consolidated annual report & accounts year ended …vianet group plc 3 together with the interim...
TRANSCRIPT
The market leading provider of real time monitoring systems and
data management services for the UK leisure and forecourt sectorsOne Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR
www.vianetplc.com
Vianet Group plc
Consolidated Annual Report & AccountsYear ended 31 March 2013
Vianet Group plc i
HigHligHts
• Revenuefortheyearof£21.09million(2012:£22.98million)
• Recurringrevenuesremainedsteadyat71%(2012:70%)
• Grossmarginsstableat51%(2012:53%)
• Operatingprofitbeforeamortisationofintangibles,shareoptionandexceptionalcostsof£3.3million(2012:£3.9million)
• Profitbeforetaxof£1.8million(2012:£2.3million)
• Finaldividendof4.00pencepersharegivingafullyeartotalof5.70pencepershare(2012:5.67pencepershare)
• 864newinstallations,ofwhich828werehighervalueiDraughtTM
• VianetFuelSolutions(“VFS”)reducedlossesby£0.6million
• Groupadministrativecostsonapre-exceptionalbasissuccessfullyreducedby£0.8million
since year end• SaleofUniverseGroupplcshareholdingraising£0.6millionforagainoninvestmentof£90,000
• Strategic partnership establishedwith BigOil, the Petrol Retailer Association’s vehicle, providing VFSwithdirectaccesstomembersandprospectswithapproximately3,500independentforecourts
• CommencedactivityonGulfcontractforVFSforecourtservices
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section Page
Companyinformation 1
Chairman’sstatement 2
FinancialReview 8
ReportoftheDirectors 11
CorporateGovernanceStatement 18
ReportoftheIndependentAuditor 21
ConsolidatedStatementofComprehensiveIncome 22
ConsolidatedBalanceSheet 23
ConsolidatedStatementofChangesinEquity 24
ConsolidatedCashflowStatement 25
NotestotheConsolidatedFinancialStatements 26-54
ReportoftheIndependentAuditor(ParentCompany) 55
CompanyBalanceSheet 57
NotestotheCompanyBalanceSheet 58-64
contents
Vianet Group plc 1
comPany information
directors SWDarling(ChiefExecutiveOfficer) JWDickson(ExecutiveChairman) MHFoster(FinanceDirector) SCGilliland(Non-ExecutiveDirector) JHNewman(Non-ExecutiveChairman)(resigned31March2013) DJNoble(Director)(resigned5July2012) CWilliams(Non-ExecutiveDirector)(appointed20May2013)
secretary MHFoster
registered office OneSurteesWay SurteesBusinessPark StocktononTees TS183HR
registered number 5345684
auditors GrantThorntonUKLLP No1WhitehallRiverside Leeds LS14BN
Bankers BankofScotland 1stFloor BlackHorseHouse 91SandyfordRoad Newcastle NE991JW
nominated adviser CenkosSecuritiesplc 6.7.8.TokenhouseYard London EC2R7AS
stockbroker CenkosSecuritiesplc 6.7.8.TokenhouseYard London EC2R7AS
solicitors GordonsLLP RiversideWest WhitehallRoad Leeds LS14AW
registrars CapitaIRG TheRegistry 34BeckenhamRoad Beckenham Kent BR34TU
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AsStewartDarlingwasonlyappointedChiefExecutiveatthestartofthecurrentfinancialyeartheBoardfeltitsensiblethatforthispreliminaryreportalone,theChiefExecutive’sstatementwillbeconsolidatedwiththis,myfirstChairman’sstatement.
During the period under review, good operationalprogress has beenmade in developing the Group’skey businesses across various markets, includingthenationallaunchofiDraughtTMUSA.Acombinationof increased investment in the US, delays to newcontracts and pressure in the leisure sector had adetrimentalimpactonfinancialperformance.
TheBoard isencouragedbyrecentcontractwins intheUKandtheimprovedoutlookfor2014.However,the Board is conscious that uncertainty aroundthe Government’s proposed Statutory Code forPub Companies may lead to delays in new orderselsewhere. The actions taken to reduce costs,particularly in theFuelSolutionsbusiness,arealsonowcomingthroughtooperatingprofitsandfurthercost reduction initiatives are being implementedacrosstheGroup.Itisagainstthisbackdropandthecontinued strong cash generation that theBoard ismaintainingthedividend.
resultsFull year pre-exceptional operating profit, beforeamortisation and share based payments, of £3.3million (2012: £3.9million) was broadly in linewiththerevisedmarketexpectationsfollowingFebruary’stradingupdate.
Revenuefor theyearof£21.09million (2012:£22.98million) was down 8.2%, in themain due to exitinglowermarginworkintheLeisureandFuelSolutionsdivisions,andreducednewinstallationsintheVendingsegment.Largelyasaresultofexitinglowermargin
compliancecellarinspectionactivityintheperiodtherevenueintheLeisuredivisionwasdown7%at£16.27million(2012:£17.53million).
The level of contractual and recurring revenuesremainsconsistentatjustover70%ofGrouprevenueandtherecentcontractextensions,bothintheGroup’sbeermonitoringandvendingsectorsareexpectedtoensurethatthislevelofcontractualbusinessremainssteadyinthecurrentfinancialyear.
The Group’s overall operating gross marginsremainedstableat51%(2012:53%)anditispleasingtonotethatgrossmargins,netofdirectcoreproductand engineering costs, remain at over 60% (2012:60%) in the Leisure division which was achievedthrough improved productmix and the reduction inthecostbase.
CostsassociatedwiththedecisiontakenintheFuelSolutions division to exit lower margin LiquefiedPetroleum Gas (“LPG”) work and the re-launch ofits ClearView wet stock management solutions,resulted in a reduction in this division’smargins to21%(2012:22%).
Groupprofitbeforetaxationamountedto£1.82millioncomparedto£2.34millionin2012.Basicearningspersharepost-exceptionalcostsdecreasedto7.12pencefrom8.00pencein2012.
dividendDespite the trading performance in the year notmatching original expectations, the Board remainsconfidentofthelongertermprospectsfortheGroupandisthereforemaintainingitsprogressivedividendpolicy.TheBoardisrecommendingthepaymentofafinaldividendof4.00pencepershareinrespectoftheyearended31March2013.
cHairman’s statement
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Together with the interim dividend of 1.70 penceper share paid in January 2013, thismakes a totaldividendof5.70pencepershare,slightlyaheadofthe5.67pencepersharepaidinrespectoftheyearended31March2012.
SubjecttoapprovalfromshareholdersattheAnnualGeneralMeeting,tobeheldon16July2013,thefinaldividendwillbepaidon2August2013toshareholdersontheregisterasat21June2013.
Board, senior management and corporate governanceThecultureand valuesof theGrouphelp toensurethat everyone at Vianet collectively and individuallyalways‘seekstodotherightthing’andthistoneissetfromtheBoarddownthroughtheextendedleadershipteamtoallstaffusingtheGroup’sdevelopmentandreviewframeworks.
Livingandbreathing ‘doing the right thing’not onlyunderpinsVianet’sethosandcorporategovernance,butalsothereputationforintegrityandtransparencywhich is a key component of the Group’s customersolutions.
On 15 January 2013 the Group announced a seriesofBoardchangeswhichhelpposition theGroup forthenextstageofitsdevelopmentacrosskeymarkets,whilstfurtherreducingthebusinessdependenceonmyself, and allowing scope for increased focus onproactiveinvestorcommunication.
At the end of the year James Newman retired asNon-Executive Chairman and the Board would liketothankhimforhiscontributiontothebusinessoverthe past seven years. Having led Vianet as its CEOsince 2003, I have in turnmoved to the position ofExecutiveChairman. StewartDarling,who has heldthe role of Chief Operating Officer since 2009, withprimary responsibility for the core beer monitoringandvendingoperations,becameCEO.
ThetransferofCEOresponsibilitiestoStewartisgoingsmoothly and will be completed with the handoverof executive responsibilities for Vianet AmericastowardstheendofJune,andFuelSolutionslaterinthecalendaryear.
The Group recently announced the appointmentof Chris Williams as a new independent Non-ExecutiveDirector.Chriswillenhancetheknowledgeand expertise of the Board as Vianet develops itsbusinessesacrossUKandinternationalmarkets.
Duringtheyearit istheBoard’sintentiontoappointafurtherindependentNon-ExecutiveDirectorwithatechnologybackgroundtocomplementthebusinessneeds,whilstalsoimprovingthebalanceoftheBoard.
Following Stewart’s promotion, Steve Alton whojoinedtheGroupfromBTin2011,hasbeenpromotedtotheroleofManagingDirectorofVianetLimitedwithresponsibilityfortheLeisuredivisioncomprisingcorebeer,vendingandtechnologyactivities.
Responding to the increasing demands of dealingwith international blue chip customers, the Groupcontinues to attract and develop high calibreindividualstoensurethattheorganisationalstructureispopulatedwithleaderswhocantakethebusinessforward,particularlyinsalesanddeliveryexecution.
ThisseriesofBoardandseniormanagementchangesreflectsthetransformationofVianetandthestrategicchangesthathavebeenimplementedtoenableVianetto become a growing provider of datamanagementservicesacrossanumberofsectors.
I would like to thank all of my Board colleagues,senior management and staff for their continuedeffortsandcommitmentonbehalfoftheGroupoverthepastyear.
strategy and Business developmentThe Group’s strategic intent remains to extend itsdata collection, management and support servicespresence in its selected sectors where there isconsiderable technical and operational overlap, andtorespondtonewopportunitiesastheyarise.
There is absolute focus on working in partnershipwithkeycustomers to introduceproductsetswhichwill provide the customer with a compelling andsustainablereturnoninvestmentand,inturn,cementaprofitablelongtermtradingrelationshipwithVianet.
Utilising the solid financial platform provided by itscorebeermonitoringbusiness,theGrouphasmadea series of prudent investments in acquiring anddevelopingitsproductsetinthefollowingareas:
• Nextgenerationbeermonitoringtechnologyforthewiderlicensedtrade;
• Battle tested, cutting edge data capture andmachine to machine transmission technologywith potential for application across multiplesectors;
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• Market-leadingend-to-endvendingmanagementsolutions;and
• Aunique‘onestopshop’forecourtproductsuiteand distribution for fuel asset managementsolutions.
TheGroupprovidessolutions forcomplexcustomerdemands and has established an impressivereputation for its robust and innovative technology,as well as the quality of its support to blue chipcustomers who demand continuous world classserviceanddataaccuracy,andthecapacitytoprovidethislevelofservicetosmallercompaniesaswell.
Having transformed the shape of the business,the management and staff are now focussed onsuccessfullyexploitingthesignificantorganicgrowthopportunities which the Board anticipates willtransformtheearningsoftheGroup.
leisure solutionsTheLeisureSolutionsdivisionachievedanoperatingprofitpre-amortisationandexceptionalcostsof£4.68million.Amortisation,exceptionalandfinancialcoststotalled£0.27million.
core Beer monitoringThe re-launch of iDraughtTM, the Group’s barmanagement solution, to drive profit and qualityand the introduction of the Group’s Nucleus SmartTills™EPOSsystemwerereceivedverypositivelybycustomers, many of whom have been carrying outextensiveevaluationsofiDraughtTMonnewsitesandasareplacement forstandard legacyBrulinesBeerMonitoringsystems.
Following a strong period of trading in H1, duringwhich the Group secured contract renewals withseveral high profile customers, Vianet’s core beermonitoringbusinesstradedlessstronglyinH2.Thiswas due to delays to several anticipated iDraughtTMinstallationprogrammesandareducedcontributionfromtraditionalbeermonitoringsolutionsasaresultof bottom end pub disposals and the uncertaintythat accompanies the disposal process. In addition,there have been less favourable rates at the pointof contract renewals as a result of customerstransferring some non-core, lower margin supportservices back in-house. Whilst there has beenincreasediDraughtTMpenetrationandgoodprogressingainingnewcontractstomonitorgamingmachinesinthepubsector,thishasnotbeenenoughtooffsettheseissues.
Nevertheless, overall installation progresswas encouraging despite some initial delays toprogrammes. In total there were 864 new beermonitoring installations, of which 828 were highervalue iDraughtTM. iDraughtTM is gaining penetrationacross the on-premise draught beer market andnowaccounts for almost fifteenper cent ofLeisureSolutions’beermonitoringinstallationbase.
Several major contract extensions, including theintroduction of iDraughtTM, have been secured withcustomerssuchasEnterprise Inns,PunchTaverns,andMarstons.NucleusSmartTillsTMhasgainedgoodsalestractionwithalmost500installations.
The Board remains confident that the outlook forfurthergrowthinthehighervalueiDraughtTMproductand service remains promising with many pubretailers conducting extensive evaluations. Overall,theBoarddoesnotexpectsignificantfurthererosioninthenumberof theGroup’s installations,currentlyatapproximately17,500sites.
government’s proposed statutory code for Pub companiesOn22April2013theSecretaryofStateforBusiness,VinceCable,releasedadraftconsultationdocument(the“ConsultationDocument”)foraStatutoryCodeforPubCompaniesregardingtheirdealingwithtenants.Contained within the Consultation Document areprovisionsforcontrollingtheapplicationofbeerflowmonitoringformanagingcompliancewithcontractedbeerpurchaseobligations.
The Group believes these proposals are unjust andthattheyarenotbaseduponfactoranysubstantiatedevidence. As such the Board intends to formallyrespond to the Secretary of State to reject theproposals regarding beer flow monitoring and tosupport the continued legal use of beermonitoringproductsandservices.
The reason given by the Consultation Documentfor proposing a limitation on the use of beerflow monitoring product is that it is considered‘controversial’ by certain parties who have madeunprovenaccusationsagainstourtechnology.
Vianet’sservicehasbeensubjecttolegalscrutinybythe court of law onmany occasions and has neverbeenshowntobeunfitforpurposeandaccordinglyasaBoard,weareextremelydisappointedandfrustratedby the proposals contained within the ConsultationDocument.
chairman’s statement (continued)
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SupportedbystronglegaladvicefromleadingcounselwewillberespondingtotheConsultationDocumentinordertorobustlydefendtheGroup’sbeermonitoringproduct.Wewill respondby14June2013when theConsultation period is due to end. Although, at thisstage, the Consultation Document only containsproposalstheBoardbelievesthat iftheseproposalswere to be implemented into legislation theywouldlikely have a detrimental effect on the Company’sbusiness and therefore the Board is prepared tochallenge these proposals as forcibly as necessaryto prevent thembeing enacted into legislation. It issomewhatironicthatthemeasuresproposedbythegovernmentwillreducetransparencyinthelandlord–lesseerelationship, increasetherisktoHMRCtaxrevenues,andunderminebeerqualityfordrinkers.
TheBoardlooksforwardtotheGovernmentexercisingproper due diligence and reviewing the facts andevidenceinthisconsultationandanticipatesthatifitdoesso,theproposalswillbeamendedsatisfactorily.
Vianet americas inc.As announced in the Interim Results in December2012, the Group has identified an opportunity toaccelerate iDraughtTM investment in the USA andextendtheVianetAmericasInc.footprintbeyondtheColoradoon-premisebeermarket.
Vianet Americas’ roll out delivery capability hasadvanced significantly, having established a USAteamandformedastrategicalliancewithMicroMaticUSA for nationwide iDraughtTM installation, serviceandsalessupport.
Followingseveralmonthsofset-upactivity, thefirstphaseofa fullUSA launchcommenced inFebruarywithinitialinstallationsonbothfullcommercialandpilotcontractsacrosstenstateswithseveralnationalUSA retail chains, who between them control over2,000bars.
The initial results have been encouraging and thesecondphaseofthelaunchtookplaceattheNationalRestaurantAssociationconventioninChicagoon16-19May2013.
Alossofover£0.3millionwasrecordedcomparedtothesmallprofitoriginallyexpectedwiththeColorado-onlybusiness,reflectingtheincreasedstart-upcostsoftheenlargedopportunity.ByMarch2014,theGroupwill have a good understanding of the likely scaleof the opportunity and be in a position confirm ourintentionsfortheUSA.
Vending solutionsTheVendingTelemetrybusinesscontinuedtotradeataroundbreakeveninH2,althoughthebreakthroughinrevenueandprofitabilityfromanexpectedsignificantorderwillnownotmaterialiseuntillate2013/14attheearliest.Progressinfinalisingthiscontracthasbeenheldbackfurtherbymergerandacquisitionactivityinthiscustomer’ssector.
PerformanceoftheGroup’sTouch&PayTMcashlessandcontactlesspaymentsolutions,whichwereusedsuccessfullybyCocaColaandVISAatLondon2012OlympicGames,hasalsobeenconstrainedbydelaysingainingextensionapprovals.
Operating loss was £0.05 million pre-amortisation,share based payments and exceptional costs, withamortisation and exceptional costs being £0.20million. Further initiatives reduced costs during theyear to the point where the business will trade atbreakeven whilst we await the delivery of the newcontracts.
Vending Solutions now offers the full end-to-endproduct set for vending telemetry, comprisingTouch&Pay™contactlesspayment solution, Vitel™data capture and transmission telemetry andVendExpert™managementsoftware.Theseproductsallow customers to achieve significant cost savingsandsalesuplift.
Contactless payment is extremely well-suited tothevendingsectoras itallowscustomerstopayforlow-value items by presenting their bank card ornear field communication (“NFC”) enabled mobilephone to a special reader fitted on the front of thevendingmachine,helpingtoreducethetimeittakesto pay. The growth of contactless-enabled cardsin circulation in the UK has been substantial, andthe figure of 32 million contactless-enabled cardscurrently in circulation (source: UKCard Authority).The Group’s technology is at the forefront of thesedevelopments as weworkwith large brand ownersandvendingoperatorsinouraimtobecometheclearmarketleaderintheprovisionoftelemetrysolutionsfortheglobalvendingmarket.
Vianet fuel solutions (“Vfs”)The Group’s Fuel Solutions division continues tobenefit from a reduced cost base and some newbusinessgains.WhilstH2was loss-making, arisingfrompoortradinginDecember/Januaryanddelaystotwosignificantcontractswhichhavenowcommenced
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inApril,thebusinessdidtradeatjustoverbreakeveninQ4.
VFSlosseswere£0.35millionforthefullyear(aswellas £0.35 million exceptional costs), and whilst thisisalmost£0.6millionbetter thanthepreviousyear,thelosswashigherthananticipatedprimarilyduetotimingissuesrelatingtonewcontractactivity,whichwill nowbe carried forwardandbenefit the currentyear.
VFS also exited the non-contributing LPG marketwhich allowed further cost rationalisation. TheBoard is pleased to report that VFS is gaining newbusinessasthemarket’sonlyend-to-endsolutionforforecourtoperators.ThestarttothecurrentyearwiththeimprovedcostbaseindicatesthatVFSwilltradepositivelyin2014.
VFS continues to benefit from its five year contractextension with Morrisons Supermarkets plc(“Morrisons”) to provide Facilities and ComplianceManagementsolutionsforitsestateofover300petrolforecourts and12distribution centre fuel depots asMorrisonsgrowsitsfuelandconveniencefootprint.
Fuel Solutions now has the only fully integrated‘one-stop-shop’ for leading fuel assetmanagementproductsandservices.ThishasbeenakeyfacilitatorinsecuringtheGroup’slongtermstrategicpartnershipwithBigOil,thePetrolRetailerAssociation’svehicle,providing VFS with direct access to membersand prospects who control approximately 3,500independentforecourts.
VFS now hosts the revamped Big Oil portal whichhas been enhanced with our class leading suite ofwetstockanalysistoolsandthecreationofaMarginManagement toolbox linking daily Platt’s prices tothe real-time recording of sales, inventory levelsand deliveries to create a suite of web-based toolsincludingrealtimeprofitreporting.
The initial response has been very positive andpositions VFS well to build a robust and exclusivedistributionofitsproductstotheindependentsector
Vianet technology solutionsTechnology Solutions supports and manages theR&Drequirement for theLeisureandFueldivisionstogether with Group infrastructure. Additionally,utilising the Group’s datamanagement expertise isalsosucceedingintakingitsleadingdatacaptureandtransmissiontechnologytonewermarkets.Securing
relationships with Costa Coffee and Autotime aretwosuchexamplesoftheGroup’spotentialtodeliversolutionstonewmarkets.
summary and outlookWithintheLeisuredivision,there-launchofiDraught™has been successful with increased penetrationachievedwithintheon-premisedraughtbeermarket.Furthergainsareexpectedinthecurrentyear.
The Group’s Vending Solutions business has madeexcellent progress in developing significant newsalesopportunitieswithmajorglobalcustomers,andalthough frustrated by delays we remain confidentthatdeeperrelationshipswilldevelopintosignificanttractionandcontractwins.
TheFuelSolutionsdivisionhascompleteditscreationofa‘one-stop’solutionfortheindustryand,havingcutcostsduring the last year, isexpected tocontributepositivelytoGroupprofitsinthecurrentyear.
Having successfully completed a significant periodof development and change the Group has movedsuccessfully beyond being a one product companyoperating in the tenanted pub market, now havingthe competencies and technology base to benefitfromthecontinuedgrowth indataservicesglobally.TheBoardlooksforwardtothefuturewithconfidenceasallofthedivisionswithintheGroupmovetowardsachievinggrowthanddemonstratethesuccessofourdiversificationstrategy:
• The core Leisure Solutions business alreadyprovides visibility of strong earnings andis expected to deliver organic growth as itcontinues to gain traction for iDraughtTM,NucleusSmartTills™andMachineInsiteacrossthe wider licensed on trademarket. Althoughin the early stages the recent national launchoftheiDraughtTMintheUShasthepotentialtosignificantlyenhancethemediumtermgrowthprospects.
• TheVendingSolutionsbusinessisnowtradingat break even and is expected to move intostrong profit as and when new contracts arerealised.
• FuelSolutionsisnowtradingclosetobreakevenandthecurrentsalespipelineshouldtakethedivisionintoprofitthisyear.
chairman’s statement (continued)
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• The Technology Solutions team has identifiedhorizontal market sales opportunities whichshould allow it to move towards being costneutralinthemediumterm.
TheGrouphastransformedtheshapeofthebusinessoverthepastfewyearsandwhilstthereremainshortterm challenges and economic conditions remainchallenging, themarkets, products, customers andpeoplearenowinplacetodeliverearningsgrowthfortheGroup.
James dicksonexecutive chairman11 June 2013
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group trading resultFollowing the transition from the previous financialyear into the distinct Leisure (consisting of corebeer, Vending and Technology segments) and Fueldivisions, the integration process continued duringthecurrentyear,withanon-goingcostrationalisationprogramme which will continue into the newfinancialyear.
The general economic climate is well documented,continues to be very challenging and has impactedboth the pub and leisure marketplaces, as well asthe fuel sector. Despite this background there hasbeensomegoodunderlyingprogressinallsegmentswhichprovidesagoodplatformmovingintothenewfinancialyear.
Total revenue for theyearwas£21.09million (2012:£22.98million).Operatingprofit(beforeamortisationof intangible assets, share based payments, andexceptionalitems)amountedto£3.3million(2012:£3.9million).TheresultsareshownafterabsorbingmuchreducedlossesintheFuelDivision,VianetAmerica’snewcompanysetupandfurther investmentaswellas some Leisure division customers taking someperipherysupportfunctionsinhouse.Thecombinedimpactofthesefactorsisestimatedatapproximately£1.3million.
BlendedrecurringrevenuesfortheGroupareslightlyaheadoflastyearat71%(2012:70%),withcontinueddivisionalresultsacrossallLeisureat80%,corebeerremainingrobustat82%andFuelSolutionsimprovedtoover40%fromnear20%lastyear.
Exceptionalcostsof£0.7million(2012:net£0.5million)principally relate to the cost of staff rationalisation,fuelproductrationalisationandassociatedexitcosts
and US set up costs, resulting in Group operatingprofit (pre intangible asset amortisation and sharebasedpayments)of£2.5million(2012:£3.4million).
divisional performanceTheLeisuredivisionachievedrevenueof£16.27million(2012: £17.53 million) and achieved gross marginsprethecostofdatamanagementof60%,inlinewithlast year. The core business delivered 864 (2012:538) installations ofwhich 828 (2012: 487)were thehighervalue iDraughtTMsystems,aswellas36beermonitoringsystems.Theactiveinstallationbaseafterpub company disposals, change of use and upliftedsystems is approximately 17,600 (2012: 18,500)systems.Additionally,483NucleusSmartTillswereadded(2012:300).Thepubmarkethascontinuedtofacewelldocumentedchallengeswhichwillcontinuebut the further growth in iDraughtTM penetration intheUKandmove into theUS enables theBoard tobeconfidentaboutiDraughtTMgrowth,whichcurrentlyaccountsforaround14%oftheinstallationbase.
Vendingmadesomesolidprogressintermsofproductdevelopment and cost rationalisation offsetting theslowerthandesiredgrowthinunitsalesandrevenue.TheChairman’sreportreferstotheimpactofmajordelayed contracts, while other customers haverationalised their estates in light of the economicbackdrop. As a result, Vending delivered 475 (2012:2,576) additional units in the year, the installationbasenowbeingnear 10,000 configuredunits in thefield.Despite the lowernumberof installations, therecurringrevenuebaseofover85%thisyearcoupledwithlowercostbaseallowedanearbreak-evenresultfor Vending. Themarket opportunities thatwehaveidentified and the products that the Group offersposition Vianetwell to achieve growth in this spaceandtheBoard’sconfidenceinattainingtheaspirationsinthisfieldisunabated.
financial reVieW
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The Technology division continues to support theLeisure and Fuel divisions with its Research andDevelopment, in addition to the infrastructurerequirementsoftheGroupaswellashavingitsownincomestreams.
The finalpartof theLeisuredivision is theMachineInsite brand which contributed approximately £0.2million (2012: £0.1 million) this year and growth isfurtherexpectedinthenewfinancialyear.
TheFuelSolutionsdivisionoperatedasonecompanythisyearofferingarangeofkeyproductsandservicestotheforecourt industry.Thetransitionandproductofferinghastakenlongerthandesiredtobedin,andalsoresultedintheexitfromprovidinganLPGservicewhichwascostandmarginprohibitive.Nevertheless,thedivisiondeliveredamuchreducedlossintheperiodunder review. The division contributed £4.8 million(2012: £5.4million) in revenueandconsistentgrossmarginsof21%whicharesettogrowfollowingtheexitfromtheLPGmarket.Thisresultedinaconsiderablylowerlossfortheyearbeforeexceptionalcostsof£0.3million(2012:£0.9million)withfinalquartertradingjust in profit. The developments referred to in theChairman’sreportfortheforthcomingfinancialyearunderpin theBoard’s belief that the divisionwill beprofitablefor2014.
overall group resultsGroup results, before amortisation of intangibleassets, share based payments, option costs, andexceptional costs, were an operating profit of £3.3million as compared to £3.9million atMarch 2012.TheseresultsarestatedafterabsorbingthereducedFuel losses, US investment costs, and loss tocustomers of some periphery services to in houseas referred to above of £1.3 million, as well as animprovedcostbaseyieldingayearonyearreductioninoperatingexpensesofapproximately£0.8million,aspreviouslyexpected.TheresultsareinlinewiththeTradingUpdateissuedinFebruary2013.
ThetablebelowshowstheperformanceoftheGroup(under IFRS), pre and post exceptional costs, asfollows:
FY2013 FY2012 £’000 £’000
Revenue 21,085 22,975Grossprofit 10,810 12,235 (51%) (53%)operating profit pre amortisation, share based payments and exceptional costs 3,265 3,896PBTpostexceptionalcosts 1,820 2,341PBTpre-exceptionalcosts 2,558 3,080
divisional performance fy 2013 LeisureDivision
£’000 £’000 £’000 £’000 £’000 £’000 Core Vending Tech Fuel Corp Total
Revenue 14,490 907 873 4,815 - 21,085GrossProfit 8,753 641 397 1,019 - 10,810 (60%) (71%) (46%) (21%) - (51%)operating profit/(loss) pre amortisation, share based payments and exceptional costs 4,682 (48) (230) (345) (794) 3,265
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earnings per shareBasicearningspersharefortheyearended31March2013 before exceptional costs amounted to 9.84pencecomparedto9.93patMarch2012.Fullydilutedearningspershare(beforeexceptionalcosts),whichtakesaccountofalldilutiveshareoptions,amountedto9.79pencewhichcomparesto9.83pencelastyear.
taxationTheGrouphasattaineda taxcredit this yeardrivenbytheGroup’suseofhistorically-acquiredlosses.Thecredit of £0.11 million (2012: charge £0.08 million)relates to overprovision in prior periods along withenhancedallowances forresearchanddevelopmentexpenditure.
Balance sheet and cash flowThe Group’s balance sheet remains healthy with agood working capital base supported by the goodcashgenerativetradingperformanceintheyear.
Operationally,theGroupgeneratedcashflowof£4.6million (2012:£1.8million) impactedby rationalisedoperatingexpenses,customerup-frontpaymentsandgenerallyimprovedcustomercollections.TheLeisurebusinesscontinuedtobeahealthygeneratorofcashatover£6.0millionhelpingtofundtheCorporateandTechnology segments, US investment and reducedlossesinfuel.
Inaddition to theabove, the fundsgenerated in theyear were utilised to invest in technology throughResearch and Development, service borrowings,purchase own shares and fund dividends. Duringthe year, the Group converted the core element oftheoverdrafttoatwoyear£1.5milliontermloan.Atthe yearend, theGrouphadnet borrowingsof £3.0million(2012:netborrowingsof£3.4million),havingcompletedtherepaymentofthefiveyear£1.7milliontermloansupportingtheNucleusDataacquisitionof2008.
The balance sheet and cash generating capacity oftheLeisuredivisionremainsrobust,Fuelissteppingforward, andas such, theBoardexpects to be abletocapturesomeoftheorganicgrowthopportunitiesthatexist.
mark foster finance director 11 June 2013
financial review (continued)
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Thedirectorspresenttheirreportandtheauditedfinancialstatementsfortheyearended31March2013.
Principal activitiesThe company is the holding company of a group, the principal activities of which are those of design, productdevelopment,saleandrentaloffluidmonitoringandmachinemonitoringequipment,togetherwiththeprovisionofdatamanagementandrelatedservices,bothtotheleisureandpetrolforecourttrade.
review of business and future developmentsThedirectorsaccepttheresultsfortheyearended31March2013whichshowaprofitbeforetaxandexceptionalitemsof£2.56m(2012£3.08m).
The results for the year reflect thecontinuedchallengingeconomiccircumstancesandpressures in the leisuremarketplace.Thefueldivision,whilestilllossmaking,hassteppedforwardsignificantlywitha£0.5mreductioninitslosses.Despitetheoveralllowerresultcomparedtolastyear,recurringrevenuesandmarginsremainhealthy.Withthemarketopportunitiesthatexistcoupledwiththeon-goingrationalisationofthecostreductionmeasurestheDirectorsareconfidentofastrongeryeargoingforward.Thegroupre-alignmentintotwolargerandstrongertradingdivisionsisareflectionoftheDirectors’confidenceandbeliefinourgrowthplans.
TheChairman’sStatementandtheFinancialReviewprovidefurtherdetailontheperformanceoftheGrouptogetherwithanindicationoffutureprospects.
Business riskThedirectorshaveconsideredareasofpotentialrisktothebusinesstoassessitsfuture.Onthebasisoftheirreviewtheyconsider theresultsandbusinessprojections taking intoaccountmarketconditions that thebusiness isofsoundfinancialfootingandhasasustainableoperatingfuture.Inparticulartheynotethatthebusinesshasachievedanacceptableresultintheyeardespitethedifficulttradingconditions,reducedlossesintheFueldivision,impactofcostrationalisationandoverallmarketconfidenceinliquidityandcredit.
Thedirectorsdonotconsidertheretobeanyothermaterialbusinessrisksotherthangeneralslowdownassociatedwiththecurrenteconomicclimatetoadegreemitigatedbythereductioninthecostbasethroughouttheyear.
NonfinancialrisksaresummarisedintheChairman’sStatementonpages2to7.
Key performance indicators Actual Actual Target 2013 2012
Percentageofrevenuefromrecurringincomestreams1 70% 71% 70%GrossMargin2 50% 51% 53%EmployeeTurnover3 2% 3% 3%
notes to KPis1Percentageofrevenuefromrecurringincomestreams=recurringincomestreamsasapercentageofallincomestreams.Grouptradingcompaniesaimtoincreaseshareholdervaluethroughgrowthinrevenue,linkedtoprofitability(seeGrossMarginbelow).Sourcedataistakenfrommanagementinformation.Therecurringcontractualnatureofthecompany’sincomestreamhasledtocontinuedimprovementinperformanceversustarget.2GrossMargin = Gross profit as a percentage of revenue. Group trading companies aim to generate sufficient profit for bothdistribution toshareholdersandre-investment in thecompany,asmeasuredbyGrossMargin.Sourcedata is taken fromtheauditedfinancialstatements.
3EmployeeTurnover=Grouptradingcompaniesaimtobeseenasagood,attractiveemployerswithpositivevaluesandcareerprospects.
rePort of tHe directors
12 Vianet Group plc
financial risk managementTheGroup’soperationsexposeittoavarietyoffinancialrisksincludingtheeffectsofchangesininterestratesondebt,creditrisk,exchangeratemovementandliquidityrisk.
WhiletheGroupdoeshaveadebtexposure,thepositivecashgenerationfromoperationsoftheGroupmeanswedonothavematerialexposuresinanyoftheareasidentifiedaboveandconsequentlydonotusederivativeinstrumentstomanagetheseexposures.
TheGroup’smain financial instrumentscompriseprincipallyofsterlingcashandbankdeposits,bank loansandoverdraftstogetherwithtradereceivablesandtradepayablesthatarisedirectly fromitsoperations.TheGroup’sexposuretoforeignexchangeriskisminimalduetothelowbalancesheldwhicharedisclosedinnote19.
ThemainrisksarisingfromtheGroup’sfinancialinstrumentscanbeanalysedasfollows:
Price riskTheGroupholdslistedequityinvestmentsasfollows:
2013 2012
UniverseGroupplc–ordinarysharesof5p 13,209,754 13,209,754
TheGrouphasnosignificantexposuretosecuritiespricerisk.TheGroupsolditsinvestmentinUniverseGroupplcon16April2013atapriceof4.75ppersharerealisingaprofitondisposalof£90,049.
credit riskTheGroup’sprincipalfinancialassetsarebankbalances,cash,inventory,andtradereceivableswhichrepresenttheGroup’smaximumexposuretocreditriskinrelationtofinancialassets.
TheGroup’screditriskisprimarilyattributabletoitstradereceivables.Creditriskismanagedbymonitoringtheaggregateamountanddurationofexposuretoanyonecustomerdependingupontheircreditrating.Theamountspresented in thebalancesheetarenetofallowances fordoubtfuldebts,estimatedby theGroup’smanagementbasedonpriorexperienceandtheirassessmentofthecurrenteconomicenvironment.
Thecreditriskonliquidfundsislimitedbecausethecounterpartiesarebankswithhighcredit-ratingsassignedbyinternationalcredit-ratingagencies.TheGrouphasnosignificantconcentrationofcreditrisk,withexposurespreadoveralargenumberofcounterpartiesandcustomers.
liquidity riskTheGroup’spolicyhasbeentoensurecontinuityoffundingthrougharrangingfacilitiesforoperationsviamedium-termloansandadditionalrevolvingcreditfacilitiestoaidshort-termflexibility.
cash flow interest rate riskInterestbearingassetscomprisecashandbankdeposits,allofwhichearninterestatarateofBankofEnglandbaserateorabove.Theinterestrateonthebankloanandoverdraftareatmarketrates.TheGroup’spolicyistomaintainotherborrowingsatfixedratestofixtheamountoffutureinterestcashflows.ThedirectorsmonitortheoveralllevelofborrowingsandinterestcoststolimitanyadverseeffectsonfinancialperformanceoftheGroup.
report of the directors (continued)
Vianet Group plc 13
dividendsThedirectorsrecommendthepaymentofafinaldividendof4.00ppershare(2012:final4.00p),takingthefullyeardividendto5.70p.(2012:5.67p)
directors and their interestsThecurrentdirectorsofthecompanyareshownbelow.
Thosedirectorsservingattheendoftheperiodhadinterestsinthesharecapitalofthecompanyat31Marchasfollows:
Ordinary Ordinary sharesof sharesof 10peach 10peach 2013 2012
SWDarling - -JWDickson 4,287,219 3,946,552MHFoster 75,000 75,000SCGilliland 26,000 26,000CWilliams - -
directors’ emolumentsDetailsofDirectors’emolumentsfortheyearareasfollows:
Salary Salary and Other Total and Other Total fees emoluments emoluments fees emoluments emoluments 2013 2013 2013 2012 2012 2012 £’000 £’000 £’000 £’000 £’000 £’000
executive JWDickson 167 43 210 159 41 200MHFoster 142 30 172 130 28 158SWDarling 129 29 158 116 28 144DJNoble 59 6 65 114 26 140non-executive JHNewman 44 - 44 36 - 36SCGilliland 32 - 32 30 - 30
total 573 108 681 585 123 708
1. Executiveremunerationisdeterminedbytheremunerationcommitteeconsistingofnon-executiveDirectorsJHNewman(resigned31March2013)replacedbyCWilliamson20May2013andSCGilliland
2. NopaymentsweremadetoanyDirectorinrespectofcompensationforlossofofficein2013or2012
3. Otheremolumentsreceivedconsistoftheprovisionforprivatemedicalcare,bonuses,motorcarallowancesandpensioncontributions
4. JHNewman’sfeeswerepaidtoWestwoodonDerwentLimited,acompanyofwhichheisaDirector
5. SGillilandfeesarepaidtoSMDHConsultingLimited,acompanyofwhichheisaDirector
6. Pensioncontributionsrepresentpaymentsmadetodefinedcontributionschemes.Paymentsmadearedisclosedwithinotheremoluments.Non-executiveDirectorsarenotentitledtoretirementbenefits
7. JHNewmanresignedon31March2013
14 Vianet Group plc
directors’ share optionsDetailsoftheshareoptionsheldbyDirectorsareasfollows:
At At 1April 31March Option 2012 2013 price Dategranted
JWDickson 75,000 75,000 123.0p October2006 31,000 31,000 96.5p January2011MHFoster 150,000 150,000 67.2p March2006 65,000 65,000 123.0p October2006 31,000 31,000 96.5p January2011SWDarling 100,000 100,000 125.0p April2009 31,000 31,000 96.5p January2011SCGilliland 24,000 24,000 123.0p October2006 30,000 30,000 102.5p September2009JHNewman 36,000 - 123.0p October2006 30,000 - 102.5p September2009
Shareoptionsareexercisablebetweennilandtenyearsfromthedateofthegrant.
ThemarketpriceoftheCompany’ssharesattheendofthefinancialyearwas87.5pandtherangeofmarketpricesduringtheyearwasbetween87.5pand124p.
Joint ownership PlanThefollowingawardsoversharesintheCompanyweremadetothefollowingExecutiveDirectorsoftheCompanyon25September2009byaJointOwnershipPlan.
Director NumberofPlansharesinwhichtheDirectorhasaninterest
JWDickson 100,000MHFoster 100,000SWDarling 100,000
Awardsweremade by theCompany’s RemunerationCommittee through theCompany’s employee benefit trustoperated by Halifax EES Trustees International Limited. The awards are subject to EPS performance targetsanddependantonperformanceveston31March2014.Novaluehasbeenpaidongrantof thePlansharesandparticipantsareentitledtogrowthoverthePlanterm.
donationsCharitabledonationsof£nil(2012:£nil)weremadeduringtheyear.Nopoliticaldonationsweremade(2012:£nil).
report of the directors (continued)
Vianet Group plc 15
substantial shareholdingsThe Company has been informed that on 23 May 2013 the following shareholders (excluding Directors) heldsubstantialholdingsoftheissuedordinarysharesofthecompany:
Holdingof Issued Ordinaryshares Sharecapital Number %
AXAFramlington 3,625,000 13.04ISISEquityPartners 2,693,982 9.70OctopusInvestmentsLimited 1,694,533 6.10LazardAssetManagement 1,321,294 4.80DowningLLP 1,017,650 3.70ISPartnersAG 1,000,000 3.60AmatiGlobalInvestors 978,871 3.50BrewinDolphin 789,608 3.00WesternStandardPartners 776,000 3.00ArtemisFundManagers 735,000 3.00
going concernTheDirectors,afterhavingmadeappropriateenquiries,including(butnotlimitedto)areviewoftheGroup’sbudgetfor2013/2014,andcashgeneratingcapacityatleast12monthsfromthedateofsigning(underpinnedbylongtermcontractsinplaceandhistoricalresults),haveareasonableexpectationthattheGrouphasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.Forthisreasontheycontinuetoadoptthegoingconcernbasisinpreparingthefinancialstatements.
Payment of PayablesTheGroup’spolicyistosettleinvoicespromptlyaccordingtotermsandconditionsasfarasitispracticable.Tradepayablesat thebalancesheetdaterepresented45dayspurchases (2012:45days).As thecompany isaholdingcompanyithasnotradepayablesandaccordinglynodisclosureismadeoftheyearendcreditordaysforthecompany.
employeesTheGroupplacesgreat importanceon the involvementof itsemployees, themajorityofwhomareable toworkcloselywiththeirmanagersonadailybasis.EmployeesareencouragedtobeinvolvedintheGroup’sperformancethrough the use of share options. Employees have frequent opportunities to meet and have discussions withmanagement.TheGroupaimstokeepemployeesregularlyinformedofthefinancialandeconomicfactorsaffectingtheperformanceoftheGroupanditsobjectivesinpartthroughtheGroupintranetandwebsiteandinpartthroughregularcommunication.
Thequalityandcommitmentofourpeopleoverallhascontinuedtoplayamajorroleinourbusinessperformance.Thishasbeendemonstratedinmanyways, includingimprovements incustomersatisfaction,contractgainsandcontinued profitability, the development of customer offering and the flexibility they have shown in adapting tochangingbusinessrequirementsandnewwaysofworking.Employees’performanceisalignedtocompanygoalsthroughanannualperformancereviewprocessthatiscarriedoutwithallemployees.Employeeturnoverwas3%,inlinewiththethresholdwehaveset.
TheGroup’spolicyisthat,whereitisreasonableandpracticablewithinexistinglegislation,allemployees,includingdisabledpersonsaretreatedinthesamewayinmattersrelatingtoemployment,trainingandcareerdevelopment.
research and developmentTheGrouphasacontinuingcommitmenttolevelsofresearchandcostofensuringsystemsperformoptimallywhichreflecttheneedtobeattheforefrontoftechnologicaladvancetoensurefuturegrowth.Duringtheyearexpenditureonresearchanddevelopmentwas£753,000(2012:£740,000)allofwhich£753,000hasbeenrecognisedasanassetonthebalancesheet(2012:£740,000)
16 Vianet Group plc
annual general meetingTheAnnualGeneralMeetingwillbeheldon16July2013at9am,attheofficesofVianetGroupplc,OneSurteesWay,SurteesBusinessPark,StocktononTees,TS183HR.
Post balance sheet eventsOn16April2013theGroupdisposedofits13,209,754shareholdinginUniverseGroupplcatapriceof4.75ppersharerealisingaprofitondisposalof£90,049.
directors’ indemnityQualifyingthirdpartyindemnityprovisionsareinforceforthebenefitofthedirectors
statement of directors’ responsibilities for the financial statementsThe directors are responsible for preparing theAnnualReport and the financial statements in accordancewithapplicablelawandregulations.
Company law requires the directors to prepare financial statements for each financial year.Under that law thedirectors have elected to prepare financial statements in accordance with International Financial ReportingStandardsasadoptedbytheEuropeanUnionandtheparentcompanyhaselectedtopreparecompanystatementsinaccordancewithUnitedKingdomAccountingStandards(UnitedKingdomGenerallyAcceptedAccountingPractice).UndercompanylawthedirectorsmustnotapprovethefinancialstatementsunlesstheyaresatisfiedthattheygiveatrueandfairviewofthestateofaffairsoftheGroupandtheparentcompanyandoftheprofitorlossoftheGroupforthatperiod.Inpreparingthesefinancialstatements,thedirectorsarerequiredto:
• selectsuitableaccountingpoliciesandthenapplythemconsistently
• makejudgementsandaccountingestimatesthatarereasonableandprudent
• state whether applicable UK Accounting Standards/IFRS have been followed, subject to any materialdeparturesdisclosedandexplainedinthefinancialstatements
• preparethefinancialstatementsonthegoingconcernbasisunlessitisinappropriatetopresumethatthecompanywillcontinueinbusiness
Thedirectorsareresponsibleforkeepingadequateaccountingrecordsthataresufficienttoshowandexplainthecompany’stransactionsanddisclosewithreasonableaccuracyatanytimethefinancialpositionofthecompanyandenablethemtoensurethatthefinancialstatementscomplywiththeCompaniesAct2006.Theyarealsoresponsibleforsafeguardingtheassetsofthecompanyandhencefortakingreasonablestepsforthepreventionanddetectionoffraudandotherirregularities.
Insofaraseachofthedirectorsisaware:
• thereisnorelevantauditinformationofwhichthecompany’sauditorisunaware
• thedirectorshavetakenallstepsthattheyoughttohavetakentomakethemselvesawareofanyrelevantauditinformationandtoestablishthattheauditorisawareofthatinformation
Thedirectorsareresponsibleforthemaintenanceandintegrityofthecorporateandfinancialinformationincludedonthecompany’swebsite.LegislationintheUnitedKingdomgoverningthepreparationanddisseminationoffinancialstatementsmaydifferfromlegislationinotherjurisdictions.
report of the directors (continued)
Vianet Group plc 17
audit Partner rotationTheexternalauditorisrequiredtorotatetheleadauditpartnerresponsiblefortheGroupandsubsidiaryauditeveryfiveyearsinaccordancewithEthicalStandard3(ES3)‘Longassociationwiththeauditengagement’,issuedbytheAuditingPracticesBoard.However,incertaincircumstancesitispermissibletoextendthattenure.
TheBoardbelievesthatfollowingsignificantchangestothecompositionofthegroup,withfiveacquisitionsmadesinceApril2010,auditqualitywouldbecompromisedbyintroducinganewauditpartner,becauseoftheunderstandingofthetransactionsthattheincumbentpartnerhas.
Withthegroupstillinthetransitionalphaseofintegration,thegroupneedstodrawontheincumbent’sexperienceanddeepunderstandingof thebusiness,soastoensurethat impairmentreviewsandothersensitiveestimatesrelatingtotheacquisitionsarechallengedrobustly,butfromapositionofknowledge.
Asaresult, theBoardandAuditCommitteeconsiderthatnowisnot theright timeforthe leadauditpartnertochange.GrantThorntonUKLLPandtheCompanyhaveagreedtoextendthetermoftheleadauditpartner,inlinewithES3,foroneyearto31March2013.
auditorGrantThorntonUKLLPhas indicated itswillingnesstocontinue inoffice.Aresolutionfor itsre-appointmentasindependentauditorwillbeproposedattheAGM.
approvalThereportofthedirectorswasapprovedbytheBoardon11June2013andsignedonitsbehalfby:
mark H fosterdirector
18 Vianet Group plc
general PrincipleTheGroupiscommittedtohighstandardsofcorporategovernanceinall itsactivities.Whilstthecompanyisnotrequiredtocomplywiththe2010UKCorporateGovernanceCode,theBoardrecognisesthevalueoftheCodeandhasregardtoitsrequirementsasfaraspracticableandappropriateforapubliccompanyofitssizeandnature.
the BoardTheBoardconsistsofthreeExecutiveandtwoNon-ExecutiveDirectorsasfollows:
executive directorsStewartWDarling(ChiefExecutiveOfficer)JamesWDickson(ExecutiveChairman)MarkHFoster(FinanceDirector&CompanySecretary)
non-executive directorsStewartCGillilandChrisWilliams(appointed20May2013)
AlldirectorshaveaccesstotheadviceandservicesoftheCompanySecretary.
ThereisacleardivisionofresponsibilitiesbetweentheChairman,whoisresponsiblefortherunningoftheBoard,andtheChiefExecutiveOfficer,who,togetherwiththeotherExecutiveDirectors,areresponsibleforrunningthebusiness.
TheBoardmeets regularly, with no less than tenmeetings planned in any one calendar year. Each director isprovidedwithsufficientinformationtoenablethemtoconsidermattersingoodtimeformeetingsandenablethemtodischargetheirdutiesproperly.ThereisaformalscheduleofmattersreservedforBoardapproval.InprincipletheBoardagreestheGroupbusinessplan,determinesoverallGroupStrategy,acquisition,investment,humanresourceandhealthandsafetypolicies,aswellasapprovalformajoritemsofcapitalexpenditure.
AlldirectorshaveaccesstoindependentprofessionaladviceattheGroup’sexpense.Thedirectorscontinuallyensuretheyaretrainedinassociationwithdutiesandresponsibilitiesofbeingadirectorofalistedcompany.
Theindependentnon-executivedirectorsbringanindependentjudgementtothemanagementoftheGroup.Theyarefreefromanybusinessorotherrelationshipswhichcouldinterferewiththeexerciseoftheirjudgement.Thenon-executivedirectorsfulfilakeyroleincorporateaccountability.
Board committeesTheGrouphasestablishedanumberofcommittees,detailsofwhicharesetoutbelowandallofwhichoperatewithdefinedTermsofReference:
audit committeeThisconsistsof:
StewartCGillilandChrisWilliams(appointed20May2013)
Itmeetsatleastthreetimesinanyyear,andisusuallyattendedasaminimumbytheChiefExecutiveOfficerandFinanceDirector,aswellastheGroup’sExternalAuditor.
corPorate goVernance statement
Vianet Group plc 19
TheAuditCommitteehastermsofreference(whichareavailableforinspection)toreportonmatterssuchastheGroup’sannualaccounts,interimreports,majoraccountingissuesanddevelopments,theappointmentofexternalauditorandtheirfee,theobjectivityoftheauditor,theGroup’sstatementoninternalcontrolsystemsandthescopeandfindingsofexternalaudit.
remuneration committeeThisconsistsof:
StewartCGilliland(Chairman)ChrisWilliams(appointed20May2013)
TheRemunerationCommitteehastermsofreference(whichareavailableforinspection)andmeetsatleasttwiceperyear,reviewingandadvisingupontheremunerationandbenefitpackagesoftheExecutiveDirectorsandotherseniormanagement. The remuneration of theChairmanandnon-executiveDirector is decideduponby the fullBoard.
TheRemunerationpolicyistoattract,retainandmotivatehighqualityexecutivescapableofachievingtheGroup’sobjectivesandtherebyenhancingshareholdervalue.
TheremunerationoftheExecutiveDirectorsconsistsofabasicsalaryandbenefits,performancerelatedbonusesandshareoptions.Thenon-ExecutiveDirectorsareeligibleforperformancerelatedshareoptions.
nominations committeeThisconsistsof:
JamesWDickson(Chairman)StewartCGillilandChrisWilliams(appointed20May2013)
TheCommitteemetasrequiredduringthecourseoftheyear.TheCommitteehastermsofreferencewhichareavailableforinspection.
internal control and risk managementTheBoardhasoverallresponsibilityfortheGroup’ssystemofinternalcontrolandforreviewingitseffectiveness,andrecognisesthesesystemsaredesignedtomanageratherthaneliminatetheriskofmaterialloss.
TheBoardmonitorsriskthroughongoingprocessesandprovidesassurancethatthesignificantrisksfacedbytheGrouparebeingidentified,evaluatedandappropriatelymanaged.
Themainelementsoftheinternalcontrolsystemsare:
• managementstructurewithclearlyidentifiedresponsibilities
• budgetsettingprocessincludinglongertermforecastreview
• comprehensivemonthlyfinancialreportingsystem,withcomparisontobudget,supportedbywrittenreportfromtheChiefExecutiveOfficerandFinanceDirector
• reporttotheAuditCommitteefromtheexternalauditorstatingthematerialfindingsarisingfromtheaudit.ThisreportisalsoconsideredbythemainBoardandactiontakenwhereappropriate
20 Vianet Group plc
• aframeworkforcapitalexpenditureandcontrolsincludingauthorisationproceduresandrulesrelatingtodelegationofauthority
• riskmanagementpoliciestomanageissuesrelatingtohealthandsafety,environment,legalcompliance,insuranceandsecurity
• daytodayhandsoninvolvementoftheExecutiveDirectors
Asaresultoftheabovesystemsandcontrols,andduetoitscurrentsize,theGroupdoesnotoperateaninternalauditfunction,butiskeepingitspositionunderreview.
shareholder communicationTheGroupplacesahighlevelofimportanceoncommunicatingwithitsshareholdersandwelcomesandencouragessuchdialoguewithintheregulationsgovernedbytheLondonStockExchange.TheBoardarekeentoencouragethe participation of a broad base of both institutional and private investors in the Group. Communication withshareholderswillbemaintainedthroughtheAnnualGeneralMeeting,annualandinterimreports,pressreleasesandperiodicpresentations.
share optionsTheshareoptionplansinexistenceat31March2013weretheEMIplan,theExecutiveplan,theEmployeePlan,theEmployeeCompanyShareOptionPlanandanExecutiveJointOwnershipPlan.Shareoptionswillbeissuedatappropriate intervals inordertomotivateandretainExecutiveDirectors,seniormanagementandotherkeystaffwhilstaligningtheirinterestswiththoseoftheGroup’sshareholders.SuchgrantsareapprovedbytheRemunerationCommittee.
corporate governance statement (continued)
Vianet Group plc 21
WehaveauditedthegroupfinancialstatementsofVianetGroupplcfortheyearended31March2013whichcomprisetheconsolidatedstatementofcomprehensiveincome,theconsolidatedbalancesheet,theconsolidatedstatementofchangesinequity,theconsolidatedcashflowstatementandtherelatednotes.ThefinancialreportingframeworkthathasbeenappliedintheirpreparationisapplicablelawandInternationalFinancialReportingStandards(IFRSs)asadoptedbytheEuropeanUnion.
Thisreport ismadesolelytothecompany’smembers,asabody, inaccordancewithChapter3ofPart16oftheCompaniesAct2006.Ourauditworkhasbeenundertakensothatwemightstatetothecompany’smembersthosematterswe are required to state to them in an auditor’s report and for no other purpose. To the fullest extentpermittedbylaw,wedonotacceptorassumeresponsibilitytoanyoneotherthanthecompanyandthecompany’smembersasabody,forourauditwork,forthisreport,orfortheopinionswehaveformed.
respective responsibilities of directors and auditorsAsexplainedmorefullyintheDirectors’ResponsibilitiesStatementthedirectorsareresponsibleforthepreparationofthegroupfinancialstatementsandforbeingsatisfiedthattheygiveatrueandfairview.OurresponsibilityistoauditandexpressanopiniononthegroupfinancialstatementsinaccordancewithapplicablelawandInternationalStandardsonAuditing(UKandIreland).ThosestandardsrequireustocomplywiththeAuditingPracticesBoard’s(APB’s)EthicalStandardsforAuditors.
scope of the audit of the financial statementsAdescriptionofthescopeofanauditoffinancialstatementsisprovidedontheAPB’swebsiteatwww.frc.org.uk/apb/scope/private.cfm
opinion on financial statementsInouropinionthegroupfinancialstatements:
• giveatrueandfairviewofthestateofthegroup’saffairsasat31March2013andofitsprofitfortheyearthenended;
• havebeenproperlypreparedinaccordancewithIFRSasadoptedbytheEuropeanUnion;and
• havebeenpreparedinaccordancewiththerequirementsoftheCompaniesAct2006.
opinion on other matter prescribed by the companies act 2006Inouropinion the informationgiven in theDirectors’Report for the financial year forwhich thegroup financialstatementsarepreparedisconsistentwiththegroupcompanyfinancialstatements.
matters on which we are required to report by exceptionWehavenothingtoreportinrespectofthefollowingmatterswheretheCompaniesAct2006requiresustoreporttoyouif,inouropinion:
• certaindisclosuresofdirectors’remunerationspecifiedbylawarenotmade;or
• wehavenotreceivedalltheinformationandexplanationswerequireforouraudit.
other matterWehavereportedseparatelyontheparentcompanyfinancialstatementsofVianetGroupplcfortheyearended31March2013.
AndrewWoodSeniorStatutoryAuditorforandonbehalfofGrantThorntonUKLLPStatutoryAuditor,CharteredAccountants
Leeds
11June2013
indePendent auditor’s rePort to tHe memBers of Vianet grouP Plc
22 VianetGroupplc
Before Exceptional Exceptional Total Total 2013 2013 2013 2012 Note £000 £000 £000 £000
Continuing operations Revenue 3 21,085 - 21,085 22,975Costofsales (10,275) - (10,275) (10,740)
Gross profit 10,810 - 10,810 12,235 Administrationandotheroperatingexpenses (7,545) (738) (8,283) (8,828)
Operating profit pre amortisation and share based payments 3,265 (738) 2,527 3,407 Intangibleassetamortisation (591) - (591) (952)Sharebasedpayments (52) - (52) (57) Operating profit post amortisation and share based payments 2,622 (738) 1,884 2,398 Financeincome 6 - - - 5Financecosts 7 (64) - (64) (62)
Profit before taxation 2,558 (738) 1,820 2,341 Incometaxexpense 8 110 - 110 (82)
Profit after tax and total comprehensive income for the year attributable to the owners of the parent 5 2,668 (738) 1,930 2,259
Earnings per share
–Basic 9 9.84p (2.72)p 7.12p 8.00p
–Diluted 9 9.79p (2.71)p 7.08p 7.90p
Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthesefinancialstatements.
Detailsoftheexceptionalitemsareincludedinnote4.
COnsOlidatEd statEmEnt Of COmPrEhEnsivE inCOmEfortheyearended31March2013
VianetGroupplc 23
2013 2012 Note £000 £000
assets non-current assets Goodwill 11 17,723 17,723Otherintangibleassets 12 2,179 1,990Property,plantandequipment 13 3,812 3,662Investments 14 533 533
total non-current assets 24,247 23,908
Current assets Inventories 15 1,875 1,903Tradeandotherreceivables 16 3,661 4,157Taxasset 140 213Cashandcashequivalents 1,196 105
6,872 6,378
total assets 31,119 30,286
Equity and liabilities liabilities Current liabilities Tradeandotherpayables 17 4,548 3,400Borrowings 18 899 1,985
5,447 5,385
non-current liabilities Borrowings 18 2,146 1,526Deferredtax 20 157 157
2,303 1,683
Equity attributable to owners of the parent Sharecapital 21 2,827 2,825Sharepremiumaccount 11,182 11,174Sharebasedpaymentreserve 345 333Ownshares (1,381) (1,154)Mergerreserve 310 310Retainedprofit 10,086 9,730
total equity 23,369 23,218
total equity and liabilities 31,119 30,286
TheGroupfinancialstatementswereapprovedbytheBoardofDirectorson11June2013andweresignedonitsbehalfby:
J dicksondirector
Theaccompanyingaccountingpoliciesandnotesformanintegralpartofthesefinancialstatements.
COnsOlidatEd BalanCE shEEtat31March2013
24 VianetGroupplc
Share Share based Share premium Own payment Merger Retained capital account shares reserve reserve profit Total £000 £000 £000 £000 £’000 £000 £000
at 1 april 2011 2,825 11,174 (1,154) 276 310 9,008 22,439Dividends - - - - - (1,537) (1,537)Sharebasedpayments - - - 57 - - 57
Transactionswithowners - - - 57 - (1,537) (1,480)
Profitandtotalcomprehensiveincomefortheyear - - - - - 2,259 2,259
Totalcomprehensiveincomelessownerstransactions - - - 57 - 722 779
at 31 march 2012 2,825 11,174 (1,154) 333 310 9,730 23,218
At1April2012 2,825 11,174 (1,154) 333 310 9,730 23,218Dividends - - - - - (1,547) (1,547)Issueofshares 2 8 - - - - 10Exercisedoptionsreownshares - - 134 (3) - (64) 67Purchaseofownshares - - (361) - - - (361)Sharebasedpayments - - - 52 - - 52Shareoptionforfeitures - - - (37) - 37 -
Transactionswithowners 2 8 (227) 12 - (1,574) (1,779)
Profitandtotalcomprehensiveincomefortheyear - - - - - 1,930 1,930
Totalcomprehensiveincomelessownerstransactions 2 8 (227) 12 - 356 151
at 31 march 2013 2,827 11,182 (1,381) 345 310 10,086 23,369
COnsOlidatEd statEmEnt Of ChanGEs in Equityfortheyearended31March2013
VianetGroupplc 25
2013 2012 £000 £000
Cash flows from operating activities Profitfortheyear 1,930 2,259adjustments for Interestreceivable - (5)Interestpayable 64 62Incometaxexpense (110) 82Amortisationofintangibleassets 591 701Impairment - 250Depreciation 410 448Exceptionalitem - (808)Paymentofdeferredconsideration (18) (12)Lossonsaleofproperty,plantandequipment 19 8Sharebasedpayments 52 57
Operating cash flows before changes in working capital and provisions 2,938 3,042Changeininventories 28 797Changeinreceivables 496 517Changeinpayables 1,166 (2,368)Changeinprovisions - (164)
1,690 (1,218)Cash generated from operations 4,628 1,824Incometaxesrefunded 183 -Incometaxespaid - (853)
net cash generated from operating activities 4,811 971
Cash flows from investing activities Proceedsondisposalofproperty,plantandequipment 18 21Purchasesofproperty,plantandequipment (597) (495)Purchasesofintangibleassets (856) (740)Disposalofintangibleassets 76 -Purchaseofsubsidiaryundertakings - (377)Cashacquiredwithsubsidiary - 39
net cash used in investing activities (1,359) (1,552)
Cash flows from financing activities Interestpayable (64) (62)Interestreceived - 5Issueofsharecapital 10 -Purchaseofownshares (361) -Proceedsfromdisposalofownshares 67 -Repaymentsofborrowings (435) (511)Newborrowings 1,500 -Dividendspaid (1,547) (1,537)
net cash used in financing activities (830) (2,105)
Netincrease/(decrease)incashandcashequivalents 2,622 (2,686)Cashandcashequivalentsatbeginningofperiod (1,426) 1,260
Cash and cash equivalents at end of period 1,196 (1,426)
COnsOlidatEd Cash flOw statEmEntfortheyearended31March2013
26 VianetGroupplc
1. significant accounting policies1.1 Basis of preparationThe financialstatementshavebeenprepared inaccordancewith InternationalFinancialReportingStandardsasadoptedbytheEU(IFRS).IFRSincludesInterpretationsissuedbytheInternationalFinancialReportingInterpretationsCommittee.
Thefinancialstatementshavebeenpreparedonthehistoricalcostconventionwiththeexceptionofcertainitemswhicharemeasuredatfairvalueasdisclosedintheprincipleaccountingpoliciessetoutbelow.ThemeasurementbasesandprincipalaccountingpoliciesoftheGrouparesetoutbelow.Thesepolicieshavebeenconsistentlyappliedtoallyearspresentedunlessotherwisestated.
ThepreparationoffinancialstatementsinconformitywithIFRSrequirestheuseofestimatesandassumptionsthataffectthereportedamountsofassetsandliabilitiesatthedateofthefinancialstatementsandthereportedamountsofrevenuesandexpensesduringthereportingperiod.Althoughtheseestimatesarebasedonmanagement’sbestknowledgeoftheamount,eventoractions,actualresultsultimatelymaydifferfromtheseestimates.
TheDirectors,afterhavingmadeappropriateenquiries,including(butnotlimitedto)areviewoftheGroup’sbudgetfor2013/2014,andcashgeneratingcapacityatleast12monthsfromthedateofsigning(underpinnedbylongtermcontractsinplaceandhistoricalresults),haveareasonableexpectationthattheGrouphasadequateresourcestocontinueinoperationalexistencefortheforeseeablefuture.Forthisreasontheycontinuetoadoptthegoingconcernbasisinpreparingthefinancialstatements.
1.2 subsidiariesTheconsolidatedfinancialstatementsincorporatetheresults,assets,liabilitiesandcashflowsofthecompanyandeachofitssubsidiariesforthefinancialyearended31March2013.
SubsidiariesareentitiescontrolledbytheGroup.ControlisdeemedtoexistwhentheGrouphasthepower,directlyorindirectlytogovernthefinancialandoperatingpoliciesofanentitysoastoobtainbenefitsfromitsactivities.Theresults,assets,liabilitiesandcashflowsofsubsidiariesareincludedintheconsolidatedfinancialstatementsfromthedatecontrolcommencesuntilthedatethatcontrolceases.
UnrealisedgainsontransactionsbetweentheGroupanditssubsidiariesareeliminated.Unrealisedlossesarealsoeliminatedunlessthetransactionprovidesevidenceofanimpairmentoftheassettransferred.Amountsreportedin the financial statements of subsidiaries have been adjustedwhere necessary to ensure consistencywith theaccountingpoliciesadoptedbytheGroup.
1.3 Business combinationsForbusinesscombinationsoccurringsince1January2010,therequirementsof IFRS3Rhavebeenapplied.TheconsiderationtransferredbytheGrouptoobtaincontrolofasubsidiaryiscalculatedasthesumoftheacquisitiondatefairvaluesofassetstransferred,liabilitiesincurredandtheequityinterestsissuedbytheGroup,whichincludesthefairvalueofanyassetor liabilityarisingfromacontingentconsiderationarrangement.Acquisitioncostsareexpensed as incurred. The Group recognises identifiable assets acquired and liabilities assumed in a businesscombinationregardlessofwhethertheyhavebeenpreviouslyrecognisedintheacquiree’sfinancialstatementspriortotheacquisition.Assetsacquiredandliabilitiesassumedaregenerallymeasuredattheacquisitiondatefairvalues.
1.4 revenue recognitionRevenue ismeasured at the fair value of the consideration received or receivable and represents the amountsreceivableforgoodsprovidedinthenormalcourseofbusiness,netofallrelateddiscountsandsalestax.
nOtEs tO thE finanCial statEmEntsfortheyearended31March2013
VianetGroupplc 27
1. significant accounting policies (continued)leisure including vending and technologysale of dispense monitoring equipment
Therevenuefromthesaleisrecognisedatthepointofinstallationwhenthetransferofriskandrewardismadetothecustomer.
sale of support service packs
Therevenueisrecognisedoverthesupporttermofthelengthoftheservicecontractinaccordancewiththerespectivecustomer’sagreements.
machine & vending monitoring sale of equipment
Therevenuefromthesaleisrecognisedatthepointofinstallationwhenthetransferofriskandrewardismadetothecustomer.
machine monitoring licence and support, vending service revenue
Therevenueisrecognisedoverthesupporttermofthelengthoftheservicecontractinaccordancewiththerespectivecustomer’sagreements.
machine monitoring data management services
Therevenueisrecognisedoverthesupporttermofthelengthoftheservicecontractinaccordancewiththerespectivecustomer’sagreements.
interest income
Interestincomeisaccruedonatimebasisusingtheeffectiveinterestmethod.
rental income
Income fromequipment leased to customers is accounted for on a straight-line basis over the period towhichitrelates.Thesearrangementsareoperatingleases,wheretheriskandrewardof theunit,which iscapitalised,remainswiththeGroup.
deferred income
Deferredincomeisreleasedoverthetermoftheservicecontracttowhichitreleates.
fuel solutionsfuel loss management and prevention (wetstock analysis)
Therevenueisrecognisedoverthesupporttermofthelengthoftheservicecontractinaccordancewiththerespectivecustomer’sagreements.
Pump dispense calibration and verification services
Therevenuefromthesale isrecognisedatthepointofcalibrationandverificationwhenthetransferofriskandrewardismadetothecustomer.
facilities management, engineering and project management solutions
Therevenueisrecognisedoverthesupporttermofthelengthoftheservicecontractinaccordancewiththerespectivecustomer’sagreements.
28 VianetGroupplc
1. significant accounting policies (continued)fuel management systems, tank gauging and lining solutions and liquefied petroleum gas and forecourt services
Therevenuefromthesaleisrecognisedatthepointofworkbeingcompletedwhenthetransferofriskandrewardismadetothecustomer.
interest income
Interestincomeisaccruedonatimebasisusingtheeffectiveinterestmethod.
rental income
Income fromequipment leased to customers is accounted for on a straight-line basis over the period towhichitrelates.Thesearrangementsareoperatingleases,wheretheriskandrewardof theunit,which iscapitalised,remainswiththeGroup.
1.5 foreign currenciesTransactionsinforeigncurrenciesaretranslatedattheexchangeraterulingatthedateofthetransaction.Monetaryassetsandliabilitiesinforeigncurrenciesaretranslatedattheratesofexchangerulingatthebalancesheetdate.Non-monetaryitemsthataremeasuredathistoricalcostinaforeigncurrencyaretranslatedattheexchangerateatthedateofthetransaction.
Anyexchangedifferencesarisingonthesettlementofmonetary itemsorontranslatingmonetary itemsatratesdifferentfromthoseatwhichtheywereinitiallyrecordedarerecognisedintheprofitorlossintheperiodinwhichtheyarise.
1.6 GoodwillGoodwill onacquisitionof subsidiaries represents theexcessof the cost of anacquisitionover the fair valueoftheGroup’sshareof the identifiablenetassetsof theacquiredsubsidiary.Goodwill isnotamortised,but testedatleastannuallyforimpairment,andcarriedatcostlessaccumulatedimpairmentlosses.Impairmentlossesareimmediatelyrecognisedinprofitorlossandarenotsubsequentlyreversed.
GoodwillarisingonacquisitionsbeforethedateoftransitiontoIFRShasbeenretainedatthepreviousUKGAAPamountssubjecttobeingtestedforimpairmentatthatdate.
Testshavebeenundertakenusingcommercialjudgementsandanumberofassumptionsandestimateshavebeenmadetosupportthecarryingamount,assessedagainstdiscountedcashflows.Thedetailsoftheseassumptionsaresetoutinnote11.
1.7 intangible assetsacquisition as part of a business combination
Identifiable intangibleassetsacquiredaspartofabusinesscombinationare initially recognisedseparately fromgoodwillattheirfairvalue,irrespectiveofwhethertheassethadbeenrecognisedbytheacquireebeforethebusinesscombination.Anintangibleassetisconsideredidentifiableonlyifitisseparableorifitarisesfromcontractualorotherlegalrights,regardlessofwhetherthoserightsaretransferableorseparablefromtheentityorfromotherrightsandobligations.
IntangibleassetsacquiredaspartofabusinesscombinationandrecognisedbytheGroupincludecustomercontracts.
After initial recognition, intangible assets acquired as part of a business combination are carried at cost lessaccumulatedamortisationandany impairment lossesrecognised inadministrativeexpenses in thestatementofcomprehensiveincome.
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 29
1. significant accounting policies (continued)amortisation
Intangibleassetsareamortisedonastraight-linebasis,toreducetheircarryingvaluetotheirresidualvalue,overtheirestimatedusefullives.Thefollowingusefulliveswereappliedduringtheyear:
Customercontractsandrelationships expectedlengthofrelationshipPatents expectedlengthofpatentOrderbook expectedlengthofcontract
Methodsofamortisation,residualvaluesandusefullivesarereviewed,andifnecessaryadjusted,ateachbalancesheetdate.
1.8 research and developmentExpenditureonresearch(ortheresearchphaseofaninternalproject)isrecognisedasanexpenseintheperiodinwhichitisincurred.
Developmentcostsincurredonspecificprojectsarecapitalisedwhenallthefollowingconditionsaresatisfied:
• completionoftheintangibleassetistechnicallyfeasiblesothatitwillbeavailableforuseorsale
• theGroupintendstocompletetheintangibleassetanduseorsellit
• theGrouphastheabilitytouseorselltheintangibleasset
• theintangibleassetwillgenerateprobablefutureeconomicbenefits.Amongotherthings,thisrequiresthatthereisamarketfortheoutputfromtheintangibleassetorfortheintangibleassetitself,or,ifitistobeusedinternally,theassetwillbeusedingeneratingsuchbenefits
• thereareadequatetechnical,financialandotherresourcestocompletethedevelopmentandtouseorselltheintangibleasset,and
• theexpenditureattributabletotheintangibleassetduringitsdevelopmentcanbemeasuredreliably
Developmentcostsnotmeetingthecriteriaforcapitalisationareexpensedasincurred.
Thecostofan internallygenerated intangibleassetcomprisesalldirectlyattributablecostsnecessarytocreate,produceandpreparetheassettobecapableofoperatinginthemannerintendedbymanagement.
Directly attributable costs include employee (other than directors) costs incurred on development and directlyattributableoverheads.Thecostsofinternallygeneratedsoftwaredevelopmentsarerecognisedasintangibleassetsandaresubsequentlymeasuredinthesamewayasexternallyacquiredlicences.However,untilcompletionofthedevelopmentproject,theassetsaresubjecttoimpairmenttestingonly.
Capitaliseddevelopmentcostsareamortisedoverthelifeoftheproductwithincostofsales,whichisusuallynomorethanfiveyears.
1.9 Property, plant and equipmentProperty,plantandequipment isstatedatcost lessaccumulateddepreciationandany impairment losses.Costcomprisesthepurchasepriceofproperty,plantandequipmenttogetherwithanydirectlyattributablecosts.
30 VianetGroupplc
1. significant accounting policies (continued)Subsequentcostsareincludedinanasset’scarryingvalueorrecognisedasaseparateasset,whenitisprobablethatfutureeconomicbenefitsassociatedwiththeadditionalexpenditurewillflowtotheGroupandthecostoftheitemcanbemeasuredreliably.Allothercostsarechargedtothestatementofcomprehensiveincomewhenincurred.
Depreciationcommenceswhenanassetisavailableforuse.Depreciationischargedsoastowriteoffthedepreciableamountofassetstotheirresidualvaluesovertheirestimatedusefullivesusingamethodthatreflectsthepatterninwhichtheassets’futureeconomicbenefitsareexpectedtobeconsumedbytheGroup.
Depreciationischargedinequalannualinstalmentsoverthefollowingperiods:
Freeholdlandandproperty 50yearsPlantandmachinery 4yearsEquipmentandvehicles 4yearsFixturesandfittings 4yearsRentalsystems Termofhire
Methodsofdepreciation,residualvaluesandusefullivesarereviewedandadjusted,ifappropriate,ateachbalancesheetdate.
Thegainorlossarisingfromthedisposalorretirementofanitemofproperty,plantandequipmentisdeterminedasthedifferencebetweenthenetdisposalproceedsandthecarryingamountof the item,and is included intheconsolidatedstatementofcomprehensiveincome.
1.10 impairmentAteachbalancesheetdate,theGroupassesseswhetherthereisanyindicationthatitsassetshavebeenimpaired.Ifanysuchindicationexists,therecoverableamountoftheassetisestimatedinordertodeterminetheextentoftheimpairment,ifany.Ifitisnotpossibletoestimatetherecoverableamountoftheindividualasset,therecoverableamountofthecash-generatingunittowhichtheassetbelongsisdetermined.
Therecoverableamountofanassetoracash-generatingunitisthehigherofitsfairvaluelesscoststosellanditsvalueinuse.Thevalueinuseisthepresentvalueofthefuturecashflowsexpectedtobederivedfromanassetorcash-generatingunit.Thispresentvalueisdiscountedusingapre-taxratethatreflectscurrentmarketassessmentsofthetimevalueofmoneyandoftherisksspecifictotheassetforwhichfuturecashflowestimateshavenotbeenadjusted.Iftherecoverableamountofanassetislessthanitscarryingamount,thecarryingamountoftheassetisreducedtoitsrecoverableamount.Thatreductionisrecognisedasanimpairmentloss.
Animpairmentlossrelatingtoassetscarriedatcostlessanyaccumulateddepreciationoramortisationisrecognisedimmediatelyintheincomestatement.
Goodwillacquiredinabusinesscombinationis,fromtheacquisitiondate,allocatedtoeachofthecash-generatingunitsorgroupsofcash-generatingunitsthatareexpectedtobenefitfromthesynergiesofthecombination.
Goodwill is tested for impairment at least annually, andwhenever there is an indication that the assetmay beimpaired.
Animpairmentlossisrecognisedforcash-generatingunitsiftherecoverableamountoftheunitislessthanthecarryingamountoftheunit.Theimpairmentlossisallocatedtoreducethecarryingamountoftheassetsoftheunitbyfirstreducingthecarryingamountofanygoodwillallocatedtothecash-generatingunit,andthenreducingtheotherassetsoftheunitprorataonthebasisofthecarryingamountofeachassetintheunit.
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 31
1. significant accounting policies (continued)Ifanimpairmentlosssubsequentlyreverses,thecarryingamountoftheassetisincreasedtotherevisedestimateofitsrecoverableamountbutlimitedtothecarryingamountthatwouldhavebeendeterminedhadnoimpairmentlossbeenrecognisedinprioryears.Areversalofanimpairmentlossisrecognisedinprofitorloss.Impairmentlossesongoodwillarenotsubsequentlyreversed.
1.11 Operating leasesThecostsofalloperatingleasesarechargedtotheprofitorlossonastraight-linebasisatexistingrentallevels.Incentivestosignoperatingleasesarerecognisedintheprofitorlossinequalinstalmentsoverthetermofthelease.
1.12 Own sharesThecostsofpurchasingownsharesareshownasadeductionagainstequity.Theproceedsfromthesaleofownsharesheldincreaseequity.Suchamountsareshowninaseparatereserve.Neitherthepurchasenorsaleofownsharesleadstoagainorlossbeingrecognised.
1.13 inventoriesInventoriesarestatedatthelowerofcostandnetrealisablevalueonafirstinfirstout(FIFO)basis.Costoffinishedgoodsandworkinprogressincludesmaterialsanddirectlabour.
Netrealisablevalueistheestimatedsellingprice,whichwouldberealisedafterdeductingallestimatedcostsofcompletion,andcostsincurredinmarketing,sellinganddistributingsuchinventory.
1.14 taxationThetaxexpenserepresentsthesumofcurrenttaxanddeferredtax.
Current tax
Currenttaxisbasedontaxableprofitfortheyearandiscalculatedusingtaxratesenactedorsubstantivelyenactedatthebalancesheetdate.Taxableprofitdiffersfromaccountingprofiteitherbecauseitemsaretaxableordeductibleinperiodsdifferent to those inwhich theyare recognised in the financialstatementsorbecause theyarenevertaxableordeductible.
deferred tax
Deferredtaxontemporarydifferencesatthebalancesheetdatebetweenthetaxbasesofassetsandliabilitiesandtheircarryingamountsforfinancialreportingpurposesisaccountedforusingthebalancesheetliabilitymethod.
Using the balance sheet liabilitymethod, deferred tax liabilities are recognised in full for all taxable temporarydifferencesanddeferredtaxassetsarerecognisedtotheextentthatitisprobablethattaxableprofitswillbeavailableagainstwhichdeductibletemporarydifferencescanbeutilised.However,ifthedeferredtaxassetorliabilityarisesfromtheinitialrecognitionofgoodwillortheinitialrecognitionofanassetorliabilityinatransaction,otherthanabusinesscombination,thatatthetimeofthetransactionaffectsneitheraccountingnortaxableprofit, it isnotrecognised.
Deferredtaxationismeasuredatthetaxratesthatareexpectedtoapplywhentheassetisrealisedortheliabilitysettledbasedontaxratesandlawsenactedorsubstantivelyenactedatthebalancesheetdate.
Deferred taxassetsand liabilitiesareoffset onlywhen there is a legally enforceable right to set off current taxamountsandwhentheyrelatetothesametaxauthorityandtheGroupintendstosettleitscurrenttaxamountsonanetbasis.
Currentanddeferredtaxarerecognisedintheprofitorlossexceptwhentheyrelatetoitemsrecogniseddirectlyinequity,whentheyaresimilarlytakentoequity.
32 VianetGroupplc
1. significant accounting policies (continued)Pension Costs
TheGroupoperatesadefinedcontributionpensionscheme.TheassetsoftheseschemesareheldseparatelyfromthoseoftheGroupinanindependentlyadministeredfund.ThepensioncostchargerepresentscontributionspayablebytheGrouptotheschemefortheyear.
1.15 financial instruments
TheGroupclassifiesfinancialinstruments,ortheircomponentparts,oninitialrecognitionasafinancialasset,afinancialliabilityoranequityinstrumentinaccordancewiththesubstanceofthecontractualarrangement.
FinancialassetsandfinancialliabilitiesarerecognisedontheGroup’sbalancesheetwhentheGroupbecomespartytothecontractualprovisionsoftheinstrument.
TheparticularrecognitionandmeasurementmethodsadoptedfortheGroup’sfinancialinstrumentsaredisclosedbelow:
investments
Investmentsarecarriedatfairvalueandarereviewedforimpairmentbyreferencetotradedshareprices.
trade receivables and Cash and cash equivalents
Tradereceivablesandcashandcashequivalentsarecategorisedasloansandreceivables,whicharerecognisedinitiallyatfairvalueandaremeasuredsubsequenttoinitialrecognitionatamortisedcostusingtheeffectiveinterestmethod,lessprovisionforimpairment.Cashandcashequivalentscomprisecashonhandanddemanddeposits,togetherwithothershort-term,highlyliquidinvestmentsthatarereadilyconvertibleintoknownamountsofcashandwhicharesubjecttoaninsignificantriskofchangesinvalue.
trade payables and borrowings
Tradepayablesandborrowingsarerecordedinitiallyatfairvalue,netofdirectissuecosts,andsubsequentlyarerecordedatamortisedcostusingtheeffectiveinterestmethod.
1.16 dividendsFinaldividendsarerecognisedasaliabilityintheperiodinwhichtheyareapprovedbythecompany’sshareholders.Interimdividendsarerecognisedwhentheyarepaid.
1.17 Employee share option schemesAllshare-basedpaymentarrangementsgrantedafter7November2002arerecognisedinthefinancialstatements.IFRS2hasbeenappliedtograntsbefore7November2002onlywherethegrouphasdisclosedpubliclythefairvalueofthoseequityinstruments,determinedasatthegrantdateinaccordancewithIFRS2.
All goodsand services received in exchange for thegrant of any share-basedpayment, includingawardsmadeundertheJointOwnershipPlan(anequitysettledscheme)aremeasuredattheirfairvalues.Whereemployeesarerewardedusingshare-basedpaymentsthefairvaluesofemployees’servicesaredeterminedindirectlybyreferencetothefairvalueoftheinstrumentgrantedtotheemployee.Thisfairvalueisappraisedatthegrantdateandexcludestheimpactofnon-marketvestingconditions(forexample,profitabilityandsalesgrowthtargets).
All equity-settled share-based payments are ultimately recognised as an expense in the profit or loss with acorrespondingcreditto“Sharebasedpaymentreserve”.
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 33
1. significant accounting policies (continued)Ifvestingperiodsorothernon-marketvestingconditionsapply, theexpense isallocatedoverthevestingperiod,basedonthebestavailableestimateofthenumberofshareoptionsexpectedtovest.Estimatesaresubsequentlyrevisedifthereisanyindicationthatthenumberofshareoptionsexpectedtovestdiffersfrompreviousestimates.Anycumulativeadjustmentpriortovestingisrecognisedinthecurrentperiod.Noadjustmentismadetoanyexpenserecognisedinpriorperiodsifshareoptionsultimatelyexercisedaredifferenttothatestimatedonvesting.
Uponexerciseofshareoptions theproceeds receivednetofattributable transactioncostsarecredited tosharecapital,andwhereappropriatesharepremium.
1.18 Equity Equitycomprisesthefollowing:
• “Sharecapital”representsthenominalvalueofequityshares.
• “Sharepremium”representstheexcessovernominalvalueofthefairvalueofconsiderationreceivedforequityshares,netofexpensesoftheshareissue.
• “Share based payment reserve” represents equity-settled share-based employee remuneration untilsuchshareoptionsareexercised.
• “Ownsharesreserve”representsthecosts/proceedsofpurchasing/sellingownshares.
• “Mergerreserve”representstheexcessovernominalvalueoffairvalueofconsiderationattributedtoequitysharesissuedinpartsettlementforsubsidiarycompanysharesacquired.
• “Retainedearningsreserve”representsretainedprofits.
1.19 new ifrs standards and interpretations not appliedNew standards and interpretations currently in issue but not effective thatwill have an impact on the financialstatementsarelistedbelow.Thesewillaffectpresentationonly:
• IFRS9FinancialInstruments(effective1January2015)
• IFRS10ConsolidatedFinancialInstruments(effective1January2013)
• IFRS13FairValueMeasurement(effective1January2013)
• IAS19EmployeeBenefits(effective1January2013)
• DeferredTaxRecoveryofUnderlyingassets–AmendmentstoIAS12IncomeTaxes(effective1January2012)
• IAS27(revised)SeparateFinancialStatements(effective1January2013)
• PresentationofItemsofOtherComprehensiveIncome–AmendmentstoIAS1(effective1July2012)
• OffsettingFinancialAssetsandFinancialLiabilities–AmendmentstoIAS32(effective1January2014)
ThedirectorsanticipatethattheadoptionofthesestandardsandinterpretationsinfutureperiodswillhavenomaterialimpactonthefinancialstatementsoftheGroupexceptforadditionaldisclosureandpresentationalrequirements.
34 VianetGroupplc
1. significant accounting policies (continued)1.20 Exceptional itemsTheGroupseekstohighlightcertainitemsasexceptionaloperatingincomeorcosts.Theseareconsideredtobeexceptionalinsizeand/ornatureratherthanindicativeoftheunderlyingtradingoftheGroup.Thesemayincludeitemssuchasacquisitioncosts,restructuringcosts,materialprofitsorlossesondisposalofproperty,plantandequipment,profitsorlossesonthedisposalofsubsidiariesandinventorywritedownsassociatedwithacquisitionbalancesheets.Alloftheseitemsarechargedorcreditedbeforecalculatingoperatingprofitorloss.Materialprofitsorlossesondisposalofproperty,plantandequipmentareshownasseparateitemsinarrivingatoperatingprofitorlosswhereasotherexceptionalitemsarechargedorcreditedwithinoperatingcostsandhighlightedbyanalysis.TheDirectorsapplyjudgementinassessingtheparticularitems,whichbyvirtueoftheirsizeandnaturearedisclosedseparately in theStatement ofComprehensive Incomeand thenotes to the financial statementsas exceptionalitems.TheDirectorsbelievethattheseparatedisclosureoftheseitemsisrelevanttounderstandingtheGroup’sfinancialperformance.
2. Critical accounting judgements and key sources of estimation uncertainty2.1 significant judgements and key sources of estimation uncertaintyThepreparationofthefinancialstatementsinconformitywithIFRSrequiresmanagementtomakeestimatesandassumptionsthataffecttheapplicationofpoliciesandreportedamountsofassets,liabilities,income,expensesandrelateddisclosures.Theestimatesandunderlyingassumptionsarebasedonhistoricalexperienceandvariousotherfactorsthatarebelievedtobereasonableunderthecircumstances.Thisformsthebasisofmakingthejudgementsaboutcarryingvaluesofassetsandliabilitiesthatarenotreadilyapparentfromothersources.
Actualresultsmayhoweverdifferfromtheseestimates.Theestimatesandunderlyingassumptionsarereviewedonanongoingbasis.Changesinaccountingestimatesmaybenecessaryiftherearechangesinthecircumstancesonwhichtheestimatewasbased,orasaresultofnewinformationorfurtherinformation.Suchchangesarerecognisedintheperiodinwhichtheestimateisrevised.
Certainaccountingpoliciesareparticularly importanttothepreparationandexplanationof theGroup’sfinancialinformation.Keyassumptionsaboutthefutureandkeysourcesofestimationuncertaintythathaveariskofcausingamaterialadjustmenttothecarryingvalueofassetsandliabilitiesoverthenexttwelvemonthsaresetoutbelow.
impairment of intangible assets and property, plant and equipment
TheGrouptestsgoodwillatleastannuallyforimpairment,andwheneverthereisanindicationthattheassetmaybeimpaired.Allotherintangibleassetsandproperty,plantandequipmentaretestedforimpairmentwhenindicatorsofimpairmentexist.Impairmentisdeterminedwithreferencetothehigheroffairvaluelesscoststosellandvalueinuse.Valueinuseisestimatedusingadjustedfuturecashflows.Significantassumptionsaremadeinestimatingfuturecashflowsaboutfutureeventsincludingfuturemarketconditionsandfuturegrowthrates.Changesintheseassumptionscouldaffecttheoutcomeofimpairmentreviews.Seenotes11to13.
intangible assets acquired in a business combination
Intangible assets acquired in a business combination including customer contracts and customer lists arerecognisedwhen theyare identifiableorarise fromcontractualorother legal rightsand their fair valuecanbereliablymeasured.Fairvalueisestimatedusingriskadjustedfuturecashflows.Significantassumptionsaremadein estimating future cash flowsabout futureevents including futuremarket conditionsand futuregrowth rates.Changesintheseassumptionscouldaffectfairvalues.
income taxes
ThedeterminationoftheGroup’staxliabilitiesrequirestheinterpretationoftaxlaw.TheGroupobtainsappropriateprofessional advice from its tax advisors in relation to all significant taxmatters. The directors believe that thejudgements made in determining the Group’s tax liabilities are reasonable and appropriate, however, actualexperiencemaydifferandmateriallyaffectfuturetaxcharges.
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 35
2. Critical accounting judgements and key sources of estimation uncertainty (continued)development costs
Carefuljudgementbythedirectorsisappliedwhendecidingwhethertherecognitionrequirementsfordevelopmentcostshavebeenmet.Thisisnecessaryastheeconomicsuccessofanyproductdevelopmentisuncertainandmaybesubjecttofuturetechnicalproblemsatthetimeofrecognition.Recognitionisbasedonjudgementsatthetimeexpenditureisincurred.Inaddition,allinternalactivitiesrelatedtotheresearchanddevelopmentofnewsoftwareproductsarecontinuouslymonitoredbythedirectors.
3. segment reportingBusiness segmentsAnoperatingsegmentisacomponentofanentitythatengagesinbusinessactivitiesfromwhichitmayearnrevenuesandincurexpenses.ThesegmentoperatingresultsareregularlyreviewedbytheChiefOperatingDecisionMakertomakedecisionsaboutresourcestobeallocatedtothesegmentandassessitsperformance.Leisureservicesisanalysedintothreesegments–Leisure,VendingandTechnologyhighlightingthethreekeydivisionswithinleisure.VendingandTechnologydonotmeetthequantitativethresholdsrequiredforsegmentalreporting.However,thesehavebeensplitoutforthefirsttimethisyearasmanagementbelievesthisinformationisusefultotheusersofthefinancialstatements.
Theproducts/servicesofferedbyeachoperatingsegmentare:
Leisure: design, product development, sale and rental of fluid monitoring and machine monitoring equipmenttogetherwiththeprovisionofdatamanagementandrelatedservices.
FuelSolutions:wetstockanalysisandrelatedservices.
Theinter-segmentsalesareimmaterial.Segmentresults,assetsandliabilitiesincludeitemsdirectlyattributabletoasegmentaswellasthosethatcanbeallocatedonareasonablebasis.Unallocatedassetsandliabilitiescompriseitemssuchascashandcashequivalents,taxation,andborrowings.Segmentcapitalexpenditureisthetotalcostincurredduringtheyeartoacquiresegmentassetsthatareexpectedtobeusedformorethanoneperiod.
36 VianetGroupplc
3. segment reporting (continued)2013 Leisure Fuel ContinuingOperations Services Vending Technology Solutions Corporate Total(postexceptionalitems) £’000 £’000 £’000 £’000 £’000 £’000
Totalrevenue 14,490 907 873 4,815 - 21,085
Pre-exceptionalsegmentresult 4,563 (231) (264) (397) (1,049) 2,622Exceptionalcosts (128) (17) (11) (350) (232) (738)Postexceptionalsegmentresult 4,435 (248) (275) (747) (1,281) 1,884Financeincome - - - - - -Financecosts (23) - - (1) (40) (64)
Profit/(loss)beforetaxation 4,412 (248) (275) (748) (1,321) 1,820Taxation 110
Profitfortheyearfromcontinuingoperations 1,930
Other informationAdditionstoproperty,plant,equipmentandintangibleassets 579 247 293 207 30 1,356Depreciationandamortisation 368 322 151 159 1 1,001
Leisure Fuel Services Vending Technology Solutions Corporate Total £’000 £’000 £’000 £’000 £’000 £’000
Segmentassets 10,748 - - 1,800 32 12,580Unallocatedassets - - - - 18,539 18,539
total assets 10,748 - - 1,800 18,571 31,119
Segmentliabilities 6,686 - - 638 269 7,593Unallocatedliabilities - - - - 157 157
total liabilities 6,686 - - 638 426 7,750
TheassetbaseoftheLeisuredivisioncannotbesplitacrossVendingandTechnology.
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 37
3. segment reporting (continued)2012 Leisure Fuel ContinuingOperations Services Vending Technology Solutions Corporate Total(postexceptionalitems) £’000 £’000 £’000 £’000 £’000 £’000
Totalrevenue 14,978 1,455 1,098 5,444 - 22,975
Pre-exceptionalsegmentresult 5,507 276 (4) (956) (1,686) 3,137Exceptionalcosts (348) (185) (80) (504) 378 (739)Postexceptionalsegmentresult 5,159 91 (84) (1,460) (1,308) 2,398Financeincome 2 - - 1 2 5Financecosts (37) - - (4) (21) (62)
Profitbeforetaxation 5,124 91 (84) (1,463) (1,327) 2,341Taxation (82)
Profitfortheyearfromcontinuingoperations 2,259
Other informationAdditionstoproperty,plant,equipmentandintangibleassets 307 364 440 124 355 1,590Depreciationandamortisation 447 286 168 498 - 1,399
Leisure Fuel Services Vending Technology Solutions Corporate Total £’000 £’000 £’000 £’000 £’000 £’000
Segmentassets 7,945 - - 1,882 1 9,828Unallocatedassets - - - - 20,245 20,245
total assets 7,945 - - 1,882 20,246 30,073
Segmentliabilities 5,529 - - 1,050 119 6,698Unallocatedliabilities - - - - 157 157
Totalliabilities 5,529 - - 1,050 276 6,855
analysis of revenue by category 2013 2012 £000 £000
Continuing operations Saleofgoods -leisure 3,077 2,614-fuel - -Renderingofservices -leisure 13,193 14,917-fuel 4,815 5,444Financeincome -leisure - 5-fuel - -
21,085 22,980
38 VianetGroupplc
4. Exceptional items 2013 2012 £000 £000
Deferredconsiderationrelease - (808)Corporaterestructuringandtransitionalcosts 738 1,297
738 489
Exceptional items include subsidiary office closure costs, group people restructuring costs, business segmentclosurecostsandnewcompanystartupcosts.
5. Profit for the yearThefollowingitemshavebeenincludedinarrivingatprofitfortheyear:
2013 2012 £000 £000
Employeebenefitsexpense(note22) 8,238 9,045Depreciationofproperty,plantandequipment(note13) 410 448Amortisationofintangibleassets(note12) 591 701Lossondisposalofproperty,plantandequipment 19 8Operatingleaserentalspayable 300 243Impairmentofgoodwill - 250
auditor’s remuneration 2013 2012Servicestothecompanyanditssubsidiaries £000 £000
Feespayabletothecompany’sauditorfortheauditoftheannualfinancialstatements 12 16Feespayabletothecompany’sauditoranditsassociatesforotherservices: Auditofthefinancialstatementsofthecompany’ssubsidiariespursuanttolegislation 39 37Otherservicesrelatingtotax-complianceandadvice 20 16Otherservices–principallyIFRSadvice,halfyearreportingandaccountingadvice 73 103
144 172
6. finance income 2013 2012 £000 £000
Interestonbankdeposits - 5
- 5
7. finance costs 2013 2012 £000 £000
Interestpayableonbankborrowings 64 62
64 62
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 39
8. taxationanalysis of (credit)/charge in period 2013 2012 £000 £000
Currenttax(credit)/expense –UKcorporationtaxonprofitsoftheperiod - 298–Amountsinrespectofpriorperiods (110) 10
(110) 308Deferredtaxexpense: –Temporarydifferences - (226)
Incometax(credit)/expense (110) 82
reconciliation of effective tax rateThe tax for theperiod is lower (2012 lower) than thestandard rateof corporation tax in theUK (24%/26%).Thedifferencesareexplainedbelow:
2013 2012 £000 £000
Profitbeforetaxation–Continuingoperations 1,820 2,341
ProfitbeforetaxationmultipliedbyrateofcorporationtaxintheUKof24%(2012:26%) 437 609Effectsof: Otherexpensesnotdeductiblefortaxpurposes 38 21Amortisationofintangibles 149 36Utilisationoflosses (691) -Disposalofinvestment - -Adjustmentsforprioryears (110) 10Researchanddevelopment (486) (247)Amortisationofintangibles - (547)Movementonlossesnotrecognised 553 200
Totaltax(credit)/expense (110) 82
40 VianetGroupplc
9. Earnings per shareBasicearningspersharearecalculatedbydividingtheearningsattributabletoordinaryshareholdersbytheweightedaveragenumberofordinarysharesoutstandingduringtheperiod.
Dilutedearningspersharearecalculatedonthebasisofprofitfortheyearaftertaxdividedbytheweightedaveragenumberofsharesinissueintheyearplustheweightedaveragenumberofshareswhichwouldbeissuedifalltheoptionsgrantedwereexercised
Reconciliationsoftheearningsandweightedaveragenumberofsharesusedinthecalculationsaresetoutbelow.
2013 2012 Basic Diluted Basic Diluted Earnings earnings earnings Earnings earnings earnings £000 pershare pershare £000 pershare pershare
Profitattributabletoequityshareholders 1,930 7.12p 7.08p 2,259 8.00p 7.90p
2013 2012 Number Number
Weightedaveragenumberofordinaryshares 27,098,352 28,248,164Dilutiveeffectofshareoptions 172,940 330,000
Dilutedweightedaveragenumberofordinaryshares 27,271,292 28,578,164
10. Ordinary dividends 2013 2012 £000 £000
Finaldividendfortheyearended31March2012of4.0p(yearended31March2011:3.98p) 1,089 1,083Interimdividendpaidinrespectoftheyearof1.70p(2012:1.67p) 458 454
Amountsrecognisedasdistributionstoequityholders 1,547 1,537
Inaddition,thedirectorsareproposingafinaldividendinrespectoftheyearended31March2013of4.00ppershare.Ifapprovedbyshareholders,itwillbepaidon2August2013toshareholderswhoareontheregisterofmemberson21June2013.Totaldividendpayable5.70p(2012:5.67p).
11. Goodwill 2013 2012Group £000 £000
Cost At1April 17,973 17,618Additions - 355At31March 17,973 17,973
Accumulatedimpairmentlosses At1April (250) -
Impairmentlossduringperiod - (250)At31March (250) (250)
Netbookamount31March 17,723 17,723
Goodwillistestedforimpairmentannuallyorwheneventsorchangesincircumstancesthatthecarryingamountmaynotberecoverable.ThegoodwillimpairmenttestisperformedbycomparingthecarryingvalueoftheCGUandassociatedgoodwillwiththeaggregaterecoverableamount.
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 41
11. Goodwill (continued)Thecarryingvalueofgoodwillisallocatedtothefollowingcashgeneratingunits:
2013 2012 £000 £000
LeisureServices 15,503 15,503Technology - -Vending - -FuelSolutions 2,220 2,220
Carryingamount31March 17,723 17,723
FollowingarestructureundertakenduringtheyearthegoodwillhasbeenallocatedtotherelevantCGU’sandtheprioryearinformationpresentedonthesamebasis.
Therecoverableamountsattributedarebasedonvalueinusecalculations.Thekeyassumptionsmadeinundertakingthevalueinusecalculationsaresetoutbelow.
Budgetedprofitandcash flow forecasts for the financial yearending31March2014wereextrapolated forasixyearperiodusingsectorgrowthassumptionsandusedasthebasisfortheimpairmentreview.Thekeyassumptionincludedwithinthese isareturn/improvement inprofitability in the futureofanumberofsubsidiarycompanies,basedoncommitted(mediumtolongtermcontracts)andpipelineorders.
Basisofbudgetsandassumptionsarebasedaroundhistoricaltrackrecordandcommittedmediumtolongtermcontracts.
Sectorgrowthassumptions,appliedtotheleisureservicessegments:3%basedonestimatesofspecificindustryrates,whereavailable.
Sectorgrowthassumptions,appliedtothefuelsolutionssegments:between3%and7.5%basedonestimatesofspecificindustryrates,whereavailable.
Discount rate assumptions, applied to both the leisure services and fuel solutions segments: 10% based onmanagement’sviewofrisksspecifictothegroup.
Ifsectorgrowthassumptionrateswereappliedat0%andadiscountrateassumptionof10%wasapplied,theleisureservicessegmentwouldrequireno impairment,but the fuelsolutionssegmentwouldrequirean impairmentof£489,000.
Ifsectorgrowthassumptionrateswereappliedat3%andadiscountrateassumptionof15%wasapplied,theleisureservicessegmentwouldrequireno impairment,but the fuelsolutionssegmentwouldrequirean impairmentof£1,133,000.
Ifsectorgrowthassumptionrateswereappliedat0%andadiscountrateassumptionof15%wasapplied,theleisureservicessegmentwouldrequireno impairment,but the fuelsolutionssegmentwouldrequirean impairmentof£1,452,000.
TheDirectorsareconfident that the restructuringandexitof lossmakingservices in fuelsolutionsresult innoimpairmentbeingrequired.ThisiscontinuallyreviewedbytheDirectors.
42 VianetGroupplc
12. Other intangible assets Capitalised Order Customer development book contracts Patents TotalGroup £000 £000 £000 £000 £000
Cost At1April2011 1,112 281 1,826 21 3,240Arisingfrombusinesscombinations - - 310 3 313Internallygenerateddevelopmentcosts 740 - - - 740
at 31 march 2012 1,852 281 2,136 24 4,293Internallygenerateddevelopmentcosts 829 - - 27 856Disposals (76) - - - (76)
at 31 march 2013 2,605 281 2,136 51 5,073
amortisation At1April2011 108 144 1,341 9 1,602Chargefortheyear 210 107 382 2 701
at 31 march 2012 318 251 1,723 11 2,303Chargefortheyear 362 27 199 3 591
at 31 march 2013 680 278 1,922 14 2,894
net book amountat 31 march 2013 1,925 3 214 37 2,179
at 31 march 2012 1,534 30 413 13 1,990
Whereappropriate,intangibleassetsidentifiedinbusinesscombinationshavebeenrecognisedinaccordancewiththeprovisionsofIFRS3(BusinessCombinations)andIAS38(IntangibleAssets).Intangibleassetshaveonlybeenrecognisedwheretheyhaveidentifiablefutureeconomicbenefitsthatarecontrolledbytheentity,itisprobablethatthesebenefitswillflowtotheentityandtheirfairvaluecanbemeasuredreliably.
The£829,000ofcapitaliseddevelopmentcostsrepresentsexpenditurethatfulfilstherequirementofIAS38.Thesecostswillbeamortisedoverthefuturecommerciallifeoftheproduct,commencingonthesaleofthefirstcommercialunit.
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 43
13. Property, plant and equipment Freehold Plant, Landand vehiclesand Fixturesand buildings equipment fittings TotalGroup £000 £000 £000 £000
Cost At1April2011 3,104 588 2,101 5,793Additions 6 89 400 495Disposals - (110) - (110)
at 31 march 2012 3,110 567 2,501 6,178Additions 1 329 267 597Disposals - (41) (24) (65)
at 31 march 2013 3,111 855 2,744 6,710
accumulated depreciation At1April2011 289 256 1,605 2,150Chargefortheyear 61 94 293 448Disposals - (82) - (82)
at 31 march 2012 350 268 1,898 2,516Chargefortheyear 60 92 258 410Disposals - (18) (10) (28)
at 31 march 2013 410 342 2,146 2,898
net book amountat 31 march 2013 2,701 513 598 3,812
at 31 march 2012 2,760 299 603 3,662
14. investments 2013 2012 £000 £000
Valuation: Othershares At1April 533 533
At31March 533 533
TheGroupheld13,209,754ordinary5psharesinUniverseGroupplc,anAIMlistedcompanywhichrepresents7.04%(2012:11.52%)ofthesharecapitalasat31March2013.Seepostbalancesheetnote26.
44 VianetGroupplc
15. inventories 2013 2012 £000 £000
Rawmaterials 2,054 2,208Writedownonrawmaterials (272) (472)Workinprogress 93 167
1,875 1,903
Noreversalofpreviouswrite-downswasrecognisedasareductionofexpensein2012or2013.In2013£3,199,743(2012: £4,473,573) was included in the statement of comprehensive income under cost of sales. None of theinventoriesarepledgedassecuritiesforliabilities.
TheGroup’sinventoriesarecomprisedofproducts,whicharenotgenerallysubjecttorapidobsolescenceonaccountoftechnological,deteriorationinconditionormarkettrends.ConsequentlymanagementconsidersthatthereislittleriskofsignificantadjustmentstotheGroup’sinventoryassetswithinthenextfinancialyear.
16. trade and other receivables 2013 2012 £000 £000
Tradereceivables 3,184 3,683Otherreceivables 36 18Prepaymentsandaccruedincome 441 456
3,661 4,157
Thedirectorsconsiderthatthecarryingamountoftradeandotherreceivablesapproximatestheirfairvalue.AlloftheGroup’stradeandotherreceivableshavebeenreviewedforindicatorsofimpairment.
All tradeandother receivableshavebeen reviewed for indicatorsof impairment.Certain trade receivableswerefoundtobeimpairedandaprovisionof£14,504(2012:£19,792)hasbeenrecordedaccordingly(note19)
Inadditionsomeoftheunimpairedtradereceivablesarepastdueasatthereportingdate.Theageoffinancialassetspastduebutnotimpairedisasfollows:
2013 2012 £000 £000
Notmorethanthreemonths 1,012 1,458Morethanthreemonthsbutnotmorethansixmonths 97 66Morethansixmonthsbutnotmorethanoneyear 34 107Morethanoneyear - 5
1,143 1,636
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 45
17. trade and other payables 2013 2012 £000 £000
Tradepayables 929 1,210Othertaxationandsocialsecurity 723 728Accrualsanddeferredincome 2,829 1,100Deferredconsideration 67 362
4,548 3,400
Thedirectorsconsiderthatthecarryingamountoftradeandotherpayablesapproximatestheirfairvalue.
18. Borrowings 2013 2012Current £000 £000
Bankoverdraft - 1,531Bankloans 898 444Hirepurchase 1 10
899 1,985
2013 2012Non-current £000 £000
Bankloans 2,146 1,525Hirepurchase - 1
2,146 1,526
Bankloansaredenominated in£sterlingandbear interestbasedonBankofScotlandBaseRateplusarateofbetween1%and3%.ThebankloansaresecuredbyafixedchargeoverthelandandbuildingsoftheGroup.
TheweightedaverageeffectiveinterestratesontheGroup’sborrowingswereasfollows:
2013 2012 % %
Bankoverdrafts–floatingrates 2.5 2.5Bankborrowings–floatingrates 1.5 1.5
ThematurityprofileoftheGroup’snon-currentbankloansandhirepurchasewasasfollows:
2013 2012 £000 £000
Betweenoneandtwoyears 900 130Betweentwoandfiveyears 438 436Morethanfiveyears 808 960
2,146 1,526
TheGroup’sbankborrowingsbearinterestatfloatingrates,whichrepresentprevailingmarketrates.TheDirectorshavenotconsideredtheimpactofinterestonthesecommitmentsgiventhelevelsofcashintheGroupandfacilitiestheGrouphas.Thecashgenerativenatureof theGroupandhenceany interestratechangewouldbemitigatedto a degree by interest earned. The directors consider therefore that the carrying amount of bank borrowingsapproximatestheirfairvalue.
46 VianetGroupplc
19. financial instrumentsTheGroupisexposedonaminimalbasistomarketriskthroughitsuseofaUSDollarandaEuroaccount.TheGroup’sriskmanagementisco-ordinatedbythedirectorswhofocusactivelyonsecuringtheGroup’sshorttomediumtermcashflowsthroughregularreviewofalltheoperatingactivitiesofthebusiness.Longtermfinancialinvestmentsaremanagedtogeneratelastingreturns.
TheGroupdoesnotactivelyengage in the tradingof financialassets for speculativepurposesnordoes itwriteoptions.ThemostsignificantfinancialriskstowhichtheGroupisexposedaredescribedbelow.
foreign currency sensitivityExposurestocurrencyexchangeratesarisefromtheGroup’soverseasactivities,allofwhicharedenominatedinUSDollarsandEuros.
DuetothenonmaterialnatureoftheGroup’sexposuretoforeigncurrencyrisk,sensitivityanalysestomovementinexchangeratesarenotproduced.
Foreigncurrencydenominatedfinancialassetsandliabilitiesaresetoutbelow.
2013 2012 $000 $000
Financialassets 351 33Financialliabilities - -
351 33
2013 2012 a000 a000
Financialassets 36 21Financialliabilities - -
36 21
TheGrouphasnolongtermforeignexchangeexposure.
Atthebeginningandendoftheyear,theGrouphadnounexpiredforwardforeignexchangecontracts.
Credit risk analysis
TheGroup’sexposuretocreditriskislimitedtothecarryingamountoffinancialassetsrecognisedatthebalancesheetdateandwhicharesetoutbelow.
2013 2012 £000 £000
Cashandcashequivalents 1,196 105Tradeandreceivables 3,184 3,683
4,380 3,788
TheGroupcontinuouslymonitorscreditriskofcustomersandothercounterpartiesandincorporatesthisinformationintoitscreditriskcontrols.TheGrouptakesuptradereferencesonallnewcustomersanditspolicyistodealonlywithcreditworthycompanies.
Themovementonthebaddebtprovision intheperiod isanalysedbelow.TheGroupprovidesforbaddebtsonaspecificbasiswithreferencetotheageprofileofthetradereceivablesheldattheyearend
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
VianetGroupplc 47
19. financial instruments (continued)Credit risk analysis (continued) £000
Baddebtprovisionat31March2012 20Amountsutilised (20)Amountsprovided 15
Baddebtprovisionat31March2013 15
Managementconsidersthatalltheabovefinancialassetsareofgoodcreditquality,includingthosethatarepastdue.
NoneoftheGroup’sfinancialassetsaresecuredbycollateralorothercreditenhancements.
Inrespectof tradeandotherreceivables, theGroup isnotexposedtoanysignificantcreditriskexposuretoanysinglecounterpartyoranygroupofcounterpartieshavingsimilarcharacteristics.Thecreditriskforliquidfundsisconsiderednegligible,sincethecounterpartyisareputablebankwithahighqualityexternalcreditrating.
liquidity risk analysis
The Groupmanages its liquidity needs by carefully monitoring all scheduled cash outflows. Liquidity needs aremonitoredinvarioustimebands,onaday-to-dayandweektoweekbasis,aswellasonthebasisofarollingeightweekprojection.LongertermneedsaremonitoredaspartoftheGroup’sregularrollingmonthlyreforecastingprocess.
loans and receivables 2013 2012CurrentAssets £000 £000
Cashandcashequivalents 1,196 105Tradeandreceivables 3,184 3,683
4,380 3,788
2013 2012Non-CurrentAssets £000 £000
Availableforsalefinancialassets 533 533
533 533
2013 2012CurrentLiabilities £000 £000
Financialliabilitiesmeasuredatamortisedcost 1,827 3,184
non Current liabilities Financialliabilitiesmeasuredatamortisedcost 2,146 1,526
3,973 4,710
Netfinancialassets/(liabilities) 940 (389)
TheDirectorshavenotdisclosedaninterestratesensitivityanalysisnotegiventhelevelsofcashintheGroup,andthecashgenerativenatureoftheGroup,henceanyinterestratechangewouldbemitigatedtoadegreebyinterestearned.
Thecarryingvalueoftheaboveassetsandliabilitiesisequaltotheirfairvalue.
48 VianetGroupplc
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
19. financial instruments (continued)Capital management policies and proceduresTheGroup’scapitalmanagementobjectivesaretoensureitsabilitytocontinueasagoingconcernandtoprovideanadequatereturntoshareholdersbypricingproductsandservicescommensuratelywiththelevelofrisk.
TheGroupmonitorscapitalonthebasisofcarryingamountofequitylesscashandcashequivalentsaspresentedonthefaceofthebalancesheet.Capitalforthereportingperiodsunderreviewissetoutbelow.
2013 2012 £000 £000
Totalequity 23,369 23,218Lesscashequivalents (1,196) (105)
22,173 23,113
TheGroupisnotsubjecttoexternalimposedcapitalrequirements,otherthantheminimumcapitalrequirementsanddutiesregardingreductionofcapitalasimposedbytheCompaniesAct2006forallpubliclimitedcompanies.
20. deferred taxDeferredtaxiscalculatedinfullontemporarydifferencesundertheliabilitymethodusingataxrateof24%(2012:26%).
Themovementonthedeferredtaxaccountisasshownbelow:
2013 2012 £000 £000
At1April 157 303Profitandlosscharge - (226)Acquisition - 80
At31March 157 157
Themovementsindeferredtaxassetsandliabilities(priortotheoffsettingofbalanceswithinthesamejurisdictionaspermittedbyIAS12)duringtheperiodareshownbelow:
net deferred tax liability
Group £000
At31March2013 157
At31March2012 157
Deferredtaxhasbeenrecognisedduringtheyearinrespectoftaxlossesincertainofthegroup’ssubsidiariesasthedirectorsbelievethereissufficientcertaintyovertheextentandtimingoftheirrecoverytodoso.Includedintheamountof£157k(2012:£157k)areamountsof£nilrelatingtotaxlosses(2012:£nil).
VianetGroupplc 49
21. issued share capital 2013 2012 £000 £000
Issuedandfullypaid Ordinarysharesof10peach:28,268,164(2012:28,248,164) 2,827 2,825
Own sharesTheGroupaccountsforitsownsharesheldbytheTrusteesoftheemployeeoptionschemeasadeductionfromshareholdersequity.At31March2013,theTrustowned818,470shares(2012:818,470shares)withanominalvalueof£81,847 (2012:£81,847).
At31March2013,VianetGroupplcowned456,000shares(2012:216,000shares)withanominalvalueof£45,600(2012:£21,600),allheldintreasury.
Dividendspayableontheseshareshavebeenwaived.
Noshareshavebeenconditionallygiftedtocertainemployeesasat31March2013.
22. Employees and directorsEmployee benefit expense during the period 2013 2012 £000 £000
Wagesandsalaries 7,246 7,879Socialsecuritycosts 735 863Pensioncosts 205 246Sharebasedpayments 52 57
8,238 9,045
average monthly number of people (including directors) employed 2013 2012 Number Number
Sales 12 11
Engineering 81 68
VRS 7 7
Management 11 14
Administration 146 160
257 260
Key management personnel - directors 2013 2012 £000 £000
Shorttermemploymentbenefits 614 634Pensioncontributions 67 74
681 708
Duringtheyearfour(2012:four)directorshadbenefitsaccruingunderdefinedcontributionpensionschemes.
50 VianetGroupplc
22. Employees and directors (continued)highest paid director 2013 2012 £000 £000
Shorttermemploymentbenefits 181 174Pensioncontributions 29 26
210 200
23. Operating lease commitmentsTheGroupleasevariousmotorvehiclesandpropertyundernon-cancellableoperatingleases.Theleaseshavebeenenteredintoundernormalcommercialterms.
Totalfutureminimumleasepaymentsundernon-cancellableoperatingleases:
Motor Landand 2013 2012 Vehicles Buildings Total TotalGroup2013 £000 £000 £000 £000
Withinoneyear 232 75 307 348Afteroneyearandlessthanfiveyears 236 130 366 304
468 205 673 652
24. share-based paymentsTherearefiveshareoptionplansinplacetheEMIPlan,theExecutivePlan,theEmployeePlan,anEmployeeCompanyShareOptionPlanandanExecutiveJointOwnershipPlan.Undertheshareoptionplans,thedirectorscangrantoptionsoversharesinthecompanytoemployees.Optionsaregrantedwithafixedexercisepriceequaltothemarketvalueofthesharesatthedateofgrant.Thecontractuallifeofanoptionis10years.OptionsgrantedundertheEMIshareoptionplanswill becomeexercisable immediately, andoptionsgrantedunder theExecutivePlanand theEmployeePlanwillbecomeexercisableonthethirdanniversaryofthedateofgrant.Exerciseofanoptionissubjecttocontinuedemployment.
Detailsofshareoptionsoutstandingduringtheperiod(includingthoseheldbydirectors)aresetoutbelow:
2013 2012 Weighted Weighted average average Numberof exercise Numberof exercise shareoptions pricep shareoptions pricep
At1April 1,926,250 102.9 1,884,250 105.2Granted - - 110,000 82.6Exercised (140,000) 54.9 - -Forfeited (165,000) 118.6 (68,000) 134.0
At31March 1,621,250 105.4 1,926,250 102.9
Exercisableat31March 1,021,750 115.2 1,136,750 108.0
NotestotheFinancialStatementsfortheyear
ended31March2013(continued)
Vianet Group plc 51
24. Share-basedpayments(continued) Weighted average sharepriceNameofdirector/ Numberof Exercise Exercise atdateof Gainon Exercisesenioremployee Dateofgrant options price date exercise exercise period
D J Noble 31/03/06 80,000 50.0p 11/01/13 101.0p £40,800 01/04/06 to 31/03/16M H Foster 31/03/06 150,000 67.2p - - - 01/04/06 to 31/03/16D J Noble 31/03/06 40,000 67.2p 18/01/13 101.0p £13,520 01/04/06 to 31/03/16J W Dickson 26/10/06 75,000 123.0p - - - 27/10/09 to 26/10/16M H Foster 26/10/06 65,000 123.0p - - - 27/10/09 to 26/10/16S C Gilliland 26/10/06 24,000 123.0p - - - 27/10/09 to 26/10/16S Darling 07/04/09 100,000 125.0p - - - 08/04/12 to 07/04/19S C Gilliland 25/09/09 30,000 102.5p - - - 26/09/12 to 25/09/19J W Dickson 27/01/11 31,000 96.5p - - - 28/01/14 to 27/01/20M H Foster 27/01/11 31,000 96.5p - - - 28/01/14 to 27/01/21S Darling 27/01/11 31,000 96.5p - - - 28/01/14 to 27/01/21
52 Vianet Group plc
Notes to the Financial Statements for the year
ended 31 March 2013 (continued)
24. Share-basedpayments(continued)The fair value per option and the assumptions used in the calculation were as follows:
Share price at grant date 34.8p (March 2006) 123.0p (October 2006) 147.5p (December 2006) 148.5p (January 2008) 154.0p (July 2008) 155.5p (August 2008) 123.0p (November 2008) 125.0p (April 2009) 102.5p (September 2009)Exercise price 50.0p (March 2006) 67.2p (March 2006) 123.0p (October 2006) 147.5p (December 2006) 148.5p (January 2008) 151.5p (July 2008) 151.5p (August 2008) 132.5p (November 2008) 143.8p (January 2010) 126.5p (April 2010) 119.0p (June 2010) 115.0p (September 2010) 111.0p (November 2010) 96.5p (January 2011) 102.0p (February 2011)Shares under option 1,621,250Vesting period – EMI Options (years) 0Vesting period – Executive/Employee Scheme (years) 3Option life (years) 10Expected life (years) 3Expected volatility 30%Risk free rate – 31 March 2006 4.39%Risk free rate – 19 October 2006 4.75%Risk free rate – 6 December 2006 4.58%Expected dividends expressed as a dividend yield 3%Fair value per option – EMI Options (50.0p) 3.2pFair value per option – EMI Options (67.2p) 1.3pFair value per option – Executive/Employee Scheme (123.0p) 25.0pFair value per option – Executive/Employee Scheme (147.5p) 30.0p
Vianet Group plc 53
24. Share-basedpayments(continued)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 £52,000 (2012: £57,000) in relation to equity settled share-based payment transactions in the year.
Joint Ownership Plan
The following awards over shares in the Company were made to the following Executive Directors of the Company on 25 September 2009 by a Joint Ownership Plan.
Director NumberofPlansharesinwhichtheDirectorhasaninterestJ W Dickson 100,000M H Foster 100,000S Darling 100,000
Awards were made by the Company’s Remuneration Committee through the Company’s employee benefit trust operated by Halifax EES Trustees International Limited. The awards are subject to EPS performance targets and dependant on performance vest on 31 March 2014. No value has been paid on grant of the Plan shares and participants are entitled to growth over the Plan term. The fair value on the Joint Ownership plan was calculated under the Black Scholes model.
54 Vianet Group plc
Notes to the Financial Statements for the year
ended 31 March 2013 (continued)
25. RelatedpartytransactionsIAS 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. J H Newman, a non-executive director invoiced Vianet Group plc for fees totalling £43,371 (2012: £43,601). As at 31 March 2013, there was £nil outstanding (2012: £3,821). S Gilliland, a non-executive director invoiced Vianet Group plc for fees totalling £29,025 (2012: £34,161). As at 31 March 2013, there was £2,500 outstanding (2012: £2,485).
26. EventsafterthebalancesheetdateOn 16 April 2013 the Group disposed of its entire shareholding in Universe Group plc at a price of 4.75p per share realising a profit on disposal of £90,049.
Vianet Group plc 55
We have audited the parent company financial statements of Vianet Group plc for the year ended 31 March 2013 which comprise the Company balance sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the 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 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 company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
RespectiveresponsibilitiesofdirectorsandauditorsAs explained more fully in the Directors’ Responsibilities Statement the directors are responsible for the preparation of the parent company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
ScopeoftheauditofthefinancialstatementsA description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm
OpiniononfinancialstatementsIn our opinion the parent company financial statements:
• give a true and fair view of the state of the company’s affairs as at 31 March 2013;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
OpiniononothermatterprescribedbytheCompaniesAct2006In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the parent company financial statements.
MattersonwhichwearerequiredtoreportbyexceptionWe have nothing to report in respect of the following matters where 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.
INDEPENDENtAuDItOR’SREPORttOthEMEMbERSOfVIANEtGROuPPlC
56 Vianet Group plc
OthermatterWe have reported separately on the group financial statements of Vianet Group plc for the year ended 31 March 2013.
Andrew WoodSenior Statutory Auditorfor and on behalf of Grant Thornton UK LLPStatutory Auditor, Chartered Accountants
Leeds
11 June 2013
Independent auditor’s report to the members
of Vianet Group plc (continued)
Vianet Group plc 57
2013 2012 Note £000 £000
fixedassetsInvestments in subsidiaries 2 5,170 20,323Other intangible assets 3 22 -Property, plant and equipment 4 7 -Investments 5 533 533
5,732 20,856
Currentassets Debtors 6 14,831 2,998Cash at bank and in hand 4 -
14,835 2,998
Creditors:amountsfallingduewithinoneyear 7 (239) (667)
Netcurrentassets 14,596 2,331
Netassets 20,328 23,187
Capitalandreserves Ordinary share capital 8 2,827 2,825Share premium 9 11,182 11,174Share based payment reserve 9 345 333Own shares 9 (1,081) (851)Merger reserve 9 310 310Retained earnings 9 6,745 9,396
totalequity 9 20,328 23,187
The balance sheet was approved by the Board on 11 June 2013 and signed on its behalf by:
JWDicksonDirectorCompanynumber:5345684
The accompanying accounting policies and notes form an integral part of the financial statements.
COMPANybAlANCEShEEtat 31 March 2013
58 Vianet Group plc
1. Principalaccountingpolicies1.1 basisofpreparationThis balance sheet has been prepared under the historic cost convention and in accordance with UK Generally Accepted Accounting Practice.
The principal accounting policies of the company are set out below and have remained unchanged from the previous year.
1.2 taxationDeferred tax is provided, except as noted below, on timing differences that have arisen but not reversed by the balance sheet date, where the timing differences result in an obligation to pay more tax, or a right to pay less tax, in the future. Timing differences arise because of differences between the treatment of certain items for accounting and taxation purposes.
In accordance with FRS19 deferred tax is not provided on timing differences arising from gains on the sale of non-monetary assets, where on the basis of all available evidence it is more likely than not that the taxable gain will be rolled over into replacement assets.
Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered.
Deferred tax is measured at the tax rates that are expected to apply in the periods when the timing differences are expected to reverse, based on tax rates and law enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities are not discounted.
Where law or accounting standards require gains and losses to be recognised in the statement of total recognised gains and losses, the related taxation is also taken directly to the statement of total recognised gains and losses in due course.
1.3 InvestmentsInvestments in subsidiary undertakings and other entities are stated at cost net of impairments.
1.4 EmployeeshareoptionschemesAll share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 April 2006 are recognised in the financial statements.
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.
Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate share premium.
NOtEStOthECOMPANybAlANCEShEEt
Vianet Group plc 59
1.5 Property,plantandequipmentProperty, 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 consolidated statement of comprehensive income 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:
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 consolidated statement of comprehensive income.
1.6 IntangibleAssetsSeparatelyacquiredintangibleassetsThe Group does not operate any purchased computer software. All such software is licensed and expensed.
AmortisationIntangible 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:
Patents 4 years
Methods of amortisation, residual values and useful lives are reviewed, and if necessary adjusted, at each balance sheet date.
2. Investmentsinsubsidiary 2013 2012Company £000 £000
Costandnetbookamount: Shares in subsidiaries At 1 April 20,323 20,323Additions 85 -Transfer to group undertakings (15,238) -
At 31 March 5,170 20,323
The company owns the whole of the issued ordinary share capital of the following operating subsidiaries:
60 Vianet Group plc
Notes to the Company Balance Sheet (continued)
2. Investmentsinsubsidiary(continued) CountryofSubsidiary Shareholding incorporation Principalactivity
Brulines Trustee Company Limited 100% UK Employee TrustEdis Limited 100% UK DormantBruline Limited 100% UK DormantNucleus Data Limited 100% UK DormantNucleus Data Holdings Limited 100% UK DormantVianet Americas Inc 100% USA Leisure SolutionsVianet Fuel Solutions Limited 100% UK Forecourt SolutionsVianet Limited 100% UK Leisure Solutions
On 1 April 2012 the company transferred the entire share capital of Energy Level Systems and Retail & Forecourt Solutions to Vianet Fuel Solutions at investment value. The company also transferred the entire share capital of Brulines Limited, Machine Insite Limited, Coin Metrics Limited and Viatelemetry Limited to Vianet Limited at investment value.
No impairment of the investments was carried out as the trade of each business was hived in to its respective new owner.
Energy Level Systems Limited, Retail & Forecourt Solutions Limited and LBI Installations Limited are indirect investments via Vianet Fuel Solutions Limited in Fuel solutions. Brulines Limited, Machine Insite Limited, Coin Metrics Limited, Viatelemetry Limited and Lookout Solutions Limited are indirect investments via Vianet Limited in Leisure.
3. Otherintangibleassets Patents £000
CostAt 1 April 2011 -Additions -
At31March2012 -Additions 23
At31March2013 23
AmortisationAt 1 April 2011 -Charge for the year -
At31March2012 -Charge for the year 1
At31March2013 1
NetbookamountAt31March2013 22
At31March2012 -
Vianet Group plc 61
4. Property,plantandequipment Fixtures andfittings £000
CostAt 1 April 2011 -Additions -
Disposals -At31March2012 -Additions 8Disposals -
At31March2013 8
AccumulateddepreciationAt 1 April 2011 -Charge for the year -Disposals -
At31March2012 -Charge for the year 1Disposals -
At31March2013 1
NetbookamountAt31March2013 7
At31March2012 -
5. Investment 2013 2012Company £000 £000
Cost and net book amount: Other shares At 1 April 533 533Additions - -
At 31 March 533 533
The Group currently held 13,209,754 ordinary 5p shares in Universe Group plc, an AIM listed company which represents 7.04% (2012: 11.52%) of its share capital as at 31 March 2013. See note 26 in Group accounts.
62 Vianet Group plc
6. Debtors 2013 2012 £000 £000
Amounts due from subsidiaries 14,796 2,998Other debtors 21 -Other taxation 14 -
14,831 2,998
All intercompany debt is repayable on demand, however Vianet Group plc will not insist on repayment in the next twelve months.
7. Creditors:amountsfallingduewithinoneyear 2013 2012 £000 £000
Amounts owed to subsidiaries - 547Other payables 35 54Accruals and deferred income 204 66
239 667
8. Issuedsharecapital 2013 2012 £000 £000
Issued and fully paid Ordinary shares of 10p each: 28,268,164 (2012: 28,248,164) 2,827 2,825
AllotmentsduringtheyearSince the end of the financial year no shares have been issued under the share option scheme.
Notes to the Company Balance Sheet (continued)
Vianet Group plc 63
9. Reserves Sharebased Share Share Own payment Merger Retained capital premium shares reserve reserve earnings Total £000 £000 £000 £000 £000 £000 £000
At1April2011 2,825 11,174 (851) 276 310 5,898 19,632Profit for the year - - - - - 5,035 5,035Share based payment - - - 57 - - 57Dividends - - - - - (1,537) (1,537)
At31March2012 2,825 11,174 (851) 333 310 9,396 23,187Loss for the year - - - - - (1,093) (1,093)Share capital issued 2 8 - - - - 10Purchase own shares - - (321) - - - (321)Share option exercise - - 91 (3) - (48) 40Share based payment - - - 52 - - 52Share option forfeiture - - - (37) - 37 -Dividends - - - - - (1,547) (1,547)
At31March2013 2,827 11,182 (1,081) 345 310 6,745 20,348
10. Dividends 2012 2011 £000 £000
Final dividend for the year ended 31 March 2012 of 4.0p (year ended 31 March 2011: 3.98p) 1,089 1,083Interim dividend paid in respect of the year of 1.70p (2012:1.67p) 458 454
Amounts recognised as distributions to equity holders 1,547 1,537
In addition, the directors are proposing a final dividend in respect of the year ended 31 March 2013 of 4.00p per share. If approved by shareholders, it will be paid on 2 August 2013 to shareholders who are on the register of members on 21 June 2013.
11. EmployeesanddirectorsEmployee benefit expense during the period
2013 2012 £000 £000
Wages and salaries 387 -Social security costs 49 -Pension costs 47 -Share based payments 52 -
535 -
Average monthly number of people (including directors) employed
2013 2012 Number Number
Management 4 -
4 -
64 Vianet Group plc
12. Directors 2013 2012 £000 £000
Directors’ emoluments 412 315Pension contribution 46 43
458 358
The amounts in respect of the highest paid director are as follows:
2013 2012 £000 £000
Directors’ emoluments 181 174Pension contribution 29 26
210 200
Other Directors’ emoluments see Group accounts, Report of the Directors.
13. Share-basedpaymentsThe company disclosures required under UK GAAP are identical to those required under IFRS. See Group accounts, note 24 for details.
14. ParentCompanyProfitandlossAccountThe 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 £1,093,000 (2012: profit £5,035,000).
15.RelatedPartytransactionsNon-executive director payments were incurred in the company during this year.
J H Newman, a non-executive director invoiced Vianet Group plc for fees totalling £43,371 (2012: £43,601). As at 31 March 2013, there was £nil outstanding (2012: £3,821). S Gilliland, a non-executive director invoiced Vianet Group plc for fees totalling £29,025 (2012: £34,161). As at 31 March 2013, there was £2,500 outstanding (2012: £2,485).
See Group accounts, Report of the Directors for details of non-executive directors’ emoluments.
The company has taken advantage of the FRS 8 exemption not to disclose related party transactions between wholly owned group undertakings as these will be eliminated within the consolidated financial statements.
Notes to the Company Balance Sheet (continued)
The market leading provider of real time monitoring systems and
data management services for the UK leisure and forecourt sectorsOne Surtees Way, Surtees Business Park, Stockton on Tees, TS18 3HR
www.vianetplc.com