Vianet Group plc

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

Interim Results

Momentum building and on track to deliver sustained growth

Vianet Group plc (AIM: VNET), an international cloud base provider of business intelligence to the hospitality, unattended retail vending and remote asset management sectors, is pleased to announce its unaudited results for the six months ended 30 September 2022.

The Company supplies hardware and connectivity to capture operational and sales data for customers on typically 3 to 5-year agreements. The operational alerts, performance dashboards and insights enable our customers to transform their business. Our solutions, which have been used by our customers for many years are critical in normal times and become vital during times of economic downturn and uncertainty.

The Group  saw strong recovery in Smart Zones, which benefitted from the re-opening of the hospitality sector, at the same time Smart Machines has experienced solid YOY growth in both new business and unit sales. This resulted in a good H1 2023 performance and strengthened our high-quality recurring revenue base.

Fast-growing Smart Machines division provides a comprehensive end-to-end vending management system through our SmartVend platform, contactless payment solutions and business intelligence for unattended vending machines and remote assets to maximise operational efficiency, stock control and cash flow whilst reducing our customers' carbon footprint.

Smart Zones division provides SmartDraught a market leading beverage and bar management system which enables the drinks retailing industry to reduce waste and POS shrinkage, whilst driving quality, consumer experience and sales.

H1 2023 has contributed solid momentum into the second half and whilst we continue to see impacts from global semiconductor chip shortages and the economic backdrop, the management is pleased to report that trading is on track to meet full-year market expectations.

Financial highlights

Divisional highlights

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

^(b) EBIDTA is earnings before interest, tax, depreciation, and amortisation

Operational highlights

·    Our ongoing investment in data insight and relationship with Oxford Partnership allows the Group to develop new incremental revenue streams, and this will gather further momentum through FY2024.

·    Recent re-engineering of hardware to reduce costs and improve functionality will underpin the H2 2023 launch of SmartDraught, which, coupled with a new bar inventory partnership, is expected to provide new growth in the managed and independent sectors.

·    In addition to helping customers reduce their carbon footprint, we continue to press forward with our ESG agenda. Recently installed solar panel system in our HQ building will save in the region of c15 tonnes of carbon consumption per annum. By 2025 our annual energy consumption in our HQ building will have reduced by over two-thirds as we seek to ensure we play our part in reducing greenhouse emissions.

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

"The first half has benefitted from increased demand for data, which has positively impacted operating profit and our momentum going into H2.

"Despite the challenging economic backdrop, we are on track to meet market expectations for the full year and have a clear line of sight to achieving pre-pandemic trading levels during FY 2023 and into FY24.

"We have successfully laid the foundations for growth and have a great team, an exciting product range, high-quality recurring income, and strong sales pipelines in our core markets. We also see opportunities for our data capture capabilities in several other complimentary new verticals."  

- Ends -

James Dickson, Chairman & CEO, and Mark Foster CFO will provide a live presentation relating to Results for the six months ended 30 September 2022 via the Investor Meet Company platform today at 10:30am GMT.

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.

Investors can sign up to Investor Meet Company for free and add to meet Vianet Group via:

https://www.investormeetcompany.com/vianet-group-plc/register-investor

Investors who already follow Vianet Group plc on the Investor Meet Company platform will automatically be invited.

Enquiries:

Chairman and Chief Executive Officer's Statement

The Group has delivered strong year-on-year growth in both our core trading divisions resulting in a c 48% increase in adjusted operating profit to £1.21 million. Despite a challenging economic backdrop and continued supply chain pressures, this positive momentum going into H2 2023 gives us confidence in meeting full year market expectations and that the Group will be back to pre-pandemic run rates in FY2023.

Performance

Group turnover was at £7.18 million (H1 2022: £6.34 million), being 85.4% of pre-pandemic performance levels. Our high-quality recurring revenue base, on contracts varying from 3 to 5 years, grew to £6.17 million being 86% of turnover during H1 2023 (H1 2022: £5.25 million)

The Group's adjusted operating profit was up c 48% at £1.21 million (H1 2022: £0.82 million).

Operating profit post exceptional items was £1.17 million (H1 2022: £0.78 million). The pre-tax loss was £0.11 million (H1 2022: £0.36 million loss).

The Group's loss per share was 0.27 pence (H1 2022: loss 1.15 pence).

Smart Machines

New telemetry and contactless payment device sales enabled Smart Machines to increase adjusted operating profit by 14% to £0.81 million (H1 2022: £0.71 million), which is ahead of pre-pandemic performance. Our installation footprint increased c 24% YOY from c 42,000 connected units to over 52,000. The Smart Machines sales team delivered 44 new contracts, with further contract wins expected in H2 2023 following the recent launch of our award-winning SmartVend vending management software.

Smart Zones

Smart Zones adjusted operating profit recovered strongly to £1.81 million (H1 2022: £1.31 million), helped by a return to full billing of high-quality recurring income from our long-term contracts. Due to pub closures during the period, there was a net reduction of around 200 contracted sites from 10,100 to 9,900. However, we expect to reverse this trend with our new business pipeline and the imminent launch of SmartDraught.

Dividend

While the Group's recovery is on track, Vianet is not immune from macro-economic factors. We remain focused on managing our cash balances to fund working capital and invest in growth. Whilst our banking facilities provide flexibility the Board remains prudent and will refrain from re-introducing an interim dividend for H1 2023. However, subject to no further adverse factors beyond our control or a deterioration of semi-conductor supply, we expect that H2 cash generation will enable the Board to consider reintroducing a dividend in July for FY2023.

Outlook

The bounce-back recovery experienced in FY2022 and H1 2023 has continued to develop momentum into H2 2023, giving us confidence in meeting the market's expectations for the full year, and well-placed to achieve our pre-pandemic run rates.

The team work closely with our customers and suppliers on intelligent cash management solutions. We have excellent momentum to take advantage of opportunities in remote asset management, contactless payment, and market data insights in both our core and new markets.

·    The recent launch of the SmartVend management platform in H2 2023 is being well received and will generate further operational efficiencies for our customers. This will further cement Smart Machines as the marketplace's leading end-to-end solution. Our highly motivated sales and commercial team in Smart Machines are continuing to accelerate growth from the significant pipeline of opportunities from existing and new customers in the c 3 million machine UK and Europe vending machine market. In H1, new business gains resulted in 44 customers being onboarded, helping us deliver significant new device sales in H2.

·    Despite the economic backdrop, Smart Zones has a healthy sales pipeline in its core UK leased and tenanted sector driven primarily by our data capabilities. We expect new system sales in H2 2023 to offset further pub closures.

·   Growing demand for connectivity solutions to capture data, insights, and payment systems is driving new sales in our core hospitality and unattended retail sectors. The recent announcement of our partnership with Suresite, a leading forecourt retail specialist, demonstrates our progress toward leveraging our existing technology to extend our growth in other sectors such as catering and forecourt solutions.

Whilst we are not immune from the global supply chain challenges or the economic backdrop, increasing demand for our highly relevant products will continue to drive growth, high-quality recurring income, and cash generation. Ongoing investment in product development and people is creating real momentum. The Group is confident with the team, products, and financial capabilities we have to continue delivering growth of the business.

The Board remains confident that momentum and sales will continue to build as we execute our long-term strategy and deliver sustainable earnings growth and profitability.

James Dickson                                                                                 

Chairman & CEO                                                               

6 December 2022

Chief Financial Officer's Review

Operational cash generation of £1.43 million pre working capital maintains our record of strong cash conversion at 104% of EBITDA (H1 2022: £1.09 million, 110% of EBITDA). Post working capital, cash generation was £0.71 million (H1 2022: £1.40 million). Working capital in the period was impacted by c £240k of component premium, stock building investment of c £400k to ensure continuity of supply and increased trade debt from improved turnover year on year. As we write, H2 2023 stock premiums are running lower, and H1 stock build up is turning to cash. We expect this to lead to a more normalised working capital picture over H2.

Despite the economic backdrop and continued supply side pressures, we are confident that our cash trajectory is robust and can support our business needs.

Exceptional costs amounted to £0.04 million (H1 2022: £0.04 million). Taking account of the CBIL facility and overdraft, the Group had an overall net debt position of £3.56 million at the half-year (H1 2022:  £2.52 million), with gross debt of £4.01 million (H1 2022: £4.45 million). The net debt increase was primarily due to the stock premiums and the continued investment in our technology solutions. We expect the net debt position to improve in H2 onwards and a positive net cash position to be achieved around February 2024.

Smart Machines

The acceleration of contactless payment adoption and industry demand for machine connectivity   resulted in Smart Machines winning 44 new contracts in the period.

There was continued growth in new telemetry and contactless payment device connections, with overall sales of 6,306 new units (H1 2022: 5,990 units) of which 5,092 were contactless payment units (H1 2022: 5,410 units). The sales performance was very encouraging, with 24% YOY growth to just over 52,000 connected devices driving valuable growth in recurring income.

Turnover was £3.00 million (H1 2022: £2.63 million), being £0.3 million ahead of pre-pandemic performance. Recurring revenue remained strong at just over 76% (H1 2022: c70%).

Smart Zones

Against a challenging economic backdrop for our hospitality sector customers, the Group's core beer monitoring business performance was resilient, with 179 new system installations (H1 2022: 151) helping the strong divisional recovery.

Turnover of £4.18 million (H1 2022: £3.72 million) was c. 75% of pre-pandemic levels with recurring revenue strong at over 93%.

Pre-exceptional profit of £1.81 million (H1 2022: £1.31 million) represented c. 80% of our pre-pandemic performance.

Throughout the period since onset of the pandemic, customer demand for our trading insights and data analytics has increased. The Group's ongoing investment in new technology and the migration of data and services to the cloud has significantly increased the opportunities we see ahead in Smart Zones.

Looking Forward

Despite the continued uncertain economic outlook, I am encouraged that in H1, the business continues to deliver solid YOY growth and demonstrate a clear path back to pre-pandemic performance levels.

Through our strong sales pipeline and exciting new product launches, we see continued business momentum for the full year and beyond and expect to deliver FY 2023 results in line with market expectations.

Consolidated Statement of Comprehensive Income

For the six months ended 30 September 2022

Consolidated Balance Sheet

At 30 September 2022

Summarised Consolidated Cash Flow Statement

For the six months ended 30 September 2022

Statement of changes in equity

Six months ended 30 September 2022

Six months ended 30 September 2021

12 months ended 31 March 2022

Notes to the interim report

1.            Statutory information

The interim financial statements are neither audited nor reviewed and do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The financial information for the year ended 31 March 2022 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.           Accounting policies

The interim financial statements have been prepared in accordance with the AIM Rules for Companies and on a basis consistent with the accounting policies and methods of computation as published by the Group in its Annual Report for the year ended 31 March 2022, which is available on the Group's website.

The Group has chosen not to adopt IAS 34 'Interim Financial Statements' in preparing these interim financial statements and therefore the Interim financial information is not in full compliance with International Financial Reporting Standards.

Having considered current trading performance, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Financial forecasts and projections, taking account of reasonably possible changes and sensitivities in future trading performance and the market value of the Group's assets, have been prepared and show that the Group is expected to be able to operate within the level of cash and the available headroom within existing banking facilities.

The Directors are confident that the Company will be able to meet its liabilities as they fall due over the next 12 months and beyond. As a result, this financial information has been prepared on a going concern basis.

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 bars) and Smart Machines (mainly adopted in the vending sector (particularly in unattended retail vending machines) supported by Corporate/Technology & Stores costs.

The products/services offered by each operating segment are:

·    Smart Zones: Data insight & actionable data services, design, product development, sale and rental of fluid monitoring equipment.

·    Smart Machines: Data insight & actionable data services, design product development, sale and rental of machine monitoring and contactless payment equipment and services.

·    Corporate/Technology: Centralised Group overheads along with technology and stores 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 segmental results for the six months ended 30 September 2022 are as follows:

Notes to the interim report (continued)

The segmental results for the six months ended 30 September 2021 are as follows:

Notes to the interim report (continued)

The segmental results for the 12 months ended 31 March 2022 are as follows:

Notes to the interim report (continued)

4.            Exceptional items

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

5.            Tax

The credit for tax is based on the loss for the period and comprises:

The tax credit 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.            Loss per share 

Basic loss per share is calculated by dividing the earnings attributable to ordinary shareholders (loss of £77k) by the weighted average number of ordinary shares outstanding during the period.

Diluted earnings per share are calculated on the basis of loss 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 per share result.

Due to the loss in the period no dilutive effect of share options is required to be calculated.

INDEPENDENT REVIEW REPORT TO VIANET GROUP PLC

For H1 2023, we have chosen not to undertake an independent audit review which is an agreed standard approach.