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
FR EANKAFFPXEFF
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