Half-year Report

RNS Number : 3584Y

Iomart Group PLC

05 December 2017

 

5 December 2017

iomart Group plc

("iomart" or the "Group" or the "Company")

Half Yearly Results

iomart (AIM:IOM), the cloud computing company, is pleased to report its consolidated half yearly results for the period ended 30 September 2017.

FINANCIAL HIGHLIGHTS

·      Revenue growth of 12% to £47.0m (H1 2017: £42.1m)

o  Cloud Services growth of 13% (H1 2017: 13%)

·      Adjusted EBITDA¹ growth of 9% to £19.2m (H1 2017: £17.6m)

·      Adjusted profit before tax² growth of 9% to £11.6m (H1 2017: £10.6m)

·      Adjusted diluted earnings per share³ from operations increased by 10% to 8.82p (H1 2017: 8.03p)

·      Maiden interim dividend of 2.25p per share

OPERATIONAL HIGHLIGHTS

·      Ongoing investment in cloud skills

·      Further improvements and investment in automation of server deployment

·      Significant investment in software defined network

·      Development of skills in major niche verticals, particularly in the eCommerce sector

·      Acquisition of two eCommerce cloud businesses, one during period and one post period end

Statutory Equivalents

The above highlights are based on adjusted results. A full reconciliation between adjusted and statutory results is contained within this statement. The statutory equivalents of the above results are as follows:

·      Profit before tax growth of 9% to £7.8m (H1 2017: £7.1m)

·      Basic earnings per share from operations increased by 10% to 5.96p (H1 2017: 5.43p)

Angus MacSween, CEO commented,

"The Group has enjoyed another good period of trading in the first half of the year, with growing recurring revenues in line with our business model. The market opportunity remains significant and we continue to invest in our skills, infrastructure and capabilities to meet the evolving demands of the market. We are firmly on track to deliver another year of material growth and we remain confident in our prospects."

¹  Throughout this statement adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges and acquisition costs. Throughout this statement acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

²  Throughout this statement adjusted profit before tax is profit before tax, amortisation charges on acquired intangible assets, share based payment charges, mark to market adjustments in respect of interest rate swaps, interest charges in respect of contingent consideration due and acquisition costs.

³   Throughout this statement adjusted earnings per share is earnings per share before amortisation charges on acquired intangible

assets, share based payment charges, mark to market adjustments in respect of interest rate swaps, interest charges in respect of contingent consideration due and acquisition costs including the taxation effect of these.

This interim announcement contains forward-looking statements, which have been made by the directors in good faith based on the information available to them up to the time of the approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

 

For further information:

iomart Group plc	Tel: [phone]
Angus MacSween, Chief Executive
Richard Logan, Finance Director
Peel Hunt LLP (Nominated Adviser and Broker)	Tel: [phone]
Edward Knight Nick Prowting
Alma PR	Tel: [phone]
Hilary Buchanan
John Coles
Helena Bogle

About iomart Group plc

iomart Group Plc (AIM: IOM) helps organisations maximise the flexibility, cost effectiveness and security of the cloud. From strategy to delivery, our 300+ consultants and solutions architects provide the cloud expertise to transform your business. With a dynamic range of managed cloud services that integrate with the public clouds of AWS and Azure, our agnostic approach delivers solutions tailored to your exact needs. iomart is a long term supplier to G-Cloud and our infrastructure and cloud and backup services are designed to meet the requirements of the UK public sector.

For further information about the Group, please visit www.iomart.com

 

Chief Executive's Statement

 

Introduction

We have again enjoyed a very good trading period with Group revenue having grown by 12% to £47.0m (H1 2017: £42.1m). Our adjusted EBITDA has grown by 9% to £19.2m (H1 2016: £17.6m) and our adjusted profit before tax also by 9% to £11.6m (H1 2017: £10.6m).

Market

There is still a long term and large market opportunity in preparing and managing enterprises for transformation and deployment to cloud platforms.

iomart continues to invest in the skills required to architect, migrate, manage, monitor, secure and scale private cloud, public cloud, and any combination of the two in order to capitalise on this significant opportunity.

IT is increasingly evolving project by project, application by application, with a view to maximising value, not being locked into any one technology vendor, and being able to migrate services at will.

This plays into the strengths we have established around agility and flexibility alongside the right expertise and infrastructure, with an ability to manage the mix of public and private cloud and hybrids of both effectively.

Within the overall growth of cloud, eCommerce is one of the fastest growing areas. We have always had an exposure to the online retail market and we are building our expertise in this area to position ourselves as eCommerce cloud leaders.

Operational review

Cloud Services

The Cloud Services operation continues to perform well, delivering an overall revenue growth rate of 13%. The organic growth rate in the period was 4% which has been weighed down by a low margin public cloud consultancy project coming to an end. Adjusting for the effect of that project the organic growth rate was 8% which is greater than the comparable growth rate for the same period last year.

We have long since recognised that the management of compute power for our customers and prospects may involve elements of on premise infrastructure, private or dedicated infrastructure within our estate of datacentres, shared infrastructure within our datacentres and public cloud infrastructure from the hyper cloud vendors. The addition of Cristie Data ("Cristie") into the Group in August 2016 gave us more exposure to the support of on premise infrastructure and in our March 2017 accounts we showed the performance of that unit separately within a non-recurring revenue segment. As this period has progressed the operation of Cristie has become more integrated into our Cloud Services operation. We have provided consultancy services, through SystemsUp, to customers of Cristie, focusing on cloud strategy. In addition, Cristie has also won contracts to provide solutions from our datacentres on a dedicated cloud basis. Consequently, in this period, nearly half of the revenue generated and orders won by Cristie has been of a recurring nature. Therefore, we have concluded that it is no longer appropriate to include the results of Cristie separately, particularly in a non-recurring revenue segment, from the rest of our Cloud Services operations and we will report it within this segment from now on.

As expected and indeed as we indicated in our March 2017 results, the direct revenue generated through our consultancy operation SystemsUp, which is not as recurring in nature as the rest of our Cloud Services activities, has declined due to one low margin public cloud project coming to an end. Whilst, to some extent, this is the nature of consultancy services, the rationale behind the acquisition of a consultancy unit was to seek to engage at an earlier stage with customers and prospects on their cloud strategy and as a result to generate additional recurring revenue within the Group through the provision of cloud solutions. This strategy has worked and we are now providing solutions and generating recurring revenue as a consequence of consultancy assignments.

We are investing in our infrastructure to refresh and upgrade our network and other systems to provide further automation and efficiencies within our environment. This investment will help us streamline our own services for customers and prospects. We are also seeing growing interest from resellers who are being asked for cloud products by their customers but who don't have the capacity, appetite or ability to invest in the substantial infrastructure required.

The acquisition of Dediserve Limited ("Dediserve") in May 2017 provides us with an operation in the European Union post Brexit together with a much greater spread of cloud infrastructure in locations across the world. We now have a significant global footprint.

We also acquired Tier 9 Limited Limited (which trades as Simple Servers") in July 2017 and Sonassi Holding Company Limited ("Sonassi") in November 2017. Both specialise in the provision of infrastructure for eCommerce applications and in particular for the Magento eCommerce platform. We have always had exposure to the online retail sector which is a fast growing area of the market. We believe eCommerce is an area of the market which provides a good opportunity for future growth and we plan to use the acquisition of both of these operations to firmly establish the Group as a provider of choice in this significant market sector.

Our revenues have grown to £40.3m (H1 2017: £35.6m) as a result of our acquisitive and organic activities and we continue to expect Cloud Services to be the driver of growth going forward.

Easyspace

The Easyspace segment has performed well and continues to deliver a modest level of organic growth.

Easyspace provides a range of products to the small and micro business community including an ever wider range of domain names, shared hosting, emails and dedicated servers.

Our revenues have grown by 2.3% to £6.7m (H1 2017: £6.6m) all of which is organic.

M&A Activity

On 17 May 2017 we acquired the entire share capital of Dediserve on a no debt, no cash, normalised working capital basis for a total purchase price of €7.9m (£6.7m). An initial payment of €7.8m (£6.7m) in cash less the sum of €0.25m (£0.21m) in cash as an interim settlement of the expected amount due by the vendors in respect of the no debt, no cash, normalised working capital adjustment was made on acquisition. The initial payment was funded by a draw down from the Group's revolving credit facility. A further payment of €0.11m (£0.10m) was made in respect of the final no debt, no cash, normalised working capital adjustment. In November a final amount of deferred consideration of €0.1m (£0.09m) was paid.

On 26 July we acquired the entire share capital of Tier 9 Limited (which trades as "Simple Servers") on a no debt, no cash, normalised working capital basis. Simple Servers provides cloud solutions for the Magento eCommerce application. On completion an initial payment of £3.0m in cash was made. The initial payment was funded by a draw down from the Group's revolving credit facility. In October a further payment of £0.37m was made in respect of the no debt, no cash, normalised working capital position at the time of completion. There is also an earn out which runs through until March 2018 which may result in a maximum additional amount due of £3.0m depending on the profitability of Simple Servers. The maximum purchase price is therefore £6.0m, excluding any sums due in respect of the no debt no cash, normalised working capital adjustment.

After the period end, on 17 November 2017 we acquired the entire share capital of Sonassi Holding Company Limited ("Sonassi") on a no debt, no cash, normalised working capital basis using a locked box mechanism at  30 September 2017 and a daily contribution from then until completion with the benefit of trading during that period accruing to the vendors. Sonassi provides cloud solutions for the Magento eCommerce application. At completion, an initial payment of £10.0m in cash was made. In addition, an amount of £3.1m in cash was paid in settlement of the amount due in respect of the no debt, no cash, normalised working capital and daily contribution adjustment. The initial payment was funded by a draw down from the Group's revolving credit facility. A further sum of £1.0m is contingent on the completion of an element of software development and a final sum of no more than another £5.5m on the profitability of the business in the year ending 31 July 2018. The maximum purchase price is therefore £16.5m, excluding any sums due in respect of the no debt, no cash, normalised working capital, daily contribution adjustment.

The M&A market continues to provide opportunities and we remain committed to complementing our organic growth through further acquisitions.

Dividend

As we indicated in our trading update at the end of September we have decided to introduce an interim dividend payment as part of our overall dividend policy. We will pay a maiden interim dividend of 2.25p per share on 31 January 2018 to shareholders on the register on 22 December 2017, based on an ex-dividend date of 21 December 2017. We continue to offer shareholders the option to participate in a Dividend Reinvestment Plan (DRIP) as an alternative to receiving cash. Details of the DRIP scheme can be found by visiting our website at the following address www.iomart.com/investors and clicking on the Shareholder Services icon.

Financial Performance

 

Revenue

Overall revenues from our operations grew 12% to £47.0m (H1 2017: £42.1m).

Our Cloud Services segment, which now includes the operation of Cristie which was reported within the non-recurring revenue segment at March 2017, grew revenues by 13% to £40.3m (H1 2017: £35.6m). The increase includes the contribution for the full six-month period from the acquisition of Cristie in August 2016 and contributions from the acquisitions of Dediserve and Simple Servers during the period.

Our Easyspace segment grew revenues by 2% to £6.7m (H1 2017: £6.6m). This increase was solely due to organic growth and is around the same level as the comparable period last year.

Gross Margin

The gross profit in the period, which is calculated by deducting from revenue variable cost of sales such as domain costs, public cloud costs, the cost of hardware and software sold, power, sales commission and the relatively fixed costs of operating our datacentres, increased by 8% to £30.0m (H1 2017: £27.7m). This substantial increase in gross profit was a direct result of the contribution from the additional revenue generated over the period, including the impact of acquisitions.

In percentage terms the gross margin was 63.9% (H1 2017: 65.8%). The reduction in the percentage margin is largely within the Cloud Services segment. The operation of Cristie involves the sale of hardware and software which is then delivered to and installed on customers' premises. As a result, the cost of that hardware and software is included in cost of sales and thereby the overall percentage margin reduces. Offsetting that, due to the public cloud consultancy project coming to an end, we have seen a decline in the amount of public cloud costs and as a result an improvement in our percentage margin.

The Easyspace segment also saw a decrease in its gross margin percentage mainly due to an adverse impact of exchange rates on domain costs.

Adjusted EBITDA

The Group's adjusted EBITDA grew by 9% to £19.2m (H1 2017: £17.6m) reflecting a significantly improved performance. In percentage terms the adjusted EBITDA margin reduced to 40.7% (H1 2017: 41.8%) with both segments showing very modest reductions.

Cloud Services increased its adjusted EBITDA by 10% to £18.0m (H1 2017: £16.3m). The continued improvement in adjusted EBITDA is largely due to the additional gross margin contribution arising from our organic sales growth, a full period contribution from the acquisition of Cristie in August 2016 and the contribution of both Dediserve and Simple Servers since their respective acquisitions offset by continued investment in staffing levels. In percentage terms the margin reduced to 44.6% (H1 2017: 45.8%). The primary reasons for this modest percentage margin reduction were the reduction in the Cloud Services gross margin percentage previously discussed, the inclusion of Cristie for the full six-month period offset by relatively static organic staff costs and the favourable percentage margin impact  of both Dediserve and Simple Servers since their respective acquisitions.

The adjusted EBITDA of Easyspace was maintained at £3.1m (H1 2017: £3.1m). In percentage terms the margin reduced slightly to 45.9% (H1 2017: 46.8%) due to the reduction in the Easyspace gross margin percentage previously discussed offset by administration costs continuing to be tightly controlled.

Group overheads, which are not allocated to segments, include the cost of the Board, all the running costs of the headquarters in Glasgow, and Group led functions such as human resources, marketing, finance and design. Group overheads of £1.9m have increased modestly in the period (H1 2017: £1.8m).

Adjusted profit before tax

Depreciation charges of £6.0m (H1 2017: £5.4m) have increased due to a combination of continued investment in our datacentre estate and the purchase of equipment to provide services to our new and existing customers, offset by assets bought in previous periods becoming fully depreciated in this period and therefore no longer contributing to the ongoing depreciation charge. The charge for the amortisation of intangible assets, excluding amortisation of intangible assets resulting from acquisitions ("amortisation of acquired intangible assets") has increased to £1.1m (H1 2017: £0.9m) as a result of increased charges for software licenses and the additional development activity within the enlarged Group.

Net finance costs, excluding the mark to market adjustment on interest swaps on the Company's loans and the interest charge on contingent consideration due, were £0.5m (H1 2017: £0.7m).

After deducting the charges for depreciation, amortisation, excluding the amortisation of acquired intangible assets, and finance costs, excluding the interest charges in respect of contingent consideration due and the mark to market adjustment on interest rate swaps, from adjusted EBITDA the adjusted profit for the period before tax increased by 9% to £11.6m (H1 2017: £10.6m).

The adjusted profit before tax margin for the period was 24.6% (H1 2017: 25.2%). The decrease in percentage margin of 0.6% is largely due to a combination of the reduction in the adjusted EBITDA margin over the period of 1.1% offset by the reduction in net finance costs as a percentage of revenue of 0.6%.

Profit before tax

The measure of adjusted profit before tax is a non-statutory measure which is commonly used to analyse the performance of companies where M&A activity forms a significant part of their activities.

A reconciliation of adjusted profit before tax to reported profit before tax is shown below:

Reconciliation of adjusted profit before tax to profit before tax		6 months to 30/09/2017	6 months to 30/09/2016	Year to 31/03/2017
Adjusted profit before tax		11,589	10,632	22,406
Less: Share based payments		(398)	(557)	(1,844)
Less: Amortisation of acquired intangible assets		(2,831)	(2,697)	(5,558)
Less: Acquisition costs		(573)	(102)	(104)
Add: Mark to market adjustment on interest rate swaps		28	43	84
Less: Interest on contingent consideration		(51)	(177)	(330)
Profit before tax		7,764	7,142	14,654

The adjusting items are: share based payment charges in the period which decreased to £0.4m (H1 2017: £0.6m) as a result of options granted in previous periods not vesting, offset by the issue of additional share options; charges for the amortisation of acquired intangible assets of £2.8m (H1 2017: £2.7m) which have remained at similar levels to the previous period as a result of the net impact of a full period effect of acquisitions made in previous periods, acquisitions made in the current period and reduced charges for acquisitions made in previous periods; costs of £0.6m (H1 2017: £0.1m) as a result of acquisitions, including increased professional fees; a finance cost credit of £0.03m (H1 2017: £0.04m) in respect of mark to market adjustments relating to interest rate swaps on the Company's loans and interest charges on contingent consideration due of £0.1m (H1 2017: £0.2m).

After deducting the charges for share based payments, the amortisation of acquired intangible assets, acquisition costs, the mark to market adjustment on interest rate swaps and the interest charges in respect of contingent consideration, the reported profit before tax increased by 9% to £7.8m (H1 2017: £7.1m).

In percentage terms the profit before tax margin was 16.5% (H1 2017: 17.0%). This decrease in percentage margin of 0.5% is largely due to the reduction in the adjusted EBITDA margin over the period of 1.1% plus the impact of the increase in acquisition related costs offset by relative reductions in finance and share based payment charges.

 

Profit for the period from total operations

There is a tax charge in the period of £1.3m (H1 2017: £1.3m), which comprises a current taxation charge of £2.5m (H1 2017: £2.1m), and a deferred taxation credit of £1.1m (H1 2017: £0.8m). The tax charge for the period has increased because of the increase in profitability of the Group. This results in a profit for the period from total operations of £6.4m (H1 2017: £5.8m) an increase of 10%.

Earnings per share

Adjusted diluted earnings per share, which is based on profit for the period attributed to ordinary shareholders before share based payment charges, amortisation of acquired intangible assets, the mark to market adjustment on interest rate swaps, the interest charges in respect of contingent consideration due and acquisition costs and the tax effect of these items, was 8.82p (H1 2017: 8.03p) an increase of 10%.

The measure of adjusted earnings per share as described above is a non-statutory measure which is commonly used to analyse the performance of companies where M&A activity forms a significant part of their activities.

Basic earnings per share from continuing operations was 5.96p (H1 2017: 5.43p), an increase of 10%.

The calculation of both adjusted diluted earnings per share and basic earnings per share is included at note 3.

Cash flow

The Group generated cash from operations in the period of £17.0m (H1 2017: £16.7m), representing 89% of our adjusted EBITDA (H1 2017: 95%) which has been adversely affected by the advance payment for maintenance services on a major network upgrade. Expenditure on taxation in the period was £2.4m (H1 2017: £1.2m), the comparative figure having been reduced due to the receipt of a tax refund, resulting in net cash flow from operating activities in the period of £14.6m (H1 2017: £15.5m).

Expenditure on investing activities of £20.9m (H1 2017: £8.5m) was incurred in the period. £8.4m (H1 2017: £4.6m), net of related finance lease drawdown and trade creditors, was incurred on the acquisition of property, plant and equipment principally to provide services to our customers. This includes a substantial payment in respect of a major network upgrade which will provide network resources to the Group for several years into the future. We made purchases of intangible assets of £0.7m (H1 2017: £1.4m) in the period, with the decrease largely due to the advance purchase of additional software licences for storage and backup purposes which was incurred in the previous period. In respect of M&A activity, £2.0m (H1 2017: £1.2) was paid out for contingent consideration due on acquisitions made in previous periods and £8.9m (H1 2017: £0.7m) was incurred on the acquisitions of Dediserve and Simple Servers in the period, as described above, net of cash acquired of £0.7m. We also incurred £0.9m (H1 2017: £0.7m) in respect of the capitalisation of development costs during the period.

There was net cash generated from financing activities of £4.5m (H1 2017: £6.7m net cash used). We generated £0.1m (H1 2017: £0.6m) from the issue of shares as a result of the exercise of options by staff. We made drawdowns under our bank facility of £15.0m (H1 2017: £nil) and we made repayments of £3.0m (H1 2017: £3.0m) during the period. We repaid £0.2m (H1 2017: £0.3m) of finance leases and incurred £0.9m (H1 2017: £0.6m) of finance charges. We also made a dividend payment of £6.5m (H1 2017: £3.4m). As a result, cash and cash equivalent balances at the end of the period were £7.1m (H1 2017: £10.6m).

Net Debt

The net debt position of the Group at the end of the period was £24.5m (H1 2017: £22.2m). This represents a multiple of much less than one times our annual adjusted EBITDA which we believe is a very comfortable level of debt to carry.

Current trading and outlook

The Group has enjoyed another good period of trading in the first half of the year, with growing recurring revenues in line with our business model. The market opportunity remains significant and we continue to invest in our skills, infrastructure and capabilities to meet the evolving demands of the market. We are firmly on track to deliver another year of material growth and we remain confident in our prospects.

Angus MacSween

CEO

4 December 2017

Consolidated Interim Statement of Comprehensive Income        

Six months ended 30 September 2017

		Unaudited	Unaudited	Audited
		6 months to 30/09/2017	6 months to 30/09/2016	Year to 31/03/2017
		£'000	£'000	£'000
Revenue		47,036	42,119	89,573
Cost of sales		(16,992)	(14,416)	(32,266)
Gross profit		30,044	27,703	57,307
Administrative expenses		(21,726)	(19,693)	(41,074)
Operating profit		8,318	8,010	16,233
Analysed as:
Earnings before interest, tax, depreciation, amortisation, acquisition  costs and share based payments		19,164	17,585	36,570
Share based payments		(398)	(557)	(1,844)
Acquisition costs	4	(573)	(102)	(104)
Depreciation	8	(5,953)	(5,365)	(10,972)
Amortisation - acquired intangible assets		(2,831)	(2,697)	(5,558)
Amortisation - other intangible assets		(1,091)	(854)	(1,859)
Finance income		5	16	22
Finance costs	5	(559)	(884)	(1,601)
Profit before taxation		7,764	7,142	14,654
Taxation	6	(1,352)	(1,327)	(2,571)
Profit for the period from total operations		6,412	5,815	12,083
Other comprehensive income
Currency translation differences		(100)	14	22
Other comprehensive (expense)/income for the period		(100)	14	22
Total comprehensive income for the period attributable to equity  holders of the parent		6,312	5,829	12,105
Basic and diluted earnings per share
Total operations
Basic earnings per share	3	5.96 p	5.43 p	11.27 p
Diluted earnings per share	3	5.87 p	5.36 p	11.08 p

 

Consolidated Interim Statement of Financial Position

As at 30 September 2017

		Unaudited	Unaudited	Audited
		30/09/2017	30/09/2016	31/03/2017
		£'000	£'000	£'000
ASSETS
Non-current assets
Intangible assets - goodwill	7	68,461	61,724	62,000
Intangible assets - other	7	22,782	22,497	19,707
Lease deposit		2,760	2,760	2,760
Property, plant and equipment	8	38,648	35,340	35,049
		132,651	122,321	119,516
Current assets
Cash and cash equivalents		7,128	10,599	8,906
Trade and other receivables		15,725	14,092	15,080
		22,853	24,691	23,986
Total assets		155,504	147,012	143,502
LIABILITIES
Non-current liabilities
Non-current borrowings		(664)	(740)	(625)
Trade and other payables		-	(318)	(102)
Provisions for other liabilities and charges		(1,750)	(2,010)	(1,721)
Deferred tax liability		(750)	(1,521)	(888)
		(3,164)	(4,589)	(3,336)
Current liabilities
Contingent consideration due on acquisitions	9	(1,741)	(2,220)	(2,373)
Deferred consideration due on acquisitions	10	(456)	-	-
Trade and other payables		(23,161)	(19,827)	(23,368)
Provisions		-	-	(38)
Current income tax liabilities		(2,198)	(2,506)	(2,000)
Current borrowings		(30,959)	(32,037)	(18,872)
		(58,515)	(56,590)	(46,651)
Total liabilities		(61,679)	(61,179)	(49,987)
Net assets		93,825	85,833	93,515
EQUITY
Share capital		1,078	1,078	1,078
Own shares		(70)	(267)	(120)
Capital redemption reserve		1,200	1,200	1,200
Share premium		21,067	21,067	21,067
Merger reserve		4,983	4,983	4,983
Foreign currency translation reserve		(115)	(23)	(15)
Retained earnings		65,682	57,795	65,322
Total equity		93,825	85,833	93,515

 

Consolidated Interim Statement of Cash Flows

Six months ended 30 September 2017

		Unaudited	Unaudited	Audited
		6 months to 30/09/2017	6 months to 30/09/2016	Year to 31/03/2017
		£'000	£'000	£'000
Profit before tax		7,764	7,142	14,654
Finance costs - net		554	868	1,579
Depreciation		5,953	5,365	10,972
Amortisation		3,922	3,551	7,417
Share based payments		398	557	1,844
Movement in trade receivables		(436)	186	837
Movement in trade payables		(1,109)	(944)	480
Cash flow from operations		17,046	16,725	37,783
Taxation paid		(2,405)	(1,222)	(3,874)
Net cash flow from operating activities		14,641	15,503	33,909
Cash flow from investing activities
Purchase of property, plant and equipment		(8,431)	(4,634)	(10,189)
Capitalisation of development costs		(850)	(667)	(1,372)
Purchase of intangible assets		(738)	(1,384)	(1,845)
Payment for acquisition of subsidiary undertakings net of cash acquired		(8,903)	(675)	(703)
Contingent consideration paid		(1,965)	(1,161)	(1,161)
Finance income received		5	16	22
Net cash used in investing activities		(20,882)	(8,505)	(15,248)
Cash flow from financing activities
Exercise of share options		58	610	1,064
Draw down of bank loans		14,956	-	-
Repayment of finance leases		(164)	(343)	(580)
Repayment of bank loans		(3,000)	(3,000)	(16,000)
Finance costs paid		(929)	(632)	(1,205)
Dividends paid		(6,458)	(3,375)	(3,375)
Net cash generated from/(used in) financing activities		4,463	(6,740)	(20,096)
Net (decrease)/increase in cash and cash equivalents		(1,778)	258	(1,435)
Cash and cash equivalents at the beginning of the period		8,906	10,341	10,341
Cash and cash equivalents at the end of the period		7,128	10,599	8,906

 

Consolidated Interim Statement of Changes in Equity

Six months ended 30 September 2017

Changes in equity	Share capital	Own shares EBT	Own shares Treasury	Foreign currency translation reserve	Capital redemption reserve	Share premium account	Merger reserve	Retained earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 April 2016	1,078	(70)	(419)	(37)	1,200	21,067	4,983	54,467	82,269
Profit in the period	-	-	-	-	-	-	-	5,815	5,815
Currency translation differences	-	-	-	14	-	-	-	-	14
Total comprehensive income	-	-	-	14	-	-	-	5,815	5,829
Dividends	-	-	-	-	-	-	-	(3,375)	(3,375)
Share based payments	-	-	-	-	-	-	-	557	557
Deferred tax on share based payments	-	-	-	-	-	-	-	(57)	(57)
Issue of own shares for option redemption	-	-	222	-	-	-	-	388	610
Total transactions with owners	-	-	222	-	-	-	-	(2,487)	(2,265)
Balance at 30 September 2016	1,078	(70)	(197)	(23)	1,200	21,067	4,983	57,795	85,833
Profit in the period	-	-	-	-	-	-	-	6,268	6,268
Currency translation differences	-	-	-	8	-	-	-	-	8
Total comprehensive income	-	-	-	8	-	-	-	6,268	6,276
Share based payments	-	-	-	-	-	-	-	1,287	1,287
Deferred tax on share based payments	-	-	-	-	-	-	-	(335)	(335)
Issue of own shares for option redemption	-	-	147	-	-	-	-	307	454
Total transactions with owners	-	-	147	-	-	-	-	1,259	1,406
Balance at 31 March 2017	1,078	(70)	(50)	(15)	1,200	21,067	4,983	65,322	93,515
Profit in the period	-	-	-	-	-	-	-	6,412	6,412
Currency translation differences	-	-	-	(100)	-	-	-	-	(100)
Total comprehensive income	-	-	-	(100)	-	-	-	6,412	6,312
Dividends	-	-	-	-	-	-	-	(6,458)	(6,458)
Share based payments	-	-	-	-	-	-	-	398	398
Issue of own shares for option redemption	-	-	50	-	-	-	-	8	58
Total transactions with owners	-	-	50	-	-	-	-	(6,052)	(6,002)
Balance at 30 September 2017	1,078	(70)	-	(115)	1,200	21,067	4,983	65,682	93,825

 

Notes to the Half Yearly Financial Information            

Six months ended 30 September 2017

1.              Accounting policies

The financial information for the year ended 31 March 2017 set out in this half yearly report does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The figures for the year ended 31 March 2017 have been extracted from the Group financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included an independent auditor's report, which was unqualified and did not contain a statement under section 493 of the Companies Act 2006.

The half yearly financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 31 March 2018. The Group financial statements for the year ended 31 March 2017 were prepared under International Financial Reporting Standards as adopted by the European Union. These half yearly financial statements have been prepared on a consistent basis and format with the Group financial statements for the year ended 31 March 2017. The provisions of IAS 34 'Interim Financial Reporting' have not been applied in full.

2.              Operating segments

Revenue by Operating Segment

In our September 2016 Half Year Report, which was published shortly after the acquisition of Cristie, the results of Cristie were incorporated into the Cloud Services segment. In that report we advised that the inclusion of Cristie within Cloud Services was under review and subsequently, in our March 2017 annual report, Cristie was included in a separate non-recurring revenue segment. In this Half Yearly report, for the reasons outlined in the Operational Review section of the Chief Executive Officer's Statement, the results of Cristie have been included in the Cloud Services segment and it is our intention to continue to report in this way in the future.

	6 months to 30/09/2017			6 months to 30/09/2016			Year to 31/03/2017 (restated)
	External	Internal	Total	External	Internal	Total	External	Internal	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Easyspace	6,702	2	6,704	6,550	-	6,550	13,249	12	13,261
Cloud Services	40,334	716	41,050	35,569	846	36,415	76,324	1,538	77,862
	47,036	718	47,754	42,119	846	42,965	89,573	1,550	91,123

Geographical Information

In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. The United Kingdom is the place of domicile of the parent company, iomart Group plc. No individual country other than the United Kingdom contributes a material amount of revenue therefore revenue from outside the United Kingdom has been shown as from Rest of the World.

Analysis of Revenue by Destination

				6 months to 30/09/2017	6 months to 30/09/2016	Year to 31/03/2017
				£'000	£'000	£'000
United Kingdom				38,875	35,062	75,163
Rest of the World				8,161	7,057	14,410
Revenue from operations				47,036	42,119	89,573

 

2.              Operating segments (continued)

Profit by Operating Segment

	6 months to 30/09/2017			6 months to 30/09/2016			Year to 31/03/2017
	EBITDA before share based payments and acquisition costs	Share based payments, acquisition costs, depreciation & amortisation	Operating profit/(loss)	EBITDA before share based payments and acquisition costs	Share based payments, acquisition costs, depreciation & amortisation	Operating profit/(loss)	EBITDA before share based payments and acquisition costs	Share based payments, acquisition costs, depreciation & amortisation	Operating profit/(loss)
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Easyspace	3,075	(814)	2,261	3,067	(840)	2,227	6,244	(948)	5,296
Cloud Services	17,981	(9,061)	8,920	16,287	(8,076)	8,211	34,006	(17,441)	16,565
Group overheads	(1,892)	-	(1,892)	(1,769)	-	(1,769)	(3,680)	-	(3,680)
Share based payments	-	(398)	(398)	-	(557)	(557)	-	(1,844)	(1,844)
Acquisition costs	-	(573)	(573)	-	(102)	(102)	-	(104)	(104)
	19,164	(10,846)	8,318	17,585	(9,575)	8,010	36,570	(20,337)	16,233
Group interest and tax			(1,906)			(2,195)			(4,150)
Profit for the period	19,164	(10,846)	6,412	17,585	(9,575)	5,815	36,570	(20,337)	12,083

Group overheads, share based payments, acquisition costs, interest and tax are not allocated to segments. 

3.              Earnings per share

The calculations of earnings per share are based on the following results and numbers:

	6 months to 30/09/2017	6 months to 30/09/2016	Year to 31/03/2017
Total Operations
	£'000	£'000	£'000
Profit for the financial period and basic earnings attributed to ordinary shareholders	6,412	5,815	12,083
	No	No	No
Weighted average number of ordinary shares:	000	000	000
Called up, allotted and fully paid at start of period	107,803	107,803	107,803
Own shares held in Treasury	(54)	(619)	(465)
Shares held by Employee Benefit Trust	(141)	(141)	(141)
Weighted average number of ordinary shares - basic	107,608	107,043	107,197
Dilutive impact of share options	1,621	1,390	1,808
Weighted average number of ordinary shares - diluted	109,229	108,433	109,005
Basic earnings per share	5.96 p	5.43 p	11.27 p
Diluted earnings per share	5.87 p	5.36 p	11.08 p

Adjusted earnings per share	6 months to 30/09/2017	6 months to 30/09/2016	Year to 31/03/2017
	£'000	£'000	£'000
Profit for the financial period and basic earnings attributed to ordinary shareholders	6,412	5,815	12,083
-   Amortisation of acquired intangible assets	2,831	2,697	5,558
-   Acquisition costs	573	102	104
-   Share based payments	398	557	1,844
-   Mark to market interest adjustment	(28)	(43)	(84)
-   Finance charge on contingent consideration	51	177	330
-   Tax impact of adjusted items	(608)	(597)	(1,313)
Adjusted profit for the financial period and adjusted basic earnings attributed to ordinary shareholders	9,629	8,708	18,522
Adjusted basic earnings per share	8.95 p	8.14 p	17.28 p
Adjusted diluted earnings per share	8.82 p	8.03 p	16.99 p

 

4.              Acquisition costs

			6 months to 30/09/2017 £'000	6 months to 30/09/2016 £'000	Year to 31/03/2017 £'000
Professional fees			573	98	99
Non-recurring integration costs			-	4	5
Total acquisition costs for the period			573	102	104

During the period costs of £573,000 (H1 2017: £98,000) were incurred in respect of professional fees on acquisitions and there were no costs (H1 2017: £4,000) directly related to the integration of acquisitions into the Group.

5.              Finance costs

			6 months to 30/09/2017 £'000	6 months to 30/09/2016 £'000	Year to 31/03/2017 £'000
Bank loans			(439)	(628)	(1,131)
Finance leases			(70)	(99)	(172)
Other interest charges			(27)	(23)	(52)
			(536)	(750)	(1,355)
Items affecting adjusted profit before tax calculation:
Mark to market adjustment on interest rate swaps			28	43	84
Finance charge on contingent consideration			(51)	(177)	(330)
Finance costs for the period			(559)	(884)	(1,601)

6.              Taxation

			6 months to 30/09/2017 £'000	6 months to 30/09/2016 £'000	Year to 31/03/2017 £'000
Tax charge for the period			(2,468)	(2,126)	(4,349)
Effect of different statutory tax rates of overseas jurisdictions			21	-	-
Adjustment relating to prior periods			-	-	(12)
Total current taxation			(2,447)	(2,126)	(4,361)
Origination and reversal of temporary differences			1,013	871	1,751
Adjustment relating to prior periods			84	(4)	227
Effect of different statutory tax rates of overseas jurisdictions			3	12	27
Effect of changes in tax rates			(5)	(80)	(215)
Total deferred taxation credit			1,095	799	1,790
Taxation charge for the period			(1,352)	(1,327)	(2,571)

7.              Intangible assets

	Goodwill	Development costs	Customer relationships	Software	Beneficial contracts	Domain names & IP addresses	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Cost:
At 1 April 2016	61,123	4,832	34,882	3,137	86	280	104,340
Additions in the period	601	-	-	1,315	-	-	1,916
Currency translation differences	-	-	65	25	-	-	90
Acquired on acquisition of subsidiary	-	-	982	-	-	-	982
Development costs capitalised	-	667	-	-	-	-	667
At 30 September 2016	61,724	5,499	35,929	4,477	86	280	107,995
Additions in the period	276	-	-	355	-	-	631
Currency translation differences	-	-	36	15	-	-	51
Development costs capitalised	-	705	-	-	-	-	705
At 31 March 2017	62,000	6,204	35,965	4,847	86	280	109,382
Additions in the period	6,461	-	-	662	-	-	7,123
Disposals in the period	-	-	-	(10)	-	-	(10)
Currency translation differences	-	-	(51)	(26)	-	-	(77)
Acquired on acquisition of subsidiary	-	-	5,501	-	-	-	5,501
Development costs capitalised	-	850	-	-	-	-	850
At 30 September 2017	68,461	7,054	41,415	5,473	86	280	122,769
Accumulated amortisation:
At 1 April 2016	-	(3,194)	(15,308)	(1,453)	(26)	(171)	(20,152)
Currency translation differences	-	-	(51)	(20)	-	-	(71)
Charge for the period	-	(442)	(2,693)	(385)	(4)	(27)	(3,551)
At 30 September 2016	-	(3,636)	(18,052)	(1,858)	(30)	(198)	(23,774)
Currency translation differences	-	-	(26)	(9)	-	-	(35)
Charge for the period	-	(547)	(2,858)	(430)	(3)	(28)	(3,866)
At 31 March 2017	-	(4,183)	(20,936)	(2,297)	(33)	(226)	(27,675)
Disposals in the period	-	-	-	10	-	-	10
Currency translation differences	-	-	44	17	-	-	61
Charge for the period	-	(588)	(2,827)	(476)	(4)	(27)	(3,922)
At 30 September 2017	-	(4,771)	(23,719)	(2,746)	(37)	(253)	(31,526)
Carrying amount:
At 30 September 2017	68,461	2,283	17,696	2,727	49	27	91,243
At 31 March 2017	62,000	2,021	15,029	2,550	53	54	81,707
At 30 September 2016	61,724	1,863	17,877	2,619	56	82	84,221

8.              Property, plant and equipment

	Freehold property		Leasehold improve-ments	Datacentre equipment	Computer equipment	Office equipment	Motor vehicles	Total
	£'000		£'000	£'000	£'000	£'000	£'000	£'000
Cost:
At 1 April 2016	2,062		7,323	20,472	47,242	2,356	68	79,523
Additions in the period	-		34	312	3,884	148	-	4,378
Acquisition of subsidiary	-		-	-	179	27	-	206
Disposals in the period	-		(3)	-	(58)	-	-	(61)
Currency translation differences	-		-	-	134	-	-	134
At 30 September 2016	2,062		7,354	20,784	51,381	2,531	68	84,180
Additions in the period	-		613	385	4,231	83	-	5,312
Currency translation differences	-		-	-	(9)	-	-	(9)
At 31 March 2017	2,062		7,967	21,169	55,603	2,614	68	89,483
Additions in the period	-		670	600	7,362	10	-	8,642
Acquisition of subsidiary	-		-	-	945	2	-	947
Disposals in the period	-		-	-	(908)	(100)	(48)	(1,056)
Currency translation differences	-		-	-	(103)	-	-	(103)
At 30 September 2017	2,062		8,637	21,769	62,899	2,526	20	97,913
Accumulated depreciation:
At 1 April 2016	(191)		(2,337)	(7,939)	(31,585)	(1,371)	(55)	(43,478)
Charge for the period	(21)		(226)	(922)	(4,067)	(121)	(8)	(5,365)
Disposals in the period	-		3	-	58	-	-	61
Currency translation differences	-		-	-	(58)	-	-	(58)
At 30 September 2016	(212)		(2,560)	(8,861)	(35,652)	(1,492)	(63)	(48,840)
Charge for the period	(46)		(214)	(902)	(4,303)	(137)	(5)	(5,607)
Currency translation differences	-		-	-	13	-	-	13
At 31 March 2017	(258)		(2,774)	(9,763)	(39,942)	(1,629)	(68)	(54,434)
Charge for the period	(24)		(248)	(959)	(4,591)	(131)	-	(5,953)
Disposals in the period	-		-	-	908	100	48	1,056
Currency translation differences	-		-	-	66	-	-	66
At 30 September 2017	(282)		(3,022)	(10,722)	(43,559)	(1,660)	(20)	(59,265)
Carrying amount:
At 30 September 2017	1,780		5,615	11,047	19,340	866	-	38,648
At 31 March 2017	1,804		5,193	11,406	15,661	985	-	35,049
At 30 September 2016	1,850		4,794	11,923	15,729	1,039	5	35,340

 

9.              Contingent consideration due on acquisitions

			30/09/2017	30/09/2016	31/03/2017
			£'000	£'000	£'000
Contingent consideration due on acquisitions
-       Simple Servers Limited			(1,741)	-	-
-       United Communications Limited			-	(2,220)	(2,373)
Total contingent consideration due on acquisitions			(1,741)	(2,220)	(2,373)

10.             Deferred consideration due on acquisitions

			30/09/2017	30/09/2016	31/03/2017
			£'000	£'000	£'000
Deferred consideration due on acquisitions
-       Simple Servers Limited			(370)	-	-
-       Dediserve Limited			(86)	-	-
Total deferred consideration due on acquisitions			(456)	-	-

11.            Analysis of change in net debt

		Cash and cash equivalents £'000	Bank loans £'000	Finance leases and hire purchase £'000	Total £'000
At 1 April 2016		10,341	(34,525)	(1,399)	(25,583)
Repayment of bank loans		-	3,000	-	3,000
Impact of effective interest rate		-	(147)	-	(147)
Acquired on acquisition of subsidiary		3,104	-	(25)	3,079
Currency translation difference		-	-	(24)	(24)
Cash flow		(2,846)	-	343	(2,503)
At 30 September 2016		10,599	(31,672)	(1,105)	(22,178)
Repayment of bank loans		-	13,000	-	13,000
Impact of effective interest rate		-	33	-	33
Currency translation difference		-	-	10	10
Cash flow		(1,693)	-	237	(1,456)
At 31 March 2017		8,906	(18,639)	(858)	(10,591)
New bank loans		-	(14,956)	-	(14,956)
Repayment of bank loans		-	3,000	-	3,000
Impact of effective interest rate		-	139	-	139
Acquired on acquisition of subsidiaries		718	-	(283)	435
Currency translation difference		-	-	(190)	(190)
Cash flow		(2,496)	-	164	(2,332)
At 30 September 2017		7,128	(30,456)	(1,167)	(24,495)

 

12.            Acquisitions

Dediserve Limited

The Group acquired 100% of the issued share capital of Dediserve Limited, ("Dediserve") on 17 May 2017 for €7.9m on a no debt, no cash, normalised working capital basis.

Dediserve is a company registered in the Republic of Ireland based in Dublin which provides cloud hosting services to over 1,500 customers from 10 locations world-wide. The acquisition is in line with the Group's strategy to grow its hosting operations both organically and by acquisition. It also provides the Group with an additional European Union place of operation.

The Group incurred £426,000 of third party acquisition related costs in respect of this acquisition. These expenses are included in administrative expenses in the Group's consolidated statement of comprehensive income for the 6 months ended 30 September 2017. 

The following table summarises the consideration to acquire Dediserve and the amounts of identified assets acquired and liabilities assumed at the acquisition date and are provisional:

	£'000
Recognised amounts of net assets acquired and liabilities assumed (provisional):
Cash and cash equivalents	250
Trade and other receivables	99
Property, plant and equipment	791
Intangible assets	3,680
Trade and other payables	(290)
Borrowings	(283)
Current income tax liabilities	(120)
Deferred tax liability	(588)
Identifiable net assets	3,539
Goodwill	3,130
Total consideration	6,669
Satisfied by:
Cash - paid on acquisition	6,485
Deferred consideration - paid	98
Deferred consideration - payable	86
Total consideration transferred	6,669

The share purchase agreement, in respect of the acquisition of Dediserve, includes a provision under which the total consideration payable was adjusted by a payment to be made either to or by the Company, depending on the level of cash, debt and working capital shown in an agreed set of accounts (the Completion Accounts) made up to, and as at, the completion date. The initial payment to acquire the company was €7,800,000 (£6,700,000) in cash and in addition an amount of €250,000 (£215,000) in cash was deducted as an interim settlement of the expected amount due in respect of the no debt, no cash, normalised working capital adjustment. Following agreement of the Completion Accounts an additional payment of €113,000 (£98,000) was paid in respect of the no debt, no cash, normalised working capital adjustment. An amount of €100,000 (£86,000) was deferred and paid 6 months after the completion date in November 2017. The initial payment of €7,550,000 (£6,485,000) was funded by a draw down from the revolving credit facility of £6,485,000.

Dediserve earned revenue of £1,076,000 and generated profits, before allocation of group overheads, third party acquisition related costs and tax, of £389,000 in the period since acquisition.

Tier 9 Limited

The Group acquired 100% of the issued share capital of Tier 9 Limited (which trades as "Simple Servers") on 26 July 2017.   Tier 9 Limited is a non-trading holding company with two 100% owned subsidiaries: Cloudfuel Limited, which is also non-trading, and Simple Servers Limited.

Simple Servers is a Redditch based hosting company, which specialises in providing hosting solutions for the Magento eCommerce application which is used extensively by online retailers. This is hosted on various cloud platforms for all sectors of industry from SMEs to larger enterprises.  The acquisition is in line with the Group's strategy to grow its operations both organically and by acquisition and gives the group access to a rapidly growing eCommerce market.

During the current period the Group incurred £106,000 of third party acquisition related costs in respect of this acquisition. These expenses are included in administrative expenses in the Group's consolidated statement of comprehensive income for the 6 months ended 30 September 2017. 

The following table summarises the consideration to acquire Simple Servers and the amounts of identified assets acquired and liabilities assumed at the acquisition date and are provisional.

	£'000
Recognised amounts of net assets acquired and liabilities assumed (provisional):
Cash and cash equivalents	469
Trade and other receivables	117
Property, plant and equipment	156
Intangible assets	1,821
Trade and other payables	(287)
Current income tax liabilities	(94)
Deferred tax liability	(363)
Identifiable net assets	1,819
Goodwill	3,331
Total consideration	5,150
Satisfied by:
Cash - paid on acquisition	3,039
Deferred consideration - paid in October 2017	370
Contingent consideration - payable	1,741
Total consideration to be transferred	5,150

The share purchase agreement, in respect of the acquisition of Simple Servers, included a provision under which the total consideration payable may have been adjusted by a payment to be made either to or by the Company, depending on the level of cash, debt and normalised working capital shown in an agreed set of accounts (the Completion Accounts) made up to, and as at, the completion date. The initial payment to acquire the company was £3,039,000 in cash. Following agreement of the Completion Accounts a total payment of £370,000 was due by the Company in respect of the no debt, no cash, normalised working capital adjustment and this amount was paid in cash in October 2017.

The contingent consideration arrangements require the Company to pay the former shareholders of Simple Servers an additional amount contingent on the level of profitability delivered by Simple Servers in the year ending 31 March 2018 ("the Earn-out Payment").

The potential undiscounted amount of the Earn-out Payment that the Company could be required to pay is between £nil and £2,961,000.  The amount of contingent consideration payable which was recognised as of the acquisition date was £1,741,000.

The level of profitability for the Earn-out Payment was estimated by applying the income approach to different scenarios based on historic performance and forecasts. Those scenarios reviewed had a range of outcomes for the amount of the Earn-out Payment of £1,046,000 to £2,339,000. A weighted average, based on management estimates of the probability of the achievement of the various levels of profitability, was then calculated to give the expected outcome of the amount of the Earn-out Payment of £1,741,000.

Simple Servers earned revenue of £283,000 and generated profits, before allocation of group overheads, share based payments and tax, of £148,000 in the period since acquisition.

13.            Post balance sheet events

After the period end, on 17 November, we acquired the entire share capital of Sonassi Holding Company Limited ("Sonassi") on a no debt, no cash, normalised working capital basis using a locked box mechanism as at 30 September 2017 and a daily contribution from then until completion with the benefit of trading during that period accruing to the vendors. At completion, an initial payment of £10.0m in cash was made and in addition an amount of £3.1m in cash was paid in settlement of the amount due in respect of the no debt, no cash, normalised working capital and daily contribution adjustment. The initial payment was funded by a draw down from the Group's revolving credit facility. A further sum of £1.0m is contingent on the completion of an element of software development and a final sum of no more than another £5.5m on the profitability of the business in the year ending 31 July 2018. The maximum purchase price is therefore £16.5m, excluding any sums due in respect of the no debt no cash, normalised working capital, daily contribution adjustment.

14.            Availability of half yearly reports

Half yearly reports will be sent to all shareholders on 10 January 2018.  Copies of the half yearly report will be available for collection from the offices of Peel Hunt LLP, 120 London Wall, London, EC2Y 5ET, for a period of one month from the date of despatch and in accordance with Rules 20 and 26 of the AIM Rules, available from the Company's website at www.iomart.com.

 

INDEPENDENT REVIEW REPORT TO IOMART GROUP PLC

Introduction

We have been engaged by the company to review the financial information in the half-yearly financial report for the six months ended 30 September 2017 which comprises the consolidated interim statement of comprehensive income, the consolidated interim statement of financial position, the consolidated interim statement of cash flows, the consolidated interim statement of changes in equity and the related notes 1 to 14 set out on pages 9 to 22. We have read the other information contained in the half yearly financial report which comprises only the interim results announcement and the chief executive's statement and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

This report is made solely to the company in accordance with guidance contained in Independent Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our review work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusion we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules for Companies of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in Note 1.

 

Our Responsibility

Our responsibility is to express to the Company a conclusion on the financial information in the half-yearly financial report based on our review.

 

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 September 2017 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 1.

GRANT THORNTON UK LLP

Statutory auditor, Chartered Accountants

Glasgow

4 December 2017

 

END

 

 

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