Consolidated Annual Report & Accounts
Year ended 31 March 202 2
GROUP PLC
Vianet Group plc is a leading international Business
to Business (“b2b”) provider of internet enabled,
cloud based, telemetric services to the hospitality,
unattended retail vending, and remote asset
management sectors where we provide data services,
actionable management information, and business
insight. Combining data from our customers’ assets
with our smart, cloud-based, Internet of Things (‘IoT’)
solutions, we deliver critical insight and analysis that
drives superior operational performance.
With over 300 customers and nearly 215,000 connected
devices across the UK, Europe, and the US, Vianet’s
experience and knowledge form a powerful market-
leading proprietary technology and insight capability.
We connect customers to their assets via single or
multiple IoT smart devices which interface to the
asset, collecting the relevant data. The machine data
is sent to our cloud-hosted IoT platform, where it is
processed.
Vianet currently operates
in two core business
verticals. Our Smart Machines solution is designed for
the unattended coffee, snack and soft drink vending
machine market, and our Smart Zones solution is
designed for the pub and hospitality industry, both
connecting customers to their assets and delivering
powerful insights and analytics in real-time.
The Group’s Smart Zones division provides
unparalleled product quality and waste management,
business intelligence and stock management services
to the drinks retailing industry.
Our Smart Machines division provides innovative
real
time monitoring, software management
applications, business intelligence and data insights
for unattended vending machines that significantly
improve operational efficiency, stock control, sales,
and cash flow, whilst also reducing our customers’
carbon footprint. Smart Machines is one of the
largest b2b connected solutions providers in Europe
with established long-term relationships with major
industry players and growing recurring revenues,
which comprise over 85% of total revenues. The
acquisition of Vendman Systems Limited (“Vendman”)
in 2017 resulted in a further c. 200,000 machines
connected via mobile technology, the majority of
which will, over time, become higher value Smart
Machines connections.
By connecting customers to their assets, we gather
data from which
insight and analytics support
improves decision-making and enables our end-to-
end contactless payment solution. The outcome for
our clients is increased sales and asset utilisation,
reduced operating costs and improved operational
performance, with more informed customer decision-
making.
We achieve this by;
•
•
•
•
•
•
Increasing utilisation and significantly reducing
servicing costs by identifying asset performance
opportunities;
Maximising asset uptime and sales by providing
alerts on fault conditions and product availability;
seamless
touchless
payment
Providing
solutions, reducing customer dependency, in
a COVID conscious world, on ‘dirty’ cash, and
providing the contactless payment solutions
that consumers increasingly desire;
Improving
cash flow management and
resource planning by tracking real-time sales
performance and enabling more
frequent
invoicing; and
Defining potential new procedures, revenue
streams, and automation
services and
incorporating these into the customers’ existing
processes.
Real time capture and processing of machine
data from the installation base allows customers
to significantly improve the efficiency of re-
stocking and maintenance operations providing
substantial cost and sales benefits whilst also
reducing our customers’ carbon footprint.
In both divisions, the data collected is structured and
rendered through an advanced web portal and mobile
applications to provide the analytics and insight that
support better business decision making to improve
our customers’ asset utilisation and profitability.
technologies were developed
for
Whilst our
unattended retailing and hospitality, the flexibility
and functionality of our smart devices offer multiple
applications and can be connected to practically any
machine with a data output. The device used in our
Smart Machines division is the same used to connect
our contactless payment solution and communicate
payment terms to our cloud-based payment services
providers. Ongoing successful asset management
and contactless payment field trials and conversion
have been completed in other verticals such as
Fuel Forecourts, fast casual restaurant chains, and
environmental services.
As a business, we are passionate about developing
innovative solutions and employing talented people
focused on transforming business performance.
Our ambitions are underpinned by driving our
financial performance through long-term contracts
typically with recurring high cash margins and
scalable annuity revenue streams that facilitate
ongoing product development.
Vianet Group plc
i
FINANCIAL HIGHLIGHTS
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
4500
4000
3500
3000
2500
2000
1500
1000
TURNOVER PERFORMANCE
£2.36 MILLION ADJUSTED OPERATING PROFIT(a)
TURNOVER (£’000)
15,683
16,282
13,215
8,369
Mar-19
Mar-20
Mar-21
Mar-22
3950
3850
3750
3650
3550
3450
3350
3250
3150
3050
2950
2850
5000
OPERATING PROFIT (£’000)
4000
3,855
4,030
3000
2000
1000
0
-1000
2,363
Mar-19
Mar-20
Mar-21
Mar-22
(687)
RECURRING REVENUE
88%
(2021: 89%)
OPERATIONAL CASH GENERATION
NET DEBT OF £3.00 MILLION(b)
CASH GENERATION (£’000)
NET CASH/(DEBT) (£’000)
4,233
2,037
2,397
Mar-19
Mar-20
1,052
Mar-21
Mar-22
Mar-19
Mar-20
Mar-21
Mar-22
(1,196)
(952)
(2,661)
(2,999)
0
-500
-1000
-1500
-2000
-2500
-3000
-3500
BASIC EPS
NEW CONNECTIONS
0.65P
(2021: (6.75p))
16,927
(2021: 8,115)
Note:
a) Adjusted operating profit is profit before exceptional costs, amortisation, interest and share-based payments
b) Net debt includes a CBIL loan
ii
Vianet Group plc
OPERATIONAL HIGHLIGHTS
Our business currently has two divisions: Smart
Machines and Smart Zones.
Smart Machines added 12,895 connections with a
current estate at just over 48,000. The division returned
a profit of over £1.6 million, above both FY2021 and,
importantly, FY2020 pre-pandemic levels.
The Smart Zones division delivered a strong H2
rebound from C19 lifting operating profit to £2.99m
(FY2021: £0.5m), being almost 68% of FY2020 pre-
pandemic performance of £4.57m.
The Group’s Smart Zones connected device base
remains significant with c. 167,000 devices in over
10,100 premises in the UK and USA.
CONNECTED DEVICES - TOTAL
Mar-22
166,804
48,179
Mar-21
173,580
37,557
0
50,000
100,000
150,000
200,000
250,000
Smart Zones
Smart Machines
SMART MACHINES
•
•
•
•
12,895 new connected devices (FY2021: 7,215)
being 78% YOY growth.
The highest Payment Card Industry Compliance
level (PCI-DSS level 1) was re-confirmed in
September 2021
for Contactless Payment
deployment.
41 new contract wins across various customer
sizes, and 6 contract renewals.
Smart Machines adjusted operating profit of
£1.82 million (FY2021: £1.10 million) being a 19%
increase on pre-pandemic FY2020 of £1.53m.
Vianet Group plc
iii
CONTENTS
Section
Company Information
Chairman’s Statement
Strategic Report
Report of the Directors
Corporate Governance Statement
Independent Auditor’s Report
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Statement of Changes in Equity
Consolidated Cash flow Statement
Notes to the Consolidated Financial Statements
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Balance Sheet
Page
1
2
5
14
22
29
37
38
39
40
41-73
74
75
76-83
iv
Vianet Group plc
COMPANY INFORMATION
Directors
J W Dickson (Chairman and Interim CEO)
M H Foster (Chief Financial Officer)
D C Coplin (Non-Executive Director)
C Williams (Non-Executive Director)
Secretary
M H Foster
Registered office
One Surtees Way
Surtees Business Park
Stockton on Tees
TS18 3HR
Registered number
05345684
Auditors
Bankers
Nominated Adviser
Stockbroker
Solicitors
Registrars
BDO LLP
Central Square
29 Wellington Street
Leeds
LS1 4DL
Lloyds Banking Group plc
1st Floor
Black Horse House
91 Sandyford Road
Newcastle
NE1 8HQ
Cenkos Securities plc
6. 7. 8. Tokenhouse Yard
London
EC2R 7AS
Cenkos Securities plc
6. 7. 8. Tokenhouse Yard
London
EC2R 7AS
Gordons LLP
Riverside West
Whitehall Road
Leeds
LS1 4AW
Link Group
Central Square
29 Wellington Street
Leeds
LS1 4DL
Vianet Group plc
1
CHAIRMAN’S STATEMENT
James Dickson
Chairman
Performance
Given the C19 impact, there is little merit in drawing
too much of a comparison with FY2021 performance.
While comparative figures are presented for reporting
purposes alongside FY2020 for context, my comments
will be restricted to the FY2022 performance.
The focus has been on cash management, and
customer engagement, continued investment in sales
and technology as we migrate towards a fully cloud-
native environment to support growth. This approach
allows us to build momentum and accelerate our
Smart Machines growth plans whilst developing the
Smart Zones contribution and commercialising data
opportunities in new verticals. Whilst the gradual re-
opening of the hospitality sector from Q2 2022 and the
prolonged delay in return to more standard ways of
work in city centre offices has held back performance;
Group revenues rebounded to 81.2% of pre-pandemic
levels at £13.22m (FY2021: £8.37m, FY2020: £16.28m).
Against a backdrop of delayed hospitality re-opening
in H1 2022, and H2 2022 being impacted by the
additional stock premium costs currently incurred
to source microchips and inflationary pressures,
the Group delivered an adjusted operating profit of
£2.36m (FY2021: £0.69m loss, FY2020: £4.03m profit)
being almost 60% of pre-pandemic performance.
The Group had a loss before taxation of £0.17m
(FY2021: £2.82m loss, FY2020: £2.43m profit) which is
a material step forward from FY2021 with basic EPS
rising to 0.65p this year compared to a loss of 6.75p
for FY2021.
Net exceptional cost was £0.12m (FY2021: £0.34m,
FY2020: negligible), primarily related to corporate
opportunity activity and staff rationalisation net of a
contingent consideration release.
Basic earnings per share was 0.65p (FY2021: 6.75p
negative, FY2020: 8.56p positive).
A £3.5m Coronavirus Business Interruption Loan
(“CBIL”) was taken on 26 May 2020 to provide a
buffer against a prolonged recovery period and
facilitate investment in our commercial sales team
and technology roadmap. We ended the year with
net borrowings of £3.00m (FY2021: £2.66m, FY2020:
£0.95m) and a gross cash balance of £1.58m (FY2021:
£1.89m, FY2020: £1.73m).
Introduction
In last year’s Annual Report and our H1 2022 report,
I provided a comprehensive update on our proactive
response to the global Coronavirus (“C19”) pandemic.
This year the emphasis has shifted to the strength
of our recovery and the clear sales and commercial
momentum we have going into FY2023, which I expect
will return us to pre-pandemic financial performance
levels towards the end of H1 2023.
Encouragingly, strong H2 momentum resulted in
FY2022 sales rebounding to £13.2m, which equates
to 80% of FY2020 pre-pandemic levels. Adjusted
operating profit of £2.36m compared to FY2021 loss
of £0.7m, almost 60% of the pre-pandemic FY2020
performance. Whilst we note the uncertainty in global
supply chains, the strong trading momentum that we
have carried into H1 2023 gives us confidence that we
have overcome the issues caused by the pandemic
and, with the Group now returning to its pre-pandemic
performance levels, we expect to deliver strong
growth in both FY2023 and FY2024.
It has been a challenging time for any business with
a reliance on the hospitality and leisure sectors or
exposure to the pace of city centre office re-openings.
This has now been compounded by the global semi-
conductor supply chain pressures and the conflict
in Ukraine. Notwithstanding these realities, we are
confident that our sales will continue to grow, and
the H1 2023 momentum will result in a return to pre-
pandemic performance around the mid-year.
As a result of our proactive response to the pandemic,
together with the investment made in technology and
commercial resource, I am very pleased to report that
the Group has delivered resilient results and is in a
strong position to capitalise on the growing number of
excellent growth opportunities.
2
Vianet Group plc
Dividend
We are encouraged by the Group’s FY2022 results and
anticipate significantly improved trading in the coming
months, but there remain uncertainties around semi-
conductor supply, inflationary pressures and any
prolonged impact of the Ukrainian War. The Group
has completed repayment of the Vendman acquisition
loan; however, we will continue with repayment of the
CBIL facility and investment in the exciting growth
opportunities.
Given this background, the Board considers it prudent
to delay reinstating a dividend until we have returned
to pre-pandemic performance levels and have a clear
line of sight on returning to a more normal economic
and supply chain backdrop.
The Board recognises this is a significant decision
and that dividends are an important part of total
shareholder returns. Subject to global microchip
supply chain pressures abating, it fully intends to be
in a position to resume payment of dividends in the
next 12-18 months.
Board Changes and Staff
The Board’s composition and effectiveness are
continually evaluated to ensure the optimum balance
of experience and independence to support the
business and our growth ambitions.
Given the requirement to navigate the pandemic,
re-energise the organisation, drive the recovery,
and mitigate the impact of supply chain pressures,
I have remained in the post as Interim CEO, having
previously held the CEO role.
There has been the opportunity to make certain
changes to the operational structure of the Group and
I am pleased to report that the management team
continues to be energised, excited by the opportunities
and working well.
Having served on the Board for nine years, non-
executive director and chair of our audit committee,
Chris Williams intends to retire at our next AGM in
July, however he will remain until a suitable successor
is found, and a further announcement will be made
at that stage. I really appreciate the guidance, honest
counsel, and diligent support that Chris has provided
to the Board over the years, and we wish him well in
retirement.
In the face of significant challenges over the past
couple of years, the performance of our people
has been tremendous, engaging with their usual
enthusiasm, commitment, and openness. This
underpins the Group’s excellent reputation with
customers, suppliers, and other stakeholders.
The recent annual engagement survey demonstrated
further year-on-year progress in retaining our upper
quartile position in the Best Companies evaluation
and our position in Technology’s 50 Best Companies
to work for.
I am extremely proud and humbled by how our
executive team and employees have stepped up
during the last two years, and I thank them and my
Board colleagues for their ongoing commitment to
taking the Group forward.
Conclusion and Outlook
We have had a robust recovery year, emerging
strongly from the pandemic with a clear line of sight
towards achieving pre-pandemic performance levels
in FY2023, with excellent momentum and revenue
growth opportunities across our business areas.
The past two years provided a unique opportunity
to regroup, reorganise, and re-energise whilst
progressing our product development plans and
making significant investments in our marketing,
sales, commercial, and customer experience teams.
Notably, this was also an opportunity to demonstrate
and underline the value of the Group’s solutions
and deepen stakeholder relationships, resulting in
significant sales opportunities.
We have emerged out of C19 with a stronger platform,
which will allow the Group to achieve pre-pandemic
levels of performance early in H2 2023, with significant
double-digit growth in FY2024.
The Group remains on track to resume strong
earnings growth across the two divisions and new
vertical opportunities.
•
Smart Machines already has the leading end-to-
end product suite, which is being strengthened
by new releases of our SmartVend solution. At
the recent Vendies vending industry annual
awards ceremony, Vianet won the awards for
Best Supplier Website and for Best Payment
System where our SmartContact Pro all-in-one
contactless payment and telemetry solution
prevailed over international competition. We
have a high performing commercial team, long
term contracts with major blue-chip customers,
an established presence in the UK market, with a
Vianet Group plc
3
Chairman’s Statement (continued)
In the meantime, the Board’s absolute focus remains
on sales growth and cash management, particularly
with respect to stock premium costs, building on the
results achieved to be in a strong position to take
advantage of its exciting growth opportunities whilst
maintaining the health, well-being and safety of our
employees and customers.
James Dickson
Chairman
13 June 2022
significant pipeline of opportunities for telemetry
and contactless sales and data management in
both the UK and Europe. The year saw a number
of business gains, including 41 customers being
onboarded and two significant contract wins,
which underpin our growth plans.
Smart Zones has a pipeline of new site
installations in several leased and tenanted pub
companies. Our investment in hardware and
data science will enable further cost reductions,
helping to drive the growth of our installation
footprint and provide additional opportunities to
develop revenue from data.
Our investment in rapid prototyping has resulted
in successful field trials and initial orders for
our technology and services. We expect to see
further growth prospects in sectors such as
environmental, catering, forecourts and tank
monitoring.
Ongoing investment in cloud infrastructure and
mobile technology will help develop existing
revenues in Smart Zones and Smart Machines
and provide the scalability, flexibility, and speed
to support rapid growth in existing and potential
new verticals.
Our Smart Zones product roadmap and a
developing technology partnership opportunity
will bring new features and functionality which
should generate increased customer interest
and growth outside the UK leased and tenanted
market.
The Group has high
levels of contracted
recurring income and will continue to generate
strong operating cash flow.
•
•
•
•
•
The Board is confident in the long-term growth
strategy and that the Group is very well positioned
to deliver earnings growth and expand its future
strategic options.
4
Vianet Group plc
STRATEGIC REPORT
James Dickson
Interim Chief Executive
There is nothing like a crisis to create a shared sense
of purpose and provide an opportunity to demonstrate
leadership. The last two years have galvanised our
people and business and improved our customer
engagement. From the very outset of C19 and the
challenges of semi-conductor supply and stock
premium costs, we have managed cash to ensure
business continuity and enable ongoing investment,
which has positioned the Group strongly to build on
the solid results of FY2022.
Our core strategy centres on IoT and the collection
and processing of customers’ asset data, to deliver
actionable analytics and insights that drive improved
operating performance for businesses, machine
owners, operators, and brand owners.
By connecting and analysing c. 215,000 connected
assets today, Vianet can deliver insights and analytics
that support better decision-making, enabling
customers to improve their key asset utilisation and
performance metrics.
Combined with a leading-edge contactless payment
capability to support sales growth in unattended
retail machines, Vianet continues to be well placed to
strengthen its position in this rapidly developing area.
While our focus is predominantly on delivering insight
and analytics, both hardware and software remain
critical components in enabling remote assets to
be connected. Our IoT platform now supports much
greater flexibility of device connection and data
connectivity to the extent that it is possible to connect
a range of business-critical third-party devices, and
not just those we supply.
This is underpinned by our ability to collaborate
with customers to identify compelling end-to-end
solutions to address business opportunities. This
combination of capabilities will enable us to drive
sustained business growth over the coming years.
FY2022 has been challenging for many obvious
reasons, however, the Group has made excellent
progress with a sustained investment in technology
and sales and marketing capability. This has enabled us
to execute key elements of our growth plan, including
securing new and renewed contracts over several
years and successfully launching our market data
insights. Our strengthened customer relationships
have helped secure new business in existing and
new verticals such as retail, fuel forecourts and
industrial kitchens, using our contactless payment
and telemetry solutions.
Smart Machines
Conversion of opportunities
is gathering pace
following a step-change increase in sales, commercial
and marketing capability in FY2021 which saw a c.
78% growth in connected device sales in FY2022.
The investments made and the contract wins will
further accelerate the rollout of our contactless
increased machine
payment
utilisation and sales for customers, who benefit from
the reduced cost of cash handling, improved cash flow
and assured payment.
solution driving
The trend toward non-cash transactions is growing
significantly, with contactless payments giving a fast,
easy and secure transaction in a world where fewer
people are carrying cash. The impact of C19 and our
‘dirty cash’ campaign gave further impetus to this trend.
We are encouraged by the impact of our investment
in the sales team, the results achieved, and the
opportunities being progressed both in this space and
in new verticals using contactless as the lead generator.
Our route to market and distribution opportunities are
enhanced by establishing a solid network and footprint
with distributors and machine suppliers.
Smart Zones
It is well documented that through C19, we were
very proactive in supporting our hospitality sector
customers severely impacted by prolonged closures
and restrictions. Enhanced
insights and new
reporting tools helped them make better-informed
decisions, targeting support, optimising revenues,
and minimising costs.
We are seeing an increased level of interest in new
analytics and insights, aided by a new reporting suite
to support management decision-making. We are
exploring an exciting range of new services specifically
designed to help clients during this unprecedented
crisis.
OPERATING REVIEW
Smart Zones
The Smart Zones division gathered momentum,
emerging from C19 at a better than anticipated pace
going into Q2 of FY2022. This resulted in revenues of
c. £7.83m (FY2021: £3.95m, FY2020: £11.06m) being
70.8% of pre-pandemic performance and delivering a
material step forward in profit performance.
Vianet Group plc
5
Strategic Report (continued)
Sales improved to 252 (FY2021: 61, FY2020: 121) new
site installations, double that of the pre-pandemic
year. Technology upgrades to our 4th Generation IoT
hubs were completed in 1,053 pubs (FY2021: 137,
FY2020: 2,519), with a handful still to be completed in
FY2023.
UK pub closures have been difficult to assess due to
the pandemic, with prolonged temporary closures in
city centres, which may only re-open with a full return
to office-based working. The average community-
based leased and tenanted pubs have fared better.
Despite that, it is encouraging that the rate of pub
closures slowed to 535 (FY2021: 723), which, with 252
(FY2021: 61) new installations, gives a net reduction
of 357 sites (FY2021: 662 reductions, FY2020: 838
reductions). This underpins the belief that we are
now seeing a base to build on our current estate of c.
10,100 sites (FY2021: 10,800, FY2020: c. 11,700) in the
UK and Europe. There are a further c. 21 installations
in the USA, giving a total active base of c. 10,121.
The disruption to the hospitality sector during FY2021
was a significant challenge but provided opportunities
for broader engagement with our customers and
acceleration of our product roadmap. In addition to
ongoing compliance information, our customers are
increasingly seeking trading data to improve their
decision-making, optimise revenues and minimise
costs. There is also an increasing desire to embrace
digital capability to enhance efficiency and enable
more frictionless delivery from both back of house and
front of house to consumers.
Our Smart Zones connected device base remains
significant with c. 167,000 devices in the active estate.
Evermore granular data from our 4th Generation IoT
hubs, together with our increasingly sophisticated
reporting capability, delivered via our website and
mobile applications, is resulting in growth in our
insight and analytics sales. This is particularly relevant
for the provision of retail data for Brewers. We are
now contracted with the Oxford Partnership to deliver
ground-breaking insight that will support consumer-
level decision-making regarding beer brands, and we
have seen increased traction for insight data that is
expected to show further growth into FY2023.
CONNECTED DEVICES - SMART ZONES
Mar-22
145,585
10,710
3,503
7,006
Mar-21
151,853
11,116
3,537
7,074
140,000
150,000
160,000
170,000
180,000
Flowmeters
Panels
Cooler Sensors
Recirc Sensors
Machines
The emergence from C19 will see an increased focus
on operational and retail performance to drive value
from pubs, particularly for customers who are now
owned by private equity. This plays to the strength of
our operational analytics and retail insights capability
and the positive C-Level exposure we have recently
seen.
Vianet Americas revenues were c £178k (FY2021:
£130k, FY2020: c.£400k). The pandemic acutely
impacted the USA cinema market, leading to the loss
of our key customer AMC Theatres during H2 2022 as
they could no longer afford to fund our services. This
resulted in a £182k loss (FY2021: £200k loss, FY2020:
breakeven).
Whilst we have addressed the cost base to mitigate
the AMC loss, a recent strategic review has identified
interesting options which will significantly enhance the
customer benefits from our SmartDraught solution
and provide direct access to a large proportion of
national retail chains in the USA.
In addition, we were already re-engineering our
product to reduce costs and enhance the solution and
are in active dialogue with two national chains that
have re-engaged since the pandemic.
The opportunity for the Company remains significant
in the world’s largest single operator market, and
FY2023 will be a definitive year for Vianet Americas as
we commit to establishing a US profit centre.
Overall, the Board remains confident that the
Smart Zones division will return to pre-pandemic
performance levels in FY2023 whilst also delivering
growth from the UK managed pub sector, USA, and its
data insight services.
Smart Machines
Smart Machines performed well in the year, with
revenue and profit ahead of pre-pandemic levels. The
division made good progress but did not escape the
impact of C19, with major coffee brands and machine
manufacturers being slow to emerge, whilst many UK
operators were held back by the slow pace of office
re-openings.
6
Vianet Group plc
We continue to see an increase in demand and
usage of our contactless payment solution, with two
significant contract wins. We anticipate a further
acceleration of a growing business requirement and
industry trend for telemetry and contactless payment
solutions.
is
increasing recognition
There
from vending
operators that the use of cash by consumers
continues to decline. The ability to manage operations
efficiently and effectively is being materially inhibited
by the pricing inflexibility of cash, with the continued
reliance on frequent and costly machine visits.
Our leading end-to-end product portfolio, enhanced
by our launch of SmartVend, which will be complete
in H1 2023, means we are extremely well placed to
help our customers unlock the value our technology
provides, fuelling growth.
There is a significant opportunity to drive growth in
the unattended retail market by delivering market-
leading analytics and insight into premium coffee
and unattended retail snack & can channels from
new device connections and the rollout of contactless
payment capability.
The Smart Machines division’s turnover was £5.38m
(FY2021: £4.42m, FY2020: £5.22m), 3% ahead of pre-
pandemic performance resulting in an operating
profit of £1.82m (FY2021: £1.1m, FY2020: £1.53m),
being 19.0% ahead of pre-pandemic performance.
Smart Machines’ proportion of recurring revenues
returned to near pre pandemic levels at 77% (FY2021:
86%, FY2020: 80%), reflecting the revenue mix
being more toward capex this year due to a higher
proportion of hardware sales. It should be noted
that Group FY2022 recurring revenues of 88% were
positively impacted by Smart Zones’ revenue being
over 90% due to limited new sales during the various
lockdowns.
Total new device connections grew to 12,895 (FY2021:
7,215, FY2020: 12,059), 6.9% ahead of pre-pandemic
performance. This was despite a backdrop of home
working slowing the recovery of vending in city-
centre offices, vending brands and manufacturing
sectors being slow to recover, and many customers
taking the opportunity to rationalise their estates. We
were pleased with new unit sales, which increased
our overall device installations to just over c. 48,000
(FY2021: c. 38,000, FY2020: c. 38,000), giving a c.26%
estate growth in the year.
The market opportunity for the Group is significant
even when limited to the immediately addressable
market of over 300,000 vending machines in the UK. It
is estimated that the addressable market in mainland
Europe is nearer 3 million devices, and there are 15
million machines worldwide, of which only 28% have
any form of connectivity. As technology adoption
evolves, contactless transaction limits are increased
(now at £100), and the benefits of insight and analytics
in the vending sector become more widely recognised,
it is anticipated that more of the addressable market
will embrace the corresponding opportunity.
SMART MACHINE PENETRATION
48,179
831,821
Available
Penetration
Penetration
Available
Our contactless payment solution is supported by
leading industry partners Elavon, Worldpay and NMI
and has been enhanced by establishing our PCI
Master Merchant service. This allows us to speed up
the onboarding of customers for payment capability
and provide a more cost-effective reconciliation and
payment service to our customers.
Contactless payment remains a desirable solution
in a market where traditional cash-only payments
have long been an inhibitor of vending-related usage,
consumption, and customer experience. We believe
the evolution and growth of contactless payment
solutions, together with the insight of our telemetry
firmware, will materially change this dynamic and
attract more consumers to the vending vertical.
In summary, the growth prospects for our Smart
Machines business are extremely positive, and there
is a clear line of sight toward doubling the business
size by the end of FY2024.
R&D Investment
Through FY2022, the Group continued to invest
in developing and delivering its product roadmap
and operational capabilities. This has ranged from
the SmartVend product roadmap and customer
experience enhancements to revenue-generating
analytics and insights from new platforms. This allows
us to leverage new revenue streams and provide the
ability to operate a cloud based self-service model.
Vianet Group plc
7
Whilst we cannot escape the impact of stock premium
costs and inflationary pressures, we have an exciting
sales pipeline and growth opportunities that will
result in top-line recurring revenue growth for the
foreseeable future.
Finally, our high-calibre, energised team, robust
strategy, and strong earnings visibility provides a
natural platform for growth as we expand our IoT
capability and deliver data and insight applications
that help our customers make better decisions about
their assets.
Strategic Report (continued)
Simultaneously, we began the gradual migration
from legacy systems and software to a cloud-based
environment which was completed in May 2022. Further
product enhancement, a launch of SmartVend with the
final phase being delivered in H1 FY2023, and the plan
for a cloud-native environment will further boost the
services we offer to both existing customers in existing
verticals and new customers in new verticals.
The Board believes this further investment in our core
data management capability and IoT technology will
enhance the Group’s ability to improve the quality of
the existing recurring revenue streams and generate
substantial new growth.
LOOKING FORWARD
C19 has had a significant impact on our stakeholders
and economies internationally. In the year, the supply
of semi-conductor and stock premium costs added to
that impact and will still be present during FY2023.
We have acted during the period to ensure we are well
placed to manage these challenges and deliver growth
in our chosen markets.
The business is strongly placed to benefit from its
proven track record of converting data gathered from
its IoT devices into analytics and insight that drive
better decision-making for customers,
improving
asset utilisation and increasing profitability.
Smart Machines will continue
its
strong portfolio of products and services to existing
customers across Europe, with significant investment
in commercial resources adding further momentum.
leverage
to
Our cloud and mobile capability will continue to
transform the customer experience and facilitate rapidly
scalable growth in existing and new vertical markets.
Our contactless payment solution and our PCI Master
Merchant scheme, combined with the declining use of
cash by consumers and rapid technology adoption by
brand owners and machine operators, positions this
division for long-term solid year-on-year growth.
In FY2023, the Smart Zones division will deliver pre-
pandemic performance, whilst unlocking further
for stock management, enhanced
opportunities
analytics, and insight, which are expected to result
in FY2024 growth across all UK pub sectors and
the USA. Private Equity pub company ownership is
expected to drive greater focus on operating and retail
performance, where we are well placed to deliver
value for customers.
8
Vianet Group plc
FINANCIAL REVIEW
Mark Foster
Chief Financial Officer
FINANCIAL PERFORMANCE
Group operating profit, pre-exceptional costs,
amortisation and share based payments was £2.36m
(FY2021: £0.69m loss, FY2020: £4.03m profit), being
almost 60% of pre-pandemic performance.
5000
OPERATING PROFIT (£’000)
4000
3,855
4,030
AVERAGE OPERATING PROFIT PER DEVICE (£)
Mar-22
10.99
-3.25
Mar-21
-4.00
-2.00
0
2.00
4.00
6.00
8.00
10.00
12.00
This KPI is measured by taking full year operating
profit before amortisation, share based payments and
exceptional items and dividing by the total number of
connected devices at the year end.
TURNOVER
Turnover recovered well despite the tail end of
supportive terms to customers, and brands and
manufacturers still being impacted in the Smart
Machines vertical by C19. Turnover significantly
improved
(2021: £8.37m, 2020:
£16.28m) being c. 81% of pre-pandemic levels and
demonstrating a healthy recovery in both operating
verticals we currently serve.
to £13.22m
3950
3850
3750
3650
3550
3450
3350
3250
3150
3050
2950
2850
3000
2000
1000
0
-1000
RECURRING REVENUE
Group contracted recurring revenue base remains
very robust and has been strengthened by several
new 3-5 year contracts both from new customers and
contract renewals.
2,363
Mar-19
Mar-20
Mar-21
Mar-22
(687)
Despite some headwinds from the tail end of support
terms for customers emerging from the pandemic and
stock premium costs, solid management delivered
robust gross margins at c. 63% (FY2021: 60%, FY2020:
68%).
As is required, the Board has considered “Going
Concern” and concluded we have sufficient cash
and reserves to get through the 12 months post the
signing date of the statutory accounts with associated
renewed bank facilities. Going Concern is covered in
more detail in the Report of the Directors.
In this transitional year recovering from the impact
of C19, operating profit per unit has returned to a
profitable level of £10.99 per device being 61% of the
pre-pandemic FY2020 of £17.96.
Recurring revenue is measured by taking full year
revenue from service packs, licenses, rentals and
technology upgrades, as per Note 3.
TURNOVER (£’000)
15,683
16,282
13,215
8,369
18000
16000
14000
12000
10000
8000
6000
4000
2000
0
Mar-19
Mar-20
Mar-21
Mar-22
Consolidated recurring revenue across the two
divisions remained robust at 88% (2021: 89%, 2020:
92%), being sustained by both new and renewed
contracts and the tail end of contracted variation to
terms to support our customers through the pandemic
principally in Smart Zones.
Vianet Group plc
9
Financial Review (continued)
TURNOVER - MAR 22
1,606,627
EXCEPTIONALS
FY2022
‘£000
FY2021
‘£000
FY2020
‘£000
People and office
rationalisation
61
Network obsolescence costs 5
Contingent consideration
release
Loan impairment
Corporate Activity
Other items
(76)
-
127
4
Total
121
154
8
-
-
-
182
343
415
50
(1,086)
200
311
109
(1)
Largely comprising of staff rationalisation costs and
corporate activity reviews.
DIVIDEND
As noted in the Chairman’s statement, the Board has
delayed the re-introduction of a dividend in the year
(2021: nil, 2020: 1.70 pence).
Dividend cover has not been calculated due to the
dividend being delayed and a negative PBT. (2021: nil
2020: circa 1.56).
CASH
4500
4000
3500
3000
2500
2000
1500
1000
0
-500
-1000
-1500
-2000
-2500
-3000
-3500
CASH GENERATION (£’000)
4,233
2,037
2,397
Mar-19
Mar-20
1,052
Mar-21
Mar-22
NET CASH/(DEBT) (£’000)
Mar-19
Mar-20
Mar-21
Mar-22
(1,196)
(952)
(2,661)
(2,999)
11,608,581
Hardware
Recurring
The average recurring revenue per connected device
has recovered to £54.02 (2021: £35.35, 2020: £59.18).
being 91.3% of pre-pandemic levels.
AVERAGE RECURRING REVENUE PER DEVICE (£)
Mar-22
54.02
Mar-21
35.35
0
10.00
20.00
30.00
40.00
50.00
60.00
This KPI is measured by taking full year recurring
revenue and dividing by the total number of connected
devices at the year end.
PERFORMANCE SUMMARY
PBT was a small loss of £0.17m (2021: £2.82m loss,
2020: £2.43m profit) being a material improvement
from that of FY2021. This is principally due to the
impact of the tail end of pandemic customer support
measures in Smart Zones and some impact on brands
and manufacturers in Smart Machines, together with
amortisation being c£0.5m higher than in FY2021,
without which would have delivered a small PBT profit.
The table below shows the performance of the Group;
FY2022
FY2021
FY2020
Change
£13.22m
£8.37m £16.28m
57.9%
Revenue
Operating
profit/(loss)(a)
(Loss)/profit
before tax
Basic EPS
Dividend per share
Net debt (b)
£2.36m
(£0.69m)
£4.03m
(£0.17m)
0.65p
0p
£3.00m
(£2.82m)
(6.75)p
0p
£2.66m
£2.43m
8.56p
1.70p
£0.95m
(12.8%)
a) Pre-exceptional items, share based payments and amortisation
b) Refer to note 25
10
Vianet Group plc
Net cash generation pre-working capital movements was
an inflow of £2.74m (2021: £0.34m outflow, 2020: £3.72m
inflow), impacted by the strong recovery in results.
Working capital was closely managed noting the
impact of semi-conductor supply and stock premium
costs together with inflationary pressures, which
delivered a contained and managed working capital
generation outflow of £0.34m (2021: £1.39m inflow,
2020: £0.49m inflow) and has meant that after working
capital movements there was an operational cash
generation of £2.40m (2021: £1.05m, 2020: £4.22m)
which is c57% of pre-pandemic levels.
The cash generated was principally used to service
varied terms for our customers particularly in Smart
Zones and the tail end emergence from C19, full year
investment in our sales capability in Smart Machines
and continued investment in R&D and servicing of
borrowings. This resulted in an overall cash outflow
of £1.63m (2021: £1.51m inflow, 2020: £0.42m outflow
noting 2021 benefitted from a £3.5m CBIL).
At the year end, pre-mortgage, CBIL and previous
acquisition loans, the Group had gross cash of £1.58
million (2021: £1.89m, 2020: £1.73m) and net debt of
£3.00 million (2021: £2.66m, 2020: £0.95m).
C19
The pressures of C19 largely receded into H2 of the
year, notwithstanding the lower pub estate and impact
on brands and manufacturing in Smart Machines and
was to a degree replaced by the stock premium cost
impacts in the year of over £250k. The performance,
however, in the year was a strong recovery. With the
cash and facilities we have, and the expected business
plans we have developed over three indicative years,
we believe we have solid cash runway forecasts well
into 2023, which will underpin our business strategy
and allow for our growth plans.
The going concern section of the report of the Directors
makes reference to C19 and some challenges already
trailed, but based on known factors, the actions taken,
and the facilities secured, we are well placed to build
upon this year’s results with momentum.
DIVISIONAL PERFORMANCE
Currently
the Smart Zones division principally
consists of the core beer monitoring and insight
business services (including the US).
SMART ZONES
FY2022
FY2021
FY2020
Turnover
£7.83m
Operating profit(a)
£2.99m
Profit/(loss) before tax £2.23m
166,804
Connected devices
New site installations
252
YE Net premises(b)
iDraught penetration(b)
£3.95m £11.06m
£4.57m
£0.50m
£3.75m
(£0.02m)
186,554
173,580
151
61
c. 10,122 c. 10,800 c. 11,900
26.6%
29.5%
30.2%
a)
b)
Pre-exceptional items, share based payments and amortisation
UK, USA and Europe
Turnover mix is shown below with recurring revenue
being 96% (2021: 92%, 2020: 98%).
SMART ZONES TURNOVER (£) - MAR 22
Hardware 344,299
Recurring 7,487,003
Hardware
Recurring
Recurring revenue per device has improved as we
emerged from C19 to £44.89 (2021: £21.06, 2020:
£58.00) which is 77.4% of pre-pandemic levels.
AVERAGE RECURRING REVENUE PER DEVICE (£)
Mar-22
44.89
Mar-21
21.06
0
10.00
20.00
30.00
40.00
50.00
Average operating profitability per device is measured
by taking full year operating profit before amortisation,
share based payments and exceptional items and
dividing by the total number of connected devices at
the year end.
The recovery has seen average adjusted operating
profit per device in the year return to £17.93 (2021:
£2.90, 2020: £19.39) which is 92.5% of pre-pandemic
performance reflective of the cost management
during the year.
Vianet Group plc
11
Financial Review (continued)
AVERAGE OPERATING PROFIT PER DEVICE (£)
Mar-22
17.93
Mar-21
2.90
0
2.00
4.00
6.00
8.00
10.00
12.00
14.00
16.00 18.00 20.00
The division has recovered well and ahead of what was
expected at the outset of the year demonstrating both
the customer engagement for the services we provided
and the resilience of the revenue model. The net estate
at the year-end was circa 10,100 sites (UK & Europe)
versus last year’s c. 10,500 (excluding USA), the
reduction stemming from disposals and C19 impact.
Despite this, we were able to maintain a small Smart
Zones operating profit of £2.99m (2021: £0.50m,
2020: £4.57m), which was 65.4% of pre-pandemic
performance.
SMART MACHINES
The Smart Machines division consists of telemetry
insights and monitoring, and contactless payment
predominantly in the unattended vending retail and coffee
sector, as well as ERP and mobile connectivity services.
Turnover
Operating profit (a)
Profit before tax (b)
New Telemetry
|connections
New Contactless
connections
YE Net estate (c)
FY2022
FY2021
FY2020
£5.38m
£1.82m
£1.59m
£4.42m
£1.11m
£0.69m
£5.22m
£1.53m
£2.09m
2,275
2,311
3,111
10,620
c48,179
4,904
8,948
c38,000 c38,000
a) Pre-exceptional items, share based payments and amortisation on a continuing basis.
b) FY2022 includes £0.76m of deferred consideration release (2021: £nil, 2020: £1.09m)
c) Excludes circa 180,000 Vendman connections.
Turnover mix is shown in the chart below. Recurring
revenues were 77% of turnover (2021: 86%, 2020: c.
80%) reflecting the revenue mix being more capex
sales this year.
SMART MACHINES TURNOVER (£) - MAR 22
Hardware
1,262,328
Recurring 4,121,577
Hardware
Recurring
Despite some hangover from the pandemic, in particular
on office city centre re-opening pace and brands and
manufacturers taking some time to fully recover, new
contactless connections in our Smart Machines division
continued to be achieved with 10,620 new contactless
devices compared to 4,904 last year, 116.6% growth.
The estate figures reflect the net movement shown
above which also includes some customers refining
their estates in light of the pandemic.
AVERAGE RECURRING REVENUE PER DEVICE (£)
Mar-22
85.55
Mar-21
101.34
0
20.00
40.00
60.00
80.00
100.00
120.00
Average recurring revenue per device was £85.55
(2021: £101.34, 2020: £64.40), lower than last year but
above pre-pandemic levels. This is a direct result of
revenue mix where we had more bias towards capex
sales in the year alongside some estate refinement
which would impact recurring revenue overall levels.
As stated previously, this is an evolving growth story,
with overall turnover and profit growth trends being
driven by increased penetration of our contactless
solutions and so these measures will flex each year.
AVERAGE OPERATING PROFIT PER DEVICE (£)
Mar-22
37.73
Mar-21
29.34
0
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
Profit per device improved to £37.73 (2021: £29.34, 2020:
£40.32) being 93.6% of pre-pandemic performance.
While overall profit is ahead of FY2020 it must be noted
that we invested heavily in a new sales commercial
team in FY2021 and as such FY2022 has the full year
impact of that which did not exist in FY2020, hence the
overall profit per device being lower, noting also some
of the larger contracts won are at keener prices which
does impact overall profitability.
Taxation
The Group has continued to utilise available tax losses
during the year resulting in no tax being paid (2021,
£nil, 2020: £nil). The Group will continue to utilise the
available tax losses carried forward into FY2022 which
will have been modestly enhanced due to the small
PBT loss posted for the year. In the financial year under
review, the tax line includes a deferred tax credit of
12
Vianet Group plc
£0.36m (2021, £0.87m, 2020: £0.03m) recognising the
impact of the tax losses available and being utilised.
See note 20 for further detail on the deferred tax asset.
Earnings per share
Basic EPS was 0.65 pence (2021: 6.75p loss, 2020:
8.56p positive). This reflects the step forward in results.
Balance sheet and cash flow
The Group balance sheet remains resilient despite the
impact of the pandemic and addition of the CBIL facility.
The Group generated operating cash flow pre working
capital of £2.74m (2021: £0.34m outflow, 2020 £3.72m)
being 69.4% of pre-pandemic performance.
Post working capital outflow of £0.34m (2021: £1.39m
inflow, 2020: £0.49m inflow) the Group generated
operating cash flow of £2.40m (2021: £1.05m, 2020:
£4.22m) being 56.9% of pre-pandemic performance.
Working capital was impacted by the stock premium
costs we have referred to.
The cash generated was used to continue the Group’s
technology plans and to service borrowings.
At the year-end, the Group had borrowings of £4.58m
(2021: £4.57m, 2020: £1.33m), including the CBIL
facility and overdraft, with net debt of £3.00m (2021:
£2.66m, 2020: £0.95 m). The Vendman acquisition
loan of £2.0m was fully paid off in April 2022 which
has reduced our outgoings by £125k per quarter.
Our resilient balance sheet and capacity to generate
cash provides the Company with a solid base to build on
the platform of FY2022 results to pursue the significant
growth opportunities that have been identified.
Key performance indicators
Percentage of revenue from recurring income streams1
Gross Margin2
Employee Turnover3
Notes to KPIs
Business risk
The Board and senior management review business
risk two to three times per year. Naturally, over the last
two years C19 and its impact pushed the ramifications
of that to the top of the list and we covered a lot of
that in last years’ Report and Accounts and the
pathway out of C19 has been well documented. The
Directors had considered the areas of potential risk in
assessing the Group’s prospects. On the basis of their
review, and having considered various factors such as
market conditions, stock supply and premium costs,
emergence from C19, financial plans and approved
bank facilities, they believe that the business is of
sound financial footing and has a forward looking
sustainable operating future. In particular, they
note that the business has achieved a good recovery
financially in the year despite noting some of the
hurdles they have faced, set against overall market
confidence in liquidity and credit.
In addition to previous C19 comments, the Directors
consider that material business risks are limited to:
•
•
The ongoing impact of well publicised headwinds
in the pub retailing market.
The potential for a cyber security breach
where data security is compromised resulting
in unauthorised access to information which
is sensitive and/or proprietary to Vianet or its
customers. This threat is in common with most
technology businesses, however both short term
and long-term mitigation plans are in place.
Payment Card Industry Data Security Standard
(PCI DSS - Level 1) highest level of compliance
has already been achieved to support the Group’s
contactless payment solutions and by May 2022
all on premise servers are in the cloud.
•
Supply chain strains in the semi-conductor
market and stock premium costs.
Target
80%
70%
2%
Actual
2022
88%
63%
3.5%
Actual
2021
89%
61%
2.29%
Actual
2020
92%
68%
2.1%
1 Percentage of revenue from recurring income streams = recurring income streams as a percentage of all income streams. Group trading companies
aim to increase shareholder value through growth in revenue, linked to profitability (see Gross Margin below). Source data is taken from management
information. The recurring contractual nature of the Company’s income stream has led to continued improvement in performance versus target. The
achievement of this target depends on the mix of new hardware sales versus on going recurring revenue.
2 Gross Margin = Gross profit as a percentage of revenue. Group trading companies aim to generate sufficient profit for both distribution to shareholders
and re-investment in the Company, as measured by Gross Margin.
3 Employee Turnover = Gross trading companies aim to be seen as a good, attractive employer with positive values and career prospects, measured
against internal People and Development reports. In addition to normal employee turnover, the figure also includes employees leaving as a result
of business rationalisation activity.
Vianet Group plc
13
REPORT OF THE DIRECTORS
The Directors present their report and the audited financial statements for the year ended 31 March 2022.
Business Risk
Business risk is discussed in the Chief Executive’s report pages 5 to 13.
Going Concern
In our reports for FY2021 and H1 2022, the Chairman provided full insight into responding to our approach to COVID19
and our position on Going Concern which has proved valid and remains pertinent.
The Directors, after having made appropriate enquiries, including (but not limited to) a review of the Group’s budget
for 2022/2023, and cash generating capacity at least 12 months from the date of signing (underpinned by long term
contracts in place and historical results), renewal of bank facilities and support which was renewed to 31 May 2023
with a bank support note stating there was no reason why facilities would not be renewed beyond this date, have a
reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable
future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
The financial statements are prepared on a going concern basis which the directors believe to be appropriate for the
following reasons.
Current Trading
•
The Group made an operating profit of £2.36 million for the year to March 2022. The underlying group retains
a strong track record of earnings and cash growth as demonstrated in the table below. COVID19 has obviously
impacted FY21 but as government measures were relaxed in the beginning of FY22, we have delivered a credible
result to build from in what may be considered more normalised trading.
Vianet Group plc
March 2022
March 2021
March 2020
March 2019
March 2018
Turnover (£’000)
Recurring Revenue %
Operating Profit (£’000)
Cash Generation (£’000) *
Cash Generation (£’000) **
Basic EPS (p)
Dividend Cover (PAT)
13,215
88.0
2,363
2,738
2,397
0.65
N/A
8,369
89.0
(687)
(341)
1,052
(6.75)
N/A
16,282
92.0
4,030
3,739
4,233
8.56
N/A
15,683
94.0
3,855
3,990
2,036
8.87
1.23
14,561
90.0
3,621
3,523
2,974
6.55
1.16
* operational cash generation pre working capital movements (stock, debtors and creditors).
** operational cash generation post working capital movements and LTIP tax payment
•
•
•
14
The Group has bank facilities up to £1.5 million of which £1.3 million is utilised at the year end, outstanding
loans of £3.3 million, and cash on hand of £1.6 million as at 31 March 2022. The Group took advantage of the
Government supported CBIL scheme in securing a £3.5 million loan in FY2021 to ensure the impact of COVID19
was managed and allow for continued investment. Also please refer to Net Debt table in note 25. The Directors
assume that renewal of facilities will take place in May 2023 with the incumbent bank, albeit have indicative
offers from other institutions and consider the Group to be able to access similar funding requirements at that
time, as Net debt is forecast to be significantly lower by May 2023 than it was in any of the two previous years.
The Directors have prepared prudent forecasts through to March 2023, built from the detailed Board approved
FY23 budget. Further forecasts through to March 2025 have also been prepared. The forecasts include a
number of assumptions in relation to sales volume, pricing, margin impact and potential new avenues of
business. These forecasts have been extended to March 25 as noted, to ensure the forecast period covers 12
months from signing the financial statements.
The Group’s trading and cash flow forecasts have been prepared on the basis of assumptions based on more
normalised trading post COVID19, underpinned by historical performance noted above.
Vianet Group plc
The Groups cash flow forecast and projections, show that the Group will be able to operate within the level of its
facilities for at least the next 12 months.
COVID19
COVID19 is an unprecedented business interruption event impacting business and economies globally that has had a
material impact on our trading performance in FY2021 and certainly in the early months of FY2022.
The emergence from COVID19 in the year, and what is considered the minimal impact into FY23 has been separately
considered and acted upon, as part of the Directors consideration of the going concern basis of preparation. In any
downside scenario analysis performed, the Directors have considered the potential impact of COVID19 alongside the
proactive actions implemented, in its trading and, in particular, cash forecasts. Over the last two years, the Board has
taken a number of key steps and reviews in those cash projections as follows;
1)
2)
3)
4)
5)
6)
7)
8)
9)
Pro-actively worked with its customers to vary their business trading terms during the mandatory lockdown
periods, in both trading divisions, where such varied terms are appropriate. In so doing, the majority of
customers have agreed to these terms which provides a level of certainty regarding revenue and cash coming
into the business
Trading terms have now reverted to normal terms post the end of the mandatory lockdown periods
Cash forecasting based on a normalised trading economy post COVID19
Company cash and bank facilities
Overlay of opportunities won or likely to be won above those scenario reviews
Trade receivable receipts post 31 March 2023
Shareholder dividend has been delayed for the forthcoming Final dividend due in July 2022 and a view will be
taken on any interim dividend when we see the outcome of trading and the impact of semi-conductor supply
challenges settling down during FY2022
Three-year business plan
Loan and mortgage payments being paid to terms reducing by over £1 million by April 2023
10) Business running costs refined and reviewed as appropriate
Based on the hospitality recovery during FY2022 and the opening of society fully, we have a strong degree of
confidence about the hospitality sector resilience and growth assuming no further national lockdowns, added to
which the ongoing demise of cash in society will continue to present growth opportunities for our Vending telemetry
insight and contactless payment division.
The combination of all actions taken provide Vianet with a clear cash runway well into 2023, noting there are further
mitigating operational actions we can take that have not been factored in, thereby allowing the company to build on
the results posted this year, with market opportunities that clearly exist in the verticals it serves, particularly for
Contactless growth.
As a result of the above principal factors, the Board consider the Group has adequate resources to continue in
operational existence for at least 12 months from the date of signing these accounts. Thus, they continue to adopt
the going concern basis in preparing the annual financial statements. The Board does recognise, however, COVID19
has not completely gone away and currently provides a low level of uncertainty, and as such, dependent on any future
government intervention, there is a small level of uncertainty associated with any forecasts and their duration, which
could cast some doubt on our cash position beyond the minimum 12 months currently forecast from date of signing,
pre any further action we may seek to take which is referenced.
Vianet Group plc
15
Report of the Directors (continued)
Statement by the Directors in performance of their statutory duties in accordance with s172(1)
Companies Act 2006
The Board of Directors of Vianet Group plc consider that, individually and collectively, they have acted in the way
which in good faith would be most likely to promote the success of the Company for the benefit of its stakeholders,
employees, customers, suppliers, local government and communities in accordance with the stakeholder and
matters noted in S172(1)(a-f) of the Act in the decisions taken during the year reported on, having regard to;
•
•
•
•
•
•
•
The likely consequences of any decision in the long term
The interests of the Company’s employees
The need to foster the Company’s business relationships with suppliers, customers and others
The need to regularly communicate with our Investor community
The impact of the Company’s operations on the community and the environment
The desirability of the Company maintaining a reputation for high standards of business conduct,
The need to act fairly as between members of the Company
The Board undertook a share buyback programme during the year in addition to which bank facilities were renewed
through to 31 May 2023 with indicative support well beyond that date.
The Board looked to promote the success of the Company, having regard to the long term, whilst taking into account
the interests of all stakeholders. Our strategy is designed to secure the long-term financial viability of the Company
to the benefit of its members and all stakeholders. A main feature of this is to continue to operate the business within
tight budgetary controls and in line with regulatory requirements. This was done in particular by reference to:
•
•
•
•
•
•
•
•
our well documented response to the Covid-19 pandemic
our continued and ongoing communication with our employees
our continued and ongoing communication with our investor community
our continued priority for health and safety improvement measured through ongoing risk assessments, the
KPIs on incidents and enhancement to health and safety across the business
our continued review towards environmental compliance and protection
the approval of our strategic objectives (‘our strategy’) for the Company
the business plan for the next financial year (‘our plan’)
the approval of terms to enter into significant contracts
We engage with stakeholders through regular meetings and dialogue with employees, customers, suppliers and
investors. We undertake customer satisfaction surveys, employee Best Company engagement survey (retaining top
end of the 1 star rating) and host regular live employee Q&A sessions.
Our response to the Covid-19 pandemic involved considering and engaging with a number of stakeholder groups in
order to ensure we pivoted towards our customers and their needs, the absolute safety of our employees enabling
work in Covid secure environments which includes regular fogging sanitisation of our building, suppliers (amongst
others), whilst maintaining the continuance of our essential services, with a backdrop of staying true to our values
and safeguarding the future long-term health of our business.
Other key actions including delaying the dividend are covered in the Chairman’s and CEO report.
16
Vianet Group plc
The Board continually recognises that our employees are fundamental to the success of the Company and the
delivery of our plan and we are proud of how they have engaged over the last two very challenging year’s. We aim to be
a responsible employer in our approach to the pay and benefits our employees receive. The health, safety and well-
being of our employees is of primary concern in the way we do business and is monitored extensively by the Board.
As the Board of Directors, our intention is to behave responsibly to all stakeholders and to ensure that management
operate the business in a responsible manner, operating within the high standards of business conduct and good
governance expected for a business such as ours. Acting in this way will contribute to the delivery of our plan.
As the Board of Directors, our intention is also to make decisions which lead to the long-term success of the Company
whilst behaving responsibly towards our Shareholders, treating them fairly and equally, so they benefit from the
successful delivery of our strategy and plan.
Financial Instruments
Information about the use of financial instruments by the company and its subsidiaries and the Group’s financial risk
management policies is given in note 19.
Environment
The Group recognises the important role it plays in the environment and communities within which it operates. The
health, safety and wellbeing of our employees, compliance with regulations and monitoring of energy usage are
important business priorities for the Group. Vianet is committed to conducting its business operations in an open
and responsible manner and we recognise the need to continually improve our operations where practical to do so,
to reduce our impact on the environment; to continuously improve assets and processes; to ensure the safety and
welfare of our employees; and to act as a good neighbour, minimising the impact of our operations on the wider
community.
The Company is not defined as a large company required to meet the full reporting required under the Streamlined
Energy and Carbon Reporting (SECR) needs. That said, however, the company recognizes SECR and environmental
objectives are an important matter to continually seek to address.
The company is not directly involved in manufacturing - we are a people based global business operating from one
UK head office. As a company, however, we have embarked on an ESG programme that involved assessing how our
office we operate from influences the environment and what actions we can take to improve that impact.
A full external audit was undertaken which in summary confirmed we consume in the region of 300,000 KWH or
energy a year, or c66 tonnes of carbon.
We have at the time of writing implemented a number of actions including tendering for a grant assisted solar project
that together with other initiatives would see that carbon consumption figure reduce to around 20 tonnes per annum
from somewhere around April 2023, assuming the projects all get completed in that time scale.
Further work beyond those initiatives will then be undertaken to demonstrate how our products and services reduce
the carbon footprint significantly for some of our customer base, and these factors will help us determine by when
we can be confident of being a net zero carbon user.
The Group’s policy with regard to the environment today, and in particular Health and Safety requirements, is to
ensure that the Group’s operational subsidiaries understand and effectively operate in such a way that they comply
with all the legal requirements relating to the health and safety environments in which they operate. During the
period covered by this report, no Group company has incurred any fine or penalties or been investigated for any
breach of health and safety regulations.
Vianet Group plc
17
Report of the Directors (continued)
Employees
The Group places great importance on the involvement of its employees, the majority of whom are able to work closely
with their managers on a daily basis. Employees are encouraged to be involved in the Group’s performance through
regular performance management, live Q&A company-wide sessions and in the adoption of an open door policy of
engagement. Employees have frequent opportunities to meet and have discussions with management. The Group
aims to keep employees regularly informed of the financial and economic factors affecting the performance of the
Group and its objectives in part through the Group intranet and website and in part through regular communication.
The Group engages the Best Companies engagement survey as an external accredited benchmark for employee
engagement and in the year being reported on we retained our 1 star company being only c11% points of a 2 star
company (out of an accreditation range of 1 – 3 stars).
The quality and commitment of our people overall has continued to play a major role in our business performance,
despite several changes in personnel in the previous 12 months. This has been demonstrated in many ways,
including improvements in employee engagement survey, customer satisfaction, contract gains and contained
financial performance in light of the pandemic, the development of customer offering and the flexibility they have
shown in adapting to changing business requirements and new ways of working. Employees’ performance is aligned
to company goals through an annual performance review process that is carried out with all employees. Employee
turnover was 3.5% on average per month, above the target of 2% we have set.
The Group’s policy is that, where it is reasonable and practicable within existing legislation, all employees, including
disabled persons, are treated in the same way in matters relating to employment, training and career development.
We adopt an equal opportunities approach.
Research and Development
The Group has a continuing commitment to levels of research and investment in ensuring systems are at the
forefront of customer needs to ensure future growth. During the year expenditure on research and development was
£1,975,000 (2021: £2,312,000, 2020: £1,941,000) all of which has been capitalised as an asset on the balance sheet
(2021: £2,312,000, 2020: £1,941,000).
Dividends
No final dividend will be paid this year (2021: final nil, 2020: final nil), taking the full year dividend to nil (2021: nil,
2020: 1.70p).
Capital Structure
Details of the authorised and issued share capital, together with details of the movements in the company’s issued
share capital during the year are shown in note 21. The company has one class of ordinary shares which carry no
right to fixed income. Each share carries the right to one vote at general meetings of the company. The company
cancelled down 146,500 shares at a cost of c£127k, average 85.98p per share during the year, leaving number of
shares in issue at 28,808,914. Also 2,000 share options were exercised during the year.
There are no specific restrictions on the size of a holding nor on the transfer of shares, which are both governed by
the general provisions of the Articles of Association and prevailing legislation.
The Directors are not aware of any agreements between holders of the company’s shares that may result in
restrictions on the transfer of securities or on voting rights.
Details of employee share schemes are set out in note 23 and no person has any special rights of control over the
company’s share capital and all issued shares are fully paid.
Directors’ Indemnity
Qualifying third party indemnity provisions are in force for the benefit of the directors.
18
Vianet Group plc
Directors and their interests
The current directors of the company are shown below.
Those directors serving at the end of the period had interests in the share capital of the company at 31 March as
follows:
J W Dickson
M H Foster
C Williams
D Coplin
Directors’ emoluments
Details of Directors’ emoluments for the year are as follows:
Ordinary
shares of
10p each
2022
5,054,981
343,050
20,250
7,500
Ordinary
shares of
10p each
2021
5,054,981
343,050
20,250
7,500
Executive
S W Darling
M H Foster
Non-executive
J W Dickson (acting CEO)
C Williams
D Coplin
Total
Salary
and
fees
2022
£’000
Other
emoluments
2022
£’000
Total
emoluments
2022
£’000
Salary
and
fees
2021
£’000
Other
emoluments
2021
£’000
Total
emoluments
2021
£’000
-
221
213
32
32
498
-
39
-
-
-
39
-
260
213
32
32
537
404
189
214
29
30
866
12
34
-
-
-
46
416
223
214
29
30
912
1. Executive remuneration is determined by the remuneration committee consisting of non-executive Directors C
Williams, D Coplin and J W Dickson. Director remuneration is externally benchmarked to ensure it is appropriate
for the roles the directors undertake.
2. S W Darling resigned on 23 February 2021.
3. A payment of £187,000 was recognised in respect of S W Darling’s notice period.
4. A payment of nil was paid to S W Darling in respect of compensation for loss of office (2021: £30,000, 2020: Nil)
5. Other emoluments received consist of the provision for private medical care, motor car allowances and pension
contributions.
6. Whilst acting as Chairman and Interim CEO, J W Dickson’s remuneration for FY2023 has been set at £209,400 per
annum instead of Chairman’s fee plus additional days.
7. C William’s fees for 2021 were paid to MCHD Investments Limited, a company of which he is a Director.
8. D Coplin’s fees for 2021 were paid to The Envisioners Limited, a company of which he is a Director.
9. Pension contributions represent payments made to defined contribution schemes. Payments made are disclosed
within other emoluments. Non-executive Directors are not entitled to retirement benefits.
10. The company does not have a formal policy for directors notice periods, they are in line with best practice for an
AIM listed business.
11. M H Foster has c17 years’ service, J W Dickson 19 years’ service, C Williams 9 years’ service, D Coplin 5 years’
service.
Vianet Group plc
19
Report of the Directors (continued)
Directors’ share options
Details of the share options held by Directors are as follows:
M H Foster
At
1 April
2021
135,000
124,000
100,000
At
31 March
2022
135,000
124,000
100,000
Option
price
Date granted
85.0p
May 2014
103.0p December 2015
February 2021
72.0p
Share options are exercisable between nil and ten years from the date of the grant.
No options have been exercised by Directors in the current or prior year.
The market price of the Company’s shares at the end of the financial year was 87.5p and the range of market prices
during the year was between 117.5p and 73.5p.
Long Term Incentive Plan
Vianet adopted a new LTIP scheme on 17 December 2015. On 21 December 2015, awards were granted to five
members of staff, who each had a percentage entitlement in the overall awards pool. Further detail is provided on
page 70. The LTIP scheme remains in place for one member of staff. No awards were made during the year.
Substantial Shareholdings
The Company has been informed that on 10 May 2022 the following shareholders (excluding Directors) held substantial
holdings of the issued ordinary shares of the company:
Gresham House plc
Liontrust Asset Management
AXA SA
Interactive Investor Trading
Hargreaves Lansdown plc
Canaccord Genuity
City Asset Management
Teviot Partners LLP
Holding of
Ordinary shares
Number
Issued
Share capital
%
5,047,286
2,465,942
1,716,000
1,529,097
1,207,245
1,017,078
1,010,130
923,470
17.52%
8.56%
5.96%
5.31%
4.19%
3.53%
3.51%
3.21%
Annual General Meeting
The Annual General Meeting will be held on 13 July 2022 at 11.00am, at the offices of Vianet Group plc, One Surtees
Way, Surtees Business Park, Stockton on Tees, TS18 3HR
Post Balance Sheet Events
No post balance sheet events were noted.
20
Vianet Group plc
Statement of Directors’ responsibilities for the financial statements
The directors are responsible for preparing the annual report and the financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have elected to prepare the group and company financial statements in accordance with UK adopted
International Accounting Standards, (‘IFRS’) in conformity with the requirements of Companies Act 2006. Under
company law the directors must not approve the financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the group and company and of the profit or loss of the group for that period.
The directors are also required to prepare financial statements in accordance with the rules of the London Stock
Exchange for companies trading securities on AIM.
In preparing these financial statements, the directors are required to:
•
select suitable accounting policies and then apply them consistently
• make judgements and accounting estimates that are reasonable and prudent
•
•
state whether they have been prepared in accordance with UK adopted international accounting standards
(IFRS) in conformity with the requirements of Companies Act 2006, subject to any material departures disclosed
and explained in the financial statements
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the
company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the
company’s transactions and disclose with reasonable accuracy at any time the financial position of the company
and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006.
They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Website publication
The directors are responsible for ensuring the annual report and the financial statements are made available on a
website. Financial statements are published on the company’s website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in
other jurisdictions. The maintenance and integrity of the company’s website is the responsibility of the directors. The
directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
Auditor
BDO LLP has indicated its willingness to continue in office. A resolution for its re-appointment as independent
auditor will be proposed at the AGM.
Approval
The report of the Directors was approved by the Board on 13 June 2022 and signed on its behalf by:
Mark Foster
Director
Vianet Group plc
21
CORPORATE GOVERNANCE STATEMENT
General Principle
The QCA Code
The Company has adopted the QCA Code in compliance with Aim Rule 26. A very in depth explanation on how Vianet
complies with the Code and the ten principles of the Code and how the Company addresses these can be found on
the Company Investor website link noted below;
https://vianetplc.com/wp-content/uploads/2022/05/2022.03.16-VNET-Corporate-Governance-Statement-.pdf
We summarise the key Corporate Governance features below and, in addition, we further comment on certain
principles of the Code as follows;
Principle 1: Establish a strategy and business model which promotes long terms value for
stakeholders
Narrative covering the strategy and business model of the Group is included in the Strategic Report to this Annual
Report and Financial statements, include key challenges in their execution.
Principle 8: Promote a culture that is based on our values and behaviours
The Board aims to lead by example and do what is in the best interests of the Company. The Group’s culture, values
and frameworks, whereby everyone at Vianet collectively and individually always ‘seeks to do the right thing’ for
customers, suppliers, colleagues, shareholders and other stakeholders, are fundamental to delivering business
growth.
Living and breathing ‘doing the right thing’ not only underpins Vianet’s ethos and corporate governance but also the
reputation for integrity and transparency, which is a key component of the Group’s solutions for customers.
The Board ensures that the company has the means to determine that values are recognised and respected through
its reward and recognition frameworks from performance and development review through to recognition awards
Over the period, general positive feedback has been received from shareholders in relation to the management.
There have been no other key governance matters to report during the year.
The Board
The below disclosures in respect of the makeup of the Board are considered to comply with Principle 5: Maintain the
board as a well-functioning balanced team led by the Chair:
The Board currently consists of one Executive and three Non-Executive Directors as follows:
Executive Directors
M H Foster (Chief Financial Officer and Company Secretary)
Non-Executive Directors
J W Dickson (Chairman/Interim CEO)
C Williams
D Coplin
All Directors have access to the advice and services of the Company Secretary.
There is a clear division of responsibilities between the Chairman, who is responsible for the running of the Board,
and the Chief Executive Officer, who, together with the other Executive Director, are responsible for running the
business. At the current time, the Chairman is acting as the stand-in CEO, supported by the CFO.
22
Vianet Group plc
The Board meets regularly, with no less than eight meetings planned over 10 days in any one calendar year. All Board
members attended each meeting that was planned in the year.
Each Director is provided with sufficient information to enable them to consider matters in good time for meetings
and enable them to discharge their duties properly. There is a formal schedule of matters reserved for Board approval.
In principle the Board agrees the Group business plan, determines overall Group Strategy, acquisition, investment,
people and development and health and safety policies, as well as approval for major items of capital expenditure.
The Directors continually ensure they are trained in association with duties and responsibilities of being a Director
of a listed Company.
To add further detail in support of the QCA code;
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills
and capabilities
The Board is satisfied that, between the Directors, it has an effective and appropriate balance of skills and experience,
including in the areas of IOT, b2b, software as a service, finance, innovation, international trading, ecommerce and
marketing. All Directors receive regular and timely information on the Group’s operational and financial performance.
Relevant information is circulated to the Directors in advance of meetings. The business reports monthly on its
headline performance against its agreed budget, and the Board reviews the monthly update on performance and any
significant variances are reviewed at each meeting.
All Directors retire by rotation at regular intervals in accordance with the Company’s Articles of Association.
Appointment, removal and re-election of Directors
The Board makes decisions regarding the appointment and removal of Directors, and there is a formal, rigorous
and transparent procedure for appointments. The Company’s Articles of Association require that one-third of the
Directors must stand for re-election by shareholders annually in rotation; that all Directors must stand for re-election
at least once every three years; and that any new Directors appointed during the year must stand for election at the
AGM immediately following their appointment.
Mark Foster, Chief Financial Officer, and David Coplin, NED retired by rotation this year and, being eligible for re-
election were re-appointed to the Board at the AGM on 13 July 2022.
Independent advice
All Directors are able to take independent professional advice in the furtherance of their duties, if necessary, at
the Company’s expense. In addition, the Directors have direct access to the advice and services of the Mark Foster,
Company Secretary and Chief Financial Officer who in turn may refer directly to the Group’s advisors, in particular
the company lawyers and auditors.
The Company Secretary is responsible for ensuring that the Board procedures are followed and that the Company
complies with all applicable rules and regulations, governing its operation
The Board and senior management from time to time seek advice on significant matters from external advisers.
These advisers include, amongst others, the Company’s nominated adviser and broker, public relations, external
auditors, legal advisers, capital advisory services and remuneration advisory services.
The independent non-executive Directors being James Dickson (Chairman), currently interim CEO, Chris Williams
and David Coplin, bring an independent judgement to the management of the Group. They are free from any business
or other relationships which could interfere with the exercise of their judgement. The non-executive Directors fulfil
a key role in corporate accountability.
Vianet Group plc
23
Corporate Governance statement (continued)
The Board considers, after careful review, that the Non-Executive Directors bring an independent judgement to bear.
In particular, the Board has considered the independence of James Dickson, Non-Executive Chairman, now interim
CEO - who was CEO until 2013 and holds a shareholding of c17.5% and has concluded that his interests are fully
aligned to shareholders.
The Board is satisfied that it has a suitable balance between independence on the one hand, and knowledge of the
Company and markets on the other, to enable it to discharge its duties and responsibilities effectively. All Directors
are encouraged to use their independent judgement and to challenge all matters, whether strategic or operational.
The Chairman holds regular update meetings with each Director to ensure they are performing as they are required
and comfortable that they are allowed to do so independently in an inclusive environment. During the year nine Board
meetings took place including two two-day Performance & Strategy Reviews with senior management. All Board
members attended all meetings.
Key Board activities this year included:
-
-
-
-
-
-
-
-
-
-
Input into our strategic priorities and accelerating the growth plan
Ongoing open dialogue with the investment community, including follow up meetings with the Chairman.
Considered our financial and non-financial policies.
Discussed the Group’s capital structure and financial strategy, including capital investments, shareholder
returns and the dividend policy
Reviewed the investment justification and progress of the Group’s technology platform and infrastructure
development.
Discussed internal governance processes
Reviewed the Group risk register
Reviewed feedback from shareholders post full and half year results
Ongoing review and monitoring of Health & Safety, GDPR and Cyber Security
Discussed and supported the Group’s response to the Coronavirus pandemic including a Going Concern review.
Time commitments and meetings attended by directors is available in the Company’s annual report however the
Company’s Non-Executive Directors are expected to commit between 15-18 days per year to the Company and the
Chairman is expected to commit at least 40 days per year to the Company, however as the Chairman has been acting
as the Interim CEO since December 2020, a minimum of 4 days per week has been committed
Directors’ conflict of interest
The Company has effective procedures in place to monitor and deal with conflicts of interest. The Board is aware of
the other commitments and interests of its Directors, and changes to these commitments and interests are reported
to and, where appropriate, agreed with the rest of the Board.
As regards evaluating Board performance, we adopt Principle 7 of the QCA code, noted below;
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous
improvement
The Chairman assesses the individual contributions of each of the members of the team on an ongoing basis to
ensure that:
Their contribution is relevant and effective
That they are committed
Where relevant, they have maintained their independence
-
-
-
24
Vianet Group plc
The chairman holds regular individual reviews with each board member to discuss matters reserved for the Board
and matters impacting Board effectiveness.
The last internal Board effectiveness evaluation sought anonymous feedback from Directors and senior managers
covering areas including structure & skills, operating effectiveness, quality & timeliness of information, and board
development. This exercise identified a number of areas for positive action including a modest increase in the number
of Board meetings from 6 to 9 comprising:
-
-
Two two-day Board meetings incorporating Performance & Strategy reviews with senior management attending
7 one day Board meetings. The majority of which have been online MS Teams meetings due to COVID
This resulted in greater exposure between management and Non-Executive Directors, and also enables the board to
have more in depth discussions with more timely decision making and action.
The evaluation also concluded that the Chairman, whilst occasionally direct, has an open, inclusive leadership style,
demonstrates independence and objectivity, and has a strong understanding of the business.
The next Board Effectiveness Review is due in September 2023, when we intend to review the performance of the
team as a unit to ensure that the members of the board collectively function in an efficient and productive manner
Board Committees
The Group has established a number of committees, details of which are set out below and all of which operate with
defined Terms of Reference. All committees operate within those terms of reference and where appropriate pay due
regard to the Companies risk register as needed in discharging the responsibilities of their roles.
As regards evaluating Board committees, we adopt Principle 10 of the QCA code, noted below;
Audit Committee
This consists of:
C Williams (Chairman)
J W Dickson
D Coplin
It meets at least twice in any year and is usually attended as a minimum by the Chief Executive Officer and the Chief
Financial Officer, as well as the Group’s External Auditor. All members attended each meeting that occurred during
the year.
The Audit Committee has terms of reference (which are available for inspection) to report on matters such as the
Group’s annual accounts, interim reports, major accounting issues and developments, the appointment of external
auditor and their fee, the objectivity of the auditor, the Group’s statement on internal control systems and the scope
and findings of external audit.
The Audit Committee business covers Full and Interim audit results, review of half and full year results announcements,
key audit findings and a review of the risk register. All of the Committee’s duties were discharged during the period by
a review of all these business areas. An audit committee meeting was held on 8 June 2021 in respect of the full year
results to 31 March 2021 with BDO LLP. An Audit Committee was held on 30 November 2021 for the half year results.
The external auditors plan for the audit of these Group financial statements was approved and an Audit Committee
meeting was held on 7 June 2022 to review and discuss the financial statements, including the external auditors
detailed audit completion report including the consideration of key audit matters and risks.
Vianet Group plc
25
Corporate Governance statement (continued)
Remuneration Committee
This consists of:
D Coplin (Chairman)
J W Dickson
C Williams
The Remuneration Committee has terms of reference (which are available for inspection) and meets at least twice
per year, reviewing and advising upon the remuneration and benefit packages of the Executive Directors and other
senior management. The remuneration of the Chairman and non-executive Directors is normally decided upon
by the Board’s Executive Directors, however the Chairman’s remuneration for the additional responsibility on the
interim CEO was decided by the non-executive directors and the CFO. All members attended each meeting that
occurred during the year.
The Remuneration policy is to attract, retain and motivate high quality executives capable of achieving the Group’s
objectives and thereby enhancing shareholder value.
The remuneration of the Executive Directors consists of a basic salary and benefits, performance related bonuses
and share options. The non-Executive Directors are eligible for performance related share options. Information on
Directors share interests, Directors remuneration & emoluments, Directors share options and share option schemes
can be found above in the Report of the Directors on pages 19 and 20.
Nominations Committee
This consists of:
J W Dickson (Chairman)
C Williams
D Coplin
The Committee has met two times during the course of the year with particular focus on senior management
structure. The Committee has terms of reference which are available for inspection. All members attended each
meeting that occurred during the year.
Internal Control and Risk Management
The below disclosures in respect of the internal control and risk management are considered to comply with Principle
4: Embed effective risk management, considering opportunities and threats, throughout the organisation:
The Board has overall responsibility for the Group’s system of internal control and for reviewing its effectiveness, and
recognises these systems are designed to manage rather than eliminate the risk of material loss.
The Board monitors risk through ongoing processes and provides assurance that the significant risks faced by the
Group are being identified, evaluated and appropriately managed.
The main elements of the internal control systems are:
• management structure with clearly identified responsibilities
•
•
•
26
budget setting process including longer term forecast review and plans
comprehensive monthly financial reporting system, with comparison to budget, supported by written report
from the Chief Executive Officer and Chief Financial Officer
report to the Audit Committee from the external auditor stating the material findings arising from the audit.
This report is also considered by the main Board and action taken where appropriate
Vianet Group plc
•
•
•
a framework for capital expenditure and controls including authorisation procedures and rules relating to
delegation of authority
risk management policies to manage issues relating to health and safety, environment, legal compliance,
insurance and security
day to day hands on involvement of the Executive Directors
As a result of the above systems and controls, and due to its current size, the Group does not operate an internal
audit function, but is keeping its position under review. We believe these are key areas of risk under Companies Act
2006 s414C (2) and are noted below;
Risk description
Mitigation
Covid-19 pandemic (when this was prevalent –
less so now)
General economic risk
The performance of the business is linked to economic
activity in two vertical markets currently, the pub
retailing market and unattended retail vending
Cyber Security
A cyber security breach where customer data security
is compromised resulting in unauthorised access to
sensitive/proprietary customer information.
Environmental sustainability
The company is seeking to address a sustainability
agenda around health, safety and wellbeing, operating
to environmental
efficiently giving due regard
responsibility.
Price Risk
Price pressure from suppliers in the semi-conductor
commodity market
•
•
•
•
•
•
•
All staff that can work from home do.
All sites have been equipped to be Covid-19
compliant
All operational staff have been trained to cover
for multiple tasks to cover absenteeism due to
Covid-19
Minimisation of visitors to site and social
distancing
We operate Covid secure working practices in
accordance with all health and safety guidelines
The business secured varied contracts with all
customers that ensured a revenue stream was
achieved and took advantage of a CBIL £3.5m
loan and furlough funding which supported our
investment into the business and payroll costs
Pub retailing market has been severely
hampered due to national Covid19 lockdown
measures in the year
•
Ongoing PCI-DSS compliance – Level 1
•
See above section.
•
Agree forward buying of components
Technological factors
Technological risk factors may cause technology in
use to become obsolete or too costly to maintain
•
•
Vianet has a full technology strategy both
commercially and infrastructure wise
Employ strategic planning to make timely
investments in existing and new equipment
Vianet Group plc
27
Corporate Governance statement (continued)
Risk description
Mitigation
Ukraine/Russia risk
While the impact currently is minimal, the Board will
monitor events and sanctions as they unfold and act
accordingly.
•
The Company has implemented all recommended
review actions and has support contracts ready
to implement if needed
Shareholder and Stakeholder Communication
The Group places a high level of importance on communicating with its shareholders and key stakeholders including
customers, suppliers and employees. The Group welcomes and encourages such dialogue with all such parties and
with the investor community in compliance with the regulations governed by the London Stock Exchange. The Group
actively engages directly with shareholders and works closely with Cenkos its nominated advisor and broker, Yellow
Jersey and H2Glenfern, investor communications and corporate finance & relations advisors.
While attending to full and half year investor meetings and follow up, the Directors actively engage in new and
existing investor contact throughout each reporting period. This is also the case with customers and suppliers as
needed, and very importantly with employees, undertaking an annual engagement survey to determine employee
engagement and views on the company and actions that may need to be considered to build upon that engagement.
Whilst the pandemic and the emergence from it has been challenging it has afforded the Board and management with
a great opportunity to demonstrate leadership and engage proactively with all stakeholders. Many of the activities
and actions have been covered in the Chairman’s report, however it is worthy to note that employee engagement
and welfare management has been exceptionally good, including regular live all business MS Teams question and
answer sessions attended by over 90% of employees with the recording available to those who were unable to join.
The Group prides itself on pro-active communication across all interested parties where appropriate as our
relationships with investors, customers, suppliers and employees form core foundations upon which the businesses
success is built, and it is the Directors considered view that we treat all such parties fairly and impartially.
Share Options
The share option plans in existence on 31 March 2022 were the EMI plan, the Executive plan, the Employee Plan,
and a Long-Term Incentive Plan. Share options will be issued at appropriate intervals in order to motivate and retain
Executive Directors, senior management and other key staff whilst aligning their interests with those of the Group’s
shareholders. Such grants are approved by the Remuneration Committee.
28
Vianet Group plc
INDEPENDENT AUDITOR’S REPORT TO
THE MEMBERS OF VIANET GROUP PLC
Opinion on the financial statements
In our opinion:
•
•
•
•
the financial statements give a true and fair view of the state of the Group’s and of the Parent Company’s affairs
as at 31 March 2022 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with UK adopted international
accounting standards;
the Parent Company financial statements have been properly prepared in accordance with United Kingdom
Accounting Standards; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements of Vianet Group plc (the ‘Parent Company’) and its subsidiaries (the ‘Group’) for
the year ended 31 March 2022 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated
Balance Sheet, the Consolidated Statement of Changes in Equity, the Consolidated Cash Flow Statement, and notes
to the financial statements, the Company Balance Sheet, the Company Statement of Changes in Equity, notes to the
Company Balance Sheet including a summary of significant accounting policies.
The financial reporting framework that has been applied in the preparation of the Group financial statements is
applicable law and UK adopted international accounting standards. The financial reporting framework that has
been applied in the preparation of the Parent Company financial statements is applicable law and United Kingdom
Accounting Standards, including Financial Reporting Standard 101 Reduced Disclosure Framework (United Kingdom
Generally Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our
responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remain independent of the Group and the Parent Company in accordance with the ethical requirements that are
relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group
and the Parent Company’s ability to continue to adopt the going concern basis of accounting included:
•
•
•
Obtaining and examining the Board’s Going concern paper, alongside supporting forecasts for the period of at
least twelve months from when the financial statements are authorised for issue.
Challenging Director’s assumptions, such as revenue pipeline, as used in the forecast period through review of
the historic forecast accuracy, comparing forecasts to post year end results, cost performance, current business
trends and pipeline/contract analysis.
Considering the Board’s probable scenarios of sensitivities, to understand the robustness of the forecast trading
model and the headroom available to the Group and Parent Company.
Vianet Group plc
29
Independent auditor’s report (continued)
•
•
Review of the available cash and financing facilities within the Group, and evaluation of the Directors’ downside
sensitivities on cash flow headroom, incorporating a review of financial covenants compliance and headroom
analysis throughout the forecast period. This included the renewal of financial facilities which occurred during
May 2022.
Review of the disclosures made in the financial statements.. We assessed whether these adequately disclose the
basis of the judgements taken and the view formed by the Directors with respect to going concern.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue
as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
Overview
Coverage
100% of Group loss before tax
99% of Group revenue
100% of Group total assets
Key audit matters
2022
2021
Going concern assessment
Valuation of goodwill and intangibles
Capitalisation of development costs
X
X
Revenue recognition
X
X
X
X
Going concern assessment is no longer considered to be a key audit
matter having regard to the renewal of facilities that the Parent Company
has undertaken as set out in the going concern accounting policy in note
1.1 to the financial statements.
Revenue recognition, in respect of occurrence and cut off assertions, is
no longer considered to be a key audit matter having regard that no new
revenue streams or changes in existing revenue recognition policies have
been identified in the year, and no material issues were identified in the
prior period as a result of our audit procedures.
Materiality
Group financial statements as a whole
£132k (2021: £98k) based on 1% on revenue (2020: 0.74% of three
year average revenues)
An overview of the scope of our audit
Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s
system of internal control, and assessing the risks of material misstatement in the financial statements. We also
addressed the risk of management override of internal controls, including assessing whether there was evidence of
bias by the Directors that may have represented a risk of material misstatement.
The Parent Company and Vianet Limited were considered to be significant components and were subject to a full scope
audit by the Group audit team, covering 99% of the revenue of the Group for the year.
30
Vianet Group plc
Non-significant components (being Vianet Americas Inc and Vendman Systems Limited), were subject to specified
audit procedures and relevant analytical procedures. The cost base included in these non-significant components was
approximately £0.4m which was audited by the group audit team.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit
strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were
addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
Key audit matter
Valuation of goodwill
and intangibles
Group’s
The
policies
accounting
on
and
goodwill
intangibles are shown
in notes 1.6 - 1.8 and
2.1 to the financial
and
statements
related
disclosures
are included in notes
10 and 11.
How the scope of our audit addressed the key audit
matter
We assessed the underlying methodology for the impairment
assessment to check it was in accordance with the requirements
of accounting standards.
We performed procedures to assess and challenge the
assumptions
impairment
underpinning management’s
assessment model including:
•
•
•
•
•
•
Testing the mathematical accuracy of the calculations and
the integrity of the underlying data;
Agreeing forecast cash flows to Board approved budgets
(as reviewed in the going concern review) and reviewing the
reasonableness of the assumptions adopted against our
understanding of past performance, market opportunities
available to the Group and wider sector growth expectations;
Challenging
the growth assumptions adopted by
management for future periods to market expectations and
considering the sensitivity to changes in the assumptions;
Considering the short-term and long-term impacts of
inflationary pressures in the macro-economic environment
and how this has been factored into forecast cash flows;
Assessing the discount rate applied including consideration
of whether it appropriately takes account of additional risks
arising from inflationary pressures in the macro-economic
environment;
Assessing the disclosures made in relation to goodwill
and other intangibles, to ensure compliance with relevant
accounting standards, in particular in relation to the level of
estimation uncertainty inherent in the assessment.
Key observations
Based on the procedures performed we did not identify any
issues with the assumptions underpinning management’s
assessment of the valuation of goodwill and intangibles, and
consider the associated disclosures to be reasonable.
In line with the requirements of IFRS,
management test goodwill annually
for impairment. In additional, other
intangibles are included in the annual
impairment review,
though other
intangibles are amortised in line with
the accounting policies.
The goodwill impairment assessment
model prepared by management,
based on the expected present value
of future cash flows to be generated
from both the Smart Zones and Smart
Machines cash generating units, is
underpinned by a number of estimates
including future cash flows, growth
assumptions and the discount rate.
The impairment assessment model
prepared by management is sensitive
to changes
the assumptions
in
is also additional
adopted. There
uncertainty in predicting future cash-
flows due to inflationary pressures in
the macro-economic environment.
There is an associated risk in the
Parent Company balance
sheet
over the potential impairment of the
investment and intercompany position
with Vianet Limited as a subsidiary
impairment
the
undertaking,
assessment for which is based on
the same discounted cash flow model
used for assessing
impairment of
goodwill and other intangible assets.
to
involved
the assumptions
Due
we considered this to be a key
audit matter, alongside the related
disclosures
to ensure compliance
with relevant accounting standards;
in particular in relation to the level of
estimation uncertainty inherent in the
assessment.
Vianet Group plc
31
Independent auditor’s report (continued)
Capitalisation of
development costs
The Group capitalises
generated development costs.
internally
Group’s
The
policies
accounting
capitalisation of
on
generated
internally
development
costs
are shown in notes 1.8
and 2.1 to the financial
statements
and
related disclosures are
included in note 11.
is a risk that the specific
There
International
requirements under
(IAS)
38
Standard
Accounting
‘Intangible
regarding
Assets’
capitalisation of internally generated
intangible assets are not met and
that the gross and net book value is
materially misstated.
We therefore identified capitalisation
of internally generated development
costs and relevant impairment review
of the carrying value as a significant
risk and a key audit matter.
Our audit work included but was not restricted to:
•
•
•
Obtained management’s capitalisation policy for intangible
assets, to check it is reasonable and in accordance with the
IAS 38;
On a sample basis agreed additions to developments costs
in the year to supporting documentation and checking
that they have capitalised in line with the policy and also
meet the criteria for capitalisation in accordance with the
requirements if IAS 38;
We performed procedures to assess and challenge the
impairment
assumptions underpinning management’s
assessment model over goodwill and other intangibles (as
per the goodwill impairment key audit matter above).
Key observations
Based on our audit work, we consider that internally generated
developments costs have been capitalised in accordance with
the Group’s accounting policies and accounting standards.
32
Vianet Group plc
Our application of materiality
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of
misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could
influence the economic decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a
lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements
below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified
misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial
statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and
performance materiality as follows:
Parent company financial
statements
2022
£k
79
2021
£k
39
60% of Group
materiality
40% of Group
materiality
60% of Group
materiality
40% of Group
materiality
Materiality
Group financial statements
2022
£k
132
2021
£k
98
0.74% of three
year average
revenues
We considered
revenue
to
be
the most
a p p r o p r i a t e
measure
of
p e r fo r m a n ce
for users of
the
financial
s t a t e m e n t s ,
the
given
volatility in loss
before tax.
Basis for determining materiality
1% of revenues
Rationale for the benchmark
applied
We considered
to
revenue
be
the most
a p p r o p r i a t e
measure
of
p e r fo r m a n ce
for users of
the
financial
s t a t e m e n t s ,
the
given
volatility
in
loss before tax.
The
change
in basis from
three
using
average
year
revenues
in
2021, to using
year
current
revenue in 2022
was as a result
of the Group
r e c o v e r i n g
revenue
its
profile
after
the Covid-19
pandemic.
Performance materiality
92
63
85
25
Basis for determining performance
materiality
70% (2020: 65%) of materiality, based upon there being a limited number
of areas subject to significant estimation uncertainty and no significant
errors identified in the prior period.
Vianet Group plc
33
Independent auditor’s report (continued)
Component materiality
Component materiality for the significant component, other than the Parent Company, was £116k (2021: £95k), being 88%
(2021: 97%) of Group materiality, which was based on the size and our assessment of the risk of material misstatement
of that component We further applied performance materiality levels of 70% (2021: 65%) of the component materiality
to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £3,000
(2021: £2,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
Other information
The directors are responsible for the other information. The other information comprises the information included in
the Consolidated Annual Report and Accounts, other than the financial statements and our auditor’s report thereon. Our
opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly
stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we
identify such material inconsistencies or apparent material misstatements, we are required to determine whether this
gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Other Companies Act 2006 reporting
Based on the responsibilities described below and our work performed during the course of the audit, we are required
by the Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report
and Directors’
report
Matters on which
we are required
to report by
exception
In our opinion, based on the work undertaken in the course of the audit:
•
the information given in the Strategic report and the Directors’ report for the financial
year for which the financial statements are prepared is consistent with the financial
statements; and
•
the Strategic report and the Directors’ report have been prepared in accordance with
applicable legal requirements.
In the light of the knowledge and understanding of the Group and Parent Company
and its environment obtained in the course of the audit, we have not identified material
misstatements in the strategic report or the Directors’ report.
We have nothing to report in respect of the following matters in relation to which the
Companies Act 2006 requires us to report to you if, in our opinion:
•
•
adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or
the Parent Company financial statements are not in agreement with the accounting
records and returns; or
•
certain disclosures of Directors’ remuneration specified by law are not made; or
•
we have not received all the information and explanations we require for our audit.
34
Vianet Group plc
Responsibilities of Directors
As explained more fully in the Statement of Directors’ responsibilities for the financial statements, the Directors
are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair
view, and for such internal control as the Directors determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent
Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Parent
Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Extent to which the audit was capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in
line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:
As part of the audit we gained an understanding of the legal and regulatory framework applicable to the Group and the
industries in which it operates, and considered the risk of acts by the Group that were contrary to applicable laws and
regulations, including fraud. We considered the Group’s compliance with laws and regulations that have a significant
impact on the financial statements to be UK company law, UK tax legislation, the accounting frameworks and ISO
security standards, and we considered the extent to which non-compliance might have a material effect on the Group
financial statements.
Based on our understanding we designed our audit procedures to identify instances of non-compliance with such
laws and regulations for the Group and significant components. Our procedures included enquiries of management
and of the Directors, reviewing the financial statement disclosures agreeing to underlying supporting documentation
where necessary, review of Board meeting minutes and review of any applicable correspondence with tax authorities.
Our assessment of the susceptibility of the financial statements to fraud for the Group and significant components was
through management override of controls and revenue recognition which was addressed through detailed testing. We
addressed the risk of management override of internal controls, including testing journal entries processed during
and subsequent to the year, testing for inappropriate payments being made, testing of significant estimates (including
impairment review of goodwill and other intangibles, and capitalised development costs, as set out in the key audit
matters section of this report) and evaluating whether there was evidence of bias in the financial statements by the
Directors that represented a risk of material misstatement due to fraud. We addressed the risk of inappropriate
revenue recognition, including testing a sample of revenue transactions across the year to ensure these are recorded
in the correct period and were not fictitious in nature.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team
members and remained alert to any indications of fraud or non-compliance with laws and regulations throughout
the audit.
Vianet Group plc
35
Independent auditor’s report (continued)
Our audit procedures were designed to respond to risks of material misstatement in the financial statements,
recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting
one resulting from error, as fraud may involve deliberate concealment by, for example, forgery, misrepresentations
or through collusion. There are inherent limitations in the audit procedures performed and the further removed non-
compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less
likely we are to become aware of it.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: www.frc.org.
uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken so that we might state to the Parent Company’s members
those matters we are required to state to them in an auditor’s 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 Parent Company and the Parent
Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
Mark Langford (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
Leeds, UK
13 June 2022
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
36
Vianet Group plc
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 March 2022
Revenue
Cost of sales
Gross profit
Administration and other
operating expenses
Operating profit/(loss) pre
amortisation and share based
payments
Intangible asset amortisation
Share based payments
Note
3
Before
Exceptional
2022
£000
Exceptional
2022
£000
13,215
(4,654)
8,561
-
-
-
Total
2022
£000
13,215
(4,654)
8,561
Before
Exceptional
2021
£000
Exceptional
2021
£000
8,369
(3,307)
5,062
-
-
-
Total
2021
£000
8,369
(3,307)
5,062
(6,198)
(121)
(6,319)
(5,749)
(343)
(6,092)
2,363
(2,195)
(83)
(121)
-
-
2,242
(2,195)
(83)
(687)
(1,669)
(73)
(343)
-
-
(1,030)
(1,669)
(73)
Total administrative expenses
(8,476)
(121)
(8,597)
(7,491)
(343)
(7,834)
Operating profit/(loss)
Finance costs
Loss before tax
Income tax credit
Profit/(loss) and other
comprehensive
income for the year
Loss earnings per share
Total
- Basic
- Diluted
6
5
7
8
8
85
(138)
(53)
361
(121)
-
(121)
-
(36)
(2,429)
(343)
(2,772)
(138)
(174)
361
(50)
(2,479)
867
-
(343)
-
(50)
(2,822)
867
308
(121)
187
(1,612)
(343)
(1,955)
0.65p
0.64p
(6.75)p
(6.75)p
All operations are continuing. Total comprehensive income being attributable to equity holders of the parent.
The accompanying accounting policies and notes form an integral part of these financial statements.
Details of the exceptional items are included in note 4.
Vianet Group plc
37
CONSOLIDATED BALANCE SHEET
at 31 March 2022
Assets
Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Deferred tax asset
Total non-current assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Equity and liabilities
Liabilities
Current liabilities
Trade and other payables
Leases
Borrowings
Non-current liabilities
Other payables
Leases
Borrowings
Deferred tax liability
Equity attributable to owners of the parent
Share capital
Share premium account
Capital redemption
Share based payment reserve
Merger reserve
Retained profit
Total equity
Note
2022
£000
As restated
2021
£000
As restated
2020
£000
10
11
12
20
13
14
26
15
17
18
16
18
21
21
1.19
17,856
5,976
3,262
386
27,480
1,573
2,690
1,583
5,846
17,856
6,184
3,391
26
27,457
1,431
2,758
1,894
6,083
17,856
5,505
3,795
-
27,156
1,491
3,544
1,728
6,763
33,326
33,540
33,919
2,983
25
2,310
5,318
-
-
2,273
-
2,273
2,880
11,711
15
499
310
10,320
25,735
3,257
53
1,265
4,575
86
-
3,290
-
3,376
2,895
11,709
-
437
310
10,238
25,589
2,710
64
2,011
4,785
117
35
670
841
1,663
2,895
11,709
-
364
310
12,193
27,471
Total equity and liabilities
33,326
33,540
33,919
The Group financial statements were approved by the Board of Directors on 13 June 2022 and were signed on its
behalf by:
J Dickson
Director
The accompanying accounting policies and notes form an integral part of these financial statements.
38
Vianet Group plc
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
for the year ended 31 March 2022
Share
capital
£000
At 1 April 2020 (as previously stated) 2,895
-
Prior year restatement (note 29)
At 1 April 2020 (as restated)
Share based payments
2,895
-
Transactions with owners
Loss and total comprehensive
income for the year
Total comprehensive income
less owners’ transactions
-
-
-
Share
premium
account
£000
11,709
-
11,709
-
-
-
-
At 31 March 2021 (as restated)
2,895
11,709
At 1 April 2021 (as restated)
Issue of shares
Cancellation of shares
Share based payments
Share option forfeitures
Transactions with owners
Profit and total comprehensive
income for the year
Total comprehensive income
less owners’ transactions
2,895
-
(15)
-
-
(15)
-
(15)
11,709
2
-
-
-
2
-
2
At 31 March 2022
2,880
11,711
Share
based
payment
reserve
£000
Own
shares
£000
Merger
reserve
£’000
Capital
Redemption
£000
Retained
profit
£000
Total
£000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
364
-
364
73
73
-
73
437
437
-
-
83
(21)
62
-
62
499
310
-
310
-
-
-
-
310
310
-
-
-
-
-
-
-
310
-
-
-
-
-
-
-
-
-
15
-
-
15
12,403
(210)
27,681
(210)
12,193
-
27,471
73
-
73
(1,955)
(1,955)
(1,955)
(1,882)
10,238
25,589
10,238
-
(126)
-
21
25,589
2
(126)
83
-
(105)
(41)
-
187
187
15
15
82
146
10,320
25,735
Vianet Group plc
39
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 March 2022
Cash flows from operating activities
Profit/(loss) for the year
Adjustments for
Net interest payable
Income tax credit
Amortisation of intangible assets
Depreciation
Contingent consideration release
Loss on impairment of property, plant and equipment and businesses
Share based payments
Operating cash flows before changes in working capital and provisions
Change in inventories
Change in receivables
Change in payables
Operating cash flows post changes in working capital and provisions
Cash generated from operations
Net cash generated from operating activities
Cash flows from investing activities
Purchases of property, plant and equipment
Capitalisation of development costs
Purchases of other intangible assets
Proceeds from disposal of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Net interest payable
Repayment of leases
Repayments of borrowings
Payment of contingent consideration
New borrowings
Issue of share capital
Cancellation of shares
Net cash(used in)/from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Reconciliation to the cash balance in the Consolidated Balance Sheet
Cash balance as per consolidated balance sheet
Bank overdrafts (see note 18)
Balance per statement of cash flows
Note
2022
£000
2021
£000
187
(1,955)
6
11
12
5
12
11
11
138
(361)
2,195
489
(76)
83
83
2,738
(142)
68
(267)
(341)
2,397
2,397
(465)
(1,975)
(12)
22
(2,430)
(138)
(28)
(1,289)
(16)
-
2
(126)
(1,595)
(1,628)
1,894
266
1,583
(1,317)
266
50
(867)
1,669
563
-
126
73
(341)
60
786
547
1,393
1,052
1,052
(268)
(2,312)
(36)
-
(2,616)
(50)
(64)
(319)
(30)
3,540
-
-
3,077
1,513
381
1,894
1,894
-
1,894
40
Vianet Group plc
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 March 2022
Significant accounting policies
1.
1.1 Basis of preparation and Going Concern
Vianet Group plc is incorporated in England and Wales and quoted on the London Stock Exchange’s Alternative
Investment Market. The registered address is One Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR.
Further copies of these financial statements will be available at the Company’s registered office: which is detailed in
the Company Information page of this Annual Report, page 1.
The principal activities for the Group are detailed in the Strategic report’.
The financial statements have been prepared in accordance with UK adopted International Accounting Standards
(‘IFRS’) in conformity with the requirements of Companies act 2006.
The financial statements have been prepared on the historical cost convention with the exception of certain items
which are measured at fair value as disclosed in the principal accounting policies set out below. The measurement
bases and principal accounting policies of the Group are set out below. These policies have been consistently applied
to all years presented unless otherwise stated.
The preparation of financial statements in conformity with IFRS requires the use of estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Although these estimates are based on management’s best
knowledge of the amount, event or actions, actual results ultimately may differ from these estimates as a result of
for example unforeseen inflationary pressures or global supply and stock price premium impacts.
In considering the going concern aspect of the business, the Directors paid due regard to their financial forecasts over
the next 3 years, contracted revenue streams, emergence from Covid 19, bank and cash reserve facilities, recovered
trading levels during FY2022, the global semi-conductor challenge, and the availability of the bank overdraft facility
which is £1.5m and which has been renewed through to 31 May 2023, with a supporting note from the bank stating
they see no reason why facilities will not be renewed for a further 12 months to 31 May 2024.
Bank covenants cover 3 areas.
1.
2.
3.
Interest cover (which is currently complied with and is expected to remain the case)
CFADS cash flow covenant relaxed to June 2023
Leverage coverage with quarterly dates through to March 2023 based on EBITA performance
As a result of the above actions and bank facilities, the Directors have produced revised forecasts have also considered
possible downside impacts alongside having made appropriate enquiries, including (but not limited to) a review of the
Group’s budget for 2022/2023, and cash generating capacity at least 12 months from the date of signing (underpinned
by long term contracts in place and historical results). Such possible downside impact include stock premium costs
associated with the global semi-conductor supply challenge in the period to June 2023, with sufficient headroom in
our facilities being considered to be in place in the instance of such possible downsides.
Together with both the comments noted in the Chairman’s report and Strategic and Director reports, and a formal
going concern paper submitted to the board, noting we have assumed no reduction in staff or overheads but this
will be reviewed on an ongoing basis, we have a reasonable expectation that the Group has adequate resources to
continue in operational existence for the foreseeable future. For this reason they continue to adopt the going concern
basis in preparing the financial statements.
1.2 Subsidiaries
The consolidated financial statements incorporate the results, assets, liabilities and cash flows of the company and
each of its subsidiaries for the financial year ended 31 March 2022.
Subsidiaries are entities controlled by the Group. The Group controls an entity if and only if the Group has all of the
following elements:
Vianet Group plc
41
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
1.
•
•
•
Significant accounting policies (continued)
power over the entity, i.e. the Group has existing rights that give it the ability to direct the relevant activities (the
activities that significantly affect the entity’s returns)
exposure, or rights, to variable returns from its involvement with the entity
the ability to use its power over the entity to affect the amount of the Groups returns
The results, assets, liabilities and cash flows of subsidiaries are included in the consolidated financial statements
from the date control commences until the date that control ceases.
Unrealised gains on transactions between the Group parent and its subsidiaries are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Amounts
reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with
the accounting policies adopted by the Group.
1.3 Business combinations
For business combinations occurring since 1 January 2010, the requirements of IFRS 3 have been applied. The
consideration transferred by the Group to obtain control of a subsidiary is calculated as the sum of the acquisition
date fair values of assets transferred, liabilities incurred and the equity interests issued by the Group, which includes
the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are
expensed as incurred. The Group recognises identifiable assets acquired and liabilities assumed in a business
combination regardless of whether they have been previously recognised in the acquiree’s financial statements prior
to the acquisition. Assets acquired and liabilities assumed are generally measured at the acquisition date fair values.
Under IFRS 3 ‘Business Combinations’ and IFRS 9 ‘Financial Instruments’, management should account for contingent
consideration by fair valuing the balance at each reporting date. Any changes in fair value shall be recognised in profit
or loss. Please refer to Exceptional cost note 4 in the Financial Review.
1.4 Revenue recognition
Revenue arises from the provision of actionable data and business insight services through connected devices. To
determine whether to recognise revenue, the Group follows a 5-step process as follows:
1.
2.
Identifying the contract with a customer
Identifying the performance obligations
3. Determining the transaction price
4.
Allocating the transaction price to the performance obligations
5. Recognising revenue when/as performance obligation(s) are satisfied
Revenue is measured at transaction price, stated net of VAT and other sales related taxes. There is no return or
refund obligation. Typical payment terms are 30 days from date of invoice and terms do not include a significant
financing component.
Smart Zones and Smart Machines
Customer income is recognised at the point of installation or delivery in respect of outright sale or rental of the
connected device, in accordance with contractual terms which can include payments in advance for which we
would defer the appropriate amount of income over the length of the contract until a point in time when control is
transferred to the customer. Accrued income can arise in relation to customers who are on different billing cycles
to a calendar month. Data insight is recognised over time, based upon the timing of data collected from customers
connected devices
42
Vianet Group plc
1.
Significant accounting policies (continued)
Smart Zones
There are two performance obligations with customers, one being the provision of data insight from data collected
from customers connected devices and the other being either the outright sale or rental of the connected device to
collect the data. Data insight involves web based reporting and business asset performance for our customers and
potential marketing insight to the respective industries
Therefore, as such, there are separately identifiable transaction prices for either performance obligation. The
transaction prices are set out in the customers’ contract and is made up of either a fixed charge for the outright sale
of the connected device or a fixed element in the form of a monthly income in respect of the data insight or the rental
of the connected device. Revenue is recognised when the performance obligations have been satisfied in line with
the contract.
There are no unusual or variable payment terms in relation to performance obligations offered to customers.
The customer may from time to time request a repair to their equipment. Revenue is recognised when the performance
obligation has been satisfied.
Smart Machines
There are two performance obligations with customers, one being the provision of data insight from data collected
from customers connected devices and the other being either the outright sale or rental of the connected device to
collect the data.
Therefore, as such, there are separately identifiable contracted transaction prices for either performance obligation
noted in each customer’s contract. The transaction prices are set out in the customers’ contract and is made up of
either a fixed charge for the outright sale of the connected device or a fixed element in the form of a monthly income
in respect of the data insight or the rental of the connected device. Revenue is recognised when the performance
obligations have been satisfied in line with the contract.
There are no unusual or variable payment terms in relation to performance obligations offered to customers.
The customer may from time to time request a repair to their equipment. Revenue is recognised when the performance
obligation has been satisfied.
1.5 Foreign currencies
Transactions in foreign currencies are translated at the exchange rate ruling at the date of the transaction. Monetary
assets and liabilities in foreign currencies are translated at the rates of exchange ruling at the balance sheet date.
Non-monetary items that are measured at historical cost in a foreign currency are translated at the exchange rate
at the date of the transaction.
Any exchange differences arising on the settlement of monetary items or on translating monetary items at rates
different from those at which they were initially recorded are recognised in the profit or loss in the period in which
they arise.
1.6 Goodwill
Goodwill on acquisition of subsidiaries represents the excess of the cost of an acquisition over the fair value of
the Group’s share of the identifiable net assets of the acquired subsidiary. Goodwill is not amortised, but tested
at least annually for impairment, and carried at cost less accumulated impairment losses. Impairment losses are
immediately recognised in profit or loss and are not subsequently reversed.
Goodwill arising on acquisitions before the date of transition of 1 January 2010 to IFRS has been retained at the
previous UK GAAP amounts subject to being tested for impairment at that date.
Tests have been undertaken using commercial judgements and a number of assumptions and estimates have been
made to support the carrying amount, assessed against discounted cash flows. The details of these assumptions are
set out in note 10.
Vianet Group plc
43
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
1.
1.7
Significant accounting policies (continued)
Intangible assets: business combinations
Acquisition as part of a business combination
Identifiable intangible assets acquired as part of a business combination are initially recognised separately from
goodwill at their fair value, irrespective of whether the asset had been recognised by the acquiree before the business
combination. An intangible asset is considered identifiable only if it is separable or if it arises from contractual or
other legal rights, regardless of whether those rights are transferable or separable from the entity or from other
rights and obligations.
Intangible assets acquired as part of a business combination and recognised by the Group include customer
contracts, patents and order book.
After initial recognition, intangible assets acquired as part of a business combination are carried at cost less
accumulated amortisation and any impairment losses recognised in administrative expenses in the statement of
comprehensive income.
Amortisation
Intangible assets are amortised on a straight-line basis, to reduce their carrying value to their residual value, over
their estimated useful lives. The following useful lives were applied during the year:
Customer contracts and relationships
Software
Trademarks
Order book
2 to 5 years
5 years
10 years
2 to 5 years
Methods of amortisation, residual values and useful lives are reviewed, and if necessary adjusted, at each balance
sheet date.
Intangible assets: Research and development
1.8
Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in
which it is incurred.
Development costs incurred on specific projects are capitalised when all the following conditions are satisfied:
•
•
•
•
•
•
completion of the intangible asset is technically feasible so that it will be available for use or sale
the Group intends to complete the intangible asset and use or sell it
the Group has the ability to use or sell the intangible asset
the intangible asset will generate probable future economic benefits. Among other things, this requires that
there is a market for the output from the intangible asset or for the intangible asset itself, or, if it is to be used
internally, the asset will be used in generating such benefits
there are adequate technical, financial and other resources to complete the development and to use or sell the
intangible asset, and
the expenditure attributable to the intangible asset during its development can be measured reliably.
Development costs not meeting the criteria for capitalisation are expensed as incurred.
The cost of an internally generated intangible asset comprises all directly attributable costs necessary to create,
produce and prepare the asset to be capable of operating in the manner intended by management.
Directly attributable costs include employee (other than directors) costs incurred on development and directly
attributable overheads. The costs of internally generated software developments are recognised as intangible assets.
Capitalised development costs are amortised over a period which is usually no more than five years. Amortisation
commences once an asset is available for use, in line with IAS38.
44
Vianet Group plc
Significant accounting policies (continued)
1.
1.9 Property, plant and equipment
Property, plant and equipment is stated at cost less accumulated depreciation and any impairment losses. Cost
comprises the purchase price of property, plant and equipment together with any directly attributable costs.
Subsequent costs are included in an asset’s carrying value or recognised as a separate asset, when it is probable that
future economic benefits associated with the additional expenditure will flow to the Group and the cost of the item
can be measured reliably. All other costs are charged to the profit or loss when incurred.
Depreciation commences when an asset is available for use. Depreciation is charged so as to write off the depreciable
amount of assets to their residual values over their estimated useful lives using a method that reflects the pattern in
which the assets’ future economic benefits are expected to be consumed by the Group.
Depreciation is charged in equal annual instalments over the following periods:
Freehold buildings
Freehold Land
Plant, vehicles and equipment
Fixtures and fittings
10 - 50 years
Nil
3 - 5 years
4 years
Methods of depreciation, residual values and useful lives are reviewed and adjusted, if appropriate, at each balance
sheet date.
The gain or loss arising from the disposal or retirement of an item of property, plant and equipment is determined as
the difference between the net disposal proceeds and the carrying amount of the item, and is included in the profit
or loss.
1.10 Impairment
At each balance sheet date, the Group assesses whether there is any indication that its assets have been impaired.
If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the
impairment, if any. If it is not possible to estimate the recoverable amount of the individual asset, the recoverable
amount of the cash-generating unit to which the asset belongs is determined.
The recoverable amount of an asset or a cash-generating unit is the higher of its fair value less costs to sell and its
value in use. The value in use is the present value of the future cash flows expected to be derived from an asset or
cash-generating unit. This present value is discounted using a pre-tax rate that reflects current market assessments
of the time value of money and of the risks specific to the asset for which future cash flow estimates have not been
adjusted. If the recoverable amount of an asset is less than its carrying amount, the carrying amount of the asset is
reduced to its recoverable amount. That reduction is recognised as an impairment loss.
An impairment loss relating to assets carried at cost less any accumulated depreciation or amortisation is recognised
immediately in the profit or loss.
Goodwill acquired in a business combination is, from the acquisition date, allocated to each of the cash-generating
units or groups of cash-generating units that are expected to benefit from the synergies of the combination.
Goodwill is tested for impairment at least annually, and whenever there is an indication that the asset may be impaired.
An impairment loss is recognised for cash-generating units if the recoverable amount of the unit is less than the
carrying amount of the unit. The impairment loss is allocated to reduce the carrying amount of the assets of the unit
by first reducing the carrying amount of any goodwill allocated to the cash-generating unit, and then reducing the
other assets of the unit pro rata on the basis of the carrying amount of each asset in the unit.
If an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of
its recoverable amount but limited to the carrying amount that would have been determined had no impairment loss
been recognised in prior years. A reversal of an impairment loss is recognised in profit or loss. Impairment losses on
goodwill are not subsequently reversed.
Vianet Group plc
45
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
Significant accounting policies (continued)
1.
1.11 Leased assets
The Group as a lessee
For any new contracts entered into, the Group considers whether a contract is, or contains a lease. A lease is defined
as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time
in exchange for consideration’. To apply this definition the Group assesses whether the contract meets three key
evaluations which are whether:
•
•
•
the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified
by being identified at the time the asset is made available to the Group
the Group has the right to obtain substantially all of the economic benefits from use of the identified asset
throughout the period of use, considering its rights within the defined scope of the contract
the Group has the right to direct the use of the identified asset throughout the period of use. The Group assess
whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.
Measurement and recognition of leases as a lessee
At lease commencement date, the Group recognises a right-of-use asset and a lease liability on the balance sheet.
The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any
initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at the end of the
lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).
The Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the
earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group also assesses
the right-of-use asset for impairment when such indicators exist.
At the commencement date, the Group measures the lease liability at the present value of the lease payments unpaid
at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Group’s
incremental borrowing rate.
Lease payments included in the measurement of the lease liability are made up of fixed payments (including in
substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual
value guarantee and payments arising from options reasonably certain to be exercised.
Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is
remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.
When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit
and loss if the right-of-use asset is already reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients.
Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an
expense in profit or loss on a straight-line basis over the lease term.
On the statement of financial position, right-of-use assets have been included in property, plant and equipment and
lease liabilities have been shown separately.
1.12 Inventories
Inventories are stated at the lower of cost and net realisable value on an average pricing basis. Cost of finished goods
and work in progress includes materials and direct labour.
Net realisable value is the estimated selling price, which would be realised after deducting all estimated costs of
completion, and costs incurred in marketing, selling and distributing such inventory.
46
Vianet Group plc
Significant accounting policies (continued)
1.
1.13 Taxation
The tax expense represents the sum of current tax and deferred tax.
Current tax
Current tax is based on taxable profit for the year and is calculated using tax rates enacted or substantively enacted
at the balance sheet date. Taxable profit differs from accounting profit either because items are taxable or deductible
in periods different to those in which they are recognised in the financial statements or because they are never
taxable or deductible.
Deferred tax
Deferred tax on temporary differences at the balance sheet date between the tax bases of assets and liabilities and
their carrying amounts for financial reporting purposes is accounted for using the balance sheet liability method.
Using the balance sheet liability method, deferred tax liabilities are recognised in full for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised. However, if the deferred tax asset or liability arises
from the initial recognition of goodwill or the initial recognition of an asset or liability in a transaction, other than
a business combination, that at the time of the transaction affects neither accounting nor taxable profit, it is not
recognised.
Deferred taxation is measured at the tax rates that are expected to apply when the asset is realised or the liability
settled based on tax rates and laws enacted or substantively enacted at the balance sheet date.
Deferred tax assets and liabilities, calculated on an undiscounted basis, are offset only when there is a legally
enforceable right to set off current tax amounts and when they relate to the same tax authority and the Group intends
to settle its current tax amounts on a net basis.
Current and deferred tax are recognised in the profit or loss except when they relate to items recognised directly in
equity, when they are similarly taken to equity.
1.14 Pension Costs
The Group operates a defined contribution pension scheme. The assets of these schemes are held separately from
those of the Group in an independently administered fund. The pension cost charge represents contributions payable
by the Group to the scheme for the year.
1.15 Financial instruments
The Group classifies financial instruments, or their component parts, on initial recognition as a financial asset, a
financial liability or an equity instrument in accordance with the substance of the contractual arrangement.
Financial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes party
to the contractual provisions of the instrument.
Financial Assets
Initial recognition and measurement
In accordance with IFRS 9, ‘Financial Instruments’ the Group has classified its financial assets through the following
categories:
Vianet Group plc
47
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
1.
•
•
•
Significant accounting policies (continued)
Amortised cost
Fair value through profit or loss (FVPL)
Fair value through other comprehensive income (FVOCI)
For either year presented the Group does not have any financial assets classified as FVOCI.
The Group determines the classification of its financial assets at initial recognition based on the contractual cash
flow characteristics of the financial assets.
All financial assets are recognised initially at fair value plus transaction costs that are attributable to the acquisition
of the financial asset.
Subsequent measurement
The subsequent measurement of financial assets depends on their classification as described below:
Financial assets carried at amortised cost
This category applies to trade and other receivables due from customers in the normal course of business. Trade and
other receivables are initially recorded at fair value and thereafter are measured at amortised cost using the effective
interest rate. A loss allowance for expected credit losses is recognised based upon an amount equal to the 12-month
expected credit loss. This assessment is performed on a trade receivables and contract assets basis considering
forward-looking information, including the use of macroeconomic information, around our customer contracts and
payment history. The credit risk of financial instruments has not considered to have changed since initial recognition.
Please see note 14 which relates to expected credit loss
The group classifies its financial assets as at amortised cost only if both of the following criteria are met:
(i)
the asset is held within a business model with the objective of collecting the contractual cash flows; and
(ii)
the contractual terms give rise on specified dates to cash flows that are solely payments of principal and
interest on the principal outstanding.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, short term overdrafts, together with other
short-term, highly liquid investments that are readily convertible into known amounts of cash and which are subject
to an insignificant risk of changes in value.
Financial liabilities
Initial recognition and measurement
Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless
the Group designated a financial liability at fair value through profit or loss.
Subsequent measurement
Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for
financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised
in profit or loss. All interest related charges are included within finance costs or finance income.
Trade payables and borrowings are recorded initially at fair value, net of direct issue costs, and subsequently are
recorded at amortised cost using the effective interest method.
Contingent consideration is measured at fair value through profit or loss. The contingent consideration is fair valued
and represents management’s estimate of the contingent consideration which will be paid and is discounted. Further
details on the contingent consideration balance is included in notes 15 and 16.
48
Vianet Group plc
Significant accounting policies (continued)
1.
1.16 Dividends
Final dividends are recognised as a liability in the period in which they are approved by the company’s shareholders.
Interim dividends are recognised when they are paid.
1.17 Employee share option schemes
All share-based payment arrangements are recognised in the financial statements in accordance with IFRS 2.
All goods and services received in exchange for the grant of any share-based payment, including awards made
under the Joint Ownership Plan (an equity settled scheme) are measured at their fair values. Where employees are
rewarded using share-based payments the fair values of employees’ services are determined indirectly by reference
to the fair value of the instrument granted to the employee. This fair value is appraised at the grant date and excludes
the impact of non-market vesting conditions (for example, profitability and sales growth targets).
All equity-settled share-based payments are ultimately recognised as an expense in the profit or loss with a
corresponding credit to “Share based payment reserve”.
If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period,
based on the best available estimate of the number of share options expected to vest. Estimates are subsequently
revised if there is any indication that the number of share options expected to vest differs from previous estimates.
Any cumulative adjustment prior to vesting is recognised in the current period. No adjustment is made to any expense
recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.
Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share
capital, and where appropriate share premium.
1.18 Equity
Equity comprises the following:
•
•
•
•
•
•
“Share capital” represents the nominal value of equity shares.
“Share premium” represents the excess over nominal value of the fair value of consideration received for equity
shares, net of expenses of the share issue.
“Capital redemption” represents the nominal value of shares repurchased and cancelled.
“Share based payment reserve” represents equity-settled share-based employee remuneration until such
share options are exercised.
“Merger reserve” represents the excess over nominal value of fair value of consideration attributed to equity
shares issued in part settlement for subsidiary company shares acquired.
“Retained earnings reserve” represents retained profits.
1.19 New IFRS standards and interpretations not applied
A number of new standards, amendments and interpretations are effective for the year ended 31 March 2022. These
are considered either not relevant or to have no material impact on the Group.
There are no standards that are issued but not yet effective that would be expected to have a material impact on the
Group in the current or future reporting periods or on foreseeable future transactions.
Vianet Group plc
49
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
1.
Significant accounting policies (continued)
Issued date
New Standards
IFRS 17 Insurance contracts
including Amendments to IFRS 17
(issued on 25 June 2020)
18-May-17
and
25-June-20
IASB
mandatory
effective date
(UK mandatory
effective date)
UK Adoption
status (EU
pre 31
December
2020)
EU
Endorsement
Status
01-Jan-23
TBC
Endorsed
Amendments to Existing Standards
Amendments to IAS 1:
Classification of Liabilities as
Current or Non-current
Amendments to:
•
•
IFRS 3 Business Combinations;
IAS 16 Property, Plant and
Equipment;
IAS 37 Provisions, Contingent
Liabilities and Contingent
Assets
•
Annual Improvements to IFRSs
(2018-2020 Cycle):
•
•
•
IFRS 1
IFRS 9
Illustrative Examples
accompanying IFRS 16
IAS 41
•
23-Jan-20
01-Jan-23
TBC
TBC
14-May-20
01-Jan-22
Adopted by
UKEB
Endorsed
14-May-20
01-Jan-22
Adopted by
UKEB
Endorsed
Amendment to IFRS 16 Leases
Covid 19-Related Rent Concessions
Amendments to IFRS 4 Insurance
Contracts – deferral of IFRS 9
Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16 Interest
Rate Benchmark Reform – Phase 2
Amendments to IAS 8 - Definition of
Accounting Estimates
Amendments to IAS 1 and IFRS
Practice Statement 2 - Disclosure
of Accounting policies
Amendments to IFRS 16 - Covid-
19-Related Rent Concessions
beyond 30 June 2021
Amendments to IAS 12 - Deferred
Tax related to Assets and Liabilities
arising from a Single Transaction
Amendment to IFRS 17 - Initial
Application of IFRS 17 and IFRS 9 -
Comparative Information
28-May-20
01-June-20
Endorsed
Endorsed
25-June-20
01-Jan-21
27-August-20
01-Jan-21
Adopted by
UKEB
Adopted by
UKEB
Endorsed
Endorsed
12-Feb-21
01-Jan-23
12-Feb-21
01-Jan-23
TBC
TBC
Endorsed
Endorsed
31-Mar-21
01-April-21
Adopted by
UKEB
Endorsed
07-Feb-21
01-Jan-23
TBC
09-Dec-21
01-Jan-23
TBC
TBC
TBC
Vianet Group plc
1
2
3
4
5
6
7
8
9
10
11
12
50
Significant accounting policies (continued)
1.
1.20 Exceptional Items
The Group seeks to highlight certain items as exceptional operating income or costs. These are considered to be
exceptional in size, frequency and/or nature rather than indicative of the underlying day to day trading of the Group.
These may include items such as acquisition costs, restructuring costs, obsolescence costs, employee exit and
transition costs, legal costs, corporate activity costs, material profits or losses on disposal of property, plant and
equipment, profits or losses on the disposal of subsidiaries, loan impairment, contingent consideration fair value or
pandemic costs. All of these items are charged or credited before calculating overall operating profit or loss. Material
profits or losses on disposal of property, plant and equipment are shown as separate items in arriving at operating
profit or loss whereas other exceptional items are charged or credited within operating costs and highlighted by
analysis. The Directors apply judgement in assessing the particular items, which by virtue of their size and nature
are disclosed separately in the Statement of Comprehensive Income and the notes to the financial statements as
exceptional items. The Directors believe that the separate disclosure of these items is relevant to understanding the
Group’s financial performance.
1.21 Government Grants and Other Government Assistance
Government grants shall be recognised when there is reasonable assurance that:
(a)
(b)
the entity will comply with the conditions attaching to them; and
the grants will be received.
Grants related to income are presented as part of profit or loss and are deducted in reporting the related expense.
Government grants are recognised in profit or loss on a systematic basis over the periods in which the Group
recognises as an expense the related costs for which the grants are intended to compensate.
The Group has received access to the UK Government’s Coronavirus Job Retention Scheme during the year, with
amounts equal to 80% of employee salaries being claim under the scheme.
In addition, the Group received further Government assistance in the form of VAT deferral agreement for 12 months
from April 2021 through January 2022
2. Critical accounting judgements and key sources of estimation uncertainty
2.1 Significant judgements and key sources of estimation uncertainty
The preparation of the financial statements in conformity with IFRS requires management to make estimates and
assumptions that affect the application of policies and reported amounts of assets, liabilities, income, expenses and
related disclosures. The estimates and underlying assumptions are based on historical experience and various other
factors that are believed to be reasonable under the circumstances. This forms the basis of making the judgements
about carrying values of assets and liabilities that are not readily apparent from other sources.
Actual results may however differ from these estimates. The estimates and underlying assumptions are reviewed on
an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the circumstances on
which the estimate was based, or as a result of new information or further information. Such changes are recognised
in the period in which the estimate is revised.
Certain accounting policies are particularly important to the preparation and explanation of the Group’s financial
information. Key assumptions about the future and key sources of estimation uncertainty that have a significant risk
of causing a material adjustment to the carrying value of assets and liabilities over the next twelve months are set
out below.
Impairment of intangible assets and property, plant and equipment (Judgement)
The Group tests goodwill at least annually for impairment, as required by IAS36. All other intangible assets and property,
plant and equipment are tested for impairment when indicators of impairment exist. Impairment is determined with
reference to the higher of fair value less costs to sell or value in use. Value in use is estimated using adjusted future
cash flows and referenced to WACC/discount rates ranging between 8% and 14%. Significant assumptions are made in
estimating future cash flows about future events including future market conditions and future growth rates. Changes
in these assumptions could affect the outcome of impairment reviews. See notes 10 to 12.
Vianet Group plc
51
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
2. Critical accounting judgements and key sources of estimation uncertainty (continued)
Intangible assets acquired in a business combination (Estimate)
Intangible assets acquired in a business combination including customer contracts and customer lists are
recognised when they are identifiable or arise from contractual or other legal rights and their fair value can be
reliably measured. Fair value is estimated using risk adjusted future cash flows. Significant assumptions are made
in estimating future cash flows about future events including future market conditions and future growth rates.
Changes in these assumptions could affect fair values.
Where appropriate, intangible assets identified in business combinations have been recognised in accordance with
the provisions of IFRS 3 (Business Combinations) and IAS 38 (Intangible Assets). Intangible assets have only been
recognised where they have identifiable future economic benefits that are controlled by the entity, it is probable that
these benefits will flow to the entity and their fair value can be measured reliably.
Detailed disclosure in respect of this estimate is included within Note 11 of these financial statements.
Development costs (Judgement)
Careful judgement by the directors is applied when deciding whether the recognition requirements for development
costs have been met. This is necessary as the economic success of any product development is uncertain and may
be subject to future technical problems at the time of recognition. Recognition is based on judgements at the time
expenditure is incurred. In addition, all internal activities related to the research and development of new software
products are continuously monitored by the directors.
Contingent Consideration valuation following Lookoutsolutions Acquisition (Estimate)
The directors have carefully considered the carrying value of the contingent consideration using the budget for
the forthcoming financial year along with other potential contract wins and potential EBIT profit adjustments. The
earnout period ended on 31 March 2022 when a contingent consideration release of £76k was recognised.
COVID 19
Refer to Director Review at the front of these accounts.
In considering the going concern aspect of the business, the Directors paid due regard to the actions taken specifically
in FY21 and FY22 around customer varied contracts to support them and generate a revenue stream, revised financial
forecasts based on contracted varied revenue streams and how they impacted our financial facility streams, bank
and cash reserve facilities pre Covid trading levels in FY20 and the Government roadmap out of Covid during FY22.
Covid-19 has impacted key estimates and judgements in H1 of FY22, including the cash flow forecasts used for the
Going Concern assessment (as covered in both the Chairman review and Directors report) and in assessing whether
an impairment is needed for Goodwill and other intangible assets. Further detail on this assessment can be found
in Note 10.
3.
Segment reporting
Business segments
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 Smart Machines (mainly adopted in the vending sector (particularly in 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.
52
Vianet Group plc
Segment reporting (continued)
3.
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 of deferred tax. 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.
2022
Continuing Operations
(post exceptional items)
Total revenue
Of which is recurring
Pre-exceptional segment result
Exceptional costs
Post exceptional segment result
Finance costs
Profit/(loss) before taxation
Taxation
Profit for the year from continuing operations
Other information
Additions to property, plant
equipment and intangible assets
Depreciation and amortisation
Smart
Zones
£000
7,831
7,491
1,887
(7)
1,880
(130)
1,750
Smart
Machines
£000
Corporate/
Technology
£000
5,384
4,121
1,564
32
1,596
(8)
1,588
-
-
(3,366)
(146)
(3,512)
-
(3,512)
Total
£000
13,215
11,612
85
(121)
(36)
(138)
(174)
361
187
374
751
909
527
1,169
1,406
2,452
2,684
Recurring revenue is contracted revenue payable monthly over the length of the customer contract
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Smart
Zones
£000
27,489
-
27,489
7,187
-
7,187
Smart
Machines
£000
Corporate/
Technology
£000
4,083
-
4,083
-
-
-
1,368
386
1,754
404
-
404
Total
£000
32,940
386
33,326
7,591
-
7,591
Vianet Group plc
53
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
Segment reporting (continued)
3.
2021
Continuing Operations
(post exceptional items)
Total revenue
Of which is recurring
Pre-exceptional segment result
Exceptional costs
Post exceptional segment result
Finance costs
(Loss)/profit before taxation
Taxation
Loss for the year from continuing operations
Other information
Additions to property, plant
equipment and intangible assets
Depreciation and amortisation
Smart
Zones
£000
3,953
3,656
85
(81)
4
(28)
(24)
Smart
Machines
£000
Corporate/
Technology
£000
4,416
3,806
858
(147)
711
(23)
688
-
-
(3,372)
(115)
(3,487)
1
(3,486)
Total
£000
8,369
7,462
(2,429)
(343)
(2,772)
(50)
(2,822)
867
(1,955)
945
651
469
505
1,202
1,076
2,616
2,232
Recurring revenue is contracted revenue payable monthly over the length of the customer contract
Segment assets
Unallocated assets
Total assets
Segment liabilities
Unallocated liabilities
Total liabilities
Analysis of revenue by category
Continuing operations
Sale of goods
- Smart Zones and Smart Machines
Rendering of services
- Smart Zones and Smart Machines
Smart
Zones
£000
27,534
-
27,534
7,466
-
7,466
Smart
Machines
£000
Corporate/
Technology
£000
4,083
-
4,083
-
-
-
1,897
26
1,923
485
-
485
Total
£000
33,514
26
33,540
7,951
-
7,951
2022
£000
2021
£000
1,606
906
Included in rendering of services is £2,189,000 (2021: £1,852,000) of income related to lessor income
Geographical analysis
- United Kingdom
- Rest of Europe
- United States/Canada
10,800
2,237
178
13,215
99% (2021: 99%) of the Rest of Europe revenue is derived from the Netherlands
54
Vianet Group plc
11,609
13,215
7,463
8,369
5,754
2,484
131
8,369
Segment reporting (continued)
3.
Major Clients
In 2022 there were two major clients that individually accounted for at least 10% of total revenues (2021: one client).
The revenues relating to these clients in 2022 was £3.04m (2021: £1.27m)
Both clients are in the Smart Zones segment (2021: the client is within Smart Machines Segment)
4.
Exceptional items
Corporate activity and Acquisition costs
Disposal costs
Staff transitional costs
Contingent consideration release
Network obsolesce costs
Other
2022
£000
127
-
61
(76)
5
4
121
2021
£000
-
101
154
-
8
80
343
Corporate activity and acquisition costs relate to fees paid to corporate advisors in respect of prospective acquisitions
and corporate evaluations.
Disposal costs last year related to the exit of the Stockport property lease, disposal of associated leasehold
improvements and associated costs.
Staff transitional costs relate to the transition of people and management to ensure we have to succession and
calibre of people on board to deliver the strategic aims and aspirations of the Group.
The contingent consideration release refers to the acquisition of Lookout Solutions in 2011. This balance has now
been fair valued at the year end with the change in fair value recognised through the income statement as the
deferred period has now closed as at 31 March 2022.
Loss for the year
5.
The following items have been included in arriving at loss for the year:
Employee benefits expense (note 22)
Depreciation of property, plant and equipment (note 12)
Depreciation of property, plant and equipment – right of use assets (note 12)
Amortisation of intangible assets (note 11)
Loss on disposal of property, plant and equipment
2022
£000
6,330
462
27
2,195
83
Vianet Group plc
2021
£000
5,979
499
64
1,669
126
55
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
Loss for the year (continued)
5.
Auditor’s remuneration
Services to the company and its subsidiaries
Fees payable to the company’s auditor for the audit of the annual financial statements
Fees payable to the company’s auditor and its associates for other services:
Audit of the financial statements of the company’s subsidiaries pursuant to legislation
Other services relating to tax – taxation compliance services
Other services relating to tax – taxation advisory services
Other services – corporate activity
6. Net finance costs
Interest payable on bank borrowings
Interest payable on leasing arrangements
Interest receivable on bank deposits
Net Interest Payable
Taxation
7.
Analysis of credit in period:
Current tax expense
- Amounts in respect of the current year
- Amounts in respect of prior periods
Deferred tax credit
- Amounts in respect of the current year
- Amendment re-recognition of losses
Income tax credit
-
2022
£000
30
51
12
20
7
120
2022
£000
131
7
138
2022
£000
-
-
138
2022
£000
-
-
-
(390)
29
(361)
2021
£000
30
50
10
-
-
90
2021
£000
42
9
51
2021
£000
1
1
50
2021
£000
-
-
(846)
(21)
(867)
56
Vianet Group plc
Taxation (continued)
7.
Reconciliation of effective tax rate
The tax for the 2022 period is lower (2021 was lower) than the standard rate of corporation tax in the UK (2022: 19%
and 2021: 19%). The differences are explained below:
Loss before taxation - Continuing operations
Loss before taxation multiplied by rate of corporation tax in the UK of 19% (2021:19%)
Effects of:
Other expenses not deductible for tax purposes
Non-taxable income
Losses not provided for
Adjustments for prior years
Research and development
Other differences
Total tax credit
2022
£000
(174)
(33)
(20)
(33)
129
29
(488)
55
(361)
2021
£000
(2,822)
(536)
15
16
82
(21)
(492)
69
(867)
Unutilised Trading Losses
The Group continues to carry forward unutilised trading losses of £8,460k (2021 restated: £6,679k). A Deferred Tax
Asset of £1,607k (2021 restated: £1,269k) has been recognised as at 31 March 2022 in respect of the unutilised
trading losses. No further Deferred Tax Asset has been recognised because the Board envisages that a significant
period of time will be required to generate sufficient profits to utilise the trading losses carried forward.
No deferred tax asset has been provided for in relation to the loss making US subsidiary.
Deferred Tax Assets of £1,607k is recognised in respect of unutilised trading losses and short-term timing differences.
Deferred Tax Liabilities of £1,221k arise on timing differences in the carrying value of certain of the Company’s assets
for financial reporting purposes and for corporation tax purposes. These will reverse as the fair value of the related
assets are depreciated over time. Deferred Tax balances have been calculated at the rate of 19%, consideration have
being given to an updated rate of 25% which will be effective from 1 April 2023.
Earnings per share
8.
Earnings per share for the year ended 31 March 2022 was 0.65p (2021: loss per share (6.75)p)
Basic earnings per share are calculated by dividing the earnings attributable to ordinary shareholders being a profit
of £187k (2021: Loss £1,955k) 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
2022
Basic
earnings
per share
Diluted
earnings
per share
Profit
£000
2021
Basic
earnings
per share
Diluted
earnings
per share
Loss
£000
Post-tax profit attributable to equity shareholders
187
0.65p
0.64p
(1,955)
(6.75)p
(6.75)p
Weighted average number of ordinary shares
Dilutive effect of share options
Diluted weighted average number of ordinary shares
2022
Number
2021
Number
28,949,491
380,517
28,953,414
-
29,330,008
28,953,414
Due to the loss in the year to 31 March 2021 no dilutive effect of share options is required to be calculated.
Vianet Group plc
57
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
9. Ordinary dividends
Final dividend for the year ended 31 March 2021 of nil (year ended 31 March 2020: nil)
Interim dividend paid in respect of the year of nil (2021: nil)
Amounts recognised as distributions to equity holders
2022
£000
-
-
-
2021
£000
-
-
-
In addition, the directors are not proposing a final dividend in respect of the year ended 31 March 2022. Total dividend
payable nil (2021: nil).
10. Goodwill
Group
Cost
At 1 April and 31 March
Accumulated impairment losses
At 1 April and 31 March
Net book amount
2022
£000
2021
£000
17,856
17,856
-
-
17,856
17,856
Goodwill is tested for impairment annually as required by IAS36. The goodwill impairment test is performed by
comparing the carrying value of the CGU including associated goodwill with the aggregate recoverable amount.
The carrying value of goodwill is allocated to the following cash generating units:
Smart Zones
Smart Machines
Carrying amount 31 March
2022
£000
15,384
2,472
17,856
2021
£000
15,384
2,472
17,856
The recoverable amounts attributed are based on value in use calculations. The key assumptions made in undertaking
the value in use calculations are set out below.
Budgeted profit and cash flow forecasts for the financial year ended 31 March 2023 were extrapolated for a ten
year period using sector growth assumptions and used as the basis for the impairment review. The key assumption
included within these is an improvement in profitability, based on committed (medium to long term contracts) and
pipeline orders akin to pre-covid-19 trading performance.
Budgets and assumptions are based around historical track record and committed medium to long term contracts.
All property, plant and equipment and other intangibles have been allocated to their respective cash generating unit.
Research & Development, as well as other intangibles and Property, Plant and Equipment, has been allocated to the
respective Smart Zone and Smart Machine divisions. The impairment review uses a WACC rate of 13.93% following
an independent review of the impairment model used. Headroom identified using these base case assumptions
amounted to £1.95m for Smart Zones and £20.60m for Smart Machines.
Both business divisions were then further tested to identify at what point a question mark over whether impairment
may be required. In respect of Smart Machines division, the WACC under this sensitivity was 29.5%, while for the Smart
Zones division the WACC was 17.1%. Whilst the downside sensitivities calculated severely restricted the trading results
and growth rates applied to the forecast period, the inclusion of a terminal value calculation which had previously been
omitted, added significant headroom overall to the calculations. Given the remaining headroom available under the
downside sensitivities prepared, in management’s opinion, there are no reasonably possible scenarios under which
future impairment has been noted, and thus no further sensitivity disclosures have been included.
58
Vianet Group plc
10. Goodwill (continued)
These breaking points, in managements opinion, do not raise any requirement for impairment nor represent
scenarios which are considered reasonably possible and thus further sensitivity disclosures have not been included.
Whilst Smart Machines had significant headroom under the base case model, Smart Zones is somewhat lower under
the base case model and is justified as follows:
1)
2)
Smart Zones division regularly throws off profit and cash in broadly equal measure
Has a robust 10,000 unit estate that is largely owned by PE houses i.e. our main customers are PE backed and
they have invested for a reason – they see the bottom end of the older estates as now divested and investment
in expected
3) We have new customers and existing customers investing in new systems so potential to grow the estate back
4)
5)
The managed market place represents a c12,000 pub opportunity in the UK
There is a freehold market representing c4,000 to 5,000
6) We have identified off the shelf software solutions within stock control management which would accelerate
the managed market opportunity
7)
Ongoing performance is inline with expectations which delivers profit and cash generation.
11. Other intangible assets
Group
Cost
At 31 March 2020
Internally generated development costs
Additions
At 31 March 2021
Internally generated development costs
Additions
At 31 March 2022
Amortisation
At 31 March 2020
Charge for the year
At 31 March 2021
Charge for the year
At 31 March 2022
Net book amount
At 31 March 2022
At 31 March 2021
Capitalised
development
£000
Order
book
£000
Software
£000
Customer
contracts
£000
Patents
£000
Total
£000
9,704
2,312
-
12,016
1,975
-
13,991
5,251
1,257
6,508
1,777
8,285
5,706
5,508
281
-
-
281
-
-
281
281
-
281
-
281
-
-
430
-
21
451
-
-
451
331
44
375
38
413
38
76
3,229
-
-
3,229
-
-
3,229
2,335
356
2,691
356
3,047
182
538
128
-
15
143
-
12
155
69
12
81
24
13,772
2,312
36
16,120
1,975
12
18,107
8,267
1,669
9,936
2,195
105
12,131
50
62
5,976
6,184
The £1,975,000 of capitalised development costs represents expenditure developing technological advancements to
ensure the group is at the forefront of technology that fulfils the requirement of IAS 38. These costs will be amortised
when brought into use from April 2022 over 5 years.
Included within the net book value of capitalised development is £nil (2021: £4,387,000) relating to research and
development technology roadmaps in various stages of progress which is being amortised in accordance with the
policies in note 1.7.
Vianet Group plc
59
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
12. Property, plant and equipment
Group
Cost
At 31 March 2020
Additions
Additions – right of use assets
Disposals
At 31 March 2021
Additions
Disposals
At 31 March 2022
Accumulated depreciation
At 31 March 2020
Charge for the year
Disposals
At 31 March 2021
Charge for the year
Disposals
At 31 March 2022
Net book amount
At 31 March 2022
At 31 March 2021
Freehold
Land and
buildings
£000
Leasehold
Land and
buildings
£000
Plant,
vehicles and
equipment
£000
Fixtures and
fittings
£000
3,163
-
-
-
3,163
47
(23)
3,187
829
60
-
889
60
-
949
2,238
2,274
141
-
-
(141)
-
-
-
-
46
9
(55)
-
-
-
-
-
-
2,334
201
18
(77)
2,476
381
(371)
2,486
1,132
411
(36)
1,507
358
(289)
1,576
910
969
2,165
67
-
(15)
2,217
37
-
2,254
2,001
83
(15)
2,069
71
-
2,140
114
148
Total
£000
7,803
268
18
(233)
7,856
465
(394)
7,927
4,008
563
(106)
4,465
489
(289)
4,665
3,262
3,391
Included in the net carrying amount of property, plant and equipment as at 31 March 2022, are right-of-use assets
as follows:
Motor vehicles
As at 31 March 2021, right-of-use assets were as follows:
Motor vehicles
Carrying
amount
£’000
Depreciation
expense
£’000
Impairment
£’000
24
24
27
27
-
-
Carrying
amount
£’000
Depreciation
expense
£’000
Impairment
£’000
33
33
64
64
-
-
The right-of-use assets are included in the same line item as where the corresponding underlying assets would be
presented if they were owned.
The bank has a fixed and floating charge over all assets of the Group.
60
Vianet Group plc
13.
Inventories
Finished goods
Provision on finished goods
2022
£000
1,629
(56)
1,573
2021
£000
1,488
(57)
1,431
No reversal of previous write-downs was recognised as a reduction of expense in 2022 or 2021. In 2022 £2,711,000
(2021: £1,259,000) was included in the statement of comprehensive income under cost of sales. None of the
inventories are pledged as securities for liabilities.
The Group’s inventories comprise of products, which are not generally subject to rapid obsolescence on account of
technological, deterioration in condition or market trends. Consequently, management considers that there is little
risk of significant adjustments to the Group’s inventory assets within the next financial year.
14. Trade and other receivables
Trade receivables
Other receivables
Prepayments
Contract Assets
2022
£000
2,171
5
365
149
2,690
2021
£000
2,276
7
457
18
2,758
The Directors consider that the carrying amount of trade and other receivables approximates their fair value.
The carrying amounts of trade and other receivables are considered to be reasonable approximations to fair value.
The Group’s trade receivables have been reviewed for expected credit losses. Provisions have been made amounting
to £83,000 (2021: £111,000). It is considered that expected credit loss for receivables balances less than six months is
immaterial. Movements on provisions for doubtful debts on trade receivables are as follows:
Loss allowance as at 1 April 2021 calculated under IFRS9
Loss allowance unused and reversed during the year
Loss allowance provided
Loss allowance as at 31 March 2022
The expected credit loss for trade receivables as at 31 March 2022 was determined as follows:
Expected credit loss rate
Gross carrying amount
Lifetime expected credit loss
Current
0%
1,425
-
Less than 3
months
Less than 6
months
More than 6
months
0%
737
-
5%
169
11
100%
72
72
The expected credit loss for trade receivables as at 31 March 2021 was determined as follows:
Expected credit loss rate
Gross carrying amount
Lifetime expected credit loss
Vianet Group plc
Current
0%
1,074
-
Less than 3
months
Less than 6
months
More than 6
months
0%
824
-
0%
329
-
62%
178
111
£000
111
(111)
83
83
Total
-
2,403
83
Total
-
2,405
111
61
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
15. Trade and other payables
Trade payables
Other taxation and social security
Corporation tax liability
Accruals
Contract Liabilities
Contingent consideration
2022
£000
1,194
477
-
1,074
222
16
2,983
2021
£000
784
771
-
1,266
414
22
3,257
The Directors consider that the carrying amount of trade and other payables approximates their fair value.
Contract Liabilities arises when a customer pays the Group in advance (in advance is defined at more than one monthly
period) for unfulfilled performance obligations relating to data insight. The entity has contracts spanning from two
to four years at the year end. The deferred income will be released to the income statement as the performance
obligations are met. Revenue recognised in the reporting period that was included in the contract liability balance
at the beginning of the period was £413k (2021: £477k). No revenue has been recognised in the reporting period in
respect of performance obligations satisfied in previous periods.
Contingent consideration has been included in both current liabilities and other payables due to the nature of the
maturity. The Group has one contingent consideration liability, from the acquisition of Lookoutsolutions Limited in
October 2011. The final payment in respect of liability of £16k is due to be paid by 30 September 2022
The contingent consideration period for Lookoutsolutions Limited was 10 years to March 2022. The expected cash
outflows in respect of the Lookoutsolutions Limited contingent consideration have not been discounted (2021:
discounted by 12%).
16. Other payables
Contingent consideration
2022
£000
-
-
2021
£000
86
86
The consideration has been included in both current liabilities and other payables due to the nature of the maturity. The
Group has one contingent consideration liability, from the acquisition of Lookout Solutions Limited in October 2011.
The contingent consideration period for Lookout Solutions Limited was 10 years to March 2022. The expected cash
outflows in respect of the Lookout Solutions Limited contingent consideration have not been discounted (2021:
discounted by 12%).
Further details of the accounting treatment for the contingent consideration is included in Note 2 and Note 15 of
these financial statements.
17. Leases
Current
Lease liability
Non-current
Lease liability
62
2022
£000
25
25
2022
£000
-
-
2021
£000
53
53
2021
£000
-
Vianet Group plc
-
17. Leases (continued)
During the year, the group capitalised £nil (2021: £18k) of right of use assets. These were capitalised in accordance
with IFRS16 and are amortised over the remaining length of the lease.
The Group has leases for some vehicles. With the exception of a short term property lease, each lease is reflected
on the balance sheet as a right-of-use asset and a lease liability. The Group classifies its right-of-use assets in a
consistent manner to its property, plant and equipment (see Note 12).
Leases of vehicles are generally limited to a lease term of 3 to 4 years.
Lease payments are fixed over the term of the lease.
Each lease generally imposes a restriction that the right-of-use asset can only be used by the Group. Leases are
either non-cancellable or may only be cancelled by incurring a substantive termination fee.
Some leases contain an option to purchase the underlying leased asset outright at the end of the lease, or to extend
the lease for a further term. The Group is prohibited from selling or pledging the underlying leased assets as security.
For leases over vehicles, the Group must keep those vehicles legally maintained and roadworthy and must return in
a good condition at the end of the lease.
18. Borrowings
Current
Bank overdraft
Bank loans
Non-current
Bank loans
2022
£000
1,317
993
2,310
2022
£000
2,273
2,273
2021
£000
-
1,265
1,265
2021
£000
3,290
3,290
Bank loans are denominated in £ sterling and bear interest based on Bank of Scotland Base Rate plus a rate of
between 1% and 4%. The bank loans are secured by a fixed charge over the land and buildings of the Group.
The availability of the bank overdraft is £1.5m, which has been renewed through to 31 May 2023 with a further note of
support from the bank stating they see no reason why facilities will not be renewed to 31 May 2024.
The effective interest rates on the Group’s borrowings were as follows above base rate:
Bank overdrafts
Bank borrowings - CBIL loan
Bank borrowings – Acquisition loan
Bank borrowings – commercial mortgage
The maturity profile of the Group’s non-current bank loans was as follows:
Vianet Group plc
2022
%
2.75
3.65
3.10
1.00
2021
%
2.50
3.65
3.10
1.00
63
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
18. Borrowings (continued)
Between one and two years
Between two and five years
2022
£000
756
1,517
2,273
2021
£000
1,749
1,541
3,290
The Group’s bank borrowings bear interest at floating rates, which represent prevailing market rates.
None of the above cash flows have been discounted.
19. Financial Instruments
The Group is exposed on a minimal basis to market risk through its use of a US Dollar and a Euro account. The Group’s
risk management is co-ordinated by the directors who focus actively on securing the Group’s short to medium term
cash flows through regular review of all the operating activities of the business.
The Group does not actively engage in the trading of financial assets for speculative purposes nor does it write
options. The most significant financial risks to which the Group is exposed are described below.
Foreign currency sensitivity
Exposures to currency exchange rates arise from the Group’s overseas activities, all of which are denominated in
US Dollars and Euros. Due to the non-material nature of the Group’s exposure to foreign currency risk, sensitivity
analyses to movement in exchange rates are not produced.
Foreign currency denominated financial assets and liabilities are set out below.
Denominated in US Dollars
Financial assets
Financial liabilities
Exposure
Denominated in Euros
Financial assets
Financial liabilities
Exposure
2022
$000
43
-
43
2022
€000
329
-
329
2021
$000
7
-
7
2021
€000
10
-
10
The Group has no long term foreign exchange exposure.
At the beginning, during and end of the year, the Group had no unexpired forward foreign exchange contracts.
Credit risk analysis
The Group’s exposure to credit risk is limited to the carrying amount of financial assets recognised at the balance
sheet date and which are set out below.
Cash and cash equivalents
Trade and receivables
Contract Assets
64
2022
£000
1,583
2,176
149
3,908
2021
£000
1,894
2,283
18
4,195
Vianet Group plc
19. Financial Instruments (continued)
The Group continuously monitors credit risk of customers and other counterparties and incorporates this information
into its credit risk controls. The Group takes up trade references on all new customers and its policy is to deal only
with credit worthy companies.
None of the Group’s financial assets are secured by collateral or other credit enhancements.
In respect of trade and other receivables, the Group is not exposed to any significant credit risk exposure to any
single counterparty or any group of counterparties having similar characteristics. The credit risk for liquid funds is
considered negligible, since the counterparty is a reputable bank with a high quality external credit rating, therefore
no significant mitigating actions are required in respect of credit risk.
The Group uses an expected credit loss model for impairment that represents its estimate of incurred losses in
respect of the Trade Receivables as appropriate.
The Group applies the IFRS 9 simplified approach to measure expected credit losses using a lifetime expected credit
loss provision for trade receivables and contract assets. The expected loss rates are based on the Group’s historical
credit losses experienced over the two year period prior to the period end.
The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors
affecting the Group’s customer. Under the expected credit loss model impairment allowance wasn’t material
resulting in no provision being made.
Liquidity risk analysis
The Group manages its liquidity needs by carefully monitoring all scheduled cash outflows. Liquidity needs are
monitored in various time bands, on a day-to-day and week to week basis, as well as on the basis of a rolling eight
week projection. Longer term needs are monitored as part of the Group’s regular rolling monthly reforecasting
process. The Group’s policy is to ensure that it will always have sufficient cash to allow it to meet its liabilities when
they become due. Budgets and forecasts are agreed and set by the Board in advance to ensure the Group’s cash
requirement to be anticipated.
This has all been formally considered in the going concern review of the business and the facilities we have access to.
The maturity profile of the Group’s financial liabilities at the reporting dates, based on contractual undiscounted
payments including lease payments, are summarised below:
At 31 March 2022
Upto 3 months
£000
Between 3 and
Between 1
12 months £000 and 5 years £000
Over 5 years
£000
Trade payables and other payables
Loans and borrowings
Lease liabilities
Total
At 31 March 2021
Trade payables and other payables
Loans and borrowings
Lease liabilities
Total
Vianet Group plc
1,687
1,659
25
3,371
1,296
651
-
1,947
-
2,273
-
2,273
-
-
-
-
Upto 3 months
£000
Between 3 and
Between 1
12 months £000 and 5 years £000
Over 5 years
£000
1,719
316
13
2,048
1,538
949
40
2,527
86
3,290
-
3,376
-
-
-
-
65
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
19. Financial Instruments (continued)
Categories of financial assets and financial liabilities
Accounting policy 1.15 provides a description of each category of financial assets and liabilities and the related
accounting policies. The carrying amounts of financial assets and financial liabilities in each category are as follows:
31 March 2021
Financial assets
Cash and cash equivalents
Trade and other receivables
Total assets
31 March 2022
Financial liabilities
Non-current borrowings
Current borrowings
Trade payables
Contingent consideration
Total financial liabilities
31 March 2021
Financial assets
Cash and cash equivalents
Trade and other receivables
Total assets
31 March 2021
Financial liabilities
Non-current borrowings
Current borrowings
Trade payables
Contingent consideration
Total financial liabilities
Amortised
cost
£000
1,583
2,176
3,759
Amortised
cost
£000
2,273
2,310
1,194
-
5,777
Amortised
cost
£000
1,894
2,283
4,177
Amortised
cost
£000
3,290
1,265
784
-
5,339
FVTPL
£000
-
-
-
FVTPL
£000
-
-
-
18
18
FVTPL
£000
-
-
-
FVTPL
£000
-
-
-
108
108
Capital management policies and procedures
The Group’s capital management objectives are to ensure its ability to continue as a going concern and to provide an
adequate return to shareholders by pricing products and services commensurately with the level of risk.
No supplier financing arrangements or credit insurance is in place.
The Group’s dividend policy is to monitor reserves available for distribution to shareholders.
The Group monitors capital on the basis of carrying amount of equity less cash and cash equivalents as presented on
the face of the balance sheet. Capital for the reporting periods under review is set out below.
66
Vianet Group plc
19. Financial Instruments (continued)
Total equity
Less cash equivalents
2022
£000
25,735
(1,583)
24,152
2021
£000
25,589
(1,894)
23,695
The Group is not subject to external imposed capital requirements and any bank covenants have been relaxed until
March and September 2023, other than the minimum capital requirements and duties regarding reduction of capital
as imposed by the Companies Act 2006 for all public limited companies.
Fair value measurements
Financial assets and financial liabilities measured at fair value in the statement of financial position are grouped into
three levels of a fair value hierarchy. The three levels are defined based on the observability of significant inputs to
the measurement, as follows:
•
•
Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly
•
Level 3: unobservable inputs for the asset or liability.
The following table shows the levels within the hierarchy of financial assets and liabilities measured at fair value on
a recurring basis:
31 March 2022
Financial assets
Debenture
Total financial assets
31 March 2021
Financial assets
Debenture
Total financial assets
31 March 2022
Financial liabilities
Contingent consideration
Total financial liabilities
31 March 2021
Financial liabilities
Contingent consideration
Total financial liabilities
Level 1
£000
Level 2
£000
Level 3
£000
-
-
-
-
Level 1
£000
Level 2
£000
Level 3
£000
-
-
-
-
Level 1
£000
Level 2
£000
Level 3
£000
-
-
-
-
Level 1
£000
Level 2
£000
Level 3
£000
-
-
86
86
The following valuation techniques are used for instruments categorised as level 3:
Vianet Group plc
Total
£000
-
-
Total
£000
-
-
Total
£000
-
-
Total
£000
86
86
67
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
19. Financial Instruments (continued)
Debenture
The fair value of this balance is based on the expected future cash flows to be received from the entity, taking into
consideration a risk premium.
Contingent consideration
The fair value of the contingent consideration related to the acquisitions of Vendman Systems Limited and Lookout
Solutions Limited are estimated using a present value technique. The fair value is estimated based on the expected
target level achieved. The inputs into the fair value have been disclosed in notes 2.1, 15 and 16.
20. Deferred tax
Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19% (2021: 19%).
The movement on the deferred tax account is as shown below:
Deferred tax asset
At 1 April (as previously restated)
Prior year adjustment through opening reserves (note 30)
At 1 April (as restated)
Profit and loss credit in respect of losses realised
At 31 March
Deferred tax liability
At 1 April
Profit and loss credit in respect of timing differences
At 31 March
2022
£000
1,269
-
1,269
338
1,607
2022
£000
(1,243)
23
(1,221)
As restated
2021
£000
510
(210)
300
969
1,269
2021
£000
(1,141)
(102)
(1,243)
Net position per the Balance sheet at 31 March
386
26
Deferred tax has been recognised during the year in respect of tax losses in certain of the group’s subsidiaries as
the Directors believe there is sufficient certainty over the extent and timing of their recovery to do so. Included in the
amount of £1,607k (2021 restated: £1,269k) are amounts of £1,607k relating to tax losses (2021 restated: £1,269k).
21.
Issued share capital
Issued and fully paid
Ordinary shares of 10p each: 28,808,914 (2021: 28,953,414)
2022
£000
2021
£000
2,880
2,895
During the year, the company bought back and cancelled down 146,500 shares as part of an approved share buy back
programme.
During the year, the company issued 2,000 shares from an employee share option exercise.
68
Vianet Group plc
22. Employees and directors
Employee benefit expense during the period
Wages and salaries
Furlough receipts
Social security costs
Pension costs
Share based payments
2022
£000
5,633
(105)
505
214
83
6,330
2021
£000
6,273
(1,068)
482
219
73
5,979
Furlough receipts claimed during the year was £105k (2021: £1,068k). Furlough receipts are presented net within
employee expenses.
Average monthly number of people (including directors) employed
2022
Number
2021
Number
Sales
Engineering
Volume Recovery
Management
Administration
Key management personnel - Directors
Group
Short term employment benefits
Pension contributions
Share based payments
14
21
9
4
95
143
2022
£000
510
27
83
620
During the year one (2021:one) directors had benefits accruing under defined contribution pension schemes.
Highest paid director
2022
£000
221
39
260
Short term employment benefits
Pension contributions
Vianet Group plc
15
24
8
10
101
158
2021
£000
890
22
73
985
2021
£000
416
-
416
69
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
23. Share-based payments
There are four share option plans in place the EMI Plan, the Executive Plan, the Employee Plan, and a Long Term
Incentive Plan. Under the share option plans, the directors can grant options over shares in the company to employees.
Options are granted with a fixed exercise price equal to the market value of the shares at the date of grant. The
contractual life of an option is 10 years. Options granted under the EMI share option plans will become exercisable
immediately, and options granted under the Executive Plan and the Employee Plan will become exercisable on the
third anniversary of the date of grant. Exercise of an option is subject to continued employment.
Details of share options outstanding during the period (including those held by directors) are set out below:
At start of the financial year
Exercised
Granted
Forfeited
Lapsed
At end of financial year
Exercisable at end of financial year
2022
2021
Number of
share options
1,731,750
(2,000)
80,000
(170,000)
-
1,639,750
614,750
Weighted
average
exercise
price(p)
76.9
(85.0)
72.0
(96.1)
-
74.7
89.0
Number of
share options
1,312,550
-
525,000
(50,000)
(55,800)
1,731,750
716,750
Weighted
average
exercise
price(p)
90.7
-
67.7
(63.5)
(96.5)
76.9
90.3
The below share options are serving Directors only:
Name of director /
senior employee
M H Foster
M H Foster
M H Foster
Date of grant
09/04/14
21/12/15
24/02/21
Number of
options
Exercise
price
Exercise
date
135,000
124,000
100,000
85.0p
103.0p
72.0p
-
-
-
Weighted
average
share price
at date of
exercise
Gain on
exercise
Exercise
period
-
-
-
-
-
-
10/04/17 to 09/04/24
21/12/18 to 20/12/25
24/02/24 to 23/02/31
Expected volatility was determined by discounting the weighted average volatility of comparable listed companies to
a comparable private company volatility. The share price of £0.348 was agreed with HMR&C as the fair value of Vianet
Group plc shares at the time of grant of the EMI options. The fair value of the other shares was as per market value
at date of grant as shown above. The risk free rate of return is the yield on zero coupon UK government bonds of a
term consistent with the assumed option life.
The fair value on the EMI Plan, the Executive Plan, the Employee Plan and the Employee Company Share Option Plan
were all calculated under the Black Scholes model.
The Group recognised an expense of £83,000 (2021: £73,000) in relation to equity settled share-based payment
transactions in the year.
Long Term Incentive Plan
The Group adopted a new Long Term Incentive Plan (LTIP) on 17 December 2015 and on 21 December 2015, awards
were granted to two executive directors and three key management personnel under the scheme.
LTIP awards give a conditional right to a ‘cash payment’ at three separate points in time 30 June 2018, 30 June 2019
and 30 June 2020. The amount of the cash payment is determined by the participant’s percentage entitlement to the
award pool at each date, and the size of the award pool itself is based upon performance criteria relating to growth
in the parent company’s share price and dividends over the period to 30 June 2020. There is no clawback of earlier
awards if performance declines in later periods. The entitlement of Mark Foster in the overall award pool is 29%.
70
Vianet Group plc
23. Share-based payments (continued)
Any cash payment awarded under the LTIP will (after the deduction of income tax and employee national insurance)
be used to acquire a number of shares in the Company based upon the prevailing market value on behalf of the
participant. Accordingly, the LTIP is accounted as an equity settled share based payment with a net settlement feature.
The fair value of the LTIP was calculated at the date of grant using the Monte Carlo Model and the following key
assumptions:
21 December 2015
Expected volatility (%)
Risk free rate (%)
Expected dividend yield (%)
Share price on grant date (p)
Exercise price (p)
The fair values of each award pool are the following:
30 June 2018
30 June 2019
30 June 2020
27.3
1.15
5.534
103.0
0
£000
305
143
108
24. Related party transactions
IAS 24 (Related party transactions) requires the disclosure of the details of material transactions between reporting
entities and related parties. Transactions with group entities are eliminated on consolidation. C Williams, a non-
executive director, invoiced Vianet Group plc for fees totalling £nil (2021: £25,982). As at 31 March 2022, there was
£nil outstanding (2021: £nil). D Coplin, a non-executive director, invoiced Vianet Group plc for fees totalling £nil (2021:
£26,880). As at 31 March 2022 there was £nil outstanding (2021: £nil).
J W Dickson, a director of the Vianet Group plc, was also a director of Screenreach Interactive Limited, which he
resigned from on 20 April 2021. Screenreach was a company which the Group historically provided a loan to. Interest
receivable on this loan valued at £30,000 (2021 - £nil) is due from Screenreach Interactive Limited. The Group made
sales of £nil (2021 - £nil) to Screenreach Interactive Limited.
IAS 24:17 required disclosures are included in Note 22
25. Notes supporting statement of cash flows
Net debt as at 1 April 2020
Cash flows
Non-cash flows
- Interest accruing in the period
Net debt as at 31 March 2021
Cash flows
Non-cash flows
- Interest accruing in the period
Net debt as at 31 March 2022
Borrowings
due within
one year
£000
Borrowings
due after
one year
£000
(664)*
(651)
50
(1,265)
134
(670)
(2,620)
-
(3,290)
1,017
138
-
(993)**
(2,273)
Total
£000
(1,334)
(3,271)
50
(4,555)
1,151
138
(3,266)
* The net debt as at 31 March 2020 for borrowing due within one year of £664k as stated here, does not agree to the
Balance Sheet amount of £2,011, as this does not include the bank overdraft of £1,347k as at 31 March 2020.
** The net debt as at 31 March 2022 for borrowing due within one year of £993k as stated here, does not agree to the
Balance Sheet amount of £2,310, as this does not include the bank overdraft of £1,317k as at 31 March 2022.
Vianet Group plc
71
Notes to the Financial Statements for the year
ended 31 March 2022 (continued)
25. Notes supporting statement of cash flows (continued)
Cash and cash equivalents for the purpose of the statement of cash flows comprises
Cash at bank available on demand
Short term deposits
Cash on hand
Adjusted net cash generation
2022
£000
1,581
-
2
1,583
2021
£000
93
1,800
1
1,894
No significant non-cash transactions from investing activities are noted.
Non-cash transactions from financing activities are shown in the reconciliation of liabilities from financing
transactions in Note 25.
26. Alternative Performance Measures
In the reporting of financial information, the Directors have adopted the APMs “Adjusted operating (loss)/profit”,
“Adjusted operating cash generation”, and “Adjusted net cash generation”, (APMs were previously termed ‘Non-
GAAP measures’), which is not defined or specified under International Financial Reporting Standards (IFRS).
These measures are not defined by IFRS and therefore may not be directly comparable with other companies’ APMS,
including those in the Group’s industry. APMs should be considered in addition to, and are not intended to be a
substitute for, or superior to, IFRS measurements.
Purpose
The Directors believe that this APM assists in providing additional useful information on the underlying trends,
performance and position of the Group. This APM is also used to enhance the comparability of information between
reporting periods and business units, by adjusting for non-recurring or uncontrollable factors which affect IFRS
measures, to aid the user in understanding the Group’s performance.
Consequently, APMs are used by the Directors and management for performance analysis, planning, reporting and
incentive setting purposes and this remains consistent with the prior year. Adjusted APMs are used by the Group
in order to understand underlying performance and exclude items which distort compatibility, as well as being
consistent with public broker forecasts and measures.
Operating loss (IFRS measure)
Add back/(deduct):
Amortisation charge
Share based payments charge
Exceptional items charge
Adjusted operating (loss)/profit
Operating cash generation (IFRS measure)
Add back:
LTIP tax payment
Adjusted operating cash generation
2022
£000
(36)
2,195
83
121
2,363
2022
£000
2,738
-
2,738
2021
£000
(2,772)
1,669
73
343
(687)
2021
£000
(341)
-
(341)
72
Vianet Group plc
26. Alternative Performance Measures (continued)
Net cash generation (IFRS measure)
Add back:
LTIP tax payment
Adjusted net cash generation
27. Post Balance Sheet Events
No post balance sheet events were noted.
2022
£000
2,397
-
2,397
2021
£000
1,052
-
1,052
28. Controlling party
The Directors consider there to be no ultimate controlling party of the Group.
29. Prior period adjustment
A prior year adjustment has been made to restate deferred tax assets and opening reserves at 1st April 2020 (in
the comparative period) to reflect the outcome of voluntary disclosures made to HMRC during 2022 in respect of
previously disclosed tax losses relating to tax returns made between 2015 and 2020 that had not been picked up
correctly historically, during tax review.
An issue was identified in relation to claims for third party subcontracted expenditure and EPW costs. The Group had
treated 100% of the third party EPW costs and subcontracted expenditure as qualifying for R&D tax relief and had not
applied, for both categories of expenditure, the statutory restriction to only include 65% of the qualifying costs within
the claims. There was no restriction included on these costs in the R&D claims for the periods 31 March 2015 to 31
March 2020 inclusive.
Therefore, the Group had overclaimed R&D tax relief for these periods. The company’s R&D claims have only impacted
the quantum of its trading losses carried forward in each affected period. No trading losses have historically been
surrendered for an R&D credit and the tax profile of the Group is such that it will still be loss making in each affected
period, even when taking account of reduced R&D claims for these periods.
The adjustment to losses brought forward represents six years’ worth of R&D claim adjustments, reflecting the full
period that claims have inadvertently not applied the appropriate restriction.
The Group did not surrender any of the brought forward trading losses for an R&D tax credit. Therefore, there
is no underpaid tax because of this incorrect application of the R&D legislation and the Group have undertaken
an exercise to model the impact on carried forward loses for all periods in question. Given there is no underpaid
tax, the cumulative adjustments from FY15 to FY20 inclusive have been included as an amendment to the trading
losses brought forward figure in the FY21 computation. Deferred Tax Asset recognition for past trading losses has
historically been included and therefore, overstated.
An adjustment has been made in the FY21 tax returns in respect of the above, though in terms of accounting
presentation, this has been amended by way of a prior period adjustment to opening reserves in the comparative
period. There is no impact on comparative profit or loss or cash flows.
The effects of the restatements are set out in the table below:
Net deferred tax liability at 1 April 2020
Net deferred tax asset at 31 March 2021
Retained profit at 1 April 2020
Retained profit at 31 March 2021
Vianet Group plc
Previously
reported
£000
(631)
236
12,403
10,548
As
restated
£000
(841)
26
12,193
10,238
73
COMPANY BALANCE SHEET
at 31 March 2022
Fixed assets
Investments in subsidiaries
Other intangible assets
Tangible assets
Current assets
Debtors
Cash at bank
Creditors: amounts falling due within one year
Net current assets
Net assets
Capital and reserves
Ordinary share capital
Share premium
Share based payment reserve
Merger reserve
Capital redemption
Retained earnings
Total equity
Note
2
3
4
5
6
7
8
8
8
8
8
2022
£000
5,065
59
15
5,139
10,635
1,251
11,886
(429)
11,457
16,596
2,880
11,711
499
310
15
1,181
16,596
2021
£000
4,990
60
3
5,053
10,782
1,800
12,582
(501)
12,081
17,134
2,895
11,709
437
310
-
1,783
17,134
The company has taken the exemption under s408 of the Companies Act 2006 to not included the Company Statement
of Comprehensive Income
The company’s loss for the financial year was £497,000 (2021: loss £2,062,000).
The balance sheet was approved by the Board on 13 June 2022 and signed on its behalf by:
J Dickson
Director
Company number: 05345684
The accompanying accounting policies and notes form an integral part of the financial statements.
74
Vianet Group plc
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2022
At 1 April 2020
Share based payments
Transactions with owners
Loss and total comprehensive
income for the year
Share
capital
£000
Share
premium
account
£000
2,895 11,709
-
-
-
-
-
-
At 31 March 2021/1 April 2021
2,895 11,709
Issue of shares
Cancellation of shares
Share based payments
Share option forfeitures
Transactions with owners
Loss and total comprehensive
income for the year
-
(15)
-
-
(15)
-
2
-
-
-
2
-
At 31 March 2022
2,880 11,711
Share
based
payment
reserve
£000
364
73
73
-
437
-
-
83
(21)
62
-
499
Merger
reserve
£’000
Capital
Redemption
£000
Retained
profit
£000
Total
£000
310
-
-
-
310
-
-
-
-
-
-
310
-
-
-
-
-
-
15
-
-
15
-
15
3,845
-
19,123
73
-
73
(2,062)
(2,062)
1,783
17,134
-
(126)
-
21
(105)
2
(126)
83
-
(41)
(497)
(497)
1,181
16,596
The accompanying accounting policies and notes form an integral part of the financial statements.
Vianet Group plc
75
NOTES TO THE COMPANY BALANCE SHEET
1. Principal accounting policies
1.1 Statement of compliance
Going concern has been considered as part of the Group position. See section 1.1 on page 41.
These financial statements have been prepared in accordance with applicable accounting standards and in accordance
with Financial Reporting Standard 101 - ‘The Reduced Disclosure Framework’ (FRS 101). The principle accounting
policies adopted in the preparation of these financial statements are set out below. These policies have all been
applied consistently throughout the year unless otherwise stated.
The financial statements have been prepared on a historical cost basis.
The financial statements are presented in Sterling (£).
1.2 Disclosure exemptions
In preparing these financial statements the Company has taken advantage of all disclosure exemptions conferred by
FRS 101. Therefore these financial statements do not include:
•
•
•
•
•
•
•
•
•
A statement of cash flows and related notes
The requirement to produce a balance sheet at the beginning of the earliest comparative period
The requirements of IAS 24 related party disclosures to disclose related party transactions entered in to
between two or more members of the group as they are wholly owned within the group
Capital management disclosures
Presentation of comparative reconciliation of the number of shares outstanding at the beginning and at the end
of the period
The effect of future accounting standards not adopted
Certain share based payments disclosures
Disclosures in relation to impairment of assets
Fair value measurement disclosures (other than disclosures required as a result of recording financial
instruments at fair value)
76
Vianet Group plc
Income taxes
1. Principal accounting policies (continued)
1.3
Tax expense recognised in profit or loss comprises the sum of deferred tax and current tax not recognised in other
comprehensive income or directly in equity.
Calculation of current tax is based on tax rates and laws that have been enacted or substantively enacted by the end
of the reporting period. Deferred income taxes are calculated using the liability method.
Calculation of deferred tax is based on tax rates and laws that have been enacted or substantively enacted by the end
of the reporting period that are expected to apply when the asset is realised or the liability is settled.
The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the
entity expects to recover the related asset or settle the related obligation.
Deferred tax assets are recognised to the extent that it is probable that the underlying tax loss or deductible temporary
difference will be utilised against future taxable income. This is assessed based on the Company’s forecast of future
operating results, adjusted for significant non-taxable income and expenses and specific limits on the use of any
unused tax loss or credit. Deferred tax assets are not discounted.
Deferred tax liabilities are generally recognised in full with the exception of the following: on the initial recognition
of goodwill on investments in subsidiaries and joint ventures where the Company is able to control the timing of the
reversal of the difference and it is probable that the difference will not reverse in the foreseeable future on the initial
recognition of a transaction that is not a business combination and at the time of the transaction affects neither
accounting or taxable profit.
Deferred tax liabilities are not discounted.
Investment in subsidiaries
1.4
Investments in subsidiary undertakings, associates and joint ventures are stated at cost less any applicable provision
for impairment.
1.5 Employee share option schemes
All share-based payment arrangements are recognised in the financial statements in accordance with IFRS 2.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair
values. Where employees are rewarded using share-based payments, the fair values of employees’ services are
determined indirectly by reference to the fair value of the instrument granted to the employee. This fair value is
appraised at the grant date and excludes the impact of non-market vesting conditions (for example, profitability and
sales growth targets).
All equity-settled share-based payments are ultimately recognised as an expense in the profit and loss account with
a corresponding credit to “share based payment” reserve. Subsidiary costs are treated as a capital contribution and
added to the cost of investment.
Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share
capital, and where appropriate share premium.
Vianet Group plc
77
Notes to the Company Balance Sheet (continued)
1. Principal accounting policies (continued)
1.6 Tangible assets
Property plant and equipment (PPE) is initially recognised at acquisition cost or manufacturing cost, including any
costs directly attributable to bringing the assets to the location and condition necessary for them to be capable of
operating in the manner intended by the Company’s management.
Depreciation commences when an asset is available for use. Depreciation is charged so as to write off the depreciable
amount of assets to their residual values over their estimated useful lives using a method that reflects the pattern in
which the assets’ future economic benefits are expected to be consumed by the Company.
Depreciation is charged in equal annual instalments over the following periods:
Fixtures and fittings
4 years
Methods of depreciation, residual values and useful lives are reviewed and adjusted, if appropriate, at each balance
sheet date.
The gain or loss arising from the disposal or retirement of an item of property, plant and equipment is determined as
the difference between the net disposal proceeds and the carrying amount of the item, and is included in the Group
statement of comprehensive income.
1.7
Intangible assets
Software
Purchased software are stated at cost net of amortisation and any provision for impairment.
Amortisation
Intangible assets are amortised on a straight-line basis, to reduce their carrying value to their residual value, over
their estimated useful lives. The following useful lives were applied during the year:
Trademarks
Purchased software
expected length of trademark
5 years
Methods of amortisation, residual values and useful lives are reviewed, and if necessary adjusted, at each balance
sheet date.
1.8 Intercompany balances
The Company provides for impairment for amounts due from subsidiary undertakings based on forward looking going
concern assessments for the Group including its individual subsidiaries including and excluding Parent Company
guarantees.
The Company uses an expected credit loss model for impairment that represents its estimate of incurred losses in
respect of the Amounts due from subsidiaries as appropriate.
The Company applies the IFRS 9 simplified approach to measure expected credit losses using a lifetime expected
credit loss provision for amounts due from subsidiaries. The expected loss rates are based on the Company’s
historical credit losses experienced over the two year period prior to the period end.
The historical loss rates are then adjusted for current and forward-looking information on macroeconomic factors
affecting the Company’s subsidiaries. Under the expected credit loss model impairment allowance was considered
relevant in respect of amounts due from Vianet Americas Inc, with 100% provision being made at 31 March 2022.
78
Vianet Group plc
2.
Investments in subsidiaries
Company
Cost and net book amount:
Shares in subsidiaries
At 1 April
Additions
At 31 March
2022
£000
2021
£000
4,990
75
5,065
4,949
41
4,990
Additions relate to the subsidiary costs of the employee share option scheme.
The company owns the whole of the issued ordinary share capital of the following subsidiaries:
Subsidiary
Shareholding
Brulines Group Limited
Vianet Americas Inc
Vianet Limited
100%
100%
100%
Country of
incorporation
and registration
UK
USA
UK
Principal activity
Dormant
Leisure Solutions
Leisure Solutions
Brulines Limited and Vendman Systems Limited, are indirect investments via Vianet Limited in Leisure.
The registered address of the above subsidiaries is:-
Brulines Group Limited – One Surtees Way, Surtees Business Park, Stockton On Tees, TS18 3HR
Vianet Americas Inc - 251 Little Falls Drive, Wilmington, New Castle, DE, 19808
Vianet Limited - 4th Floor 115 George Street, Edinburgh, EH2 4JN
3. Other intangible assets
Patents
£000
Software
£000
Total
£000
Cost
At 31 March 2020
Additions
At 31 March 2021
Additions
At 31 March 2022
Amortisation
At 31 March 2020
Charge for the year
At 31 March 2021
Charge for the year
At 31 March 2022
Net book amount
At 31 March 2022
At 31 March 2021
Vianet Group plc
101
15
116
11
127
46
10
56
12
68
59
60
165
-
165
-
165
165
-
165
-
165
-
-
266
15
281
11
292
211
10
221
12
233
59
60
79
Notes to the Company Balance Sheet (continued)
4.
Tangible Assets
Cost
At 31 March 2020
Additions
At 31 March 2021
Disposals
At 31 March 2022
Accumulated depreciation
At 31 March 2020
Charge for the year
Disposals
At 31 March 2021
Charge for the year
At 31 March 2022
Net book amount
At 31 March 2022
At 31 March 2021
5. Debtors
Amounts due more than 1 year
Amounts due from subsidiaries
Amounts due within 1 year
Other debtors
Other taxation
Fixtures
and fittings
£000
45
(15)
30
17
47
39
3
(15)
27
5
32
15
3
2022
£000
2021
£000
10,565
10,730
45
25
37
15
10,635
10,782
All intercompany debt is repayable on demand. Interest is charged at base rate plus 2.5%.
The amounts due from subsidiaries have been reviewed for expected credit losses, and no further credit losses are
expected.
A provision against an amount due from a subsidiary totalling £1,613k has been made (2021: £1,538k). The subsidiary
received funding of £75k during 2022 which was provided against.
80
Vianet Group plc
6. Creditors: amounts falling due within one year
Other payables
Accruals
7.
Issued share capital
2022
£000
152
277
429
2022
£000
2021
£000
99
402
501
2021
£000
Issued and fully paid
Ordinary shares of 10p each: 28,808,914 (2021: 28,953,414)
2,880
2,895
During the year, the company bought back and cancelled down 146,500 shares as part of an approved share buy back
programme.
During the year, the company issued 2,000 shares from an employee share option exercise.
Allotments during the year
Since the end of the financial year no shares have been issued under the share option scheme.
8.
Share capital and reserves
Called-up share capital - represents the nominal value of shares that have been issued.
Share premium account - includes any premiums received on issue of share capital. Any transaction costs associated
with the issuing of shares are deducted from share premium.
Capital redemption - represents the nominal value of shares repurchased and cancelled.
Share based payment reserve - represents the fair value of all share options issued by the Company which have yet
to be exercised.
Merger reserve - excess of fair value of shares issued over nominal value when shares are issued in exchange for
obtaining at least a 90% interest in the equity share capital of another entity.
Profit and loss account - includes all current and prior period retained profits and losses.
9. Dividends
Final dividend for the year ended 31 March 2021 of nil (year ended 31 March 2020: nil)
Interim dividend paid in respect of the year of nil (2021: nil)
Amounts recognised as distributions to equity holders
2022
£000
-
-
-
2021
£000
-
-
-
In addition, the directors are not proposing a final dividend in respect of the year ended 31 March 2022. Total dividend
payable nil (2021: nil).
Vianet Group plc
81
Notes to the Company Balance Sheet (continued)
10. Employees and directors
Employee benefit expense during the period
Wages and salaries
Social security costs
Pension costs
Share based payments
Average monthly number of people (including directors) employed
Management
11. Directors
Directors’ emoluments
Pension contribution
The amounts in respect of the highest paid director are as follows:
Directors’ emoluments
Pension contribution
2022
£000
510
65
27
83
685
2022
Number
4
5
4
2022
£000
510
27
537
2022
£000
221
39
260
2021
£000
847
107
22
73
1,049
2021
Number
5
2021
£000
890
22
912
2021
£000
416
-
416
For other Directors’ emoluments see page 19 in the Report of the Directors.
12. Share-based payments
The company disclosures required under FRS 101 are identical to those required under IFRS. See Group accounts,
note 23, for details.
13. Parent Company Profit and Loss Account
The parent company has taken advantage of section 408 of the Companies Act 2006 and has not included its own
profit and loss account in these financial statements. The parent company’s loss for the financial year was £497,000
(2021: loss £2,062,000).
82
Vianet Group plc
14. Related Party Transactions
As permitted by FRS 101 related party transactions with wholly owned members of Vianet Group plc have not been
disclosed.
Non-executive director payments were incurred in the company during this year.
IAS 24 (Related party transactions) requires the disclosure of the details of material transactions between reporting
entities and related parties. Transactions with group entities are eliminated on consolidation. C Williams, a non-
executive director, invoiced Vianet Group plc for fees totalling £nil (2021: £25,982). As at 31 March 2022, there was
£nil outstanding (2021: £nil). D Coplin, a non-executive director, invoiced Vianet Group plc for fees totalling £nil (2021:
£26,880). As at 31 March 2022 there was £nil outstanding (2021: £nil).
J W Dickson, a director of the Vianet Group plc, was also a director of Screenreach Interactive Limited, which he
resigned from on 20 April 2021. Screenreach was a company which the Group historically provided a loan to. Interest
receivable on this loan valued at £30,000 (2021 - £nil) is due from Screenreach Interactive Limited. The Group made
sales of £nil (2021 - £nil) to Screenreach Interactive Limited.
See Group accounts, Report of the Directors for details of non-executive directors’ emoluments.
15. Post Balance Sheet Events
No post balance sheet events were noted.
Vianet Group plc
83
NP0422.3540
DELIVERING REAL CHANGE THROUGH UNPARALLELED INSIGHT
One Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR
www.vianetplc.com