TIDMIOM
RNS Number : 0397R
Iomart Group PLC
12 June 2018
12 June 2018
iomart Group plc
("iomart" or the "Group" or the "Company")
Final Results for the Year ended 31 March 2018
iomart (AIM:IOM), the cloud computing company, is pleased to
report its consolidated final results for the year ended 31 March
2018.
FINANCIAL HIGHLIGHTS
-- Revenue growth of 9% to GBP97.7m (2017: GBP89.6m)
-- Adjusted EBITDA(1) growth of 9% to GBP39.8m (2017: GBP36.6m)
-- Adjusted profit before tax growth(2) of 7% to GBP24.0m (2017: GBP22.4m)
-- Adjusted diluted earnings per share(3) from operations
increased by 6% to 17.96p (2017: 16.99p)
-- Cashflow from operations increased by 8% to GBP40.8m (2017: GBP37.8m)
-- Adjusted profit before tax(2) margin maintained at 25% (2017: 25%)
-- Proposed final dividend of 4.93p per share resulting in total
dividend for year of 7.18p per share, an increase of 20% (2017:
6.00p per share)
OPERATIONAL HIGHLIGHTS
-- 3 successful acquisitions completed during the year:
- Dediserve for EUR7.9m
- Simple Servers for GBP4.9m
- Sonassi for GBP11.8m
-- Creation of software defined fibre network
-- Post year-end extension on London datacentre lease until 2030
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 1% to GBP14.8m (2017: GBP14.7m)
-- Basic earnings per share from operations increased by 1% to 11.41p (2017: 11.27p)
(1) Throughout this statement adjusted EBITDA is earnings before
interest, tax, depreciation and amortisation (EBITDA) before share
based payment charges, acquisition costs, gain on revaluation of
contingent consideration and non-recurring costs. 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, share based payment charges, mark to mark adjustments in
respect of interest rate swaps, acquisition costs, interest on
contingent consideration due, gain on revaluation of contingent
consideration and non-recurring costs.
(3) Throughout this statement adjusted earnings per share is
earnings per share before amortisation charges on acquired
intangible assets, share based payment charges, mark to mark
adjustments in respect of interest rate swaps, acquisition costs,
interest on contingent consideration due, gain on revaluation of
contingent consideration and non-recurring costs and the taxation
effect of these.
Angus MacSween, CEO commented,
"We are delighted to report another year of excellent results,
with increased revenues and profits and the completion of a number
of acquisitions, augmenting the Group's customer base and skill
set. Trading in the new year has continued in a similarly positive
vein.
Since we embarked on our current strategy in 2007, we have
successfully executed on our growth strategy, growing revenues from
GBP8m to nearly GBP100m. We strongly believe that the market for
cloud computing solutions we identified at the time presents us
with as much opportunity now as it did then and that, together with
additional acquisitions, will allow us to continue to execute
successfully on the strategy we put in place at that time.
There is still a long runway of opportunity as the "IT as a
service" philosophy and delivery unfolds, providing us with
considerable scope for long-term, sustained growth. We therefore
look to the coming year and beyond with confidence".
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)
Ed Knight
Nick Prowting
Alma PR Tel: 020 8004 4218
Caroline Forde
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 the specific individual needs of our
customers. 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
I am again delighted to report on another successful year for
the Group. We have continued to grow revenues, both organically and
through acquisitions whilst maintaining profit margins and
generating our usual high levels of operating cash.
This has been another active year on the acquisition front as we
have welcomed Dediserve, Simple Servers and Sonassi into the Group.
The latter two acquisitions provide us with a high level of
expertise in the provision of Magento hosting, which represents our
first foray into the area of application support.
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.
After the year end we replaced our borrowing facility, due to
end in June 2019, with a revolving credit facility of GBP80m
through until June 2022. We appreciate the continued support shown
by the Bank of Scotland Plc through the provision of this increased
facility.
As we indicated last year, due to our high level of both profit
and operating cash generation coupled with our relatively low level
of debt, we have been able to establish a progressive dividend
policy. At present that policy is to pay out a maximum dividend of
up to 40% of our adjusted diluted earnings per share. During the
year we introduced a maiden interim dividend of 2.25p per share
which was paid to shareholders in January. In addition, the Board
is now proposing to pay a final dividend of 4.93p per share on 6
September 2018 to shareholders on the register at close on 17
August 2018. With this final dividend payment the total for the
year will be 7.18p representing an increase of 20% over last year
and equivalent to a pay-out ratio of 40% of adjusted diluted
earnings per share. This is the maximum we are committed to
distributing under our current policy and we will re-consider the
parameters of the policy over the coming financial year. 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.
I was appointed to the Board of iomart in December 2007,
becoming Chairman the following year. It has been both a privilege
and a pleasure to serve as your Chairman since then and to be part
of the success which has been achieved over these years. I have
decided not to stand for re-election at the forthcoming Annual
General Meeting and will leave the Board at that time. I look
forward to hearing of the continued success of the Group in future
years.
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
11 June 2018
CHIEF EXECUTIVE'S REVIEW
Introduction
We have again enjoyed another excellent year with revenues and
profits growing to record levels driven both organically and by
acquisition as we continue to deliver the cloud based solutions
that the market is looking for.
Our revenues in the year were GBP97.7m, an increase of 9% over
the previous year, our adjusted EBITDA of GBP39.8m also showed a 9%
increase over the previous year and our profit before tax increased
by 1% to GBP14.8m.
After over 10 years of first class commitment and service, most
of which time was spent as Chairman, Ian Ritchie has chosen not to
stand for re-election 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. Ian Steele, who was appointed
to the Board in June 2016, has agreed to replace Ian as Chairman
and we will recruit an additional Non-Executive Director in due
course.
Market and Strategy
We set out our current strategy of establishing a UK-based cloud
computing operation in March 2007 when we acquired our initial
datacentre estate. At that time the cloud computing market was in
the very early stages of growth in the UK and there were many small
entities entering the market to supply cloud based solutions. We
identified the market opportunity at that time as both substantial
and long term. The traditional method of computing power
consumption on an organisation's own premises was still prevalent
at that time and we predicted that over time the move from "on
premise" consumption to cloud based consumption would occur. Our
view was that would take place slowly as organisations chose to
move some of their IT infrastructure to the cloud when there was a
need to refresh part of their existing server estate or begin a new
project.
The market has indeed evolved as we had predicted and computing
power is now consumed in many ways by organisations. That includes
the consumption of cloud based solutions whether that be of a
public, private or hybrid nature or indeed "on premise" as a
substantial number of organisations still continue to acquire what
they need in this way.
It was always part of our strategy to address the market
opportunity by acquiring customers organically and through the
acquisition of competitors as the supply side of the market
consolidated. We made our first such acquisition in May 2009 and
since then we have made over 20 acquisitions in total including the
three we have made in the course of this financial year.
We strongly believe that the market for cloud computing
solutions we identified in 2007 presents us with as much
opportunity now as it did then and that our strategy is well
positioned to deliver continued success. There is still a long
runway of opportunity as the "IT as a service" philosophy and
delivery unfolds.
Clearly, our product portfolio has evolved over the years to
match the needs of the market.
Security and data protection remain in the headlines and
continue to be a driver of outsourcing areas of IT because of the
lack of internal skills and experience in many organisations.
Business continuity, disaster recovery and coping with ever
increasing volumes of data mean organisations will look for help in
mitigating their risk profiles.
The market overall is growing strongly and parts of that growth
are dominated by the 'public cloud' vendors, primarily Amazon,
Microsoft and Google. These are the whale sharks of the industry
and they certainly swim in the same ocean as us, but it is a very
big ocean. By their size and nature, they are largely faceless and
rigid in their business models and we are certain that there is
plenty of room in that ocean for companies, such as iomart, that
are the opposite of faceless; companies that provide advice, help
and great customer service and flexibility.
The untidy nature of the vast majority of the world's legacy IT
infrastructure provides me with the reassurance that there will
always be customers who are looking for a trusted advisor in this
space.
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.
Since 2007, we have grown to become around a GBP100m plus
revenue business with healthy margins and excellent cashflow. The
objective for us now is to maintain our revenue growth and healthy
margins over the next few years.
We are restructuring and reinvigorating our sales and marketing
team and investing in deeper customer service skills and level of
support. We remain open to growth by acquisition whilst maintaining
our disciplined approach.
Our challenge is to continue to navigate through 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
Dediserve Limited ("Dediserve") a Dublin based provider of cloud
solutions in 10 locations around the world in May 2017, Tier 9
Limited (which trades as "Simple Servers") in July 2017 and Sonassi
Holding Company Limited ("Sonassi") in November 2017. Both Simple
Servers and Sonassi are located in the UK and specialise in the
provision of cloud solutions for users of the Magento ecommerce
application.
We continue to look for businesses that fit our criteria with a
view to making further acquisitions in the coming year.
UK membership of the European Union
We have considered the potential impact of the UK's exit from
the European Union ("EU"). To this point in time, other than some
volatility in the foreign exchange markets involving Sterling, we
have not seen any impact from the decision to leave. The majority
of our revenue is generated within the UK. Revenue generated from
other EU states is not material and tends to be from our online
operations involving the provision of domain names and both shared
and dedicated servers where our customers are choosing to take a
service from our UK-based datacentres. We do not rely on migrant
employees from other EU states to provide services to our
customers. We may see an impact in administration in areas such as
VAT when trading with EU member states post the UK's exit. As a
result of the acquisition of Dediserve in May we have an
established operation within the EU should that be required post
Brexit.
Operational Review
In last year's Annual Report, we reported in three segments
following the acquisition of Cristie Data ("Cristie") in August
2016. Cristie initially gave us more exposure to the provision of
infrastructure on customers' premises and, unlike the rest of the
Group, generated a substantial amount of non-recurring revenue.
Consequently we reported the performance of that unit within a
non-recurring revenue segment. In our half-yearly results at
September 2017, we reported that Cristie had integrated well within
the Group and had become involved in projects with our consultancy
operation and in the provision of cloud solutions from our
datacentres. In addition, a substantial amount of orders won and
revenue generated through the operations of Cristie over the year
were recurring in nature. Therefore, we concluded that it was no
longer appropriate to include the results of Cristie separately,
particularly in a non-recurring revenue segment, from the rest of
our Cloud Services operations and we now report it within the Cloud
Services segment. Consequently, we now report in two operating
segments, namely Cloud Services and Easyspace.
Cloud Services
Revenues in this segment have grown by 10% to GBP84.1m (2017:
GBP76.3m). Some of this growth has been generated organically as we
continue to build on our strategy of providing cloud based
solutions to both new and existing customers as they increase their
cloud-based presence. The remainder of this growth has been driven
by the contribution from the acquisitions made in both this period
and the previous year as we continue to complement our organic
growth through acquisition.
During the year we made a substantial investment to implement a
software defined network across our datacentre estate in the UK. We
are now in a position where we can implement network changes,
within our datacentres, using software tools rather than the need
for physical intervention by an engineer. As a consequence our
network is now more resilient and is not as heavily dependent on
labour when changes are required to be made.
After the end of the financial year we extended the lease for
our London datacentre. The original lease was due to terminate in
2020 and that has now been extended until 2030. We will upgrade the
facility over the coming year and we now have the vast majority of
our datacentre estate on either freehold or leasehold terms lasting
for 12 years or more.
Software licencing in a cloud environment is a complex issue and
a recent audit carried out on behalf of a software licensor has
identified a shortfall in licence revenue owing to that licensor
for the four year period to March 2017. As a result, we estimated a
provision in this period of GBP2.1m in respect of licence fee
charges. The final amount could be higher, however not materially,
although we believe this is unlikely and it could be lower. In each
individual year to which the charge relates, the amount would not
have materially affected our profitability. Full provision has been
estimated in this financial year for licence fees relating to the
current year based on the level of provision for the prior years.
We are confident this is an isolated issue. We have taken steps to
improve our processes in this area of operation with both
additional resources and tools being deployed to ensure we
accurately report and invoice for licence usage in the future.
Through our iomart Cloud operation, we provide fully managed,
complex bespoke designs, resulting in resilient solutions involving
private, public and hybrid cloud infrastructure. This can range
from the provision of online backup and disaster recovery solutions
through to an entity's entire online live presence where all
revenue generated by that entity's activities are transacted
through the cloud infrastructure we provide.
Our Infrastructure as a Service (IaaS) operation, which
encompasses the activities of our RapidSwitch and Redstation
brands, delivers dedicated, physical, self-service servers to
customers. We provide many thousands of physical servers for our
customers using highly automated systems and processes which we
continue to develop and improve.
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 most of our other
activities within the Cloud Services segment there is less
recurring revenue generated from consultancy services. As we
indicated in our half-yearly report revenue generated from our
consultancy operation has declined in the year due to one low
margin public cloud consultancy project ending.
As previously mentioned the activities of Cristie are now
included within this segment. Having a unit within the Group that
supplies computer equipment to customers' premises has proved a
very useful addition. It has allowed us to confirm that the move to
the consumption of computing power in the cloud by established
organisations is happening over a long period. Only when entities
have both the need to acquire additional infrastructure and have
taken the decision to acquire some of that through the cloud will a
selling opportunity arise for the Group. In general, we see a
continual and steady movement in that direction.
We are able to supply products and services across the cloud
spectrum and do so using common platforms across the Group.
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, maintaining the organic revenue
growth which was re-established in the previous year.
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 2.4% to GBP13.6m (2017:
GBP13.2m) all as a result of organic growth.
Trading Results
Revenue
Revenues for the year grew by 9% to GBP97.7m (2017: GBP89.6m)
through the combination of continued organic growth and the impact
of acquisitions.
Our Cloud Services segment, including the operation of Cristie,
grew revenues by 10% to GBP84.1m (2017: GBP76.3m). A full year
contribution from Cristie, which we acquired in August 2016, and
Dediserve, Simple Servers and Sonassi all of which were acquired at
various points during the year helped this growth. Revenue growth
in the Cloud Services segment excluding the impact of acquisitions
was 3% (2017: 10%). As we reported in our half-yearly results, the
rate of organic growth in the year has been weighed down by a low
margin public cloud consultancy project coming to an end at the end
of the previous financial year. Adjusting for the effect of that
project the organic growth rate was 7%, which is similar to the
comparable growth rate in the last financial year if the low margin
public cloud consultancy project is excluded.
Revenues within the Easyspace segment grew by 2.4% to GBP13.6m
(2017: GBP13.2m) all of which is organic.
Our business model in both segments generally involves the
provision of cloud and managed hosting services from our
datacentres delivering to our customers the computing power,
storage, and network capability they require for the operation of
their own businesses. We have invested in an estate of datacentres,
in an extensive fibre network and for each customer the servers,
routers, firewalls etc that are required to create the IT
infrastructure they require. Customers then pay us for the
provision of that infrastructure.
Larger customers tend to have multi-year contracts for complex
cloud solutions, which are invoiced on a monthly basis. Many of our
smaller customers pay in advance for the provision of services
which results in a substantial sum of deferred revenue, which is
then recognised over the period of the service provision. A very
large proportion of our revenue is therefore recurring and the
combination of multi-year contracts and payment in advance provides
us with excellent revenue visibility.
The Group has completed its assessment of the impact of IFRS 15,
which will be adopted in the next financial year, and current
revenue recognition policies, and whilst unaudited, that assessment
confirms that the adoption of IFRS 15 will not result in a material
change to the financial statements.
Gross Margin
Our gross profit for the year was GBP62.9m (2017: GBP57.3m)
increasing as a result of the additional revenues we generated as
explained above. In percentage terms, our margin remained around
the same level at 64.4% (2017: 64.0%). Whilst the overall level of
percentage margin is similar there have been a few individual
movements, which have resulted in our margins being maintained.
Within Cloud Services the completion of the low margin public
cloud consultancy project has reduced our costs and therefore
improved our percentage margin. Conversely, the contribution of a
full year of Cristie, bringing low margin hardware and software
sales to customers' own premises has increased costs and reduced
our percentage margin. We have also seen a benefit from the fixed
cost nature of our datacentre estate where costs do not rise in
line with revenue offset by a relative increase in licencing costs.
All of our acquisitions in the year have also helped to increase
modestly our percentage margin.
The gross margin within our Easyspace segment has remained
consistent with the previous year.
Adjusted EBITDA
The adjusted EBITDA for the year was GBP39.8m (2017: GBP36.6m)
an increase of 9%. Our adjusted EBITDA margin has remained at the
same level of 40.8% (2017: 40.8%). The Cloud Services segment
increased its absolute level of margin over the period whilst
maintaining its percentage margin, while the Easyspace segment's
absolute and percentage margin were very similar to the previous
year.
Adjusted EBITDA in the Cloud Services segment was GBP37.1m
(2017: GBP34.0m), an increase of 9%. 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
with payroll costs having increased mainly due to the impact of
acquisitions and an increase in software licence fees, offset by a
reduction in bad debt expense. In percentage terms the adjusted
EBITDA margin has slightly decreased to 44.1% (2017: 44.6%).
The Easyspace segment's adjusted EBITDA was GBP6.4m (2017:
GBP6.2m) an increase of 3%. This improvement in adjusted EBITDA is
largely due to a reduction in the level of administrative expenses.
In percentage terms the adjusted EBITDA margin has remained
consistent at 47.3% (2017: 47.1%).
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 remained constant at GBP3.6m (2017:
GBP3.7m).
Adjusted profit before tax
Depreciation charges of GBP12.5m (2017: GBP11.0m) have increased
over the period, partly due to the impact of acquisitions, partly
due to price increases implemented by hardware vendors as a result
of the weakening of Sterling since the Brexit vote and partly
because of charges for the equipment bought to provide services to
the additional Cloud Services segment, including the impact of a
substantial investment in our fibre network, which was made during
the year.
The charge for amortisation of intangibles, excluding
amortisation of intangible assets resulting from acquisitions
("amortisation of acquired intangible assets") of GBP2.1m (2017:
GBP1.9m) has increased over the year as a result of an increase in
the level of software investment.
Finance costs of GBP1.2m (2017: GBP1.3m), excluding the mark to
market adjustment in respect of interest swaps on the Company's
loans and the interest charge on the contingent consideration due
in respect of acquisitions, 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 and the
interest charge on the contingent consideration due in respect of
acquisitions from the adjusted EBITDA, the Group's adjusted profit
before tax was GBP24.0m (2017: GBP22.4m) an increase of 7%.
The adjusted profit before tax margin for the year was 24.6%
(2017: 25.0%). This modest margin reduction is mainly due to the
slight increase in depreciation charges as a percentage of
revenue.
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 before 2018 2017
tax to profit before tax GBP'000 GBP'000
Adjusted profit before tax 24,039 22,406
Less: Amortisation of acquired intangible
assets (6,449) (5,558)
Less: Acquisition costs (774) (104)
Less: Share based payments (1,206) (1,844)
Add: Mark to market adjustment on interest
rate swaps 46 84
Less: Interest on contingent consideration (51) (330)
Add: Gain on revaluation of contingent
consideration 1,335 -
Less: Non-recurring software licence fees
relating to prior years (2,143) -
Profit before tax 14,797 14,654
---------------------------------------------- --------- ---------
The adjusting items are: charges for the amortisation of
acquired intangible assets of GBP6.4m (2017: GBP5.6m) which have
increased 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 GBP0.8m (2017: GBP0.1m) as a result of
acquisitions made; share based payment charges of GBP1.2m (2017:
GBP1.8m) which have decreased as a result of share option awards
made in previous years not fully vesting; a mark to market credit
adjustment in respect of interest rate swaps on the Company's loans
of GBP0.1m (2017: GBP0.1m); and the charge of interest, at the
weighted average cost of capital rate of 15.5%, on the contingent
consideration paid for the acquisition of United Communications
Limited of GBP0.1m (2017: GBP0.3m).
In addition, there are two adjusting items in this period with
no comparable amount in the previous financial year. We have made a
net gain on revaluation of contingent considerations in the period
of GBP1.3m (2017: GBPnil). The structure of the Sonassi earn out
arrangement was such that a relatively modest change in
profitability could result in a substantial change in the amount
due under the earn out terms. Consequently, estimating the amount
due was challenging. The decrease of GBP1.5m from the originally
estimated GBP2.3m for Sonassi represents an underlying reduction in
expected profitability over the earn out period, which ends in July
2018, of only 5.4%. We have also recorded a loss on the revaluation
of contingent considerations in respect of Simple Servers of
GBP0.1m and United Communications of GBP0.1m resulting in a total
net gain on revaluation of contingent consideration of GBP1.3m in
the period.
The other adjusting item which does not have a comparable amount
in the previous year relates to software licence fees. As a result
of an audit undertaken on behalf of a software licensor in the
current year, incorrect licence information relating to previous
financial years has been identified. The software licensor accepts
this situation is not due to any deliberate action of the Group and
we are discussing an even stronger collaboration together in the
future. The audit covered the four year period ending March 2017
and a sum of GBP2.1m has been estimated as being due in respect of
these four financial years. The final amount could be higher,
however not materially, although we believe this is unlikely and it
could be lower. The shortfall in licence count identified has been
quantified at current year prices rather than the lower pricing
that would have been applied in each of the years covered by the
audit. Software licencing in a cloud environment is not
straightforward with the cloud provider being responsible to the
licensor for all software installed on any infrastructure platform
provided to its customers, even if the cloud provider does not
actually install the software. It is the case that we should have
charged our customers more than we have for the use of software on
the cloud platforms we provided over the audit period. We are
taking steps to improve controls in this area and the adjusted
profit before tax for the period of GBP24.0m includes full
provision for all software licences due in that period.
After deducting these items from the adjusted profit before tax;
the reported profit before tax was GBP14.8m (2017: GBP14.7m) an
increase of 1%. In percentage terms the profit before tax margin
having been adversely affected by the licence fee provision offset
to some extent by the gain on revaluation of contingent
consideration reduced to 15% (2017: 16%).
Taxation
There is a tax charge for the year of GBP2.5m (2017: GBP2.6m).
The tax charge for the year is made up of a corporation tax charge
of GBP4.3m (2017: GBP4.4m) with a deferred tax credit of GBP1.8m
(2017: GBP1.8m). The effective rate of tax for the year is 17.0%
(2017: 17.5%). The decrease of 0.5% is due to the reduction to the
tax charge in the current year on the non-taxable income in respect
of the gain on revaluation of contingent consideration and the
increase in the deduction to the tax charge for the tax effect of
share based remuneration. This is offset by an increase to the tax
charge in respect of overseas jurisdictions as a result of the US
tax rate reducing from 34% to 21% effective from 1 January 2018
impacting deferred tax assets held. Further explanation of the tax
charge for the year is given in note 4.
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 GBP12.3m (2017: GBP12.1m) an increase of 2%.
Earnings per share
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 11.41p
(2017: 11.27p), an increase of 1%, and again this has been
adversely affected by the licence fee provision offset to some
extent by the gain on revaluation of contingent consideration.
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 gain
on the revaluation of contingent consideration and the charge of
interest on contingent consideration due, acquisition costs and the
tax effect of these items was 17.96p (2017: 16.99p), an increase of
6%.
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.
Acquisitions
On 17 May 2017, the Company acquired the entire share capital of
Dediserve on a no debt, no cash, normalised working capital basis
for a total purchase price of EUR7.9m (GBP6.7m). An initial payment
of EUR7.8m (GBP6.7m) in cash less the sum of EUR0.25m (GBP0.21m) as
an interim settlement of the expected amount due by the vendors in
respect of the no debt, no cash, normalised working capital
adjustment was made on acquisition. The initial payment was funded
from a drawdown from the Company's revolving credit facility. A
further payment of EUR0.11m (GBP0.1m) was made in respect of the
final no debt, no cash, normalised working capital adjustment. In
November a final amount of deferred consideration of EUR0.1m
(GBP0.09m) was paid.
On 26 July 2017, the Company acquired the entire share capital
of Simple Servers on a no debt, no cash, normalised working capital
basis for a total purchase price of GBP4.9m. An initial payment of
GBP3.0m in cash was made on acquisition. The initial payment was
funded from a drawdown from the Company's revolving credit
facility. In October, a further payment of GBP0.37m was made in
respect of the no debt, no cash, normalised working capital
adjustment. An amount of contingent consideration was due in
respect of the period ending 31 March 2018. The contingent
consideration has now been agreed at GBP1.9m. GBP1.8m was paid in
June 2018 with the balance due in September 2018 (note 12).
On 17 November 2017, the Company acquired the entire share
capital of Sonassi on a no debt, no cash, normalised working
capital basis using a locked box mechanism at 30 September 2017 and
a daily contribution from then until completion with the benefit of
trading during that period accruing to the vendors. At completion,
an initial payment of GBP10.0m in cash was made and in addition, an
amount of GBP3.2m in cash was paid in settlement of the no debt, no
cash, normalised working capital and daily contribution adjustment.
The initial payment was funded from a drawdown from the Company's
revolving credit facility. In February, a sum of GBP1.0m, which was
contingent on the completion of an element of software development
was paid. A final sum of no more than GBP5.5m is payable dependent
on the profitability of the business in the year to July 2018. The
maximum purchase price is therefore GBP16.5m, excluding any sums
due in respect of the no debt, no cash, normalised working capital
and daily contribution adjustment. We expect the amount to be paid
in respect of the final contingent consideration due will be
GBP0.8m (note 12).
Dividends
Our dividend policy, as noted in our Chairman's statement on
page 3, which has been in place for several years now, is based on
the profitability of the business in the period. We have committed
to a pay-out policy of up to 40% of the adjusted diluted earnings
per share we deliver in a financial year. This year we introduced
an interim dividend of 2.25p which was paid in January 2018. We
have now proposed a final dividend payment of 4.93p per share which
would result in a total dividend for the year of 7.18p (2017:
6.00p) an increase of 20% and representing a pay-out ratio of 40%
of the adjusted diluted earnings per share for the year. The Board
has taken the decision to increase the dividend 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.
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 GBP40.8m (2017:
GBP37.8m) with the significant increase of 8% over the previous
year's level due to a combination of the increase in adjusted
EBITDA and improvements in working capital management. The adverse
movement in trade receivables has been affected by the provision
for non-recurring software licence fees and the recording of a
large software maintenance invoice in the year covering a period
post the year-end resulting in a significant year-end prepayment.
As this invoice was not due to be paid by the end of the year it
has also contributed to the favourable movement in trade payables.
In addition, the movement in both trade receivables and payables
has been increased by the trading of Cristie close to the year end
when relatively large on premise supply of equipment has led to
both trade receivables and payables being outstanding at the
year-end. After deducting payments for corporation tax of GBP5.2m
(2017: GBP3.9m) the net cash flow from operating activities was
GBP35.6m (2017: GBP33.9m).
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 GBP41.5m (2017: GBP15.2m)
in the year. Of this amount, GBP20.1m (2017: GBP0.7m), net of cash
acquired of GBP4.2m (2017: GBP3.1m), was incurred in relation to
the acquisitions of Dediserve, Simple Servers and Sonassi as
described above. In addition, the Group incurred expenditure of
GBP2.5m (2017: GBP1.2m) in respect of contingent consideration due
on previous 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 GBP16.1m (2017: GBP10.2m) on assets, net
of related finance lease drawdowns, trade creditor movements and
non-cash reinstatement provisions. The main reason for the increase
is the substantial investment in the network which was made during
the year for which we will see the benefit in future years.
Expenditure was also incurred on development costs of GBP1.6m
(2017: GBP1.4m) and on intangible assets of GBP1.2m (2017:
GBP1.8m).
Cash flow from financing activities
Drawdowns of GBP25.0m (2017: GBPnil) were made from the
revolving credit facility in the year to fund the purchase of the
acquisitions. Bank loan repayments of GBP8.5m (2017: GBP16.0m) were
made in the year. We received GBP0.2m (2017: GBP1.1m) from the
issue of shares as a result of the exercise of options by
employees. We also made dividend payments of GBP8.9m (2017:
GBP3.4m); incurred finance costs of GBP1m (2017: GBP1.2m); and made
lease repayments of GBP0.3m (2017: GBP0.6m).
Net cash flow
As a consequence, our overall cash generated during the year was
GBP0.6m (2017: GBP1.4m cash expenditure) which resulted in cash and
cash equivalent balances at the end of the year of GBP9.5m (2017:
GBP8.9m). After recognising bank loans of GBP35.2m (2017: GBP18.6m)
and finance lease obligations of GBP0.8m (2017: GBP0.9m) net debt
balances at the end of the period stood at GBP26.6m (2017:
GBP10.6m) 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, capital expenditure and general business purposes 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
We are delighted to report another year of excellent results,
with increased revenues and profits and the completion of a number
of acquisitions, augmenting the Group's customer base and skill
set. Trading in the new year has continued in a similarly positive
vein.
Since we embarked on our current strategy in 2007, we have
successfully executed on our growth strategy, growing revenues from
GBP8m to nearly GBP100m. We strongly believe that the market for
cloud computing solutions we identified at the time presents us
with as much opportunity now as it did then and that, together with
additional acquisitions, will allow us to continue to execute
successfully on the strategy we put in place at that time.
There is still a long runway of opportunity as the "IT as a
service" philosophy and delivery unfolds, providing us with
considerable scope for long-term, sustained growth. We therefore
look to the coming year and beyond with confidence.
Angus MacSween
Chief Executive Officer
11 June 2018
Consolidated Statement of Comprehensive Income
Year ended 31 March 2018
2018 2017
Note GBP'000 GBP'000
Revenue 97,669 89,573
Cost of sales (34,741) (32,266)
--------- ---------
Gross profit 62,928 57,307
Administrative expenses (46,154) (41,074)
Administrative expenses - exceptional (2,143) -
non-recurring costs
---------------------------------------------- ----- --------- ---------
Operating profit 14,631 16,233
Analysed as:
Earnings before interest, tax, depreciation,
amortisation, acquisition costs,
share based payments and non-recurring
costs 39,843 36,570
Share based payments (1,206) (1,844)
Acquisition costs (774) (104)
Depreciation 9 (12,536) (10,972)
Amortisation - acquired intangible
assets 8 (6,449) (5,558)
Amortisation - other intangible assets 8 (2,104) (1,859)
Administrative expenses - exceptional (2,143) -
non-recurring costs
---------------------------------------------- ----- --------- ---------
Gain on revaluation of contingent 1,335 -
consideration
Finance income 13 22
Finance costs (1,182) (1,601)
--------- ---------
Profit before taxation 14,797 14,654
Taxation 4 (2,510) (2,571)
--------- ---------
Profit for the year attributable
to equity holders of the parent 12,287 12,083
Other comprehensive income
Amounts which may be reclassified
to profit or loss
Currency translation differences (25) 22
------------------------------------------------ ----- --------- ---------
Other comprehensive income for the
year (25) 22
------------------------------------------------ ----- --------- ---------
Total comprehensive income for the
year attributable to equity holders
of the parent 12,262 12,105
Basic and diluted earnings per share
Total operations
11.27
Basic earnings per share 6 11.41p p
11.08
Diluted earnings per share 6 11.21p p
------------------------------------------------ ----- --------- ---------
Consolidated Statement of Financial Position
As at 31 March 2018
2018 2017
Note GBP'000 GBP'000
------------------------------- ----- --------- ---------
ASSETS
Non-current assets
Intangible assets - goodwill 8 75,837 62,000
Intangible assets - other 8 26,926 19,707
Lease deposits 2,760 2,760
Property, plant and equipment 9 40,686 35,049
146,209 119,516
Current assets
Cash and cash equivalents 9,495 8,906
Trade and other receivables 17,958 15,080
27,453 23,986
Total assets 173,662 143,502
LIABILITIES
Non-current liabilities
Non-current borrowings 10 (503) (625)
Trade and other payables - (102)
Provisions (1,775) (1,721)
Deferred tax 5 (1,319) (888)
(3,597) (3,336)
Current liabilities
Contingent consideration due
on acquisitions 12 (2,694) (2,373)
Trade and other payables (29,145) (23,368)
Provisions (2,587) (38)
Current tax liabilities (1,608) (2,000)
Current borrowings 10 (35,566) (18,872)
(71,600) (46,651)
Total liabilities (75,197) (49,987)
Net assets 98,465 93,515
-------------------------------- ----- --------- ---------
EQUITY
Share capital 1,080 1,078
Own shares (70) (120)
Capital redemption reserve 1,200 1,200
Share premium 21,231 21,067
Merger reserve 4,983 4,983
Foreign currency translation
reserve (40) (15)
Retained earnings 70,081 65,322
-------------------------------- ----- --------- ---------
Total equity 98,465 93,515
-------------------------------- ----- --------- ---------
Consolidated Statement of Cash Flows
Year ended 31 March 2018
2018 2017
Note GBP'000 GBP'000
Profit before taxation 14,797 14,654
Gain on revaluation of contingent (1,335) -
consideration
Finance costs - net 1,169 1,579
Depreciation 9 12,536 10,972
Amortisation 8 8,553 7,417
Share based payments 1,206 1,844
Movement in trade receivables (2,289) 837
Movement in trade payables 6,195 480
------------------------------------------- ------ ---------- -----------------
Cash flow from operations 40,832 37,783
Taxation paid (5,236) (3,874)
Net cash flow from operating activities 35,596 33,909
Cash flow from investing activities
Purchase of property, plant and
equipment 9 (16,092) (10,189)
Capitalisation of development
costs 8 (1,577) (1,372)
Purchase of intangible assets 8 (1,223) (1,845)
Payments for current period acquisitions
net of cash acquired (20,143) (703)
Contingent consideration paid (2,475) (1,161)
Finance income received 13 22
Net cash used in investing activities (41,497) (15,248)
Cash flow from financing activities
Issue of shares 224 1,064
Draw down of bank loans 24,956 -
Repayment of finance leases (276) (580)
Repayment of bank loans (8,500) (16,000)
Finance costs paid (1,029) (1,205)
Dividends paid (8,885) (3,375)
Net cash received from/(used in)
financing activities 6,490 (20,096)
Net increase/(decrease) in cash
and cash equivalents 589 (1,435)
Cash and cash equivalents at the
beginning of the year 8,906 10,341
------------------------------------------ ------ ---------- -----------------
Cash and cash equivalents at the end of
the year 9,495 8,906
Consolidated Statement of Changes in Equity
Year ended 31 March 2018
Foreign
Own Own currency Capital Share
Share shares shares translation redemption premium Merger Retained
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 2016 1,078 (70) (419) (37) 1,200 21,067 4,983 54,467 82,269
Profit for 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
---------------- --------- -------- ---------- ------------ ------------ --------- --------- ---------- --------
Profit for the
year - - - - - - - 12,287 12,287
Currency
translation
differences - - - (25) - - - - (25)
--------- -------- ---------- ------------ ------------ --------- --------- ---------- --------
Total
comprehensive
income - - - (25) - - - 12,287 12,262
--------- -------- ---------- ------------ ------------ --------- --------- ---------- --------
Dividends -
interim
(paid) - - - - - - - (2,426) (2,426)
Dividends -
final
(paid) - - - - - - - (6,459) (6,459)
Share based
payments - - - - - - - 1,206 1,206
Deferred tax
on share based
payments - - - - - - - 143 143
Issue of share
capital 2 - - - - 164 - - 166
Issue of own
shares for
option
redemption - - 50 - - - - 8 58
Total
transactions
with owners 2 - 50 - - 164 - (7,528) (7,312)
--------- -------- ---------- ------------ ------------ --------- --------- ---------- --------
Balance at 31
March 2018 1,080 (70) - (40) 1,200 21,231 4,983 70,081 98,465
---------------- --------- -------- ---------- ------------ ------------ --------- --------- ---------- --------
Notes to the Yearly Financial Information
Year ended 31 March 2018
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 2018 and 31 March 2017 within the meaning of section 434 of
the Companies Act 2006. The financial information for the year
ended 31 March 2017 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 2018 is derived
from the statutory accounts for that year which were approved by
the Directors on 11 June 2018. The statutory accounts for the year
ended 31 March 2018 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 two
operating segments and the CEO reviews the Group's internal
reporting which recognises these two 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 two operating and reportable segments
being Easyspace and Cloud Services.
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, Infrastructure as a
Service (Iaas) which was previously detailed as RapidSwitch and
Redstation, SystemsUp, Cristie Data and the activities of
Dediserve, Simple Servers and Sonassi which were acquired in the
year.
In the prior year there were three segments reported which
included Easyspace, Cloud Services and a Non-recurring segment
which included the operations of Cristie Data ("Cristie") which was
acquired in the prior year. Since the prior year, Cristie has
become more integrated into our Cloud Services operation. We have
provided consultancy services, through SystemsUp, to customers of
Cristie, focusing on cloud strategy. In addition, Cristie has also
won contracts to provide solutions from our datacentres on a
dedicated cloud basis. Consequently, in this year, nearly half of
the revenue generated and orders won by Cristie have been of a
recurring nature. Therefore, we have concluded that it is no longer
appropriate to include the results of Cristie separately,
particularly in a non-recurring revenue segment, from the rest of
our Cloud Services operations and we will report it within this
segment from now on. The comparative figures for segmental analysis
for the year ended 31 March 2017 have been restated to reflect this
change.
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 and material
non-recurring items. 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 two 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
2018 2017 (restated)*
External Internal Total External Internal Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------- --------- -------- --------- --------- --------
Easyspace 13,580 2 13,582 13,249 12 13,261
Cloud Services 84,089 1,389 85,478 76,324 1,538 77,862
97,669 1,391 99,060 89,573 1,550 91,123
---------------- --------- --------- -------- --------- --------- --------
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
2018 2017
GBP'000 GBP'000
------------------------- -------- --------
United Kingdom 79,625 75,163
Rest of the
World 18,044 14,410
-------- --------
Revenue from operations 97,669 89,573
-------------------------- -------- --------
Profit by Operating Segment
2018 2017 (restated)*
Depreciation, Depreciation,
amortisation, amortisation,
acquisition acquisition
costs, share costs, share
based payments based payments
Adjusted and non-recurring Operating Adjusted and non-recurring Operating
EBITDA costs profit/(loss) EBITDA costs profit/(loss)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- --------- ------------------- --------------- --------- ------------------- ---------------
Easyspace 6,417 (1,636) 4,781 6,244 (948) 5,296
Cloud Services 37,056 (21,596) 15,460 34,006 (17,441) 16,565
Group overheads (3,630) - (3,630) (3,680) - (3,680)
Acquisition
costs - (774) (774) - (104) (104)
Share based
payments - (1,206) (1,206) - (1,844) (1,844)
-------------------- --------- ------------------- --------------- --------- ------------------- ---------------
Profit before
tax
and interest 39,843 (25,212) 14,631 36,570 (20,337) 16,233
Gain on revaluation
of contingent
consideration 1,335 -
Group interest
and tax (3,679) (4,150)
--------- ------------------- --------------- --------- ------------------- ---------------
Profit for the
year 39,843 (25,212) 12,287 36,570 (20,337) 12,083
-------------------- --------- ------------------- --------------- --------- ------------------- ---------------
Group overheads, acquisition costs, share based payments,
interest and tax are not allocated to segments.
*Prior to the restatement, external revenue for the year ended
to 31 March 2017 was GBP13,249,000 for Easyspace and GBP72,685,000
for Cloud Services; adjusted EBITDA for the year ended 31 March
2017 was GBP6,244,000 for Easyspace and GBP33,680,000 for Cloud
Services; and operating profit for the year ended 31 March 2017 was
GBP5,296,000 for Easyspace and GBP16,560,000 for Cloud
Services.
4. TAXATION
2018 2017
GBP'000 GBP'000
----------------------------------------- -------- --------
Corporation Tax:
Tax charge for the year (4,364) (4,349)
Adjustment relating to prior years 68 (12)
------------------------------------------ -------- --------
Total current taxation charge (4,296) (4,361)
Deferred Tax:
Origination and reversal of temporary
differences 1,900 1,751
Adjustment relating to prior years (15) 227
Effect of different statutory tax
rates of overseas jurisdictions (70) 27
Effect of changes in tax rates (29) (215)
------------------------------------------ -------- --------
Total deferred taxation credit 1,786 1,790
Total taxation charge (2,510) (2,571)
------------------------------------------ -------- --------
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:
2018 2017
GBP'000 GBP'000
----------------------------------------------- -------- --------
Profit before tax 14,797 14,654
------------------------------------------------ -------- --------
Tax charge @ 19% (2017 - 20 %) 2,811 2,931
Expenses disallowed for tax purposes 156 134
Tax effect of net gain on revaluation of
contingent consideration (254) -
Adjustments in current tax relating to prior
years (68) 12
Tax effect of different statutory tax rates
of overseas jurisdictions 113 5
Movement in deferred tax relating to changes
in tax rates 29 215
Tax effect of research and development tax
reliefs - (326)
Tax effect of share based remuneration (231) (151)
Movement in unprovided deferred tax related
to development costs (68) (13)
Movement in unprovided deferred tax related
to property, plant and equipment 7 (9)
Movement in deferred tax relating to prior
years 15 (227)
Total taxation charge for the year 2,510 2,571
------------------------------------------------ -------- --------
The weighted average applicable tax rate for the year ended 31
March 2018 was 19% (2017: 20%). The total current corporation tax
charge for the year of GBP4,364,000 (2017: GBP4,349,000) on
operations represents 29.5% (2017: 29.7%) of the Group profit
before tax of GBP14,797,000 (2017: GBP14,654,000). 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 17.0% (2017: 17.5%).
The net decrease of 0.5% is due to a combination of movements that
have increased or decreased the tax charge in the year.
The decrease to the tax charge in the year is a result of the
deduction in relation to tax effect of the net gain on revaluation
of contingent consideration, the increase in the tax effect of
share based remuneration in the current year largely due to the
increase in share price and the movement in deferred tax relating
to change in tax rates as the change in future corporation tax
rates was processed in the prior year.
The increase to the tax charge in the year is due to there being
no tax deduction in the current year in respect of research and
development tax relief as the Group has moved into the large
company scheme and applied a research and development credit to
profit before tax, the effect of different tax rates of overseas
jurisdictions has increased deferred tax assets due to the
reduction of the US tax rate from 34% to 21% with effect from 1
January 2018 and the movement in deferred tax relating to prior
years.
Disallowed expenses of GBP156,000 largely relate to M&A
costs incurred on the acquisitions in the 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 in the prior year and therefore
are included in these financial statements.
5. DEFERRED TAX
The Group recognised deferred tax assets and liabilities as
follows:
2018 2017
Deferred Deferred Deferred Deferred
tax Recognised tax Unrecognised tax Recognised tax Unrecognised
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------------ --------------- ----------------- --------------- -----------------
Share based remuneration 1,588 - 1,135 -
Capital allowances temporary differences 1,455 - 1,181 -
Deferred tax on development costs (329) - (311) -
Deferred tax on acquired assets
with no capital allowances (235) - (326) -
Deferred tax on customer relationships (3,581) - (2,567) -
Deferred tax on intangible software (217) - - -
------------------------------------------ --------------- ----------------- --------------- -----------------
Deferred tax liability (1,319) - (888) -
------------------------------------------ --------------- ----------------- --------------- -----------------
At the year end, the Group had no unused tax losses (2017:
GBPnil) available for offset against future profits.
The movement in the deferred tax account during the year
was:
Deferred
Capital tax on
allowances acquired
Share based temporary Development assets Customer Intangible
remuneration differences costs with no relationships Software Total
GBP'000 GBP'000 GBP'000 capital GBP'000 GBP'000 GBP'000
allowances
GBP'000
------------------- ------------- ------------- ------------- ----------- -------------- ------------ ---------
Balance at 1 April
2016 1,010 1,103 (195) (442) (3,551) - (2,075)
Acquired on
acquisition
of subsidiary - (14) - - (186) - (200)
Charged to equity (392) - - - - - (392)
Credited/(charged)
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)
Acquired on
acquisition
of subsidiary - (1) - - (2,144) (217) (2,362)
Credited to equity 143 - - - - - 143
Credited/(charged)
to statement of
comprehensive
income 310 304 (18) 91 1,200 - 1,887
Effect of different
tax rates of
overseas
jurisdictions - - - - (70) - (70)
Effect of changes
in tax rates - (29) - - - - (29)
Balance at 31 March
2018 1,588 1,455 (329) (235) (3,581) (217) (1,319)
------------------- ------------- ------------- ------------- ----------- -------------- ------------ ---------
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 2018 2017
GBP'000 GBP'000
---------------------------------------- ---- -------- --------
Profit for the financial year and
basic earnings attributed to ordinary
shareholders 12,287 12,083
---------------------------------------------- -------- --------
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 (28) (465)
Own shares held by Employee Benefit
Trust (141) (141)
Issued share capital in the year 70 -
Weighted average number of ordinary
shares - basic 107,704 107,197
Dilutive impact of share options 1,857 1,808
Weighted average number of ordinary
shares - diluted 109,561 109,005
----------------------------------------- --- -------- --------
Basic earnings per share 11.41 p 11.27 p
Diluted earnings per share 11.21 p 11.08 p
----------------------------------------------- -------- --------
Adjusted earnings per share 2018 2017
GBP'000 GBP'000
Profit for the financial year and
basic earnings attributed to ordinary
shareholders 12,287 12,083
* Amortisation of acquired intangible assets 6,449 5,558
* Acquisition costs 774 104
* Share based payments 1,206 1,844
* Mark to market interest adjustment (46) (84)
* Gain on revaluation of contingent consideration (1,335) -
* Non-recurring software licence fees 2,143 -
* Finance charge on contingent consideration 51 330
* Tax impact of adjusted items (1,850) (1,313)
Adjusted profit for the financial
year and adjusted earnings attributed
to ordinary shareholders 19,679 18,522
--------------------------------------------------------- --- -------- --------
Adjusted basic earnings per share 18.27 p 17.28 p
Adjusted diluted earnings per share 17.96 p 16.99 p
--------------------------------------------------------------- -------- --------
7. ACQUISITIONS
Dediserve Limited
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 and
is 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 Group incurred GBP431,000 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 2018.
The following table summarises the consideration to acquire
Dediserve and the amounts of identified assets acquired and
liabilities assumed at the acquisition date,which are final:
GBP'000
----------------------------------------------------------- --------
Recognised amounts of net assets acquired and liabilities
assumed:
Cash and cash equivalents 250
Trade and other receivables 99
Property, plant and equipment 791
Intangible assets 3,680
Trade and other payables (290)
Borrowings (283)
Current income tax liabilities (120)
Deferred tax liability (588)
----------------------------------------------------------- --------
Identifiable net assets 3,539
Goodwill 3,130
----------------------------------------------------------- --------
Total consideration 6,669
----------------------------------------------------------- --------
Satisfied by:
Cash - paid on acquisition 6,485
Deferred consideration - paid 98
Deferred consideration - paid 86
Total consideration transferred 6,669
----------------------------------------------------------- --------
The share purchase agreement, in respect of the acquisition of
Dediserve, includes a provision, under which the total
consideration payable was 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) was
deducted as an interim settlement of the expected amount due in
respect of the no debt, no cash, normalised working capital
adjustment. Following agreement of the Completion Accounts an
additional payment of EUR113,000 (GBP98,000) was paid in respect of
the no debt, no cash, normalised working capital adjustment. An
amount of EUR100,000 (GBP86,000) was deferred and paid 6 months
after the completion date in November 2017. The initial payment of
EUR7,550,000 (GBP6,485,000) was funded by a draw down from the
revolving credit facility of GBP6,485,000.
The goodwill arising on the acquisition of Dediserve is
attributable to the premium payable for a pre-existing, well
positioned business and the specialised, industry specific
knowledge of the management and staff, together with the benefits
to the Group in merging the business with its existing
infrastructure and the anticipated future operating synergies from
the combination. The goodwill is not expected to be deductible for
tax purposes.
Dediserve did not promote or advertise its trade name or brand
and the bulk of its new business comes either directly from
existing customers or from referrals or recommendations by existing
customers or from marketing campaigns associated with the launch of
a new location. Dediserve's privacy policy includes a commitment
not to disclose any personal information it holds on customers
unless the customer's permission is given. As a consequence, there
is no significant value in either the trade name/brand or customer
lists acquired at the acquisition date and therefore no value has
been attributed to either intangible asset.
The fair value of the financial assets acquired includes trade
receivables with a fair value of GBP51,000. The gross amount due
under contracts is GBP51,000 of which GBPnil are expected to be
uncollectable.
The fair value included in respect of the acquired customer
relationships intangible asset is GBP3,680,000.
To estimate the fair value of the customer relationships
intangible asset, a discounted cash flow method, specifically the
income approach, was used with reference to the directors'
estimates of the level of revenue, which will be generated from
them. A post-tax discount rate of 13.6% was used for the valuation.
Customer relationships are being amortised over an estimated useful
life of 8 years.
Dediserve earned revenue of GBP2,453,000 and generated profits,
before allocation of group overheads, third party acquisition
related costs and tax of GBP799,000 in the period since
acquisition.
Tier 9 Limited
The Group acquired 100% of the issued share capital of Tier 9
Limited ("Tier 9") on 26 July 2017. Tier 9 Limited is a non-trading
holding company with two 100% owned subsidiaries: Cloudfuel
Limited, which is also non-trading, and Simple Servers Limited
(which trades as "Simple Servers").
Simple Servers is a Redditch based hosting company, which
specialises in providing hosting solutions for the Magento
eCommerce application which is used extensively by online
retailers. This is hosted on various cloud platforms for all
sectors of industry from SMEs to larger enterprises. The
acquisition is in line with the Group's strategy to grow its
operations both organically and by acquisition and gives the group
access to a rapidly growing eCommerce market.
During the current period the Group incurred GBP106,000 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 2018.
The following table summarises the consideration to acquire Tier
9 and the amounts of identified assets acquired and liabilities
assumed at the acquisition date, which are final.
GBP'000
----------------------------------------------------------- --------
Recognised amounts of net assets acquired and liabilities
assumed:
Cash and cash equivalents 469
Trade and other receivables 117
Property, plant and equipment 156
Intangible assets 1,821
Trade and other payables (287)
Current income tax liabilities (94)
Deferred tax liability (363)
----------------------------------------------------------- --------
Identifiable net assets 1,819
Goodwill 3,331
----------------------------------------------------------- --------
Total consideration 5,150
----------------------------------------------------------- --------
Satisfied by:
Cash - paid on acquisition 3,039
Deferred consideration - paid 370
Contingent consideration - payable 1,741
Total consideration to be transferred 5,150
----------------------------------------------------------- --------
The share purchase agreement, in respect of the acquisition of
Tier 9, included a provision under which the total consideration
payable may have been adjusted by a payment to be made either to or
by the Company, depending on the level of cash, debt and normalised
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 Tier 9 was GBP3,039,000 in cash. Following
agreement of the Completion Accounts a total payment of GBP370,000
was due by the Company in respect of the no debt, no cash,
normalised working capital adjustment and this amount was paid in
cash in October 2017.
The contingent consideration arrangements require the Company to
pay the former shareholders of Tier 9 an additional amount
contingent on the level of profitability delivered by Simple
Servers in the year ended 31 March 2018 ("the Earn-out
Payment").
The potential undiscounted amount of the Earn-out Payment that
the Company could be required to pay is between GBPnil and
GBP2,961,000. The amount of contingent consideration payable which
was recognised as of the acquisition date was GBP1,741,000.The
level of profitability for the Earn-out Payment was estimated by
applying the income approach to different scenarios based on
historic performance and forecasts. Those scenarios reviewed had a
range of outcomes for the amount of the Earn-out Payment of
GBP1,046,000 to GBP2,339,000. A weighted average, based on
management estimates of the probability of the achievement of the
various levels of profitability, was then calculated to give the
expected outcome of the amount of the Earn-out Payment of
GBP1,741,000. The contingent consideration has now been agreed at
GBP1,862,000 was paid in June 2018 with the balance due in
September 2018. Consequently an amount of GBP121,000 has been
recognised in the Statement of Comprehensive Income during the year
as a loss on revaluation of contingent consideration.
The initial payment of GBP3,039,000 was funded by a draw down
from the revolving credit facility of GBP3,000,000.
The goodwill arising on the acquisition of Tier 9 is
attributable to the premium payable for a pre-existing, well
positioned business and the specialised, industry specific
knowledge of the management and staff, together with the benefits
to the Group in merging the business with its existing
infrastructure and the anticipated future operating synergies from
the combination. The goodwill is not expected to be deductible for
tax purposes.
Although the name Simple Servers is trademarked, it is not
actively advertised or promoted and the bulk of Simple Servers' new
business comes either directly from existing customers, from
referrals or recommendations by existing customers or from the
company's presence on Magento forums. Simple Servers privacy policy
includes a commitment not to sell, distribute or lease any personal
information it holds on customers unless the customer's permission
is given. As a consequence there is no significant value in either
the trade name/brand or customer lists acquired at the acquisition
date and therefore no value has been attributed to either
intangible asset.
The fair value of the financial assets acquired includes trade
receivables with a fair value of GBP77,000. The gross amount due
under contracts is GBP77,000 of which GBPnil are expected to be
uncollectable.
The fair value included in respect of the acquired customer
relationships intangible asset is GBP1,821,000.
To estimate the fair value of the customer relationships
intangible asset, a discounted cash flow method, specifically the
income approach, was used with reference to the directors'
estimates of the level of revenue, which will be generated from
them. A post-tax discount rate of 12.7% was used for the valuation.
Customer relationships are being amortised over an estimated useful
life of 8 years.
Simple Servers earned revenue of GBP1,123,000 and generated
profits, before allocation of group overheads, share based payments
and tax, of GBP546,000 in the period since acquisition.
Sonassi Holding Company Limited
The Group acquired 100% of the issued share capital of Sonassi
Holding Company Limited ("Sonassi Holding") on 17 November 2017.
Sonassi Holding is a non-trading holding company, which has a 100%
owned subsidiary company, Sonassi Limited (which trades as
"Sonassi").
Sonassi is a Manchester based hosting company, which, like
Simple Servers, specialises in providing hosting solutions for the
Magento eCommerce application. The acquisition is in line with the
Group's strategy to grow its operations, both organically and by
acquisition, and increases the group access to the rapidly growing
eCommerce market.
During the current period the Group incurred GBP197,000 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 2018.
GBP'000
----------------------------------------------------------- --------
Recognised amounts of net assets acquired and liabilities
assumed (provisional):
Cash and cash equivalents 3,434
Trade and other receivables 386
Property, plant and equipment 329
Intangible assets 7,646
Trade and other payables (874)
Current income tax liabilities (329)
Deferred tax liability (1,411)
----------------------------------------------------------- --------
Identifiable net assets 9,181
Goodwill 7,376
----------------------------------------------------------- --------
Total consideration 16,557
----------------------------------------------------------- --------
Satisfied by:
Cash - paid on acquisition 13,217
Deferred consideration - paid 1,000
Contingent consideration - payable 2,340
Total consideration to be transferred 16,557
----------------------------------------------------------- --------
The acquisition of Sonassi Holdings was completed using the
"locked box" mechanism, on a no cash, no debt, normalised working
capital basis. An initial payment of GBP13,217,000 was made at
completion. This initial payment included an amount of GBP3,217,000
to settle the adjustments required to the locked box accounts in
respect of the cash, debt and working capital position at the
locked box date and to compensate the seller for changes in net
debt or cash between the locked box date and completion. An
additional amount of GBP1,000,000 was deferred, pending the
completion of an upgrade of the software on which Sonassi's
provisioning and customer management systems are based, and this
amount was paid on 15 February 2018, following completion of the
upgrade.
The share purchase agreement included a provision requiring the
Company to pay the former shareholders of Sonassi Holdings an
additional amount contingent on the level of profitability
delivered by Sonassi in the year ending 31 July 2018 ("the Earn-out
Payment").
The potential undiscounted amount of the Earn-out Payment that
the Company could be required to pay is between GBPnil and
GBP5,465,000. The amount of contingent consideration payable, which
was recognised as of the acquisition date, was GBP2,340,000. The
level of profitability for the Earn-out Payment was estimated by
applying the income approach to different scenarios based on
historic performance and forecasts. Those scenarios reviewed had a
range of outcomes for the amount of the Earn-out Payment of
GBP461,000 to GBP4,309,000. A weighted average, based on management
estimates of the probability of the achievement of the various
levels of profitability, was then calculated to give the expected
outcome of the amount of the Earn-out Payment of GBP2,340,000. We
expect the amount to be paid in respect of the final contingent
consideration due will be GBP832,000. Consequently an amount of
GBP1,508,000 has been recognised in the Statement of Comprehensive
Income during the year as a gain on revaluation of contingent
consideration.
The goodwill arising on the acquisition of Sonassi Holdings is
attributable to the premium payable for a pre-existing, well
positioned business and the specialised, industry specific
knowledge of the management and staff, together with the benefits
to the Group in merging the business with its existing
infrastructure and the anticipated future operating synergies from
the combination. The goodwill is not expected to be deductible for
tax purposes.
The name Sonassi is not actively advertised or promoted and the
bulk of Sonassi's new business comes either directly from existing
customers, from referrals or recommendations by existing customers
or from the company's presence on Magento forums. Sonassi's privacy
policy includes a commitment not to sell, distribute or lease any
personal information it holds on customers unless the customer's
permission is given. As a consequence there is no significant value
in either the trade name/brand or customer lists acquired at the
acquisition date and therefore no value has been attributed to
either intangible asset.
The fair value of the financial assets acquired includes trade
receivables with a fair value of GBP275,000. The gross amount due
under contracts is GBP275,000 of which GBPnil are expected to be
uncollectable.
The fair value included in respect of the acquired customer
relationships intangible asset is GBP6,403,000.
To estimate the fair value of the customer relationships
intangible asset, a discounted cash flow method, specifically the
income approach, was used with reference to the directors'
estimates of the level of revenue, which will be generated from
them. A post-tax discount rate of 10.4% was used for the valuation.
Customer relationships are being amortised over an estimated useful
life of 8 years.
Sonassi has developed its own software, Magestack, for the
provisioning of customers' sites, to provide a control panel for
customers and for billing and customer management. To estimate the
fair value of this intangible asset, a discounted cash flow method,
specifically the relief from royalty approach, was used with
reference to the directors' estimates of the level of future cost
savings, which will be generated by the use of the company's own
software rather than 3(rd) party software, for which licence fees
would be payable. A post-tax discount rate of 10.4% was used for
the valuation. Software is being amortised over an estimated useful
life of 8 years.
Sonassi earned revenue of GBP892,000 and generated profits,
before allocation of group overheads, share based payments and tax,
of GBP704,000 in the period since acquisition.
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 2017. 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 combined
companies.
Pro-forma year
ended 31 March
2018
------------------------------- -----------------
GBP'000
------------------------------- ----------------
Revenue 100,016
Profit after tax for the year 14,150
-------------------------------- ----------------
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 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
subsidiaries 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
Additions - - 221 905 - - 1,126
Currency
translation
differences - - (91) (42) - - (133)
Acquired on
acquisition
of
subsidiaries 13,837 - 11,904 1,243 - - 26,984
Disposals - - - (10) - - (10)
Development
cost
capitalised - 1,577 - - - - 1,577
At 31 March
2018 75,837 7,781 47,999 6,943 86 280 138,926
---------------- ----------- -------------- ---------------- ---------- ------------- --------------- ---------
Accumulated
amortisation:
At 1 April 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)
---------------- ----------- -------------- ---------------- ---------- ------------- --------------- ---------
Currency
translation
differences - - 82 (27) - - 55
Disposals - - - 10 - - 10
Charge for the
year - (1,241) (6,449) (801) (8) (54) (8,553)
---------------- ----------- -------------- ---------------- ---------- ------------- --------------- ---------
At 31 March
2018 - (5,424) (27,303) (3,115) (41) (280) (36,163)
---------------- ----------- -------------- ---------------- ---------- ------------- --------------- ---------
Carrying
amount:
At 31 March
2018 75,837 2,357 20,696 3,828 45 - 102,763
---------------- ----------- -------------- ---------------- ---------- ------------- --------------- ---------
At 31 March
2017 62,000 2,021 15,029 2,550 53 54 81,707
---------------- ----------- -------------- ---------------- ---------- ------------- --------------- ---------
Of the total additions in the year of GBP1,126,000 (2017:
GBP1,670,000), GBP25,000 (2017: GBP122,000) was included in trade
payables as unpaid invoices at the year end resulting in a net cash
outflow of GBP97,000 (2017: net cash outflow GBP175,000) in trade
payables. Consequently, the consolidated statement of cash flows
discloses a figure of GBP1,223,000 (2017: GBP1,845,000) 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 Sonassi Limited with a net book value of GBP5.7m
and a remaining useful life of 8 years, Dediserve Limited with a
net book value of GBP2.8m and a remaining useful of 8 years, Simple
Servers Limited with an net book value of GBP1.4m and a remaining
useful life of 8 years, Backup Technology with a net book value of
GBP2.8m and a remaining useful life of 4 years; United Hosting with
a net book value of GBP3.2m and a remaining useful life of 6 years;
Melbourne Server Hosting with a net book value of GBP1.4m and a
remaining useful life of 3 years; and ServerSpace with a net book
value of GBP1.3m and remaining useful life of 5 years.
During the year, goodwill was reviewed for impairment in
accordance with IAS 36 "Impairment of Assets". No impairment
charges (2017: 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 year on all acquisitions has been allocated to the Hosting
CGU as this is the CGU expected to benefit from the business
combination.
The carrying value of goodwill by each CGU is as follows:
2017
2018 GBP'000
Cash Generating
Units (CGU) GBP'000 (restated)*
Easyspace 23,315 23,210
Cloud Services 52,522 38,790
75,837 62,000
-------------------------------- --------- -------------
*As noted in note 3, in the current year the Group now includes
the non-recurring cash generating unit relating to Cristie Data
reported in the prior year as part of Cloud Services cash
generating unit, consequently, the prior year has been restated to
reflect this change. Prior to restatement, the Cloud Services cash
generating unit in 2017 was GBP37,913,000.
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 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 subsidiaries - - - 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
Additions in
the year - 767 1,511 14,297 96 11 16,682
Acquisition
of subsidiaries - - - 1,275 1 - 1,276
Disposals in
the year - (194) - (1,191) (313) (48) (1,746)
Currency translation
differences - - - 59 - - 59
At 31 March
2018 2,062 8,540 22,680 70,043 2,398 31 105,754
------------------------- ---------- --------------- ----------- ----------- ----------- ---------- ---------
Accumulated
depreciation:
At 1 April 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)
Charge for the
year (48) (556) (1,984) (9,538) (409) (1) (12,536)
Disposals in
the year - 192 - 1,191 313 48 1,744
Currency translation
differences - - (8) 166 - - 158
------------------------- ---------- --------------- ----------- ----------- ----------- ---------- ---------
At 31 March
2018 (306) (3,138) (11,755) (48,123) (1,725) (21) (65,068)
------------------------- ---------- --------------- ----------- ----------- ----------- ---------- ---------
Carrying amount:
At 31 March
2018 1,756 5,402 10,925 21,920 673 10 40,686
At 31 March
2017 1,804 5,193 11,406 15,661 985 - 35,049
------------------------- ---------- --------------- ----------- ----------- ----------- ---------- ---------
The net book value of computer equipment held under finance
lease at 31 March 2018 was GBP234,000 (2017: GBP546,000) and the
net book value of datacentre equipment held under finance lease at
31 March 2018 was GBP375,000 (2017: GBP456,000).
Of the total additions in the year of GBP16,682,000 (2017:
GBP9,690,000), GBP1,846,000 (2017: GBP1,256,000) was included in
trade payables as unpaid invoices at the year end resulting in a
net increase of GBP590,000 (2017: net decrease of GBP499,000) in
trade payables. Consequently, the consolidated statement of cash
flows discloses a figure of GBP16,092,000 (2017: GBP10,189,000) as
the cash outflow in respect of property, plant and equipment
additions in the year.
10. BORROWINGS
2018 2017
GBP'000 GBP'000
----------------------------------- -------- --------
Current:
Obligations under finance leases (327) (233)
Bank loans (35,239) (18,639)
Current borrowings (35,566) (18,872)
Non-current:
Obligations under finance leases (503) (625)
Bank loans - -
Total non-current borrowings (503) (625)
Total borrowings (36,069) (19,497)
-------------------------------------- -------- --------
11. ANALYSIS OF CHANGE IN NET DEBT
Finance Total liabilities
Cash and Bank leases
Analysis of change in net cash equivalents loans and hire Total net
cash/(debt) GBP'000 GBP'000 purchase cash/(debt)
GBP'000 GBP'000
--------------------------------------- ------------------ --------- --------- ----------------- ------------
At 1 April 2016 10,341 (34,525) (1,399) (35,924) (25,583)
Repayment of bank loans - 16,000 - 16,000 16,000
Impact of effective interest
rate - (114) - (114) (114)
Acquired on acquisition
of subsidiary 3,104 - - - 3,104
Currency translation differences - - (39) (39) (39)
Cash flow (4,539) - 580 580 (3,959)
--------------------------------------- ------------------ --------- --------- ----------------- ------------
At 31 March 2017 8,906 (18,639) (858) (19,497) (10,591)
Repayment of bank loans - 8,500 - 8,500 8,500
New bank loans - (24,956) (24,956) (24,956)
Impact of effective interest
rate - (144) - (144) (144)
Acquired on acquisition
of subsidiaries 4,153 - 283 283 4,436
Currency translation differences - - 21 21 21
Cash flow (3,564) - (276) (276) (3,840)
-----------------
At 31 March 2018 9,495 (35,239) (830) (36,069) (26,574)
--------------------------------------- ------------------ --------- --------- ----------------- ------------
12. CONTINGENT CONSIDERATION
2018 2017
GBP'000 GBP'000
----------------------------------------------- --- -------- --------
Contingent consideration due on acquisitions
within one year:
* Sonassi Holding Company Limited (832) -
* Tier 9 Limited
(1,862) -
* United Communications Limited - (2,373)
------------------------------------------------ -------- --------
Total contingent consideration due on
acquisitions (2,694) (2,373)
------------------------------------------------ -------- --------
13. POST BALANCE SHEET EVENT
On 6 June 2018, the Group entered into a new banking facility
which provides an GBP80m revolving credit facility that matures in
June 2022.
On 30 May 2018, the Group extended the London datacentre lease
to June 2030.
14. ANNUAL REPORT AND ACCOUNTS
The Annual Report and Accounts for 2018 will be posted to
shareholders on 20 July 2018 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 28 August 2018 at the Company's registered office.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR EAEKFFEAPEAF
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June 12, 2018 02:00 ET (06:00 GMT)
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