hopeful of a positive final outcome from the consultation on a Statutory Code, but, in the short term, remains cautious about the outlook for the Group's core Leisure Division until the new provisions of the Code are announced, particularly as the process has now extended into the Christmas trading period.

Against that background, the Board feels it appropriate to exercise continued caution, and as outlined in the Trading Update on 9 October 2013, anticipates that pre-exceptional operating profits for the year ending 31 March 2014 will be in the region of £3.0 million.

Based on this anticipated trading outcome and given the strength of the Group's cash flow, which is underpinned by high levels of recurring revenue, the Board has maintained the interim dividend and expects to do so with the final dividend.

Assuming that a satisfactory outcome from the Statutory Code consultation is announced in the second half of the current financial year, the Board remains optimistic for the growth prospects of the Company's flagship iDraught™ in the medium to longer term as well as for the other parts of the Group which are already seeing improved performance and progress, including:

· The development of new sales opportunities in the Vending Solutions Division, notably the major international opportunities for end-to-end coffee vending telemetry, including contactless payment solutions;

· The solid progress made in the Fuel Solutions division which, December holiday season trading aside, is expected to continue in H2; and

· The recent progress in the USA which provides an excellent opportunity to establish and grow iDraught™ sales in this very significant, but as yet under developed market for draught beer flow monitoring equipment.

The Board remains confident that Vianet's long term strategy is appropriate and that the Group is capable of delivering consistent and sustained growth, within the parameters of its influence and control.

James W Dickson

Executive Chairman

3 December 2013

Chief Executive and Chief Financial Officer Review

Against a challenging political backdrop, the Group's strategy of reducing costs and increasing sales of its newer products has started to deliver the anticipated benefits. However, this positive development has been more than offset by the adverse impact on iDraughtTM sales as well as the effect of accelerated pub closures, all linked to the uncertainty created by the proposed provisions of the Statutory Code for pub companies. As a result, the underlying trading results for the six months to 30 September 2013 are in accordance with the recent Trading Update of 9 October 2013.

Despite the reduction in Group turnover, on a consolidated basis, recurring revenue across the Group was approximately 80% and almost 94% in the core Leisure division, primarily driven by lower iDraught sales.

In the period exceptional costs, principally relating to redundancy costs, amounted to £0.34 million, net of a £0.1 million gain on the disposal of the investment in Universe Group plc.

The Leisure Solutions division continues to generate strong operational cash flow with £1.12 million in H1 2014 (H1 2013: £1.84 million). Against this background, the Group had an overall net debt of £2.23 million at 30 September 2013 (H1 2013: £2.36 million). The Group continues to be cash generative which provides it with a strong financial base.

Leisure Solutions

The underlying performance of the Group's core beer monitoring business remained robust over the period. Several major customers, including Enterprise Inns, Heineken, Charles Wells and Daniel Thwaites, extended their contracts despite the 'cloud' of uncertainty around the potential Statutory Code. At a time when new capital investment in iDraughtTM is being held back by this uncertainty, it continues to account for approximately 15% of the Group's beer monitoring base by number of installations.

Over the period, the division made 150 new beer monitoring installations of which 79 were higher value iDraughtTM installations. This compares to 716 new installations in the corresponding period in 2013, including 669 for iDraughtTM. Although the previous period had had the benefit of a major roll-out with Spirit Group, these numbers illustrate the significant impact of the Statutory Code inspired uncertainty on new investment in beer flow monitoring.

Furthermore, this uncertainty has also accelerated the number of pub closures and disposals which has resulted in a net reduction of 650 sites to approximately 17,000 sites in the core Leisure installation base.

Looking forward, Vianet remains confident about the future growth potential for iDraughtTM in the UK and believes that, assuming a positive outcome from the Statutory Code, many of the sales that are currently on hold will in due course flow through once there is a satisfactory resolution. In the USA, the Board has been encouraged by the continued roll out of sites, which reached over 100 at 30 September 2013. In particular, the Board is encouraged by the strong interest from national retail chains. This is a result of the Group's increased investment in the USA reported at the full year FY 2013. Although still a start-up operation, Vianet Americas' roll-out capability has advanced significantly with the creation of a high calibre, cross functional, senior USA team, as well as entering a strategic alliance with Micro Matic USA for nationwide iDraughtTM installation, service and sales support.

Vending Solutions

The Group's vending telemetry business is now trading consistently profitably with pre-exceptional profit of £0.06 million (H1 2013: loss of £0.03 million). Whilst the division has been held back by vending estate rationalisation in its largest customer and a delayed roll out in a major new customer, solid traction has been made both in sales and cost reduction. In addition, there has been good dialogue and pilots commenced trials with potential major international customers for the Group's leading end-to-end vending telemetry solutions. The Group is particularly pleased with the customer interest in its coffee telemetry solutions which is being manifested in several pilots. Turnover increased to £0.6 million in H1 (H1 2013: £0.5 million).

Fuel Solutions

Fuel Solutions reported a £0.1 million loss before exceptional costs in the period under review (H1 2013: loss £0.3 million). The division has benefitted from the exit from LPG services, which were lower margin. This accounted for £0.5 million of H1 2013 turnover and is the principal reason for the sales reduction, which has been partially offset by increased tank lining activity with higher margins. The Board has continued to review the cost base in this division and is continuing to develop its higher margin products and services. The last two months of the period were profitable at the operating level, a trend which is expected to continue, excluding the period impacted by Christmas.

 Fuel Solutions has made good progress in establishing a relevant offering for the independent forecourt sector, which comprises approximately 5,000 sites. The division is successfully aligning itself to the Petrol Retailers Association's ("PRA") Big Oil membership as the preferred "one stop shop" service provider to fuel forecourts. During H1 the division took responsibility for the Big Oil fuel pricing portal which has included a completed re-development, introduction of several Vianet fuel management modules, and migration of existing subscribers. The formal launch to the wider PRA membership and the independent sector will commence in Q4 of the Group's financial year which the Board anticipates will lead to increased traction and growing recurring income through the next financial year.

Assuming there is a satisfactory outcome to the Statutory Code, the longer term outlook across the three principal divisions comprising Leisure, Vending and Fuel Solutions remains strong, with the potential for significant further development going forward.

Consolidated Statement of Comprehensive Income

For the six months ended 30 September 2013

Consolidated Statement of Financial Position

At 30 September 2013

Summarised Consolidated Cash Flow Statement

For the six months ended 30 September 2013

Consolidated Statement of Changes in Equity

Six months ended 30 September 2012

12 months ended 31 March 2013

Six months ended 30 September 2013

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 2013 is set out on page 13.

The financial information for the year ended 31 March 2013 has been derived from the published statutory accounts. A copy of the full accounts for that period, on which the auditor issued an unqualified 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 

2. Accounting policies

These interim financial statements are for the six months ended 30 September 2013. As is permitted, the Group has chosen not to adopt IAS 34 'Interim Financial Statements' and therefore the interim financial information is not in full compliance with International Financial Reporting Standards. They have been prepared using the recognition and measurement principles of IFRS as adopted by the European Union using the historical cost convention.

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. Leisure services is analysed in to three segments - Leisure, Vending and Technology highlighting the three key divisions within leisure. Vending and Technology do not meet the quantitative thresholds required for segmental reporting.

The products/services offered by each operating segment are:

Leisure: design, product development, sale and rental of fluid monitoring and machine monitoring equipment together with the provision of data management and related services.

Fuel Solutions: wetstock analysis and related services.

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, 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 segmental results for the six months ended 30 September 2013 are as follows:

The asset base of the leisure division cannot be split across Vending and Technology.

The segmental results for the six months ended 30 September 2012 as restated to reflect the revised reporting segments, are as follows:

The asset base of the leisure division cannot be split across Vending and Technology.

The segmental results for the 12 months ended 31 March 2013 as restated to reflect the revised reporting segments, are as follows:

The asset base of the leisure division cannot be split across Vending and Technology.

4. Exceptional items

Exceptional costs principally relate to employee exit costs. Exceptional credits relate to the profit on disposal of Universe Group plc shares.

5. Tax

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

No provision for taxation has been made due to the use of historical losses associated with previous subsidiary company acquisitions.

6. Earnings per share

Earnings per share is calculated on the profit after tax of £0.567m (2012 £1.264m) and the average number of shares in issue during the period of 26,993,684 (2012: 28,248,154).

Diluted earnings per share are calculated by taking the earnings as disclosed above and the average number of shares that would be issued on the full exercise of outstanding share options of 27,030,246 (2012: 28,429,836).

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 2013 which comprises the consolidated statement of comprehensive income, the consolidated statement of financial position, 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 executive review and considered whether it contains 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. 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 2013 is not prepared, in all material respects, in accordance with the basis of accounting described in note 2.

GRANT THORNTON UK LLPAUDITOR

LEEDS3 December 2013

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