Interim Results
Iomart Group PLC
17 November 2004
iomart Group plc
Interim Results Announcement @ 30.9.04
iomart Group plc ('iomart'), the Glasgow based software and web-services
business, presents its consolidated interim results for the six month period
ended 30 September 2004.
Financial highlights
• total turnover at £6.4m, up 121% on previous year with annualised
revenues at c. £18m
• maiden profit for the period of £167k and fully diluted earnings per
share of 0.24p (adjusted EPS 0.50p)
• minority interest in iomart Internet Limited acquired at a cost of £2.2m
• net cash inflow from operating activities and cash of £2.1m on hand
Operational highlights
• £12m acquisition of Easyspace Limited completed
• web services business now has 190,000 customers
• three acquisitions including EasySpace trading profitably
• NetIntelligence version 4 launched November as end-point security ASP
service
Prospects
• NetIntelligence positioning extended to family and SME market
• webservices business profitability well established
• significant customer base provides platform for cross selling and
continuing growth
Nick Kuenssberg, chairman, commented:
The work invested in the three web service acquisitions and the buy-in of the
iomart Internet minority are proving fruitful and will provide a solid platform
for future development. We anticipate strong organic growth and further
acquisition opportunities in the sector.
The NetIntelligence enterprise security and content management products have
been reconfigured in Version 4 and are being rolled out in November to provide
ASP services suitable for family, SME and corporate customers. A channel based
market approach beginning in 2005 should create further opportunities in the
coming year.
The £6.25m placing for the Easyspace acquisition demonstrates shareholder
confidence in the group's management; we are grateful for this. The group now
has traction and, with maiden half-year earnings of 0.24p per share, the
establishment of a fourth sales office and annualised sales of c £18m, we look
forward to a satisfactory second half-year and a healthy 2005/06.
Chief Executive Officer's review
The first half of the year has been rewarding with the successful acquisition of
Easyspace and continuing organic sales growth in our webservices business. We
are adding more than 1,700 net new customers per month and now have 190,000
customers including around 140,000 from the Easyspace acquisition.
There are differences in average revenue per annum per customer within the
various divisions of the group, but gross margins overall are healthy at around
80%. We are working to increase the revenue per customer and building a growing
recurring revenue stream.
NetIntelligence continues to evolve as an effective solution in the network
security space where our product functionality is increasingly relevant. Whilst
large corporate sales are slow to close, we are gaining sales in the SME market
and we have recently launched a home product centred around complete security
for the family. This is a web based product ideal for broadband users and we are
exploring a number of opportunities with a variety of ISPs and Telcos.
Our mailfilter product is gaining sales in all market sectors and we intend to
put more sales resource into that area to capitalise on the current demand. Our
contract with BT is progressing satisfactorily.
Financials
Turnover on continuing operations for the period was £6,105k, up from £2,772k,
which represents an increase of 120% over the corresponding period. Turnover
from Easyspace Limited from the date of acquisition was £323k. Total gross
profit margin was 77%. This is lower than previously because of higher search
engine costs in the first half. We have reduced these costs and gross margins
should recover to 80% plus for the whole year.
Administrative expenses of £4,847k for the six-month period include £50k of
restructuring costs in respect of the integration of Internetters Limited and
Easyspace Limited and are in line with our budget.
The operating profit for the period was £85k (30 September 2003 - loss £779k)
and the profit for the financial period £167k (30 September 2003 - loss £698k).
Fully diluted earnings per share were 0.24p (adjusted EPS 0.50p), compared to a
loss per share of 1.25p.
Cash balances at 30 September were £2,094k and net debt, after raising £3,500k
of bank finance for acquisitions, was £1,570k.
Prospects
We are confident that we can continue to build on our organic growth, that we
can integrate and grow our recent acquisition, and that we can make a
significant impact with NetIntelligence.
We look forward to building on our success into the second half of the year and
beyond.
Angus MacSween
Chief Executive Officer
16 November 2004
Consolidated Profit and Loss Account
Six months ended 30 September 2004
6 months ended Year ended
30.9.04 30.9.03 31.3.04
Unaudited Unaudited Audited
£ 000 £ 000 £ 000
TURNOVER
Continuing operations 6,105 2,772 6,592
Acquisitions 323 132 771
Total turnover 6,428 2,904 7,363
Cost of sales (1,496) (393) (1,589)
GROSS PROFIT
Continuing operations 4,722 2,388 5,194
Acquisitions 210 123 580
Gross profit 4,932 2,511 5,774
Administrative expenses (4,797) (3,247) (6,560)
Restructuring expenses (50) (43) (43)
Total administrative expenses (4,847) (3,290) (6,603)
OPERATING PROFIT/(LOSS)
Continuing operations 48 (755) (938)
Acquisitions 37 (24) 109
OPERATING PROFIT/(LOSS) 85 (779) (829)
Net interest 22 61 109
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 107 (718) (720)
Research and development tax credit 71 - 123
PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION FOR THE PERIOD 178 (718) (597)
Equity minority interests (11) 20 (59)
PROFIT/(LOSS) FOR THE FINANCIAL PERIOD 167 (698) (656)
Earnings/(loss) per ordinary share (pence) (Note 2)
Basic 0.26p (1.25p) (1.14p)
Fully diluted 0.24p
Adjusted earnings/(loss) per ordinary share (pence) (Note 2)
Basic 0.52p (1.21p) (1.04p)
Fully diluted 0.50p
There have been no recognised gains or losses attributable to the shareholders
other than the profit for the current financial period and the losses for the
preceding financial periods and accordingly, no statement of total recognised
gains and losses is shown.
Consolidated Balance Sheet
30 September 2004
30.9.04 30.9.03 31.3.04
Unaudited Unaudited Audited
£ 000 £ 000 £ 000
FIXED ASSETS
Intangible assets 14,588 471 748
Tangible assets 626 466 517
15,214 937 1,265
CURRENT ASSETS
Debtors 3,554 1,406 2,145
Cash at bank and in hand 2,094 3,537 3,025
5,648 4,943 5,170
CREDITORS: amounts falling due within one year (5,816) (1,739) (2,070)
NET CURRENT (LIABILITIES)/ASSETS (168) 3,204 3,100
TOTAL ASSETS LESS CURRENT LIABILITIES 15,046 4,141 4,365
CREDITORS: amounts falling due after more than one year (2,674) (268) (220)
EQUITY MINORITY INTERESTS - - (129)
12,372 3,873 4,016
CAPITAL AND RESERVES
Called up share capital 754 592 598
Capital redemption reserve 1,200 1,200 1,200
Share premium account 27,940 19,812 19,907
Profit and loss account (17,522) (17,731) (17,689)
TOTAL EQUITY SHAREHOLDERS' FUNDS 12,372 3,873 4,016
This report was approved by the board of directors on 16 November 2004.
The comparative figures for the financial year ended 31 March 2004 are an
extract of the company's statutory accounts for that financial year. Those
accounts have been reported on by the company's auditors and delivered to the
Registrar of Companies. The report of the auditors was unqualified and did not
contain a statement under section 237 (2) or (3) of the Companies Act 1985.
Consolidated Cash Flow Statement
Six months ended 30 September 2004
6 months ended Year ended
30.9.04 30.9.03 31.3.04
Unaudited Unaudited Audited
Notes £ 000 £ 000 £ 000
Net cash inflow/(outflow) from operating activities 3 82 (870) (1,311)
Returns on investments and servicing of finance
Bank interest received 42 63 112
Bank and other loan interest paid (19) - -
Finance lease and hire purchase interest paid (11) (22) (37)
Net cash inflow from returns on investments and servicing of finance 12 41 75
Taxation 4 - 334
Capital expenditure
Payments to acquire tangible fixed assets (291) (210) (444)
Proceeds of disposal of fixed assets 1 - 2
Net cash outflow from capital expenditure (290) (210) (442)
Acquisitions and disposals
Purchase of subsidiary undertakings 4 (14,448) (308) (576)
Net cash acquired with subsidiary 2,147 169 173
(12,301) (139) (403)
Cash outflow before financing (12,493) (1,178) (1,747)
Financing
Issue of ordinary shares 8,189 779 880
Issue of shares to minority interest - 50 100
Bank loan (net of arrangement fee) 3,466 - -
Repayment of hire purchase and finance leases (93) (156) (250)
Net cash inflow from financing 11,562 673 730
Decrease in cash in the period (931) (505) (1,017)
Reconciliation of net cash flow to movement in net (debt)/funds
Decrease in cash in period (931) (505) (1,017)
Cash (inflows)/outflows from debt and lease financing (3,373) 156 250
Change in net funds from cash flows (4,304) (349) (767)
Opening net funds 2,734 3,501 3,501
Closing net (debt)/funds (1,570) 3,152 2,734
Notes to the Accounts
Six months ended 30 September 2004
1. Accounting policies
The interim financial information does not constitute statutory accounts for the
purpose of section 240 of the Companies Act 1985. The figures for the year ended
31 March 2004 have been extracted from the Group accounts for that year. Those
financial statements have been delivered to the Registrar of Companies and
included an auditors' report, which was unqualified.
The interim financial information has been prepared using the same accounting
policies and estimation techniques as set out in the Group accounts for the year
ended 31 March 2004.
2. Earnings per share
The calculations of earnings/(loss) per share are based on the following profits
/(losses) and numbers of shares:
6 months ended Year ended
30.9.04 30.9.03 31.3.04
Unaudited Unaudited Audited
£ 000 £ 000 £ 000
Adjusted earnings per share is calculated as follows:
Profit/(loss) for the financial year 167 (698) (656)
Amortisation 171 19 59
Adjusted earnings/(loss) 338 (679) (597)
Number of Number of Number of
shares shares shares
Weighted average number of shares:
For basic earnings per share 64,711,976 55,823,950 57,649,489
Exercise of share options 3,558,709
For diluted earnings per share 68,270,685
FRS 14 requires presentation of diluted EPS when a company could be called upon
to issue shares that would decrease net profit or increase net loss per share.
For a loss making company with outstanding share options, net loss per share
would only be increased by the exercise of out-of-the-money options. Since it
seems inappropriate to assume that option holders would act irrationally and
there were no other diluting future share issues, diluted EPS has not been
presented for the 6 months ended 30 September 2003 or for the year ended 31
March 2004.
3. Reconciliation of operating profit/(loss) to net cash inflow/(outflow) from operating activities
6 months ended Year ended
30.9.04 30.9.03 31.3.04
Unaudited Unaudited Audited
£ 000 £ 000 £ 000
Operating profit/(loss) 85 (779) (829)
Depreciation 195 137 320
Amortisation of intangible assets 171 19 59
Increase in debtors (1,168) (573) (1,429)
Increase in creditors 799 326 568
Net cash inflow/(outflow) from operating activities 82 (870) (1,311)
Notes to the Accounts
Six months ended 30 September 2004
4. Purchase of subsidiaries
6 months ended Year ended
30.9.04 30.9.03 31.3.04
Unaudited Unaudited Audited
£ 000 £ 000 £ 000
Net assets acquired:
Tangible fixed assets 14 17 19
Debtors 170 40 128
Cash at bank 2,147 169 173
Creditors (2,034) (246) (384)
Minority interest 140 - -
437 (20) (64)
Goodwill 14,011 477 794
14,448 457 730
Satisfied by:
Cash 14,358 308 576
Deferred consideration 90 149 154
14,448 457 730
On 19 May 2004 the company acquired the minority interest in iomart Internet
Limited, making it a 100% subsidiary and on 9 September 2004 the company
acquired 100% of the issued share capital of Easyspace Limited.
5. Analysis of change in net funds
At 31.3.04 Cash flow At 30.9.04
£ 000 £ 000 £ 000
Cash at bank and in hand 3,025 (931) 2,094
Bank loan - (3,466) (3,466)
Finance leases and hire purchase (291) 93 (198)
Net funds 2,734 (4,304) (1,570)
6. Availability of interim reports
Interim reports will be sent to all shareholders on 2 December 2004. Copies of
the interim report will be available for collection from the offices of KBC Peel
Hunt Ltd, 62 Threadneedle Street, London, EC2R 8HP, for a period of 1 month from
the date of despatch.
INDEPENDENT REVIEW REPORT TO IOMART GROUP PLC
Introduction
We have been instructed by the company to review the financial information for
the six months ended 30 September 2004 which comprises the consolidated profit
and loss account, the consolidated balance sheet, the consolidated cash flow
statement, the reconciliation of net cash flow to movement in net funds and
related notes 1 to 6. We have read the other information contained in the
interim report 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 Bulletin 1999/4
issued by the Auditing Practices Board. Our work has been undertaken so that we
might state to the company those matters we are required to state to them 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 conclusions we
have formed.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are also responsible for ensuring that the accounting polices and presentation
applied to the interim figures are consistent with those applied in preparing
the preceding annual accounts except where any changes, and the reasons for
them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin
1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and applying
analytical procedures to the financial information and underlying financial data
and, based thereon, assessing whether the accounting policies and presentation
have been consistently applied unless otherwise disclosed. A review excludes
audit procedures such as tests of controls and verification of assets,
liabilities and transactions. It is substantially less in scope than an audit
performed in accordance with United Kingdom auditing standards and therefore
provides a lower level of assurance than an audit. Accordingly, we do not
express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 September 2004.
Deloitte & Touche LLP
Chartered Accountants
Glasgow
16 November 2004
Notes: A review does not provide assurance on the maintenance and integrity of
the Group's website, including controls used to achieve this, and in particular
on whether any changes may have occurred to the financial information since
first published. These matters are the responsibility of the directors but no
control procedures can provide absolute assurance in this area.
Legislation in the United Kingdom governing the preparation and dissemination of
financial information differs from legislation in other jurisdictions.
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