Interim Results
Iomart Group PLC
6 September 2001
IOMART GROUP PLC
INTERIM RESULTS AND ACQUISITION
iomart Group plc ('iomart'), the Glasgow based internet services business,
presents its consolidated interim results for the six month period ended 30
June 2001.
Financial Highlights
* Six month turnover of £2.70 million, 76% increase on first half 2000
* Loss for period of £3.28 million (6.1p per share)
* Cash balance of £10.88 million at 30 June 2001
Business Development Highlights
* Madasafish ISP business sold for £3 million cash
* 2,700 installed ADSL lines including On Cue acquisition
* Net Intelligence software added to iomart product range
* German messaging company CANBOX successfully acquired today
* Messaging products successfully launched
* Cost base reduced after voluntary redundancy programme
Nick Kuenssberg, Chairman, commented:-
'We have now completed significant moves to redirect the company. Having sold
our retail ISP business Madasafish for £3m, we have restructured and reduced
staff numbers, strengthened our ADSL business with the acquisition of On-Cue
and enhanced our capabilities with the purchase and integration of the Actis
Technology Net Intelligence product. Buying CANBOX today gives us both a
substantial market position in Germany and a good product that complements our
Thinkmail product portfolio. We believe that, despite ongoing losses, the
company with cash balances of £10m to support this revised business strategy
is now favourably positioned to make real progress'.
Further Information
Please contact iomart:
+44 (0) 141 931 7000
Angus MacSween, Chief Executive Officer
David Harrison, Finance Director
Operational Review
During 2001 we have focused on the implementation of our revised business
strategy we are pleased to report that we have made solid progress with our
aim to reposition iomart as a provider of internet and messaging solutions for
our business customers.
An important element in this transition was the successful disposal of our
consumer ISP business, Madasafish, completed on 10 May for a consideration of
£3 million cash. Securing a cash deal at this price under prevailing market
conditions was a considerable achievement. Under arrangements with the new
owners we continued to operate the service until they were ready to take over
the operation in early August.
Our ADSL business has continued to grow. The overall market uptake for ADSL in
the UK has been much less than predicted and many of our competitors have
struggled to make progress. In July we bought the ADSL customer base of OnCue
Telecommunications Ltd (in liquidation) for a price of £200,000. We now have a
total of 2,700 installed lines which, we believe, makes us the second largest
supplier of ADSL in the UK after BTOpenworld.
A major milestone earlier this year was the successful launch of our messaging
platform. We have made a substantial investment to create a first class
infrastructure enabling us to offer a powerful range of messaging solutions to
both large and small businesses. Experience to date indicates that this market
is still relatively in its infancy in the UK and the sales cycle is proving
longer than expected.
Interestingly, however, the one thing that continues to grow even in these
difficult times is the amount of email generated. Gartner Research project
that for businesses the number of mail boxes is growing at 40% a year, the
amount of mail per mailbox is growing at 40% a year and the size of the
average email is also growing at around 40% a year. The combination is 275%
growth in bytes/year for enterprises. We expect that most email systems will
need to be replaced or augmented in the next 2 years because of this growth
and we believe our product set and services are perfectly positioned to take
advantage of the weaknesses and lack of security in existing mail systems.
In July we purchased the business and assets of Actis Technology Limited from
the liquidator. This brought us a newly developed software product, Net
Intelligence, which provides organisations with a powerful tool to implement
and manage business policies around internet and email usage, illegal content
and behaviour, document management, and software management by monitoring and
identifying activity and content on PC's within a corporate network - the
first sale has now been closed. Given the ever growing costs and legal
responsibilities of company directors in this area we anticipate strong demand
for this product set.
Move into German business market
We are pleased to announce that we have completed today an agreement to
purchase the assets and business of CANBOX of Oldenburg, Germany, a 1997
start-up providing internet based unified messaging solutions and services.
The transaction will be completed through CANBOX Technologies GmbH, a newly
created wholly owned subsidiary of iomart Group plc, which has signed
contracts with the receivers for the two companies CANBOX Systems AG and
CANBOX Europe GmbH. The purchase price of EUR 700,000 includes all
intellectual property rights, the entire software developed and all related
fixed assets, payable in three tranches in September, December and March. In
addition iomart will acquire receivables for c. EUR 300,000 payable in
September and December.
The new business has a portfolio of substantial business customers which will
generate initial monthly revenues in excess of EUR 100,000 with potential for
further growth in a market that is more mature than UK.
The two founders of CANBOX augmented by 4 directors of iomart, will constitute
the board of this new company which has 23 employees. It is anticipated that
this will form the technical platform for significant development of iomart's
messaging products
We believe that this move to work with an experienced team focusing on the
German business market with an integrated messaging offering incorporating the
best of CANBOX and iomart represents an exceptional opportunity to develop our
strategy. It also provides an outlet into Europe's largest market for our Net
Intelligence product, which complements the messaging products and early
indications are that it is an ideal product for the German market.
As a wholly owned subsidiary the German company will be subject to the same
management and cost controls as the parent company, with focus on sales,
revenues and profits. We have confidence in our new German colleagues'
abilities to deliver the business plan agreed for Germany
We expect further such acquisition opportunities will arise in the coming
months as companies struggle to raise funding in the current climate. We
remain on the lookout for suitable deals that complement our existing
activities.
As part of repositioning the business, we undertook a major redundancy and
restructuring programme. A total of 46 staff from across the organisation
accepted the offer of voluntary redundancy and we have also closed our
Edinburgh office. Including the recent joiners from Actis and Canbox, our
current headcount is 129 staff. We place considerable emphasis on consulting
and communicating with our staff at all levels and were pleased to receive
Investors in People accreditation.
Financial Results
Turnover for the six months ended 30 June 2001 was £2.70 million. Compared to
2000, this is a 76% increase on the first half year and 31% on the second.
Turnover split by product shows £1.26 million from the consumer ISP business,
£0.62 million from ADSL and £0.82 million from web services (being co-location
/hosting, domain names and messaging). The consumer business was sold on 10
May 2001; however under transitional arrangements with the new owners, iomart
continued to operate the service and the turnover figure covers the full six
months.
The gross profit margin for the period is lower than for the previous year as
a result of several factors. First, we incurred gross losses over the 6
months of £0.26 million on Timezone, our unmetered access service. This
service launched late in 2000 and ceased in early August 2001. Second, after
10 May 2001, a large share of the sales of Madasafish interconnect revenue
were paid to the new owners. Third, a larger proportion of our revenue this
period came from ADSL on which, acting as a reseller, we make relatively lower
margins.
Total administrative expenses of £5.27 million comprise £2.17 million for
staff costs, £0.69 million for marketing, £0.65 million for operating our
network and technical infrastructure, £0.74 million for premises and
administrative expenses and £1.02 million for depreciation/amortisation. In
addition, we have provided £1.00 million for redundancy, restructuring and
related costs. The growth in administrative expenses compared to the previous
year is largely due to the introduction of our messaging infrastructure and
the recruitment of a direct sales organisation. Other operating income of £
0.06 million relates to grants received.
The operating loss for the period was £5.31million. The sale of the Madasafish
ISP business generated an exceptional profit of £1.83 million, made up of a
gain on sale of £2.96 million less a charge of £1.13 million to write down
assets relating to this business.
The loss before tax was £3.28 million. Loss per share was 6.1 pence or 6.4
pence on a diluted basis.
Cash balances at 30 June 2001 amounted to £10.88 million. Our financial focus
is to manage our cash religiously. We continue to strip costs out of the
business, whilst developing an organisation that can grow revenues and provide
great customer service.
Prospects
The short term outlook for the whole technology sector is undoubtedly
challenging. Across the board, businesses are curtailing and deferring their
spend on internet related services. Nevertheless, we believe that iomart has
created a broad set of products which is attracting strong interest from the
marketplace. While our revenue will take longer to grow than we had hoped, we
remain convinced that iomart is well placed to weather the storm and has
sufficient cash reserves to deliver our business plan.
Angus MacSween
Chief Executive Officer
Consolidated Profit and Loss Account
Six months ended 30 June 2001
6 months ended
Restated Year ended
30 June 30 June 31 December
2001 2000 2000
£ 000 £ 000 £ 000
TURNOVER
Continuing operations 1,437 593 1,551
Discontinued 1,259 937 2,030
Total turnover 2,696 1,530 3,581
Cost of sales (1,788) (494) (1,424)
GROSS PROFIT
Continuing operations 583 339 775
Discontinued 325 697 1,382
Gross profit 908 1,036 2,157
Administrative expenses (5,273) (2,747) (7,663)
Restructuring expenses (998) - -
Total administrative expenses (6,271) (2,747) (7,663)
Other operating income 55 170 219
Net operating expenses (6,216) (2,577) (7,444)
OPERATING LOSS
Continuing operations (4,334) (1,326) (4,857)
Discontinued (974) (215) (430)
Group operating loss (5,308) (1,541) (5,287)
Profit on disposal of Madasafish 1,829 - -
LOSS ON ORDINARY ACTIVITIES (3,479) (1,541) (5,287)
BEFORE INTEREST
Net interest 199 (206) 185
LOSS ON ORDINARY ACTIVITIES (3,280) (1,747) (5,102)
BEFORE TAXATION
Tax on loss on ordinary activities - - -
LOSS ON ORDINARY ACTIVITIES AFTER (3,280) (1,747) (5,102)
TAXATION FOR THE PERIOD
Loss per ordinary share (pence)
Basic (6.1p) (4.4p) (10.9p)
Diluted (6.4p) (4.4p) (11.0p)
There have been no recognised gains and losses attributable to the
shareholders other than the loss for the current financial period and
accordingly, no statement of total recognised gains and losses is shown.
Consolidated Balance Sheet
30 June 2001
Restated
30 June 30 June 31 December
2001 2000 2000
£ 000 £ 000 £ 000
FIXED ASSETS
Intangible assets 796 130 1,174
Tangible assets 2,719 1,555 3,960
3,515 1,685 5,134
CURRENT ASSETS
Debtors 1,640 862 1,792
Cash at bank and in hand 10,877 16,884 12,026
12,517 17,746 13,818
CREDITORS: amounts falling due within (3,975) (1,999) (3,772)
one year
NET CURRENT ASSETS 8,542 15,747 10,046
TOTAL ASSETS LESS CURRENT LIABILITIES
12,057 17,432 15,180
CREDITORS: amounts falling due after (1,232) (517) (1,620)
more than one year
PROVISIONS FOR LIABILITIES AND CHARGES (545) - -
10,280 16,915 13,560
CAPITAL AND RESERVES
Called up share capital 538 538 538
Capital redemption reserve 1,200 1,200 1,200
Share premium account 19,087 19,087 19,087
Profit and loss account (10,545) (3,910) (7,265)
TOTAL EQUITY SHAREHOLDERS' FUNDS 10,280 16,915 13,560
The comparative figures for the financial year ended 31 December 2000 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 June 2001
6 months ended
Restated Year ended
30 June 30 June 31 December
2001 2000 2000
£ 000 £ 000 £ 000
Net cash outflow from operating (3,151) (1,211) (4,681)
activities
Returns on investments and
servicing of finance
Bank interest received
Charge on early redemption of loan 318 215 667
Bank and other loan interest paid - (333) (333)
Finance lease and hire purchase - (33) (13)
interest paid
(119) (55) (136)
Net cash inflow/(outflow) from 199 (206) 185
returns on investments and
servicing of finance
Capital expenditure
Payments to acquire tangible (583) (230) (695)
fixed assets
Payments to acquire intangible (7) - (511)
fixed assets
Net cash outflow from capital (590) (230) (1,206)
expenditure
Net proceeds of disposal of 2,960 - -
Madasafish
Acquisitions - - 5
Cash outflow before financing (582) (1,647) (5,697)
Financing
Issue of ordinary shares - 20,073 20,073
Expenses of share issue - (748) (748)
Repayment of loans - (1,000) (1,000)
Repayment of hire purchase and (567) (269) (1,077)
finance leases
Net cash (outflow)/inflow from (567) 18,056 17,248
financing
(Decrease)/increase in cash in (1,149) 16,409 11,551
the period
Notes to the Accounts
Six months ended 30 June 2001
1. Accounting policies
The interim results have been prepared using accounting policies consistent
with those set out in the group financial statements for the year ended 31
December 2000. There has been no impact on the financial statements following
the adoption of FRS 18.
2. Prior period adjustment
The comparative figures for the six months ended 30 June 2000 have been
restated to reflect an increase in share premium account of £145,000 relating
to expenses now charged to the profit and loss account in connection with the
listing of the company on AIM.
3. Reconciliation of operating loss to net cash outflow from
operating activities
6 months ended
Restated Year ended
30 June 30 June 31 December
2001 2000 2000
£ 000 £ 000 £ 000
Operating loss (5,308) (1,541) (5,287)
Depreciation 798 307 826
Amortisation of intangible assets 227 68 219
Write down of fixed assets 235 - -
on restructuring
Loss on sale of fixed - - 24
assets
Decrease/(increase) in 71 (492) (1,283)
debtors
Increase in creditors 281 447 820
Increase in provisions for 545 - -
liabilities and charges
Net cash outflow from (3,151) (1,211) (4,681)
operating activities
4. Reconciliation of net cash flow
to movement in net funds
(Decrease)/increase in cash in (1,149) 16,409 11,551
period
Cash outflows from debt and lease 567 1,269 2,077
financing
Change in net funds from cash flows (582) 17,678 13,628
New hire purchase and finance leases(102) (198) (2,723)
Hire purchase acquired with - - (42)
subsidiary
Opening net funds/(debt) 9,398 (1,465) (1,465)
Closing net funds 8,714 16,015 9,398
5. Analysis of change in net funds
At Other At
31 December Cash non-cash 30 June
2000 flow changes 2001
£ 000 £ 000 £ 000 £ 000
Cash at bank and in hand 12,026 (1,149) - 10,877
Finance leases and hire (2,628) 567 (102) (2,163)
purchase
Net funds 9,398 (582) (102) 8,714
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 June 2001 which comprises the profit and loss account,
the balance sheet, the cash flow statement and related notes 1 to 5. 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.
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 policies 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 June 2001.
Deloitte & Touche
Chartered Accountants
Lomond House
9 George Square
Glasgow
G2 1QQ
5 September 2001
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