Vianet Group PLC – VNET – Trading and COVID-19 Update

Vianet Group PLC – VNET – Trading and COVID-19 Update

Vianet Group plc (AIM: VNET), the international provider of actionable data and business insight through devices connected to its Internet of Things ("IOT") platform, today provides an update on trading and the Group's current status regarding COVID-19 ("C-19").

 

C-19 Update

Our primary goal remains to safeguard employee health and wellbeing, whilst continuing to support our customers and maintaining the Group's robust financial position. We are pleased to report that trading for the first four months of the financial year has been ahead of our own C-19 revised revenue and profit forecasts with a corresponding positive impact on free cash flow.

 

The nationwide mandatory closure of pubs, bars and restaurants in the UK, which had a material impact on almost all of our Smart Zones customers, was lifted in England on Saturday, 4 July allowing venues to re-open with special C-19 measures, with Scotland following on 15 July and Wales on 3 August.

 

Whilst our business continuity measures through the C-19 disruption, with furlough and working from home, has been very successful, we recognised that this way of working is difficult for many and is often less productive and inspiring than our office environment. Utilising safe working arrangements and a
C-19 secure environment, including the monthly application of our 30-day Smart Shield sanitisation product, we are pleased to report that we were able to reopen our offices in June.

 

Trading Update

Whilst pub re-openings remain sensitive to local lockdowns, it is very encouraging that the number of Vianet customers' sites who have resumed operations has risen from 56% to over 80% during the past six weeks, which is higher than we had anticipated. Importantly, the volume of beer sales across pubs which have re-opened compares favourably year on year, indicating positive consumer sentiment. However, a number of factors such as limited floor and outside space, city centre office dependent locations, economic concerns and publicans shielding has meant that some pubs still remain closed.

From the outset of the lockdown, we successfully introduced a reduced billing rate on all of our contracts in order to maintain business continuity and to avoid expensive reconnection costs for customers when pubs reopened. This generated significant goodwill and protected a meaningful portion of the Group's recurring revenues during the period of mandatory pub closures.

 

We continue to provide support to our customers by billing 30% of normal monthly charges for the c. 20% of pubs which still remain closed. For the c. 80% which have re-opened, we are invoicing 70% of normal recurring charges until the end of October 2020, at which time normal contract terms will resume.

 

Data insight, analytics and customer support revenues recommenced in August and we anticipate a gradual restoration of this business income through to the calendar year end, with growing customer demand for trading data and insights to improve decision-making during the C-19 exit phase. This validates our ongoing technology investment as well as securing future growth.

 

Although delayed by a further month due to C-19, we are pleased to say that in North America, our partner AMC Theaters is re-opening this month to coincide with Hollywood's release of the films 'The New Mutants' and 'Tenet'. 

 

In our Smart Machines business, we have seen a more positive level of trading with a core of over two thirds of vending machines operating consistently and remaining on our normal terms throughout the lockdown. Unsurprisingly, it is in closed city centre offices where machines continue to experience little or no sales and, as with pub company customers, we have provided Smart Machines customers with reduced weekly charges for machines which were non-operational.  

 

In our AGM Statement in June, we forecast a continued and significant growing structural trend away from cash payments towards connected assets and contactless payment as customers seek to improve sales and operational performance.  We are pleased to say that this structural trend has resulted in over 1,900 new orders for telemetry and contactless units during lockdown, with sales accelerating from June, once restrictions began to be lifted. Following our 'dirty cash' marketing campaign we are also seeing increased new sales demand and usage of our contactless payment solution in line with the consumer shift from cash to contactless payment across retail.

The appointment of our Sales Director, a newly-created role within Smart Machines, and the expansion of our sales team earlier this year means the team is now fully up to speed with customer engagements and already successfully originating new business revenues, helping to secure 12 contracts, including new customers and extensions from a number of our core existing customers.  

 

We are also pleased to report growing engagement with brewers and consumer goods brand owners to provide them with data insight and analytics in the leisure and unattended retail sectors respectively.

Whilst the C-19 situation remains difficult to predict, the Group remains in a robust position to navigate FY2021 and resume its earnings growth, continue the solid momentum that was building prior to C-19 and deliver on the exciting growth opportunities that we see ahead of us.  

 

James Dickson, Chairman of Vianet Group plc, commented:

"From the outset of the pandemic, our intention was to manage our cash and come through C-19 strongly and in better shape to take advantage of the significant opportunities available to the Group. 

 

"Our actions to support our customers and maintain investment while sustaining a good level of recurring revenue, which was ahead of our own expectations, have placed the business in a highly encouraging position to benefit from the increased demand for data insight and contactless solutions as the economy recovers. 

 

"We are also very much aware of the difficulties our employees have faced during this time and we are proud both of their collective response to the crisis and the fact that our level of staff engagement during this period has had strong employee approval, resulting in a significant increase in survey ratings to over 80%.

 

"Although the C-19 situation remains uncertain, the Board is confident that we have taken the correct measures to ensure we can accelerate the momentum we had generated before the pandemic, and we look forward to updating the market in due course."

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