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IOM Iomart Group Plc

145.40
1.40 (0.97%)
28 Mar 2024 - Closed
Delayed by 15 minutes
Share Name Share Symbol Market Type Share ISIN Share Description
Iomart Group Plc LSE:IOM London Ordinary Share GB0004281639 ORD 1P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
  1.40 0.97% 145.40 143.00 145.40 149.80 143.00 144.00 41,414 16:35:26
Industry Sector Turnover Profit EPS - Basic PE Ratio Market Cap
Services, Nec 115.64M 7M 0.0624 22.92 160.25M

Iomart Group PLC Final Results (8742H)

13/06/2017 7:00am

UK Regulatory


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TIDMIOM

RNS Number : 8742H

Iomart Group PLC

13 June 2017

13 June 2017

iomart Group plc

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

Final Results for the Year ended 31 March 2017

iomart (AIM:IOM), the cloud computing company, is pleased to report its consolidated final results for the year ended 31 March 2017.

FINANCIAL HIGHLIGHTS

   --      Revenue growth of 17% to GBP89.6m (2016: GBP76.3m) 

o Cloud Services segment organic revenue growth of 10% (2016: 9%)

   --      Adjusted EBITDA(1) growth of 13% to GBP36.6m (2016: GBP32.3m) 
   --      Adjusted profit before tax growth(2) of 18% to GBP22.4m (2016: GBP19.0m) 

-- Adjusted diluted earnings per share(3) from operations increased by 18% to 16.99p (2016: 14.44p)

   --      Cashflow from operations increased by 22% to GBP37.8m (2016: GBP30.9m) 
   --      Adjusted profit before tax(2) margins maintained at 25% (2016: 25%) 
   --      Proposed final dividend increased by 90% to 6.00p per share (2016: 3.15p per share) 

OPERATIONAL HIGHLIGHTS

   --      Acquisition of Cristie Data during the year for a net consideration of GBP0.7m 
   --      Acquisition of Dediserve post year end for a consideration of EUR7.9m 
   --      Further investment in skills and accreditations to support broadening service offering 
   --      Strengthened relationships with Hypercloud vendors 

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 13% to GBP14.7m (2016: GBP13.0m) 
   --      Basic earnings per share from operations increased by 9% to 11.27p (2016: 10.32p) 

(1) Throughout this statement adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges, acquisition costs and in the previous year gain on revaluation of contingent consideration. 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, shared based payment charges, mark to mark adjustments in respect of interest rate swaps, acquisition costs, interest on contingent consideration due and in the previous year gain on revaluation of contingent consideration and the accelerated write off of arrangement fees on the bank borrowing facility which was restructured during that year.

(3) Throughout this statement adjusted earnings per share is earnings per share before amortisation charges on acquired intangible assets, shared based payment charges, mark to mark adjustments in respect of interest rate swaps, acquisition costs, interest on contingent consideration due, and in the previous year gain on revaluation of contingent consideration and the accelerated write off of arrangement fees on the bank borrowing facility which was restructured during that year, including the taxation effect of these.

Angus MacSween, CEO commented,

"This has been another year of strong growth and trading since the year end remains good.

"The long term opportunity and runway for success remains large and long. iomart remains well positioned to take advantage of that opportunity and to deliver further significant growth.

"I look forward, once again, with confidence to the year ahead."

For further information:

 
 iomart Group plc      Tel: 0141 931 6400 
 Angus MacSween 
 Richard Logan 
 
 Peel Hunt LLP         Tel: 020 7418 8900 
  (Nominated Adviser 
  and Broker) 
 Richard Kauffer 
  Euan Brown 
 
 Alma PR               Tel: 020 8004 4218 
 Hilary Buchanan 
 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.

To find out more about our managed cloud services visit www.iomart.com

CHAIRMAN'S STATEMENT

We have once again seen another year of excellent performance for our shareholders. Not only have we maintained our relative level of organic growth in our Cloud Services segment, our Easyspace segment has also returned to organic growth after declining a little last year.

Both of those elements of organic growth plus the acquisition of Cristie during the year, which we have allocated to a new Non-recurring Revenue segment, together with the full year contributions of SystemsUp and United Hosting has meant we have maintained our overall level of revenue growth for the year. In May, after the end of our financial year we purchased Dediserve and we believe that there will be other opportunities to allow us to continue to add to our organic growth through acquisition.

We have again enjoyed a substantial increase in profitability over the year, driven by that organic and acquisitive revenue growth.

All of this progress is a result of a great deal of hard work by our executives and staff and I thank them all on behalf of the Board and the shareholders for their efforts over the year.

Sarah Haran, who has served as an executive director of iomart throughout the time the Group has been listed on AIM, decided to step down from the Board at the end of this financial year. She has given many years of loyal and valuable service to the Group and on behalf of all shareholders I thank her warmly for her service.

After nearly 6 years of first class commitment and service, Crawford Beveridge has chosen not to stand for re-election as Non-Executive Director at our forthcoming Annual General Meeting. Both personally and on behalf of everyone connected with the Group, I want to thank him for his valuable contribution to the development of iomart over the years. The search for a replacement for Crawford is at an advanced stage and we expect to be in a position to make an announcement about this in the near future.

As we indicated in our trading update which was issued at the end of March we have decided to improve our dividend policy to reflect the ongoing growth that we have been delivering, the level of cash we generate, and the confidence we continue to have in our future prospects. We had previously committed to paying up to 25% of our adjusted diluted earnings per share by way of dividend and last year our pay-out ratio was 22%. We have now increased the upper limit of dividend pay-out to 40% and the Board is proposing to pay a final dividend of 6.0p per share on 6 September 2017 to shareholders on the register on 11 August 2017, based on an ex-dividend date of 10 August 2017. This represents an increase of 90% over the dividend last year and equivalent to a pay-out ratio of 35% of adjusted diluted earnings per share. 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 will be distributed with the annual accounts in due course.

We have started the new financial year in a strong position and I look forward to another exciting year of growth with considerable confidence.

Ian Ritchie

Chairman

12 June 2017

CHIEF EXECUTIVE'S REVIEW

Introduction

We have again enjoyed another very successful year with revenues and profits growing to record levels both organically and through acquisition as we continue to deliver an ever broader range of cloud solutions.

Our revenues in the year were GBP89.6m, an increase of 17% over the previous year, our adjusted EBITDA of GBP36.6m showed a 13% increase over the previous year and our profit before tax also increased by 13% to GBP14.7m.

The opportunity remains to continue to grow both organically and through a disciplined acquisition strategy.

Market

The market for cloud services continues to grow and evolve. There is still a long runway of opportunity as the 'IT as a service' philosophy and delivery unfolds. There is an inevitability around this fundamental change in how IT is delivered but there is also a built in delay mechanism as systems, processes and applications are dealt with on a 'one by one' basis rather than in one full organisation wide swoop, as applications and workloads are individually considered for an upgrade, refresh or rewrite.

Security has again been in the headlines and it serves to show that on premise infrastructure is far more difficult to keep secure and available on a 24x7x365 basis than those in the cloud, in specialist datacentres, with 24x7x365 monitoring and management and with all the required perimeter defences in place.

We believe that iomart is one of the most compliant organisations with regard to security and certification in the sector. This will drive more opportunity for us, with our long experience of security whether it be infrastructure and network protection, detection and response to threats, access control, log management, or compliance with various standards.

We are now less than a year away from the introduction of the new regulations around data security, the EU General Data Protection Regulation (GDPR). Our plans for the introduction of these regulations are well advanced both for the Group's own needs and to help other organisations understand the implications for their own business and thereby to become compliant.

Organisations today are confronted by an increasingly complex set of cloud decisions in terms of cost, value, effectiveness, complexity, security, data protection and compliance. Whatever the cloud challenge iomart can assist all organisations in moving to the cloud, whether it be private, public or hybrid approach. The long term recurring revenue opportunity for iomart remains compelling. We are well established as a major player in providing the flexible cloud solutions that businesses require.

The future success of cloud companies will be driven by their ability to address further towards the application layer as well as the underlying infrastructure. There is growing evidence of different market segments with distinct hosting and cloud requirements and characteristics. This is leading to a growing trend in specialisation in various verticals such as e-commerce or financial software and this is one reason why the hosting and cloud markets will be served by a wide variety of vendors and vendor types.

Our challenge is to continue to navigate through these early days of the further evolution of cloud adoption and to ensure we build the skills and resources necessary to be successful in that ever more complex space.

Acquisitions

We again augmented our organic growth through the acquisition of Cristie Data Limited ("Cristie") in August and after the year-end, in May, through the acquisition of Dediserve Limited ("Dediserve"), a Dublin based provider of Cloud solutions in ten locations around the world. To date we have not seen any impact from the UK's decision to leave the European Union other than the weakening of Sterling. The Board has considered the impact on the Group of the UK's decision to leave and whilst there are still many issues to be resolved we believe we will be able to deal with them as they arise. The acquisition of Dediserve gives us a Cloud operation in geographical areas where we do not currently have a presence, including another base in the European Union.

We continue to look for businesses that fit our criteria with a view to making further acquisitions in the coming year.

Operational Review

We have previously reported in two operating segments (Cloud Services and Easyspace) both of which involve the provision of services from common infrastructure delivering a very high level of recurring revenue. During the year we acquired Cristie and we have decided to report that in a separate segment as it predominantly involves the provision of IT infrastructure on customers' premises with little by the way of recurring revenue. We have designated this segment as Non-recurring Revenue.

Cloud Services

Revenues in this segment have grown by 11% to GBP72.7m (2016: GBP65.4m) partly as a result of the continued organic growth and as a result of acquisitions. Organic growth in the year was 10%, slightly above the level of 9% we have delivered in our last two financial years and our adjusted EBITDA percentage margin continues to be amongst the highest in the industry.

Through our iomart Cloud unit we provide complex hosting solutions, involving private, public and hybrid cloud solutions with customers typically paying for these services on a monthly basis on contracts ranging from one to three years in length. Our churn levels in this unit have stabilised and are in line with that experienced last year.

Our server infrastructure business, delivering dedicated physical servers to customers, is run as one unit encompassing the RapidSwitch and Redstation brands. We manage many thousands of physical servers for our customers using highly automated systems and processes which we continue to develop and improve.

Our Back-up and Disaster Recovery specialism is primarily sold through Backup Technology.

SystemsUp provides consultancy services to organisations, particularly in the public sector, helping them to decide on their cloud strategy with an emphasis on the public cloud. Having a consultancy division within the Group allows us to engage at an earlier stage with organisations considering their cloud strategy and provides the opportunity to leverage the provision of those consultancy services to gain recurring revenue through the deployment of cloud solutions. However, unlike our other activities within the Cloud Services segment there is less recurring revenue generated from consultancy services and this area has not performed as predicted during the year and in future we will be more prudent in projecting the revenues which we expect to generate to recognise the difficulty in estimating revenue levels. We have made some changes to senior management within the consultancy unit and have also refined its strategic approach to focus on the delivery of a set of core cloud technologies. This is with a view to ensuring that as often as possible projects that are delivered will ultimately have a managed service and recurring revenue element.

We are able to supply products and services across the cloud spectrum and do so using common platforms across the Group.

Within the scope of our product set we have strengthened our relationships with Amazon Web Services (AWS) and Microsoft now labelled as Hypercloud vendors. Both are growing strongly on a global basis although they still account for a very small fraction of overall IT and Cloud spend.

We are now an Advanced Partner of AWS and moving towards the next level. We are one of Microsoft's most respected Cloud Service Providers in the UK and we are being presented with a growing number of Microsoft Azure opportunities.

We continue to build on our skills and accreditations and see constant improvement across the Group's skillset.

Easyspace

In line with our expectations the Easyspace segment has performed well over the year, returning to a position of organic revenue growth.

Our activities within this segment provide a range of products to the micro and SME markets including domain names, shared, dedicated and virtual servers and email services.

Revenues in the segment have grown by 22% to GBP13.2m (2016: GBP10.9m) mainly as a result of the acquisition of United Hosting in the previous year. Organic growth in the year was 4% against a decline of 8% in the previous year.

Non-recurring revenue

The non-recurring revenue segment contains the results of Cristie since we acquired that business in August 2016. In just over 7 months of ownership the revenue generated was GBP3.6m.

Cristie primarily provides solutions similar to those provided by the Cloud Services segment with the exception that they would tend to be less complex in nature and predominantly installed on the customers' own premises rather than from a datacentre location. These solutions would involve, for example, the provision of storage and back-up infrastructure. Cristie has a substantial number of public sector customers in areas such as health and education and we welcome its activities into the Group.

Trading Results

Revenue

Revenues for the year grew by 17% to GBP89.6m (2016: GBP76.3m) through the combination of continued organic growth and the impact of acquisitions.

Our Cloud Services segment grew revenues by 11% to GBP72.7m (2016: GBP65.4m). This growth was helped by a full year contribution from SystemsUp which we acquired in June 2015. Revenue growth in the Cloud Services segment excluding the impact of acquisitions was 10% (2016: 9%).

Revenues within the Easyspace segment grew by 22% to GBP13.2m (2016: GBP10.9m). This growth was helped by a full year contribution from United Hosting which we acquired in November 2015. Revenue growth in the Easyspace segment excluding the impact of acquisitions was 4% (2016: decline of 8%). As expected the decline in the organic revenue levels in this segment has stopped as new sales and churn levels have moved into balance, largely due to revised pricing in the domain market and the introduction of new products. As a result, the segment has returned to an encouraging level of organic growth.

During the year we acquired Cristie which is largely a non-recurring revenue operation. Given that the vast majority of our revenue in our Cloud Services and Easyspace segments is recurring in nature we have decided to review the performance of this unit separately and as a consequence we will report this in a separate segment which we have called our Non-recurring Revenue segment. Revenues of GBP3.6m (2016: GBPnil) were generated in this segment in the year.

We continue to have good revenue visibility and high levels of recurring revenue. With our larger customers we have multi-year contracts for the provision of complex managed hosting solutions. Many of our smaller customers pay in advance for the provision of hosting services resulting in a substantial sum of deferred revenue which we then recognise during the period over which we provide our services.

Gross Margin

Our gross profit for the year was GBP57.3m (2016: GBP51.6m) increasing as a result of the additional revenues we generated as explained above. In percentage terms our margin reduced to 64.0% (2016: 67.7%). This expected reduction in percentage has arisen partly due to the changing nature of the provision of some of our cloud infrastructure and partly due to the impact of the acquisition of Cristie.

The provision of Public Cloud solutions by our Cloud Services segment results in a charge from the Public Cloud service provider within our cost of sales. This is offset by savings in our costs for power, which is included within cost of sales, and some support services which are provided by the Public Cloud service provider, which is included within our overheads and depreciation. Whilst our gross margin percentage has reduced our adjusted profit before tax percentage margin has been maintained partly due to the offsetting savings when providing Public Cloud solutions.

The gross margin within our traditional private and hybrid cloud solutions continues to rise due to our relatively static datacentre costs which to some extent are fixed in nature and therefore do not rise in line with revenue growth.

Cristie predominantly sells hardware and software to its customers on which it incurs a substantial cost of sale and therefore a lower gross margin percentage contribution than in the other segments.

The gross margin within our Easyspace segment improved over the year due largely to the impact of the acquisition of United Hosting.

Adjusted EBITDA

The adjusted EBITDA for the year was GBP36.6m (2016: GBP32.3m) an increase of 13%. As expected, our adjusted EBITDA margin has reduced to 40.8% (2016: 42.4%). The Cloud Services segment increased its absolute level of margin over the period whilst experiencing a modest reduction in its percentage margin, the Easyspace segment increased both its absolute and percentage margin and the Non-recurring Revenue segment has a lower adjusted EBITDA contribution than the other segments which contributed to the overall adjusted EBITDA percentage margin reduction.

Adjusted EBITDA in the Cloud Services segment was GBP33.7m (2016: GBP31.1m), an increase of 8.4%. This improved performance is mainly a direct result of the additional gross margin delivered by the increase in sales revenue, from both organic and acquired sources, offset by a modest increase in administrative expenses which has been helped by an exchange gain. In percentage terms the adjusted EBITDA margin has reduced to 46.3% (2016: 47.5%). This reduction is due to the impact of the reduced gross margin percentage as previously explained together with the full year effect of SystemsUp which has a lower adjusted EBITDA margin than the rest of the segment's operations but which, unlike the rest of the segment, has no depreciation charges. This was offset by administrative expenses rising at a slower rate than revenue which improved the segment's EBITDA percentage margin.

The Easyspace segment's adjusted EBITDA was GBP6.2m (2016: GBP5.1m) an increase of 22.6%. This improvement in adjusted EBITDA is almost entirely due to the full year impact of United Hosting which was acquired in the previous year. Excluding the acquisition, adjusted EBITDA increased slightly as a result of the increase in organic revenue. In percentage terms the adjusted EBITDA margin has improved to 47.1% (2016: 46.8%). Excluding the acquisition of United Hosting the Easyspace segment maintained its adjusted EBITDA percentage margin. The improvement in percentage margin is therefore entirely due to the impact of the previous year's acquisition.

The Non-recurring segment's adjusted EBITDA was GBP0.3m (2016: GBPnil). In percentage terms the adjusted EBITDA margin was 9.0%.

Group overheads, which are not allocated to segments, include the cost of the Board, the running costs of the headquarters in Glasgow, Group marketing, human resource, finance and design functions and legal and professional fees for the year. These overhead costs have reduced slightly to GBP3.6m (2016: GBP3.8m) mainly due to staff related costs.

Adjusted profit before tax

Depreciation charges of GBP11.0m (2016: GBP10.9m) have remained at the same level as previous years as a result of charges for the equipment bought to provide services to the additional Cloud Services segment customers being offset by equipment purchased in previous periods becoming fully depreciated and thereby no longer impacting the depreciation charge in the year.

The charge for amortisation of intangibles, excluding amortisation of intangible assets resulting from acquisitions ("amortisation of acquired intangible assets") of GBP1.9m (2016: GBP1.2m) has increased over the year as a result of an increase in the level of software acquired over the year and the advance purchase of some software licences.

Finance income in the period was GBPnil (2016: GBP0.1m). Finance costs of GBP1.6m (2016: GBP1.4m), excluding the mark to market adjustment in respect of interest swaps on the Company's loans, the interest charge on the contingent consideration due in respect of acquisitions and in the previous year the accelerated write off of arrangement fees on the restructuring of the bank facility, remained static over the period.

After deducting the charges for depreciation, amortisation, excluding the charges for the amortisation of acquired intangible assets, and finance costs, excluding the mark to market adjustment in respect of interest swaps on the Company's loans, the interest charge on the contingent consideration due in respect of acquisitions and in the previous year the accelerated write off of arrangement fees on the restructuring of the bank facility, and crediting the finance income from the adjusted EBITDA, the Group's adjusted profit before tax was GBP22.4m (2016: GBP19.0m) an increase of 18%.

The adjusted profit before tax margin for the year was 25.0% (2016: 24.9%). This modest margin improvement of 0.1% has two largely offsetting components. The adjusted EBITDA margin reduced by 1.6% as previously explained. Depreciation charges as a percentage of revenue have fallen by 2.0% partly due to tangible assets becoming fully depreciated, partly due to the provision of Public Cloud not incurring a depreciation charge and partly due to some of our activities not needing the purchase of tangible assets in the provision of their services.

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 particularly 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                   2017       2016 
  before tax to profit before tax                 GBP'000    GBP'000 
 Adjusted profit before tax                        22,406     18,970 
 Less: Amortisation of acquired intangible 
  assets                                          (5,558)    (5,354) 
 Less: Acquisition costs                            (104)      (116) 
 Less: Share based payments                       (1,844)    (1,081) 
 Add: Mark to market adjustment on 
  interest rate swaps                                  84         64 
 Less: Accelerated write off of arrangement 
  fees on restructuring of the bank 
  facility                                              -      (177) 
 Less: Interest on contingent consideration         (330)      (152) 
 Add: Gain on revaluation of contingent 
  consideration                                         -        870 
 Profit before tax                                 14,654     13,024 
----------------------------------------------  ---------  --------- 
 

The adjusting items are: charges for the amortisation of acquired intangible assets of GBP5.6m (2016: GBP5.4m) which have increased slightly mainly as a result of the acquisitions made in the year and the full year effect of acquisitions made in previous years; acquisition costs of GBP0.1m (2016: GBP0.1m) as a result of acquisitions made; share based payment charges of GBP1.8m (2016: GBP1.1m) which have increased as a result of the award of share options in the year; a mark to market credit adjustment in respect of interest rate swaps on the Company's loans of GBP0.08m (2016: GBP0.06m); the accelerated write off of arrangement fees on the restructuring of the bank facility during the previous year of GBPnil (2016: GBP0.2m); the charge of interest, at the weighted average cost of capital rate of 15.5%, on the contingent consideration expected to be paid for the acquisition of United Hosting of GBP0.3m (2016: GBP0.2m); and in the previous period the gain on the revaluation of the contingent consideration to be paid for SystemsUp of GBPnil (2016: GBP0.9m).

After deducting these items from the adjusted profit before tax; the reported profit before tax was GBP14.7m (2016: GBP13.0m) an increase of 13%. In percentage terms the profit before tax margin was 16% (2016: 17%). The reduction in percentage margin is for the same reasons as the adjusted profit before tax percentage margin change and also due to the gain on revaluation of contingent consideration recorded in the previous year which improved the percentage margin last year.

Taxation

There is a tax charge for the year of GBP2.6m (2016: GBP2.0m). The tax charge for the year is made up of a corporation tax charge of GBP4.4m (2016: GBP3.6m) with a deferred tax credit of GBP1.8m (2016: GBP1.6m). The effective rate of tax for the year is 17.5% (2016: 15.4%) and an explanation of this increase in given in note 4. At the year end, the Group has no unused tax losses available for offset against future profits (2016: GBPnil).

Profit for the year from total operations

After deducting the tax charge for the year from the profit before tax the Group has recorded a profit for the year from total operations of GBP12.1m (2016: GBP11.0m) an increase of 10% which has been significantly adversely affected by the gain on revaluation on contingent consideration recorded in the previous year.

Earnings per share

Adjusted diluted earnings per share, based on profit for the year attributed to ordinary shareholders before share based payment charges, amortisation charges of acquired intangible assets, mark to market adjustments in respect of interest rate swaps, the charge of interest on contingent consideration due, acquisition costs and in the previous year the accelerated write off of arrangement fees on the restructuring of the bank facility and the gain on the revaluation of the contingent consideration to be paid for SystemsUp and the tax effect of these items was 16.99p (2016: 14.44p), an increase of 18%.

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

The calculation of both adjusted earnings per share and basic earnings per share is included at note 6.

Basic earnings per share from continuing operations was 11.27p (2016: 10.32p), an increase of 9% which has been significantly adversely affected by the gain on contingent consideration recorded in the previous year.

Acquisitions

On 25 August 2016 the Company acquired the entire share capital of Cristie on a no debt, no cash, normalised working capital basis. At completion a payment of GBP3.8m in cash, including adjustments required in respect of normalised working capital, was made to acquire Cristie which at the time had net debt/cash of GBP3.1m resulting in a net outflow of funds of GBP0.7m to acquire the company.

After the end of the financial year, on 17 May 2017 we completed the acquisition of the entire share capital of Dediserve on a no debt, no cash, normalised working capital basis for a total purchase price of EUR7.9m. An initial payment was made at completion of EUR7.8m (GBP6.7m) in cash less the sum of EUR0.25m (GBP0.21m) 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. The initial payment was funded by a draw down from the Group's revolving credit facility. A further sum of EUR0.1m has been deferred and is due to be paid on the earlier of the completion of the handover of certain operational tasks or 6 months after the original purchase date.

Dividends

We have proposed a 90% increase in the level of dividend pay-out for this year thereby raising the rate to 6.00p per share (2016: 3.15p). We have also committed to an improved pay-out ratio in the future based on the level of adjusted diluted earnings per share we deliver. The Board has taken the decision to increase the dividend return to shareholders as a result of the recurring revenue nature of the Group, the level of operating cash which we now deliver and the low level of indebtedness within the Group. We have continued with our acquisition activity having brought Cristie into the Group during the year and Dediserve post the year end and we are confident that we can make additional acquisitions in the future. The proposed change to dividends will have no impact on our ability to continue to make acquisitions of the like we have to date.

Cash flow and net debt

Net cash flows from operating activities

The Group continued to generate high levels of operating cash over the year. Cash flow from operations was GBP37.8m (2016: GBP30.9m) with the significant increase of 22% over the previous year's level due to a combination of the increase in adjusted EBITDA and improvements in working capital management. After deducting payments for corporation tax of GBP3.9m (2016: GBP4.3m) the net cash flow from operating activities was GBP33.9m (2016: GBP26.6m).

Cash flow from investing activities

In line with our strategy of accelerating our growth by acquisition the Group continued to incur substantial sums on investing activities, spending a total of GBP15.2m (2016: GBP32.6m) in the year. Of this amount, GBP0.7m (2016: GBP15.9m), net of cash acquired of GBP3.1m (2016: GBP4.5m), was incurred in relation to the acquisition of Cristie as described above. In addition, the Group incurred expenditure of GBP1.16m (2016: GBP1.65m) in respect of contingent consideration due on acquisitions.

The Group continues to invest in property, plant and equipment through expenditure on datacentres and on equipment required to provide managed services to both its existing and new customers. As a result, the Group spent GBP10.2m (2016: GBP12.4m) on assets, net of related finance lease drawdown, trade creditor movements and non-cash reinstatement provisions.

Expenditure was also incurred on development costs of GBP1.4m (2016: GBP1.1m), on intangible assets of GBP1.8m (2016: GBP1.2m) and on property lease deposits of GBPnil (2016: GBP0.3m).

Cash flow from financing activities

There were no drawdowns of the bank loan in the year (2016: GBP16.5m) to fund the purchase of the acquisitions. Bank loan repayments of GBP16.0m (2016: GBP3.5m) were made in the year. We received GBP1.1m (2016: GBP0.1m) from the issue of shares as a result of the exercise of options by employees. We also made a dividend payment of GBP3.4m (2016: GBP2.7m); incurred finance costs of GBP1.2m (2016: GBP1.5m); and made lease repayments of GBP0.6m (2016: GBP1.0m).

Net cash flow

As a consequence, our overall cash expenditure during the year was GBP1.4m (2016: GBP2.0m cash generated) which resulted in cash and cash equivalent balances at the end of the year of GBP8.9m (2016: GBP10.3m). After recognising bank loans of GBP18.6m (2016: GBP34.5m) and finance lease obligations of GBP0.9m (2016: GBP1.4m) net debt balances at the end of the period stood at GBP10.6m (2016: GBP25.6m) a level the Board is comfortable with given the strong cash generation of the Group.

Financial position

The Group is now in a position where it is generating substantial amounts of operating cash. The generation of that cash flow together with the committed bank loan facility for acquisitions and capital expenditure and finance lease facilities which are also available to fund capital expenditure, means that the Group has the liquidity it requires to continue its growth through both organic and acquisitive means.

Current trading and outlook

This has been another year of strong growth and trading since the year end remains good.

The long term opportunity and runway for success remains large and long. iomart remains well positioned to take advantage of that opportunity and to deliver further significant growth.

I look forward, once again, with confidence to the year ahead.

Angus MacSween

Chief Executive Officer

12 June 2017

Consolidated Statement of Comprehensive Income

Year ended 31 March 2017

 
                                                    2017       2016 
                                         Note    GBP'000    GBP'000 
 Revenue                                          89,573     76,280 
 
 Cost of sales                                  (32,266)   (24,650) 
                                               ---------  --------- 
 
 Gross profit                                     57,307     51,630 
 
 Administrative expenses                        (41,074)   (37,917) 
--------------------------------------  -----  ---------  --------- 
 
 Operating profit                                 16,233     13,713 
 
 Analysed as: 
 Earnings before interest, 
  tax, depreciation, amortisation, 
  acquisition costs, share 
  based payments and gain on 
  revaluation of contingent 
  consideration                                   36,570     32,341 
 Share based payments                            (1,844)    (1,081) 
 Acquisition costs                                 (104)      (116) 
 Depreciation                             9     (10,972)   (10,878) 
 Amortisation - acquired intangible 
  assets                                  8      (5,558)    (5,354) 
 Amortisation - other intangible 
  assets                                  8      (1,859)    (1,199) 
--------------------------------------  -----  ---------  --------- 
 
 Gain on revaluation of contingent 
  consideration                                        -        870 
 Finance income                                       22        128 
 Finance costs                                   (1,601)    (1,687) 
                                               ---------  --------- 
 
 Profit before taxation                           14,654     13,024 
 
 Taxation                                 4      (2,571)    (2,005) 
                                               ---------  --------- 
 
 Profit for the year attributable 
  to equity holders of the 
  parent                                          12,083     11,019 
 
 
 Other comprehensive income 
 
 Amounts which may be reclassified 
  to profit or loss 
 Currency translation differences                     22         10 
--------------------------------------  -----  ---------  --------- 
 Other comprehensive income 
  for the year                                        22         10 
--------------------------------------  -----  ---------  --------- 
 
 Total comprehensive income 
  for the year attributable 
  to equity holders of the 
  parent                                          12,105     11,029 
 
 
 
 Basic and diluted earnings 
  per share 
 
 Total operations 
                                          6        11.27      10.32 
 Basic earnings per share                              p          p 
                                          6        11.08      10.17 
 Diluted earnings per share                            p          p 
--------------------------------------  -----  ---------  --------- 
 

Consolidated Statement of Financial Position

As at 31 March 2017

 
                                               2017       2016 
                                    Note    GBP'000    GBP'000 
--------------------------------   -----  ---------  --------- 
 ASSETS 
 Non-current assets 
 Intangible assets - goodwill        8       62,000     61,123 
 Intangible assets - other           8       19,707     23,065 
 Lease deposits                               2,760      2,760 
 Property, plant and equipment       9       35,049     36,045 
                                            119,516    122,993 
 Current assets 
 Cash and cash equivalents                    8,906     10,341 
 Trade and other receivables                 15,080     13,718 
                                             23,986     24,059 
 
 Total assets                               143,502    147,052 
 
 LIABILITIES 
 Non-current liabilities 
 Contingent consideration 
  due on acquisitions                12           -    (2,068) 
 Non-current borrowings              10       (625)      (826) 
 Trade and other payables                     (102)      (455) 
 Provisions                                 (1,721)    (1,879) 
 Deferred tax                        5        (888)    (2,075) 
                                            (3,336)    (7,303) 
 Current liabilities 
 Contingent consideration 
  due on acquisitions                12     (2,373)    (1,135) 
 Trade and other payables                  (23,368)   (19,532) 
 Provisions                                    (38)      (211) 
 Current income tax liabilities             (2,000)    (1,504) 
 Current borrowings                  10    (18,872)   (35,098) 
                                           (46,651)   (57,480) 
 
 Total liabilities                         (49,987)   (64,783) 
 
 Net assets                                  93,515     82,269 
---------------------------------  -----  ---------  --------- 
 
 EQUITY 
 Share capital                                1,078      1,078 
 Own shares                                   (120)      (489) 
 Capital redemption reserve                   1,200      1,200 
 Share premium                               21,067     21,067 
 Merger reserve                               4,983      4,983 
 Foreign currency translation 
  reserve                                      (15)       (37) 
 Retained earnings                           65,322     54,467 
---------------------------------  -----  ---------  --------- 
  Total equity                               93,515     82,269 
---------------------------------  -----  ---------  --------- 
 

Consolidated Statement of Cash Flows

Year ended 31 March 2017

 
                                                   2017        2016 
                                       Note     GBP'000     GBP'000 
 
Profit before taxation                           14,654      13,024 
Gain on revaluation of 
 contingent consideration                             -       (870) 
Finance costs - net                               1,579       1,559 
Depreciation                           9         10,972      10,878 
Amortisation                           8          7,417       6,553 
Share based payments                              1,844       1,081 
Movement in trade receivables                       837     (1,612) 
Movement in trade payables                          480         298 
-----------------------------------  ------  ----------  ---------- 
Cash flow from operations                        37,783      30,911 
Taxation paid                                   (3,874)     (4,311) 
Net cash flow from operating 
 activities                                      33,909      26,600 
 
Cash flow from investing 
 activities 
Purchase of property, 
 plant and equipment                   9       (10,189)    (12,385) 
Capitalisation of development 
 costs                                 8        (1,372)     (1,123) 
Purchase of intangible 
 assets                                8        (1,845)     (1,207) 
Payments for current period 
 acquisitions net of cash 
 acquired                                         (703)    (15,924) 
Contingent consideration 
 paid                                           (1,161)     (1,650) 
Payment of deposits                                   -       (300) 
Finance income received                              22          33 
Net cash used in investing 
 activities                                    (15,248)    (32,556) 
 
Cash flow from financing 
 activities 
Issue of shares                                   1,064          91 
Draw down of bank loans                               -      16,500 
Repayment of finance leases                       (580)       (984) 
Repayment of bank loans                        (16,000)     (3,500) 
Finance costs paid                              (1,205)     (1,489) 
Dividends paid                                  (3,375)     (2,668) 
Net cash (used in)/received 
 from financing activities                     (20,096)       7,950 
 
Net (decrease)/increase 
 in cash and cash equivalents                   (1,435)       1,994 
 
Cash and cash equivalents 
 at the beginning of the 
 year                                            10,341       8,347 
----------------------------------   ------  ----------  ---------- 
 
Cash and cash equivalents at the 
 end of the year                                  8,906      10,341 
 
 

Consolidated Statement of Changes in Equity

Year ended 31 March 2017

 
                                                         Foreign 
                                   Own         Own      currency       Capital      Share 
   Changes in          Share    shares      shares   translation    redemption    premium     Merger    Retained 
   equity            capital       EBT    Treasury       reserve       reserve    account    reserve    earnings     Total 
                     GBP'000   GBP'000     GBP'000       GBP'000       GBP'000    GBP'000    GBP'000     GBP'000   GBP'000 
 ----------------  ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 
 Balance at 
  1 April 2015         1,078      (70)       (468)          (47)         1,200     21,067      4,983      44,936    72,679 
 
 Profit in 
  the year                 -         -           -             -             -          -          -      11,019    11,019 
 Currency 
  translation 
  differences              -         -           -            10             -          -          -           -        10 
                   ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 Total 
  comprehensive 
  income                   -         -           -            10             -          -          -      11,019    11,029 
                   ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 
 Dividends 
  - final (paid)           -         -           -             -             -          -          -     (2,668)   (2,668) 
 Share based 
  payments                 -         -           -             -             -          -          -       1,081     1,081 
 Deferred tax 
  on share based 
  payments                 -         -           -             -             -          -          -          57        57 
 Issue of own 
  shares for 
  option 
  redemption               -         -          49             -             -          -          -          42        91 
                   ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 Total 
  transactions 
  with owners              -         -          49             -             -          -          -     (1,488)   (1,439) 
                   ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 
 Balance at 
  31 March 2016        1,078      (70)       (419)          (37)         1,200     21,067      4,983      54,467    82,269 
----------------   ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 
 
 Profit in 
  the year                 -         -           -             -             -          -          -      12,083    12,083 
 Currency 
  translation 
  differences              -         -           -            22             -          -          -           -        22 
                   ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 Total 
  comprehensive 
  income                   -         -           -            22             -          -          -      12,083    12,105 
                   ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 
 Dividends 
  - final (paid)           -         -           -             -             -          -          -     (3,375)   (3,375) 
 Share based 
  payments                 -         -           -             -             -          -          -       1,844     1,844 
 Deferred tax 
  on share based 
  payments                 -         -           -             -             -          -          -       (392)     (392) 
 Issue of own 
  shares for 
  option 
  redemption               -         -         369             -             -          -          -         695     1,064 
 Total 
  transactions 
  with owners              -         -         369             -             -          -          -     (1,228)     (859) 
                   ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 
 
 Balance at 
  31 March 2017        1,078      (70)        (50)          (15)         1,200     21,067      4,983      65,322    93,515 
----------------   ---------  --------  ----------  ------------  ------------  ---------  ---------  ----------  -------- 
 
 

Notes to the Yearly Financial Information

Year ended 31 March 2017

   1.         GENERAL INFORMATION 

iomart Group plc is a company incorporated and domiciled in Scotland. The company has a primary listing on the AIM stock exchange. The address of its registered office is Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow G20 0SP.

   2.         BASIS OF PREPARATION 

These financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements have been prepared under the historical cost convention.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 March 2017 and 31 March 2016 within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2016 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The financial information for the year ended 31 March 2017 is derived from the statutory accounts for that year which were approved by the Directors on 12 June 2017. The statutory accounts for the year ended 31 March 2017 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors reported on those accounts; their report was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

   3.         SEGMENTAL ANALYSIS 

The chief operating decision-maker has been identified as the Chief Executive Officer ("CEO") of the Company. The Group has three operating segments and the CEO reviews the Group's internal reporting which recognises these three segments in order to assess performance and to allocate resources. The Group has determined its reportable segments which are also its operating segments based on these reports.

The Group currently has three operating and reportable segments. In the previous year there were only two segments. During the year the Group acquired Cristie Data. Unlike the other operations in the Group, Cristie Data has largely non-recurring revenue and therefore this has been included in a separate segment.

-- Easyspace - this segment provides a range of shared hosting and domain registration services to micro and SME companies.

-- Cloud Services - this segment provides managed cloud computing facilities and services, through a network of owned datacentres, to the larger SME and corporate markets. The segment uses several routes to market including iomart Cloud, RapidSwitch, Redstation, Backup Technology and SystemsUp.

-- Non-recurring - this segment provides data storage, backup and virtualisation solutions across a range of sectors, from SMEs to large enterprises, encompassing both public and private sector.

Information regarding the operation of the reportable segments is included below. The CEO assesses the performance of the operating segments based on revenue and a measure of Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) before any allocation of Group overheads, charges for share based payments, costs associated with acquisitions and any gain or loss on revaluation of contingent consideration. This segment EBITDA is used to measure performance as the CEO believes that such information is the most relevant in evaluating the results of the segment.

The Group's EBITDA for the year has been calculated after deducting Group overheads from the EBITDA of the three segments as reported internally. Group overheads include the cost of the Board, all the costs of running the premises in Glasgow, the Group marketing, human resource, finance and design functions and legal and professional fees.

The segment information is prepared using accounting policies consistent with those of the Group as a whole.

The assets and liabilities of the Group are not reviewed by the chief operating decision-maker on a segment basis. Therefore none of the Group's assets and liabilities are segmental assets and liabilities and are all unallocated for segmental disclosure purposes. For that reason the Group has not disclosed details of segmental assets and liabilities.

All segments are continuing operations. No customer accounts for 10% or more of external revenues. Inter-segment transactions are accounted for using an arms-length commercial basis.

Operating Segments

Revenue by Operating Segment

 
                               2017                            2016 
                  ------------------------------  ------------------------------ 
                   External   Internal     Total   External   Internal     Total 
                    GBP'000    GBP'000   GBP'000    GBP'000    GBP'000   GBP'000 
----------------  ---------  ---------  --------  ---------  ---------  -------- 
 Easyspace           13,249         12    13,261     10,883          -    10,883 
 Cloud Services      72,685      1,538    74,223     65,397      1,114    66,511 
 Non-recurring        3,639          -     3,639          -          -         - 
                  ---------  ---------  --------  ---------  ---------  -------- 
                     89,573      1,550    91,123     76,280      1,114    77,394 
----------------  ---------  ---------  --------  ---------  ---------  -------- 
 

Geographical Information

In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. There is no single country where revenues are individually material other than the United Kingdom. The United Kingdom is the place of domicile of the parent company, iomart Group plc.

Analysis of Revenue by Destination

 
                                   2017      2016 
                                GBP'000   GBP'000 
-------------------------      --------  -------- 
 United Kingdom                  75,163    64,218 
 Rest of the 
  World                          14,410    12,062 
                               --------  -------- 
 Revenue from operations         89,573    76,280 
--------------------------     --------  -------- 
 

Profit by Operating Segment

 
                                           2017                                         2016 
                       -------------------------------------------  ------------------------------------------- 
                                    Depreciation,                                Depreciation, 
                                    amortisation,                                amortisation, 
                                      acquisition                                  acquisition 
                                            costs                                        costs 
                                        and share                                    and share 
                        Adjusted            based        Operating   Adjusted            based        Operating 
                          EBITDA         payments    profit/(loss)     EBITDA         payments    profit/(loss) 
                         GBP'000          GBP'000          GBP'000    GBP'000          GBP'000          GBP'000 
---------------------  ---------  ---------------  ---------------  ---------  ---------------  --------------- 
 Easyspace                 6,244            (948)            5,296      5,094            (815)            4,279 
 Cloud Services           33,680         (17,120)           16,560     31,084         (16,616)           14,468 
 Non-recurring               326            (321)                5          -                -                - 
 Group overheads         (3,680)                -          (3,680)    (3,837)                -          (3,837) 
 Acquisition 
  costs                        -            (104)            (104)          -            (116)            (116) 
 Share based 
  payments                     -          (1,844)          (1,844)          -          (1,081)          (1,081) 
---------------------  ---------  ---------------  ---------------  ---------  ---------------  --------------- 
 Profit before 
  tax 
  and interest            36,570         (20,337)           16,233     32,341         (18,628)           13,713 
 Gain on revaluation 
  of 
  contingent 
  consideration                                                  -                                          870 
 Group interest 
  and tax                                                  (4,150)                                      (3,564) 
                       ---------  ---------------  ---------------  ---------  ---------------  --------------- 
 Profit for 
  the year                36,570         (20,337)           12,083     32,341         (18,628)           11,019 
---------------------  ---------  ---------------  ---------------  ---------  ---------------  --------------- 
 

Group overheads, acquisition costs, share based payments, gain on revaluation of contingent consideration, interest and tax are not allocated to segments.

   4.         TAXATION 
 
                                                2017      2016 
                                             GBP'000   GBP'000 
 ---------------------------------------    --------  -------- 
 
  Tax charge for the year                    (4,349)   (3,663) 
  Adjustment relating to prior 
   years                                        (12)        52 
----------------------------------------    --------  -------- 
  Total current taxation charge              (4,361)   (3,611) 
 
  Origination and reversal 
   of temporary differences                    1,751     1,482 
  Adjustment relating to prior 
   years                                         227        31 
  Effect of different statutory 
  tax rates of overseas jurisdictions             27        61 
  Effect of changes in tax 
   rates                                       (215)        32 
----------------------------------------    --------  -------- 
  Total deferred taxation 
   credit                                      1,790     1,606 
 
  Total taxation charge                      (2,571)   (2,005) 
----------------------------------------    --------  -------- 
 

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 before tax are as follows:

 
                                                  2017      2016 
                                               GBP'000   GBP'000 
 -----------------------------------------    --------  -------- 
 
  Profit before tax                             14,654    13,024 
------------------------------------------    --------  -------- 
 
  Tax charge @ 20% (2016 - 20%)                  2,931     2,605 
 
  Expenses disallowed for tax purposes             134        67 
  Non-taxable income                                 -     (174) 
  Adjustments in current tax relating 
   to prior years                                   12      (52) 
  Effect of different statutory 
   tax rates of overseas jurisdictions               5      (53) 
  Movement in deferred tax relating 
   to changes in tax rates                         215      (32) 
  Effect of research and development 
   tax reliefs                                   (326)     (335) 
  Tax effect of share based remuneration         (151)     (206) 
  Movement in unprovided deferred 
   tax related to development costs               (13)       228 
  Movement in unprovided deferred 
   tax related to property, plant 
   and equipment                                   (9)      (12) 
  Movement in deferred tax relating 
   to prior years                                (227)      (31) 
 
  Taxation charge for the year                   2,571     2,005 
------------------------------------------    --------  -------- 
 

The weighted average applicable tax rate for the year ended 31 March 2017 was 20% (2016: 20%). The total current corporation tax charge for the year of GBP4,349,000 (2016: GBP3,663,000) on operations represents 29.7% (2016: 28.1%) of the Group profit before tax of GBP14,654,000 (2016: GBP13,024,000). The effective rate of tax for the year, based on the taxation charge for the year as a percentage of the profit before tax, is 17.5% (2016: 15.4%). The increase of 2.1% is mainly due to the reduction in future corporation rates which has had an adverse impact on the deferred tax charge relating to our deferred tax assets, a prior year adjustment in deferred tax relating to the lower availability of capital allowances than previously anticipated and the absence of non-taxable income in the year when in the previous year the gain on the revaluation of contingent consideration was non-taxable. This has been partially offset by a prior year adjustment in deferred tax relating to share based payments and the absence of a deferred tax charge relating to development costs in the current year following the initial recognition of a deferred tax liability in the prior year.

A number of changes to the UK Corporation tax system were announced in the March 2016 Budget Statement with the main rate of corporation tax reduced from 18% to 17% from 1 April 2020. These changes were substantively enacted at the period end and therefore are included in these financial statements.

   5.         DEFERRED TAX 

The Group recognised deferred tax assets and liabilities as follows:

 
                                               2017                                2016 
                                ----------------------------------  ---------------------------------- 
                                       Deferred           Deferred         Deferred           Deferred 
                                 tax Recognised   tax Unrecognised   tax Recognised   tax Unrecognised 
                                        GBP'000            GBP'000          GBP'000            GBP'000 
------------------------------  ---------------  -----------------  ---------------  ----------------- 
 
 Share based remuneration                 1,135                  -            1,010                  - 
 Capital allowances temporary 
  differences                             1,181                  -            1,103                  - 
 Deferred tax on development 
  costs                                   (311)                  -            (195)                  - 
 Deferred tax on acquired 
  assets with no capital 
  allowances                              (326)                  -            (442)                  - 
 Deferred tax on customer 
  relationships                         (2,567)                  -          (3,551)                  - 
------------------------------  ---------------  -----------------  ---------------  ----------------- 
 Deferred tax liability                   (888)                  -          (2,075)                  - 
------------------------------  ---------------  -----------------  ---------------  ----------------- 
 

At the year end, the Group had no unused tax losses (2016: GBPnil) available for offset against future profits.

The movement in the deferred tax account during the year was:

 
                                                                                  Deferred 
                                                       Capital                      tax on 
                            Tax                     allowances                    acquired 
                         losses           Share      temporary    Development       assets         Customer 
                        carried           based    differences          costs         with    relationships      Total 
                        forward    remuneration        GBP'000        GBP'000   no capital          GBP'000    GBP'000 
                        GBP'000         GBP'000                                 allowances 
                                                                                   GBP'000 
--------------------  ---------  --------------  -------------  -------------  -----------  ---------------  --------- 
 
Balance at 
 1 April 2015             289         575             873             -           (605)         (3,219)       (2,087) 
Acquired on 
 acquisition 
 of subsidiary             -           -             (24)             -             -           (1,627)       (1,651) 
Credited to 
 equity                    -           57              -              -             -              -            57 
(Charged)/credited 
 to statement 
 of comprehensive 
 income                  (289)        389             378           (195)          115           1,115         1,513 
Effect of different 
 tax rates of 
 overseas 
 jurisdictions             -           -               -              -             -             61            61 
Effect of changes 
 in tax rates              -          (11)           (124)            -            48             119           32 
Balance at 
 31 March 2016             -         1,010           1,103          (195)         (442)         (3,551)       (2,075) 
Acquired on 
 acquisition 
 of subsidiary             -           -             (14)             -             -            (186)         (200) 
Charged to 
 equity                    -         (392)             -              -             -              -           (392) 
(Charged)/credited 
 to statement 
 of comprehensive 
 income                    -          546             321           (116)          108           1,108         1,967 
Effect of different 
 tax rates of 
 overseas 
 jurisdictions             -           -               -              -             -             27            27 
Effect of changes 
 in tax rates              -          (29)           (229)            -             8             35           (215) 
Balance at 
 31 March 2017             -         1,135           1,181          (311)         (326)         (2,567)        (888) 
--------------------  ---------  --------------  -------------  -------------  -----------  ---------------  --------- 
 
   6.         EARNINGS PER 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 own shares held in Treasury and held by the Employee Benefit Trust. 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, after deducting any own shares, and adjusting for the dilutive potential ordinary shares relating to share options.

 
Total operations                                    2017      2016 
                                                 GBP'000   GBP'000 
--------------------------------------  ----    --------  -------- 
 Profit for the financial 
  year and basic earnings 
  attributed to ordinary shareholders             12,083    11,019 
--------------------------------------------    --------  -------- 
 
                                                      No        No 
 Weighted average number 
  of ordinary shares:                                000       000 
 
 Called up, allotted and 
  fully paid at start of year                    107,803   107,803 
 Own shares held in Treasury                       (465)     (898) 
 Own shares held by Employee 
  Benefit Trust                                    (141)     (141) 
 Weighted average number 
  of ordinary shares - basic                     107,197   106,764 
 
 Dilutive impact of share 
  options                                          1,808     1,609 
 
 Weighted average number 
  of ordinary shares - diluted                   109,005   108,373 
---------------------------------------    ---  --------  -------- 
 
 Basic earnings per share                          11.27     10.32 
                                                       p         p 
 Diluted earnings per share                        11.08     10.17 
                                                       p         p 
---------------------------------------------   --------  -------- 
 
 
 
 Adjusted earnings                                                    2017      2016 
  per share                                                        GBP'000   GBP'000 
 
 Profit for the financial 
  year and basic earnings 
  attributed to ordinary shareholders                               12,083    11,019 
 
   *    Amortisation of acquired intangible assets                   5,558     5,354 
 
   *    Acquisition costs                                              104       116 
 
   *    Share based payments                                         1,844     1,081 
 
   *    Mark to market interest adjustment                            (84)      (64) 
 
   *    Accelerated write off of arrangement fees                        -       177 
 
   *    Finance charge on contingent consideration                     330       152 
 
   *    Gain on revaluation of contingent consideration                  -     (870) 
 
   *    Tax impact of adjusted items                               (1,313)   (1,311) 
 Adjusted profit for the 
  financial year and adjusted 
  earnings attributed to 
  ordinary shareholders                                             18,522    15,654 
---------------------------------------------------------    ---  --------  -------- 
 
 Adjusted basic earnings                                             17.28     14.66 
  per share                                                              p         p 
 Adjusted diluted earnings per                                       16.99     14.44 
  share                                                                  p         p 
---------------------------------------------------------------   --------  -------- 
 
 
   7.         ACQUISITIONS 

Cristie Data Limited

The Group acquired 100% of the issued share capital of Cristie Data Limited ("Cristie") on 25 August 2016.

Cristie is a Stroud based data storage, backup and virtualisation solutions provider, which has operated across all sectors of industry from SMEs to large enterprises, and public sector to private sector for over 40 years. Cristie is particularly active in the education and health sectors, which offers the opportunity for the Group to increase its presence in these areas. The acquisition is in line with the Group's strategy to grow its operations both organically and by acquisition.

During the current period the Group incurred GBP99,000 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 year ended 31 March 2017.

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

 
                                              GBP'000 
-------------------------------------------  -------- 
 Recognised amounts of net assets acquired 
  and liabilities assumed: 
 Cash and cash equivalents                      3,104 
 Trade and other receivables                    2,226 
 Property, plant and equipment                    206 
 Intangible assets                                982 
 Trade and other payables                     (3,358) 
 Current borrowings                              (25) 
 Current income tax liabilities                  (33) 
 Deferred tax liability                         (200) 
-------------------------------------------  -------- 
 Identifiable net assets                        2,902 
 Goodwill                                         877 
-------------------------------------------  -------- 
 Total consideration                            3,779 
-------------------------------------------  -------- 
 
 Satisfied by: 
 Cash - paid on acquisition                     3,779 
 Total consideration to be transferred          3,779 
-------------------------------------------  -------- 
 

The agreed purchase price for the shares, on a cash-free, debt-free, normalised working capital basis was GBP1,250,000. On the date of the acquisition a payment of GBP3,779,000 was made in cash, including an amount of GBP2,529,000 in settlement in respect of the additional debt assumed, cash acquired and normalised working capital position of Cristie at completion.

Provisional fair values of the acquired assets and liabilities, including goodwill, were reported in the interim report for the 6 months ended 30 September 2016. Following a detailed review of Cristie's accounting policies in respect of revenue recognition, the policy relating to the sale of third party maintenance and support contracts was changed to defer the revenue over the life of the contract, in compliance with FRS 101, rather than recognising it in full when the sale was completed. The treatment of the cost of purchasing the third party maintenance and support contracts, which was previously expensed in full when paid, has also been changed to spread the costs over the life of the contract, with the deferred element of the cost being included in receivables.

These adjustments have been reflected in the table of net assets acquired and liabilities assumed with trade and other payables being increased by GBP1,997,000, offset by an increase of GBP1,655,000 in trade and other receivables, and a reduction in current income tax liabilities of GBP66,000, to give an increase in goodwill of GBP276,000.

The fair values of the acquired assets and liabilities, including goodwill, are now final.

Cristie earned revenue of GBP3,639,000 and generated profits before allocation of group overheads, share based payments and tax of GBP235,000 in the period since acquisition.

United Communications Limited

The fair values of acquired assets and liabilities, including goodwill, previously disclosed as provisional for United Communications Limited have been finalised in the current period with no changes to the fair values disclosed in the Annual Report and Accounts 2016.

Pro-forma full year information

The following summary presents the Group as if the businesses acquired during the year had been acquired on 1 April 2016. The amounts include the results of the acquired business, depreciation and amortisation of the acquired property, plant and equipment and intangible assets recognised on acquisition. The amounts do not include any possible synergies from the acquisition. The information is provided for illustrative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of the future results of the combined companies.

 
                                     Pro-forma 
                                    year ended 
                                      31 March 
                                          2017 
-------------------------------  ------------- 
                                       GBP'000 
-------------------------------   ------------ 
 Revenue                                91,262 
 
 Profit after tax for the year          11,939 
--------------------------------  ------------ 
 
   8.         INTANGIBLE ASSETS 
 
                                                                                                     Domain 
                        Goodwill     Development          Customer                 Beneficial         names 
                                           costs     relationships                  contracts          & IP 
                                                                      Software                    addresses      Total 
                         GBP'000         GBP'000           GBP'000     GBP'000        GBP'000       GBP'000    GBP'000 
-------------------  -----------  --------------  ----------------  ----------  -------------  ------------  --------- 
 Cost 
 At 1 April 
  2015                    47,342           3,709            26,431       2,114             86           280     79,962 
 Additions                     -               -                         1,020              -             -      1,020 
 Currency 
  translation 
  differences                  -               -                23           3              -             -         26 
 Acquired on 
  acquisition 
  of subsidiary           13,781               -             8,428           -              -             -     22,209 
 Development 
  cost capitalised             -           1,123                 -           -              -             -      1,123 
 At 31 March 
  2016                    61,123           4,832            34,882       3,137             86           280    104,340 
 Additions                     -               -                         1,670              -             -      1,670 
 Currency 
  translation 
  differences                  -               -               101          40              -             -        141 
 Acquired on 
  acquisition 
  of subsidiary              877               -               982           -              -             -      1,859 
 Development 
  cost capitalised             -           1,372                 -           -              -             -      1,372 
 At 31 March 
  2017                    62,000           6,204            35,965       4,847             86           280    109,382 
-------------------  -----------  --------------  ----------------  ----------  -------------  ------------  --------- 
 
 Accumulated 
  amortisation: 
 At 1 April 
  2015                         -         (2,496)           (9,945)     (1,003)           (19)         (116)   (13,579) 
 Currency 
  translation 
  differences                  -               -              (16)         (4)              -             -       (20) 
 Charge for 
  the year                     -           (698)           (5,347)       (446)            (7)          (55)    (6,553) 
 At 31 March 
  2016                         -         (3,194)          (15,308)     (1,453)           (26)         (171)   (20,152) 
-------------------  -----------  --------------  ----------------  ----------  -------------  ------------  --------- 
 
 Currency 
  translation 
  differences                  -               -              (77)        (29)              -             -      (106) 
 Charge for 
  the year                     -           (989)           (5,551)       (815)            (7)          (55)    (7,417) 
-------------------  -----------  --------------  ----------------  ----------  -------------  ------------  --------- 
 At 31 March 
  2017                         -         (4,183)          (20,936)     (2,297)           (33)         (226)   (27,675) 
-------------------  -----------  --------------  ----------------  ----------  -------------  ------------  --------- 
 
 Carrying amount: 
 
 At 31 March 
  2017                    62,000           2,021            15,029       2,550             53            54     81,707 
-------------------  -----------  --------------  ----------------  ----------  -------------  ------------  --------- 
 
 At 31 March 
  2016                    61,123           1,638            19,574       1,684             60           109     84,188 
-------------------  -----------  --------------  ----------------  ----------  -------------  ------------  --------- 
 

Of the total additions in the year of GBP1,670,000 (2016: GBP1,020,000), GBP122,000 (2016: GBP297,000) was included in trade payables as unpaid invoices at the year end resulting in a net cash outflow of GBP175,000 (2016: net cash outflow GBP187,000) in trade payables. Consequently, the consolidated statement of cash flows discloses a figure of GBP1,845,000 (2016: GBP1,207,000) as the cash outflow in respect of intangible asset additions in the year.

All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-financial assets classification, which is disclosed as administrative expenses in the statement of comprehensive income.

Included within customer relationships are the following significant items: customer relationships in relation to the acquisitions of Backup Technology with a net book value of GBP4.1m and a remaining useful life of 5 years; United Hosting with a net book value of GBP4.3m and a remaining useful life of 7 years; Melbourne Server Hosting with a net book value of GBP2.0m and a remaining useful life of 4 years; and ServerSpace with a net book value of GBP1.7m and remaining useful life of 6 years.

During the year, goodwill was reviewed for impairment in accordance with IAS 36 "Impairment of Assets". No impairment charges (2016: GBPnil) arose as a result of this review. For this review goodwill was allocated to individual Cash Generating Units (CGU) on the basis of the Group's operations. The goodwill acquired in the Cristie Data acquisition has been allocated to the Non-recurring CGU as this is the CGU expected to benefit from the business combination.

The carrying value of goodwill by each CGU is as follows:

 
 Cash Generating           2017       2016 
  Units (CGU)           GBP'000    GBP'000 
 Easyspace               23,210     23,210 
 Cloud Services          37,913     37,913 
 Non-recurring              877          - 
-----------------     ---------  --------- 
                         62,000     61,123 
   -----------------  ---------  --------- 
 
   9.         PROPERTY, PLANT AND EQUIPMENT 
 
                    Freehold        Leasehold   Datacentre     Computer       Office       Motor 
                    property    improve-ments    equipment    equipment    equipment    vehicles      Total 
                     GBP'000          GBP'000      GBP'000      GBP'000      GBP'000     GBP'000    GBP'000 
----------------  ----------  ---------------  -----------  -----------  -----------  ----------  --------- 
 
 Cost: 
 At 1 April 
  2015                 2,062            6,857       18,367       37,978        2,144          48     67,456 
 Additions 
  in the year              -              466        2,105        9,103          209           -     11,883 
 Acquisition 
  of subsidiary            -                -            -          152            3          20        175 
 Disposals 
  in the year              -                -            -         (15)            -           -       (15) 
 Currency 
  translation 
  differences              -                -            -           24            -           -         24 
 At 31 March 
  2016                 2,062            7,323       20,472       47,242        2,356          68     79,523 
 Additions 
  in the year              -              647          697        8,115          231           -      9,690 
 Acquisition 
  of subsidiary            -                -            -          179           27           -        206 
 Disposals 
  in the year              -              (3)            -         (58)            -           -       (61) 
 Currency 
  translation 
  differences              -                -            -          125            -           -        125 
 At 31 March 
  2017                 2,062            7,967       21,169       55,603        2,614          68     89,483 
----------------  ----------  ---------------  -----------  -----------  -----------  ----------  --------- 
 
 Accumulated 
  depreciation: 
 At 1 April 
  2015                 (150)          (1,858)      (6,253)     (23,196)      (1,112)        (41)   (32,610) 
 Charge for 
  the year              (41)            (479)      (1,686)      (8,399)        (259)        (14)   (10,878) 
 Disposals 
  in the year              -                -            -           15            -           -         15 
 Currency 
  translation 
  differences              -                -            -          (5)            -           -        (5) 
 At 31 March 
  2016                 (191)          (2,337)      (7,939)     (31,585)      (1,371)        (55)   (43,478) 
 Charge for 
  the year              (67)            (440)      (1,824)      (8,370)        (258)        (13)   (10,972) 
 Disposals 
  in the year              -                3            -           58            -           -         61 
 Currency 
  translation 
  differences              -                -            -         (45)            -           -       (45) 
----------------  ----------  ---------------  -----------  -----------  -----------  ----------  --------- 
 At 31 March 
  2017                 (258)          (2,774)      (9,763)     (39,942)      (1,629)        (68)   (54,434) 
----------------  ----------  ---------------  -----------  -----------  -----------  ----------  --------- 
 
 Carrying 
  amount: 
 At 31 March 
  2017                 1,804            5,193       11,406       15,661          985           -     35,049 
 
 At 31 March 
  2016                 1,871            4,986       12,533       15,657          985          13     36,045 
----------------  ----------  ---------------  -----------  -----------  -----------  ----------  --------- 
 
 

Of the total additions in the year of GBP9,690,000 (2016: GBP11,883,000), none (2016: GBP97,000) were funded by finance leases and GBP1,256,000 (2016: GBP1,755,000) was included in trade payables as unpaid invoices at the year end resulting in a net decrease of GBP499,000 (2016: net decrease of GBP599,000) in trade payables. Consequently, the consolidated statement of cash flows discloses a figure of GBP10,189,000 (2016: GBP12,385,000) as the cash outflow in respect of property, plant and equipment additions in the year.

   10.       BORROWINGS 
 
                                     2017      2016 
                                  GBP'000   GBP'000 
----------------------------     --------  -------- 
 
  Current: 
  Obligations under finance 
   leases                           (233)     (573) 
  Bank loans                     (18,639)  (34,525) 
  Current borrowings             (18,872)  (35,098) 
 
  Non-current: 
  Obligations under finance 
   leases                           (625)     (826) 
  Bank loans                            -         - 
  Total non-current 
   borrowings                       (625)     (826) 
 
  Total borrowings               (19,497)  (35,924) 
-------------------------------  --------  -------- 
 
   11.       ANALYSIS OF CHANGE IN NET DEBT 
 
                                                         Finance 
                                      Cash       Bank     leases 
  Analysis of change              and cash      loans   and hire 
  in net cash/(debt)           equivalents    GBP'000   purchase     Total 
                                   GBP'000               GBP'000   GBP'000 
--------------------------   -------------  ---------  ---------  -------- 
 
  At 1 April 2015                    8,347   (21,457)    (2,284)  (15,394) 
 
  Repayment of bank 
   loans                                 -      3,500          -     3,500 
  New bank loans                         -   (16,500)          -  (16,500) 
  Impact of effective 
   interest rate                         -       (68)          -      (68) 
  Inception of finance 
   leases                                -          -       (97)      (97) 
  Acquired on acquisition 
   of subsidiary                     4,476          -          -     4,476 
  Currency translation 
   differences                           -          -        (2)       (2) 
  Cash flow                        (2,482)          -        984   (1,498) 
---------------------------  -------------  ---------  ---------  -------- 
  At 31 March 2016                  10,341   (34,525)    (1,399)  (25,583) 
 
  Repayment of bank 
   loans                                 -     16,000          -    16,000 
  Impact of effective 
   interest rate                         -      (114)          -     (114) 
  Acquired on acquisition 
   of subsidiaries                   3,104          -          -     3,104 
  Currency translation 
   differences                           -          -       (39)      (39) 
  Cash flow                        (4,539)          -        580   (3,959) 
  At 31 March 2017                   8,906   (18,639)      (858)  (10,591) 
---------------------------  -------------  ---------  ---------  -------- 
 
   12.       CONTINGENT CONSIDERATION 
 
                                                   2017      2016 
                                                GBP'000   GBP'000 
 ---------------------------------------  ---  --------  -------- 
 
  Contingent consideration due 
   on acquisitions within one 
   year: 
 
    *    Systems Up Limited                           -     (135) 
 
   *    United Communications Limited           (2,373)   (1,000) 
----------------------------------------       --------  -------- 
                                                (2,373)   (1,135) 
 
  Contingent consideration due 
   on acquisitions after more 
   than one year: 
 
   *    United Communications Limited                 -   (2,068) 
----------------------------------------       --------  -------- 
                                                      -   (2,068) 
 
 
  Total contingent consideration 
   due on acquisitions                          (2,373)   (3,203) 
----------------------------------------       --------  -------- 
 
   13.       POST BALANCE SHEET EVENT 

The Group acquired 100% of the issued share capital of Dediserve Limited, ("Dediserve") on 17 May 2017 for EUR7.9m 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 share purchase agreement, in respect of the acquisition of Dediserve, includes a provision under which the total consideration payable will be 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 EUR7,800,000 (GBP6,700,000) in cash and in addition an amount of EUR250,000 (GBP215,000) 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. An amount of EUR100,000 (GBP86,000) has been deferred and will be paid 6 months after the completion date or at the end of an operational handover period, whichever is sooner. The initial net payment of EUR7,550,000 (GBP6,485,000) was funded by a draw down from the revolving credit facility of GBP6,485,000.

As the completion date of the acquisition was after the balance sheet date of the Group, there is no revenue or profit before tax from Dediserve included in the Group's Consolidated Statement of Comprehensive Income for the year ended 31 March 2017. In addition, financial information from Dediserve for the year ended 31 March 2017 has not been included in the pro-forma full year information as shown in note 7.

   14.       ANNUAL REPORT AND ACCOUNTS 

The Annual Report and Accounts for 2017 will be posted to shareholders on 14 July 2017 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.iomart.com.

   15.       ANNUAL GENERAL MEETING 

The Annual General Meeting of the Company will be held at 10.00am on 23 August 2017 at the Company's registered office.

This information is provided by RNS

The company news service from the London Stock Exchange

END

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