IOMART GROUP PLC
('iomart' or the 'Group')
Final Results for the year ended 31 March 2009
iomart (AIM:IOM), the managed hosting company, is pleased to report its final results for the year ended 31 March 2009.
Financial Highlights
Revenues from continuing operations increased by 45% to £11.8m (2008: £8.1m)
Post tax profit for the period of £11.2m (2008: £0.4m) including gain from disposal of Ufindus on-line directory operation
EBITDA loss before share based payments from continuing operations reduced to £0.3m (2008: £1.4m)
Net cash at end of period of £13.7m (2008: net debt of £0.1m)
£0.3m of operating cash generated in year (2008: operating cash expenditure £2.2m)
Dividend of 0.3p per share proposed (2008: nil pence per share)
Operational Highlights
Over 60 new managed services customers for the Hosting division
Strong growth in Easyspace customer base to 235,000
Post year end acquisition of managed hosting company RapidSwitch for £5.25m cash
Angus MacSween, Chief Executive Officer commented, 'We have enjoyed strong organic growth during the year as we continue to establish ourselves as a first class provider of managed hosting services to the SME and corporate markets from our own fully networked datacentres across the UK. The acquisition of RapidSwitch post year end will further accelerate this process, and we look forward to the coming year with increased confidence.'
For further information:
iomart Group plc |
Tel. 0141 931 6400 |
Angus MacSween, Chief Executive |
|
Ian Ritchie, Non-executive Chairman |
|
Bruce Hall, Company Secretary |
|
|
|
KBC Peel Hunt |
Tel. 020 7418 8900 |
Richard Kauffer |
|
Daniel Harris |
|
|
|
ICIS |
Tel. 020 7651 8688 |
Tom Moriarty |
|
Bob Huxford |
|
CHAIRMAN'S STATEMENT
I am pleased to report that iomart is in a strong and healthy position. We have a clearly defined strategy to become one of the UK's foremost managed hosting operators with owned datacentres and have made substantial progress in executing that strategy during the year.
A key component of this progress was the successful disposal of the Ufindus operation to BT, the proceeds of which allowed us to accelerate our growth as a managed hosting operation both organically and, after the year end, through acquisition.
With an excellent level of organic revenue growth from our main hosting divisions and with the post year end acquisition of leading UK server hosting company Rapidswitch, we have established solid foundations from which to continue to grow our managed hosting business.
Of course, the successful execution of the Group's strategy is entirely dependent on the ability and commitment of our senior management team and indeed all employees within the Group. On behalf of the Board and all shareholders I am pleased to acknowledge the contribution they have all made to a successful year and look forward to their continued hard work and commitment in the future.
In June 2007 the Board made the decision not to pay a dividend going forward but rather to concentrate the available cash resources on establishing, at that time, our newly acquired start-up datacentre operation. We did, however, make a commitment to shareholders to keep the situation under review and to consider re-introducing dividend payments at an appropriate time. I am therefore pleased to announce that the Board has concluded that we are now in a position to re-establish a dividend policy. Accordingly, the Board is proposing to pay a dividend of 0.3p per share on 3 September 2009 to shareholders on the register on 12 June 2009. It is our intention, depending on the underlying profitability and cash generation of the business, to continue to pay dividends going forward.
Last year I concluded my inaugural Chairman's statement by saying that I believed we could look to the future with confidence. Based on our future prospects and what we have achieved over the year despite challenging economic times, I see no reason other than to reach the same conclusion this year.
In fact, I believe I can say that we now look to the future with increased confidence.
Ian Ritchie
Chairman
2 June 2009
CHIEF EXECUTIVE'S REVIEW
Introduction
Despite the global recession I am delighted by the progress we are making towards our strategic goal of becoming one of the UK's foremost hosting groups. Since the disposal of our on-line directory operation Ufindus I believe that we are now benefiting from being able to focus solely on the achievement of that goal.
During the year there were two main elements to that progress. Firstly, the excellent developments we have made in growing our organic business. Revenues have grown from both segments of our continuing operations resulting in a 45% overall increase. The second was achieved through the sale of our on-line directory operation Ufindus to BT in July 2008 for £20m in cash, resulting in a gain from the disposal of £12.6m.
As we indicated at the time of that disposal this had the double benefit of removing a non-core operation whilst providing significant cash resources to accelerate our growth into managed hosting. Our strategy has always been to deliver both organic and acquisitive growth and after the year end we were delighted to conclude the acquisition of Rapidswitch Limited, a market leader in the provision of dedicated server hosting within the UK. In RapidSwitch we have acquired a fast growing and profitable business with a strong brand that we expect to continue to thrive within our group environment.
Review of the year - Continuing Operations
Overall revenues from continuing operations, which are now made up exclusively of managed hosting services grew from £8.1m to £11.8m, a 45% increase over the year.
Our Easyspace operation, which serves the SME market, had revenues of £7.2m, an increase of 14% over the year. We continued to add customers over the period and now have around 235,000 customers to whom we provide a range of services including domain names, shared, dedicated and virtual hosting.
There is currently much hype around cloud computing with the continued shift of much of the economy onto using some form of web based solution. The context of cloud computing from iomart's perspective is to deliver 'infrastructure as a service' providing all of, or extensions of a company's existing or growing online infrastructure with enterprise class features such as redundancy, high availability and disaster recovery on a fully managed, outsourced basis at lower cost than can be achieved internally.
The datacentre owning Hosting business, which addresses the needs of the corporate market, had revenues of £4.6m in its first full year of operation, up 155% from £1.8m in the previous year. Our focus continues to be on winning managed service sales and good progress was made in this area with over 60 new customers acquired during the year. We are beginning to see the benefit of the geographical spread of our datacentres across the UK where we are able to offer the corporate market what we believe is a uniquely resilient solution in terms of both location and network.
Review of the year - Discontinued Operations
Ufindus was part of the Group until early July 2008 and in that period continued to deliver the contribution which it had displayed in previous years.
Rapidswitch
The acquisition of Rapidswitch after the year end has provided the Group with a very strong brand, particularly in the dedicated server market. With an already impressive record of revenue growth and profitability we are confident that this will continue into the future and are pleased that the management team responsible for growing the business has agreed to continue to drive it under our ownership. The datacentre facility in Maidenhead, which Rapidswitch brings to the Group, increases our overall datacentre capacity to around 50,000 sq ft of high quality datacentre space.
Financials
Trading Results - Total operations
The post tax profit for the year from total operations was £11.2m (2008: £0.4m), including a gain on sale of £12.6m arising out of the disposal of our on-line directory operation Ufindus.
Trading Results - Continuing Operations
Revenues for the year from continuing operations of £11.8m have grown by 45% (2008: £8.1m) with both of our main operating units having contributed to this growth. Easyspace revenues grew by 14% to £7.2m (2008: £6.3m) and our Hosting operation grew its revenues by 155% to £4.6m (2008: £1.8m).
Our gross margin, which is calculated by deducting variable cost of sales such as domain costs and sales commission and the relatively fixed costs of operating the datacentres from revenue, was £6.1m (2008: £4.2m). This substantial increase was as a direct result of higher revenues from both Easyspace and Hosting. In percentage terms the gross margin was maintained at 52% of revenue (2008: 52%). Within this our Hosting operation showed an improved gross margin percentage due to the fixed cost element of operating our datacentres not increasing as revenues increased. Easyspace gross margin percentage reduced due to sales mix and a stronger US Dollar.
EBITDA loss for the year from continuing operations, before share based payment charges, of £0.3m (2008: loss of £1.4m) showed substantial improvement over the previous year. This expected improvement was as a direct result of the growth in absolute gross margin delivered by both of our operating units offset by an increase in staffing, particularly sales, and marketing expenses in the first full year of operating our datacentres.
Depreciation charges of £1.0m (2008: £0.6m) have increased as we bring more of our datacentre capacity on stream, amortisation of intangibles £0.1m (2008: £0.1m) has remained stable and share based payment charges £0.2m (2008: £0.1m) have increased reflecting a charge for the additional share options issued during the year. Net finance income was £0.4m (2008: £nil) due to the interest earned on the proceeds from the disposal of Ufindus during the year.
Consequently, the loss for the year for continuing operations before taxation was £1.2m (2008: £2.3m).
The taxation charge for the year of £0.7m (2008: taxation credit of £0.5m) relates to the Group's recognition of deferred tax assets and is a result of the Group expecting to use up accumulated tax losses less quickly than previously anticipated.
The loss for the year from continuing operations after taxation was £1.9m (2008: £1.8m).
Trading Results - Discontinued Operations
The Group disposed of the Ufindus operation in July 2008. The post tax profit for Ufindus for the three month period was £0.5m (2008: profit for 12 months £2.1m) and in addition the Group made a gain from the disposal of £12.6m.
Financial position
We continue to find ourselves in the enviable position of having sufficient funding to fully underwrite our current business plans and therefore have no need to rely on the availability of borrowing facilities.
Current trading and outlook
We have enjoyed strong organic growth during the year and we continue to establish ourselves as a first class provider of managed hosting services to the SME and corporate markets from our own fully networked UK datacentres The acquisition of RapidSwitch post year end will further accelerate this process, and we look forward to the coming year with increased confidence.
Angus MacSween
Chief Executive Officer
2 June 2009
CONSOLIDATED INCOME STATEMENT
Year ended 31 March 2009
CONTINUING OPERATIONS |
|
|
Note |
2009 £'000 |
Restated 2008 £'000 |
Revenue |
|
|
|
11,797 |
8,116 |
|
|
|
|
|
|
Cost of sales |
|
|
|
(5,718) |
(3,920) |
|
|
|
|
|
|
Gross profit |
|
|
|
6,079 |
4,196 |
|
|
|
|
|
|
Administrative expenses |
|
|
|
(7,728) |
(6,463) |
|
|
|
|
|
|
Operating loss |
|
|
|
(1,649) |
(2,267) |
|
|
|
|
|
|
Analysed as: |
|
|
|
|
|
Earnings before interest, tax, depreciation and amortisation |
|
|
|
(318) |
(1,447) |
Share based payments |
|
|
|
(231) |
(143) |
Depreciation |
|
|
|
(959) |
(618) |
Amortisation |
|
|
|
(141) |
(59) |
|
|
|
|
|
|
Finance income |
|
|
|
497 |
73 |
Finance costs |
|
|
|
(49) |
(122) |
|
|
|
|
|
|
Loss before taxation |
|
|
|
(1,201) |
(2,316) |
|
|
|
|
|
|
Taxation |
|
|
3 |
(731) |
528 |
|
|
|
|
|
|
Loss for the year from continuing operations |
|
|
|
(1,932) |
(1,788) |
|
|
|
|
|
|
DISCONTINUED OPERATIONS |
|
|
|
|
|
Profit for the year from discontinued operations |
|
|
5 |
516 |
2,141 |
Profit on disposal of discontinued operations |
|
|
5 |
12,598 |
- |
Net result from discontinued operations |
|
|
|
13,114 |
2,141 |
|
|
|
|
|
|
TOTAL OPERATIONS |
|
|
|
|
|
Profit for the period from total operations |
|
|
|
11,182 |
353 |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
|
|
|
|
Basic |
|
|
6 |
(1.95)p |
(1.80)p |
Diluted |
|
|
6 |
(1.95)p |
(1.80)p |
|
|
|
|
|
|
Total operations |
|
|
|
|
|
Basic |
|
|
6 |
11.27p |
0.35p |
Diluted |
|
|
6 |
11.17p |
0.35p |
CONSOLIDATED BALANCE SHEET
As at 31 March 2009
|
|
|
|
2009 |
2008 |
|
|
Note |
|
£'000 |
£'000 |
ASSETS |
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Intangible assets - goodwill |
|
|
|
16,550 |
18,525 |
Intangible assets - other |
|
|
|
363 |
720 |
Deferred tax asset |
|
4 |
|
20 |
826 |
Lease deposit |
|
|
|
884 |
884 |
Deferred consideration receivable on disposal |
|
5 |
|
1,000 |
- |
Property, plant and equipment |
|
|
|
8,672 |
8,310 |
|
|
|
|
27,489 |
29,265 |
Current assets |
|
|
|
|
|
Cash and cash equivalents |
|
|
|
13,910 |
743 |
Trade and other receivables |
|
|
|
2,184 |
3,121 |
|
|
|
|
16,094 |
3,864 |
|
|
|
|
|
|
Total assets |
|
|
|
43,583 |
33,129 |
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
|
Deferred consideration due on acquisition |
|
|
|
- |
(4,800) |
Borrowings |
|
|
|
(54) |
(187) |
|
|
|
|
(54) |
(4,987) |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Deferred consideration due on acquisition |
|
|
|
(4,800) |
- |
Trade and other payables |
|
|
|
(5,190) |
(4,789) |
Borrowings |
|
|
|
(148) |
(672) |
|
|
|
|
(10,138) |
(5,461) |
|
|
|
|
|
|
Total liabilities |
|
|
|
(10,192) |
(10,448) |
|
|
|
|
|
|
Net assets |
|
|
|
33,391 |
22,681 |
|
|
|
|
|
|
EQUITY |
|
|
|
|
|
Share capital |
|
8 |
|
1,002 |
994 |
Own shares |
|
|
|
(678) |
- |
Capital redemption reserve |
|
|
|
1,200 |
1,200 |
Share premium |
|
|
|
17,583 |
17,541 |
Retained earnings |
|
|
|
14,284 |
2,946 |
Total equity |
|
|
|
33,391 |
22,681 |
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 March 2009
|
|
|
Note |
2009 £'000 |
Restated 2008 £'000 |
|
|
|
|
|
|
Loss before taxation |
|
|
|
(1,201) |
(2,316) |
Finance (income)/expense net |
|
|
|
(448) |
49 |
Depreciation |
|
|
|
959 |
618 |
Amortisation |
|
|
|
141 |
59 |
Share based payments |
|
|
|
231 |
92 |
Movement in deposits |
|
|
|
- |
(884) |
Movement in trade receivables |
|
|
|
(453) |
(34) |
Movement in trade payables |
|
|
|
1,087 |
238 |
Cash flow from operations |
|
|
|
316 |
(2,178) |
Cash generated from discontinued operations |
|
|
|
463 |
2,702 |
Net cash flow from operating activities |
|
|
|
779 |
524 |
|
|
|
|
|
|
Cash flow from investing activities |
|
|
|
|
|
Purchase of property, plant and equipment |
|
|
|
(1,519) |
(393) |
Capitalisation of development costs |
|
|
|
(238) |
(250) |
Purchase of intangible assets - software |
|
|
|
(10) |
(23) |
Purchase of intangible assets - domain names |
|
|
|
(31) |
- |
Payment for acquisition of business |
|
|
|
- |
(4,800) |
Receipt from disposal of discontinued operation |
|
|
5 |
15,235 |
- |
Interest received |
|
|
|
389 |
73 |
Investing activities of discontinued operation |
|
|
|
(99) |
(496) |
Net cash from/(used) in investing activities |
|
|
|
13,727 |
(5,889) |
|
|
|
|
|
|
Cash flow from financing activities |
|
|
|
|
|
Issue of shares |
|
|
8 |
50 |
- |
Repayment of finance leases |
|
|
|
(210) |
(197) |
Repayment of borrowings |
|
|
|
(432) |
(876) |
Receipt of cash from share placing |
|
|
|
- |
10,466 |
Purchase of own shares |
|
|
|
(678) |
- |
Interest paid |
|
|
|
(49) |
(124) |
Financing activities of discontinued operation |
|
|
|
(20) |
(9) |
Net cash (used)/from in financing activities |
|
|
|
(1,339) |
9,260 |
|
|
|
|
|
|
Net increase in cash and cash equivalents |
|
|
13,167 |
3,895 |
|
|
|
|
|
||
Cash and cash equivalents at the beginning of the year |
|
|
743 |
(3,152) |
|
|
|
|
|
||
Cash and cash equivalents at the end of the year |
|
13,910 |
743 |
||
|
|
|
|
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2009
|
|
Share capital |
Own shares |
Capital redemption reserve |
Share premium account |
Retained earnings |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
Changes in equity |
|
|
|
|
|
|
|
Balance at 1 April 2007 |
|
994 |
- |
1,200 |
17,541 |
2,375 |
22,110 |
Profit in the period and total recognised income and expense |
|
- |
- |
- |
- |
353 |
353 |
Share based payments |
|
- |
- |
- |
- |
143 |
143 |
Deferred tax on share based remuneration |
|
- |
- |
- |
- |
75 |
75 |
|
|
|
|
|
|
|
|
Balance at 1 April 2008 |
|
994 |
- |
1,200 |
17,541 |
2,946 |
22,681 |
Profit in the period and total recognised income and expense |
|
- |
- |
- |
- |
11,182 |
11,182 |
Share based payments |
|
- |
- |
- |
- |
231 |
231 |
Deferred tax on share based remuneration |
|
- |
- |
- |
- |
(75) |
(75) |
Acquisition of own shares |
|
- |
(678) |
- |
- |
- |
(678) |
Issue of shares for option redemption |
|
8 |
- |
- |
42 |
- |
50 |
|
|
|
|
|
|
|
|
Balance at 31 March 2009 |
|
1,002 |
(678) |
1,200 |
17,583 |
14,284 |
33,391 |
NOTES TO THE FINAL RESULTS
Year ended 31 March 2009
1. BASIS OF PREPARATION
The financial information set out above does not constitute the statutory accounts for the years ended 31 March 2009 and 31 March 2008. Statutory accounts for 2008 have been delivered to the Registrar of Companies and those for 2009 will be delivered following the company's Annual General Meeting. The auditors have reported on these accounts, their reports were unqualified and did not contain statements under section 237 (2) or (3) of the Companies Act 1985.
During the year the Group disposed of its Ufindus operation and consequently, Ufindus has been treated as a discontinued operation within these financial statements. As a result the comparative amounts for the 2008 financial year for both the income statement and cashflow statement have been restated to remove the effect of the discontinued operation. In addition the Ufindus operation has been shown as discontinued within the segmental analysis at note 2.
2. SEGMENTAL ANALYSIS
Following an internal reorganisation resulting from the disposal of the non-core online directory business, Ufindus, the Netintelligence division was merged with the Hosting division, where previously it had been disclosed as a separate business segment. Consequently, as at 31 March 2009, the Group is primarily organised into two main business segments, which are detailed below.
Easyspace - a range of managed web hosting services and domain name registration services.
Hosting - provision of managed hosting facilities and services, through a network of owned Data centres.
There are no other services provided by the Group which would constitute a separately disclosable segment.
Primary Reporting Segment - Business
Assets and Liabilities by Primary Segment
|
2009 |
2008 |
||||
|
Total Assets |
Liabilities |
Net Assets (Liabilities) |
Total Assets |
Liabilities |
Net Assets (Liabilities) |
|
£000's |
£000's |
£000's |
£000's |
£000's |
£000's |
Easyspace |
13,107 |
(1,790) |
11,317 |
12,963 |
(1,934) |
11,029 |
Hosting |
15,445 |
(7,424) |
8,021 |
15,624 |
(6,631) |
8,993 |
Discontinued operations |
- |
- |
- |
4,519 |
(1,034) |
3,485 |
|
28,552 |
(9,214) |
19,338 |
33,106 |
(9,599) |
23,507 |
Group assets |
15,031 |
(978) |
14,053 |
23 |
(849) |
(826) |
|
43,583 |
(10,192) |
33,391 |
33,129 |
(10,448) |
22,681 |
The assets and liabilities of each business segment are derived using the same classifications as management reporting, excluding inter-segment balances.
Non-current assets acquired in the period by Primary Segment
|
2009 |
2008 |
||||
|
Tangible non-current assets acquired in period |
Intangible non-current assets acquired in period |
Total |
Tangible non-current assets acquired in period |
Intangible non-current assets acquired in period |
Total |
|
£000's |
£000's |
£000's |
£000's |
£000's |
£000's |
Easyspace |
70 |
36 |
106 |
53 |
- |
53 |
Hosting |
1,453 |
242 |
1,695 |
594 |
261 |
855 |
Continuing operations |
1,523 |
278 |
1,801 |
647 |
261 |
908 |
Discontinued operations |
7 |
93 |
100 |
133 |
381 |
514 |
|
1,530 |
371 |
1,901 |
780 |
642 |
1,422 |
Revenue by Primary Segment
|
2009 |
2008 |
||||
|
External |
Internal |
Total |
External |
Internal |
Total |
|
£000's |
£000's |
£000's |
£000's |
£000's |
£000's |
Easyspace |
7,224 |
- |
7,224 |
6,320 |
- |
6,320 |
Hosting |
4,573 |
572 |
5,145 |
1,796 |
524 |
2,320 |
Continuing operations |
11,797 |
572 |
12,369 |
8,116 |
524 |
8,640 |
Discontinued operations |
3,321 |
- |
3,321 |
11,933 |
- |
11,933 |
|
15,118 |
572 |
15,690 |
20,049 |
524 |
20,573 |
Profit by Primary Segment
|
2009 |
2008 |
||||
|
EBITDA |
Share based payments, depreciation & amortisation |
Operating (loss)/profit |
EBITDA |
Share based payments, depreciation & amortisation |
Operating (loss)/profit |
|
£000's |
£000's |
£000's |
£000's |
£000's |
£000's |
Easyspace |
2,143 |
(38) |
2,105 |
1,996 |
(18) |
1,978 |
Hosting |
(789) |
(1,062) |
(1,851) |
(1,733) |
(659) |
(2,392) |
Group overheads |
(1,672) |
(231) |
(1,903) |
(1,710) |
(143) |
(1,853) |
|
(318) |
(1,331) |
(1,649) |
(1,447) |
(820) |
(2,267) |
Group interest and tax |
|
|
(283) |
|
|
477 |
Total continuing |
(318) |
(1,331) |
(1,932) |
(1,447) |
(820) |
(1,790) |
Gain on disposal |
12,598 |
- |
12,598 |
- |
- |
- |
Discontinued operations |
615 |
(99) |
516 |
2,554 |
(411) |
2,143 |
Profit for the year |
12,895 |
(1,430) |
11,182 |
1,107 |
(1,231) |
353 |
Group overheads (including share based payments), interest and tax are not allocated to segments.
3. TAXATION
|
|
|
|
2009 £'000 |
2008 £'000 |
|
|
|
|
|
|
Research and development tax credit write-off |
|
|
- |
(53) |
|
Tax charge for the current year |
|
|
- |
(53) |
|
Deferred tax (charge)/credit |
|
|
(731) |
581 |
|
Taxation (charge)/credit for the year |
|
|
(731) |
528 |
The Group has a deferred tax asset which has been recognised in respect of tax losses within one of the subsidiary companies, which has generated taxable profits and is expected to continue to do so.
The differences between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit/(loss) before tax is as follows:
|
|
|
|
2009 £'000 |
2008 £'000 |
|
|
|
|
|
|
Profit/(loss) before tax |
|
|
11,913 |
(175) |
|
|
|
|
|
|
|
Tax charge/(credit) @ 28% (2008 - 30%) |
|
|
3,336 |
(53) |
|
|
|
|
|
|
|
Expenses not deductible for tax purposes |
|
|
30 |
16 |
|
Research and development tax credit write-off |
|
|
- |
53 |
|
Tax effect of share based remuneration |
|
|
25 |
(88) |
|
Movement in other deferred tax not recognised |
|
|
(12) |
26 |
|
Gain on disposal of subsidiary undertaking not subject to corporation tax |
|
|
(3,527) |
- |
|
Non-taxable income on discontinued operations |
|
|
(77) |
- |
|
Consolidation adjustments |
|
|
(36) |
(8) |
|
Utilisation of tax losses |
|
|
(9) |
(473) |
|
Depreciation in excess of capital allowances |
|
|
- |
(1) |
|
Tax losses carried forward |
|
|
207 |
- |
|
Reduction in tax losses recognised |
|
|
794 |
- |
|
|
|
|
|
|
|
Taxation charge/(credit) for the year |
|
|
731 |
(528) |
The weighted average applicable tax rate for the year ended 31 March 2009 was 28% (2008: 30%)
4. DEFERRED TAX
The Group had recognised deferred tax assets, liabilities and potential unrecognised deferred tax assets as follows:
|
2009 |
2008 |
||
|
Recognised £'000 |
Unrecognised £'000 |
Recognised £'000 |
Unrecognised £'000 |
|
|
|
|
|
Tax losses carried forward |
1,590 |
3,270 |
2,384 |
2,192 |
Share based remuneration |
79 |
- |
205 |
- |
Deferred tax on acquired assets with no capital allowances |
(1,649) |
- |
(1,763) |
- |
Deferred tax |
20 |
3,270 |
826 |
2,192 |
The movement in the deferred tax account during the year was:
|
|
Tax losses carried forward £'000 |
Share based remuneration £'000 |
Deferred tax on acquired assets with no capital allowances £'000 |
Total £'000 |
|
|
|
|
|
|
Opening balance |
|
2,384 |
205 |
(1,763) |
826 |
Charged/(credited) to income statement |
|
(794) |
(51) |
114 |
(731) |
Credited directly to equity |
|
- |
(75) |
- |
(75) |
Closing balance |
|
1,590 |
79 |
(1,649) |
20 |
The deferred tax asset in relation to tax losses carried forward arises from the unutilised tax losses of the hosting trade. The deferred tax asset has been recognised in line with future projections of the hosting company over a three year period. The basis of these projections are:
The consistent success of the sales teams in generating new business
Expectations about the retention of customers
Continued success in achieving a particular product mix and maintaining price yield
Based on the current profitability of the hosting company, an assessment of projections and the expectations of sustainable profits in future years, a deferred tax asset in relation to the utilisation of these losses is recognised in line with IAS, '12 Income Taxes'.
The deferred tax asset in relation to share based remuneration arises from the anticipated future tax relief on the exercise of share options. During the year share options were exercised on which the related £75,000 deferred tax asset had previously been recognised directly in equity and therefore has resulted in a movement in retained earnings.
The deferred tax on acquired assets arises from the datacentre equipment acquired through the acquisition of Ezee DSL Limited on which depreciation is charged but on which there are no capital allowances available.
5. DISCONTINUED OPERATIONS
The Group announced on 9 July 2008 the sale of the Ufindus business unit. The Ufindus operation represents an identifiable division of the Group and as such has been disclosed as a discontinued operation for the year ended 31 March 2009. A single amount is shown on the consolidated income statement representing the post-tax result of the discontinued operation for the period until disposal. Additionally the post-tax profit arising from the disposal of the operation has been recognised within the Discontinued Operations section of the consolidated income statement.
The table below provides further detail of the amounts shown in the income statement.
Discontinued operation financial performance |
|
|
|
Period to 9 July 2008 £'000 |
Year to 31 March 2008 £'000 |
Revenue |
|
|
|
3,321 |
11,933 |
Cost of sales |
|
|
|
(521) |
(1,581) |
Gross profit |
|
|
|
2,800 |
10,352 |
Administrative expenses |
|
|
|
(2,284) |
(8,209) |
Profit on disposal before taxation |
|
|
|
516 |
2,143 |
Finance costs |
|
|
|
- |
(2) |
Profit from discontinued operation before taxation |
|
|
|
516 |
2,141 |
Taxation |
|
|
|
- |
- |
Profit from discontinued operation after taxation |
|
|
|
516 |
2,141 |
Disposal of discontinued operation |
|
|
|
2009 £'000 |
2009 £'000 |
Total consideration |
|
|
|
|
20,006 |
Payment received to settle intercompany debt |
|
|
|
|
(2,347) |
Net consideration for shares |
|
|
|
|
17,659 |
|
|
|
|
|
|
Less: Assets associated with discontinued operations |
|
|
|
|
(752) |
Costs associated with disposal |
|
|
|
|
|
- Management incentive payments (including |
|
|
|
(3,231) |
|
- Professional fees |
|
|
|
(643) |
|
- Other expenses and provisions |
|
|
|
(435) |
|
|
|
|
|
|
(4,309) |
Profit on disposal before taxation |
|
|
|
|
12,598 |
Taxation |
|
|
|
|
- |
|
|
|
|
|
|
Profit on disposal after taxation |
|
|
|
|
12,598 |
During the year the Ufindus business unit contributed £463,000 (2008: £2,702,000) to the Group's net operating cash flows, paid £99,000 (2008: £496,000) in respect of investing activities and paid £20,000 (2008: £9,000) in respect of financing activities.
A profit of £12,598,000 arose on the disposal of the Ufindus business unit as noted above. Of the total consideration, £2,000,000 was placed into escrow against warranty claims. In January 2009, £1,000,000 was released as planned and subject to any warranty claims the remainder will be released in July 2010. Amounts held in escrow accrue interest at prevailing market rates and the Group is due to receive such interest on any sums released under these escrow arrangements.
Management incentive payments of £3,231,000 were incurred as a result of the disposal. Of this total £3,062,000 was paid to former directors and £169,000 was paid to current directors of the Group. In addition professional fees of £643,000 and other expenses and provisions of £435,000 were incurred resulting in total costs associated with the disposal of £4,309,000.
A reconciliation of the profit on disposal to the cash flow from the disposal is given in the table below.
Receipt from disposal of discontinued operations |
|
|
|
|
£'000 |
Profit on disposal after taxation |
|
|
|
|
12,598 |
Payment received to settle intercompany debt |
|
|
|
|
2,347 |
Deferred consideration not yet received |
|
|
|
|
(1,000) |
Assets associated with discontinued operations |
|
|
|
|
752 |
Costs associated with disposal not yet paid |
|
|
|
|
538 |
Cash inflow from disposal of discontinued operations |
|
|
|
|
15,235 |
6. EARNINGS per ordinary share
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, after deducting any shares held in treasury. Fully diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the total of the weighted average number of ordinary shares in issue during the year and the dilutive potential ordinary shares relating to share options.
Continuing operations |
|
|
|
2009 £'000 |
2008 £'000 |
Loss from continuing operations for the financial year and basic earnings attributed to ordinary shareholders |
|
|
(1,932) |
(1,788) |
|
|
|
|
|
|
|
|
|
|
|
No |
No |
|
|
|
|
000 |
000 |
Weighted average number of ordinary shares: |
|
|
|
|
|
For basic earnings per share |
|
|
99,183 |
99,458 |
|
Exercise of share options |
|
|
|
- |
- |
For diluted earnings per share |
|
|
|
99,183 |
99,458 |
|
|
|
|
|
|
Basic earnings per share |
|
|
(1.95)p |
(1.80)p |
|
Fully diluted earnings per share |
|
(1.95)p |
(1.80)p |
Discontinued operations |
|
|
|
2009 £'000 |
2008 £'000 |
Profit from discontinued operations for the financial year and basic earnings attributed to ordinary shareholders |
|
|
516 |
2,141 |
|
Profit on disposal of discontinued operations |
|
|
12,598 |
- |
|
Total profit from discontinued operations |
|
|
13,114 |
2,141 |
|
|
|
|
|
|
|
|
|
|
|
No |
No |
|
|
|
|
000 |
000 |
Weighted average number of ordinary shares: |
|
|
|
|
|
For basic earnings per share |
|
|
99,183 |
99,458 |
|
Exercise of share options |
|
|
|
902 |
1,759 |
For diluted earnings per share |
|
|
|
100,085 |
101,217 |
|
|
|
|
|
|
Basic earnings per share |
|
|
13.22p |
2.15p |
|
Fully diluted earnings per share |
|
13.10p |
2.12p |
Total operations |
|
|
|
2009 £'000 |
2008 £'000 |
Profit for the financial year and basic earnings attributed to ordinary shareholders |
|
|
11,182 |
353 |
|
|
|
|
|
|
|
|
|
|
|
No |
No |
|
|
|
|
000 |
000 |
Weighted average number of ordinary shares: |
|
|
|
|
|
For basic earnings per share |
|
|
99,183 |
99,458 |
|
Exercise of share options |
|
|
|
902 |
1,759 |
For diluted earnings per share |
|
|
|
100,085 |
101,217 |
|
|
|
|
|
|
Basic earnings per share |
|
|
11.27p |
0.35p |
|
Fully diluted earnings per share |
|
11.17p |
0.35p |
For periods where the Group made a loss, there was no dilutive effect from the potential exercise of options.
7. POST BALANCE SHEET EVENT
On 11 May 2009, the Group acquired the entire issued share capital of RapidSwitch Limited for a total cash consideration of £5.25 million. Of the total consideration of £5.25 million, £4.3 million was paid on completion and a further £0.95 million is payable on 31 March 2010. In addition, at the date of acquisition, RapidSwitch Limited had approximately £0.8m of net debt. Due to the proximity of the date of approval of the financial statements to the date of acquisition there has been insufficient time available to enable the identification of all assets, liabilities and contingent liabilities existing at date of acquisition and to perform a full and reliable fair value exercise thereon. Consequently, full disclosure as set out in IFRS 3 'Business combinations' has not been given as it is impracticable to provide this information.
8. SHARE CAPITAL
|
|
|
Ordinary shares of 1p each |
|
|
|
|
Number of shares |
£'000 |
Authorised |
|
|
|
|
At 31 March 2007, 2008, and 2009 |
|
|
200,000,000 |
2,000 |
Called up, allotted and fully paid |
|
|
|
|
At 31 March 2007 |
|
|
99,432,635 |
994 |
Exercise of options |
|
|
6,667 |
- |
At 31 March 2008 |
|
|
99,439,302 |
994 |
Exercise of options |
|
|
800,000 |
8 |
At 31 March 2009 |
|
|
100,239,302 |
1,002 |
During the year the company issued an additional 800,000 (2008: 6,667) ordinary shares of 1p each in respect of the exercise of options, for which a net total of £50,000 (2008: £416) was received.
At 31 March 2009 the company held 3,294,547 (2008: nil) shares in treasury which are accounted for in the Own Shares reserve and had a nominal value of £32,945 (2008: £nil) and a market value of £1,070,728 (2008: £nil). This represented 3.4% (2008 - nil) of the issued share capital as at 31 March 2009 excluding treasury shares.
The share capital of iomart Group plc consists of ordinary shares with a par value of 1p. All shares, excluding treasury shares, are equally eligible to receive dividends and represent one vote at the shareholders' meetings of iomart Group plc. All shares issued at 31 March 2009 are fully paid.
9. ANNUAL REPORT AND ACCOUNTS
The Annual Report and Accounts for 2009 will be posted to shareholders on 31 July 2009 and will also be available free of charge on request from the company's registered office; Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow G20 0SP and on the Group's web-site at www.iomartgroup.com.
10. ANNUAL GENERAL MEETING
The Annual General Meeting of the company will be held at 2.30pm on 27 August 2009 at the company's registered office.