Regulatory Story
Go to market news section View chart   Print
RNS
Iomart Group PLC  -  IOM   

Half-year Report

Released 07:00 04-Dec-2018

RNS Number : 3022J
Iomart Group PLC
04 December 2018
 

 

4 December 2018

iomart Group plc

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

Half Yearly Results

 

iomart (AIM:IOM), the cloud computing company, is pleased to report its consolidated half yearly results for the period ended 30 September 2018.

 

FINANCIAL HIGHLIGHTS

 

·      Revenue growth of 8% to £50.9m (H1 2018: £47.0m)

·      Adjusted EBITDA1 growth of 10% to £21.1m (H1 2018: £19.2m)

·      Adjusted profit before tax2 growth of 7% to £12.4m (H1 2018: £11.6m)

·      Adjusted diluted earnings per share3 increased by 6% to 9.23p (H1 2018: 8.71p)

·      Period end net debt of £33.6m, less than one times annualised EBITDA

·      Interim dividend of 2.45p per share (H1 2018: £2.25p)

 

OPERATIONAL HIGHLIGHTS

 

·      Substantial growth in sales pipeline due to re-structuring of our sales and marketing activities

·   Continued investment in cloud hosting products and services to allow us to deliver all elements of a hybrid environment

·      Strong focus on efficiency and customer service which ensures market leading profitability

·      Further expansion of our UK datacentre resources and points of presence across the globe

·      Acquisition of Bytemark, a managed hosting business in York, for total consideration of £4.9m

 

Statutory Equivalents

 

The above highlights are based on adjusted results. A full reconciliation between adjusted and statutory results is contained within this statement. The largest variance within the adjustments relates to a net increase in the contingent consideration on 2017 acquisitions, as performance was ahead of expectations within a range of earnings which had a high multiple factor under a ratchet mechanism. Accounting standards require the £1.4m additional consideration to be recorded as a loss within the profit before tax, with no such sum in the prior period comparative.  The statutory equivalents of the above results are as follows:

 

·      Profit before tax of £7.3m (H1 2018: £7.8m)

·      Basic earnings per share of 5.48p (H1 2018: 5.85p)

 

 

Angus MacSween, CEO commented,

 

"iomart's continued strong trading performance is a reflection of the strength of our cloud capabilities and business model, the breadth of our customer base and the ongoing growth of the cloud market. We help companies at all stages of their journey, with a wide portfolio of managed cloud services, which makes us confident about the significant and sustainable market opportunity ahead.

 

"The high levels of visibility within our recurring revenue business model and strong cost control provides stability to our trading performance for the second half of the year, ensuring the full year should deliver a similar overall year on year progression as we have reported in the first half. We remain very confident in the Group's long term prospects."

 

 

1  Throughout this statement adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges, acquisition costs, 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 market adjustments in respect of interest rate swaps, acquisition costs, interest on contingent consideration due, (loss)/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 market adjustments in respect of interest rate swaps, acquisition costs, interest on contingent consideration due, (loss)/gain on revaluation of contingent consideration, accelerated write-off of arrangement fees on restructuring of banking facility, and non-recurring costs and the taxation effect of these.

 

This interim announcement contains forward-looking statements, which have been made by the directors in good faith based on the information available to them up to the time of the approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

 

 

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 ("MAR"). Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of iomart by Scott Cunningham, Chief Financial Officer.

 

 

For further information:

 

iomart Group plc      

Tel: 0141 931 6400

Angus MacSween, Chief Executive Officer

                

Scott Cunningham, Chief Financial Officer       

 

Peel Hunt LLP

(Nominated Adviser and Broker)

Tel: 020 7418 8900

 

Edward Knight

Nick Prowting

 

 

 

Alma PR

Tel: 020 3405 0212

Caroline Forde

 

Helena Bogle

 

 

About iomart Group plc

 

For over 20 years iomart Group plc (AIM:IOM) has been helping growing organisations to maximise the flexibility, cost effectiveness and scalability of the cloud. From data centres we own and operate in the U.K., and from connected facilities across the globe, we deliver 24/7 storage and protection for data across the most complex of cloud and legacy infrastructures. Our team of over 400 dedicated staff work with our customers at the strategy stage through to delivery and ongoing management, to implement the secure cloud solutions that deliver to their business requirements.

 

For further information about the Group, please visit www.iomart.com

 

 

Chairman's Statement

 

In my first interim results as Chairman, I am delighted to report a very good trading performance, with Group revenue well ahead of the previous period, having grown by 8% to £50.9m (H1 2018: £47.0m). Our adjusted EBITDA has grown by 10% to £21.1m (H1 2018: £19.2m) and adjusted profit before tax was also up by 7%, to £12.4m (H1 2018: £11.6m).

 

During this time, we have invested significantly in our sales and marketing engine. We are already seeing the benefits and are confident that this investment, combined with our strong customer retention, will help accelerate organic growth.

 

There was one acquisition during the period which saw Bytemark Holdings Limited ("Bytemark") join the Group in August 2018, bringing an additional datacentre and increasing our skillset. Strict criteria continue to be applied to potential acquisition targets to ensure that they enhance our overall strategy and are accretive to the financial strength of the Group. We expect M&A activity will continue as an important growth driver for the Group in what remains a highly fragmented market.

 

The one change to the Board saw Richard Logan stand down as Chief Financial Officer. Over his 12-year tenure Richard was integral in helping shape the Group as it achieved material revenue and profit growth year on year. I would like to thank Richard for his outstanding contribution and I wish him every future success. In his replacement, Scott Cunningham, we have found an exceptional candidate who we are confident will help drive the Group forward to the next level. Since I took up the role of Non-Executive Chairman in late August 2018 we have been conducting the search for an additional independent non-executive director. We expect to have a new appointment in place before our year end. 

 

The Board is pleased to announce a proposed interim cash dividend to shareholders of 2.45p (H1 2018: 2.25p per share). This represents an increase of 9% on the prior year interim dividend and reflects the Board's confidence in the current financial position of the Group and future prospects. 

 

 

 

Ian Steele

Chairman

3 December 2018

 

 

 
 

Chief Executive's Statement

 

Market

Over the course of the past decade, cloud computing has evolved from being something service providers like iomart told companies they should be adopting, to becoming the technological lifeblood that runs through many modern enterprises. However, many industries and sectors are only now at the start of their journey to the cloud, which means that the market opportunity remains strong and varied. The market continues to grow as technology progresses. The world has an almost insatiable appetite for more bandwidth, faster downloads, more applications, which of course creates ever more data to process, store or back up.

 

The choices for businesses considering a move to the cloud are ever more complex and the Group has the skills, network and infrastructure to provide solutions across the whole cloud spectrum, including private, hybrid and public cloud. We are well positioned to take advantage of these opportunities and have continued to win good levels of business from both new and existing customers in the period. The majority of our customers are trusting us to manage their webcentric platforms where they are trading or providing online services onwards to their own customers. Platforms generally need to grow in line with our customers' success. It is worth reiterating that our customers are predominantly private companies and we have no material exposure to the public sector within our customer base.

 

Operational Review

 

Cloud Services

The Cloud Services operation continues to perform well, delivering an overall revenue growth rate of 10% with organic growth contributing around 4%. We are well through the restructuring of our sales and marketing engine, which commenced at the start of the period, with the new business sales pipeline growing substantially during the first six months of the year. These efforts have included the recruitment of a new senior sales management team, changes to marketing resources, revisions to commission schemes and the rolling out of new group wide marketing toolsets, as well as the beginning of a process to change our group wide CRM system. We are also investing in further automation, customer service and network resilience to provide the best possible service to our customers. 

The ecommerce acquisitions made in the previous year have performed strongly as our customers continue to require bigger platforms and we attract more customers to our proprietary Magento ecommerce platform which has been shown to lead the market in terms of robustness and speed.

Our global datacentre footprint continues to expand and we now have points of presence in over 25 locations around the world, as the demand for our services continues to increase internationally. During the period we extended our London datacentre lease until 2030. We expect to take some additional steps to consolidate our UK datacentre estate and provide additional long-term security over our infrastructure.

The acquisition of Bytemark is in line with the Group's strategy to grow via balanced investments into both organic and acquisitive growth and also gives the Group access to additional datacentre space. Bytemark owns a datacentre in York which further augments the stability of our existing datacentre estate. As part of the acquisition we have gained a strong customer base and a workforce with a valuable and complex skillset, especially around the more specific requirements of the software development community.

Our Cloud Services revenues have grown to £44.3m (H1 2018: £40.3m) as a result of our acquisitive and organic activities. The Cloud Services EBITDA (before share based payments, acquisition costs and central group overheads) was £20.2m being 46% of revenue (H1 2018: £18.0m (45% of revenue)).  We continue to expect Cloud Services to be the driver of revenue and profit growth going forward.


Easyspace

 

Easyspace provides a range of products to the small and micro business community including an ever wider range of domain names, shared hosting, emails and dedicated servers. The Easyspace segment has performed as expected during the period. Our revenues and EBITDA (before share based payments, acquisition costs and central group overheads) from the Easyspace segment have remained consistent at £6.7m (H1 2018: £6.7m) and £3.1m (H1 2018: £3.1m), respectively.  

 

M&A Activity

On 24 August 2018 we acquired the entire share capital of Bytemark on a no debt, no cash, normalised working capital basis.


The sale and purchase agreement included an earn-out period to 31 March 2019. During November 2018, whilst not part of the original plan, the previous director shareholders of Bytemark indicated that they wished to consider leaving the business early and a negotiated settlement on the earn-out payment of £0.2m was agreed and paid. This, along with the initial consideration of £4.7m paid at completion, results in a total final consideration of £4.9m. The initial payment was funded by a drawdown from the Group's revolving credit facility.

 

The M&A market continues to provide opportunities and we remain committed to complementing our organic growth through further acquisitions.

 

Financial Performance

 

Revenue

Overall revenues from our operations grew by 8% to £50.9m (H1 2018: £47.0m).

Our Cloud Services segment grew revenues by 10% to £44.3m (H1 2012: £40.3m). The increase includes the contribution for the full six month period from the acquisitions of Sonassi, Simple Servers and Dediserve during the previous financial year, along with contribution from the short period of ownership from the acquisition of Bytemark during August 2018.

Our Easyspace segment has performed in line with expectations over the period with revenues remaining static at £6.7m (H1 2018: £6.7m). Easyspace continues to deliver extremely strong cash flows and profits to the Group as a whole.


Gross Profit

The gross profit in the period, which is calculated by deducting from revenue variable cost of sales such as domain costs, public cloud costs, the cost of hardware and software sold, power, sales commission and the relatively fixed costs of operating our datacentres, increased by 8% to £32.5m (H1 2018: £30.0m). This strong increase in absolute gross profit was a direct result of the contribution from the additional revenue generated over the period, including the impact of acquisitions. In percentage terms the gross margin was maintained at 63.8% (H1 2018: 63.9%).

 

Adjusted EBITDA

The Group's adjusted EBITDA grew by 10% to £21.1m (H1 2018: £19.2m). In percentage terms the adjusted EBITDA margin increased to 41.5% (H1 2018: 40.7%) with the improvement arising in the Cloud Services segment.
 

Cloud Services increased its adjusted EBITDA by 12% to £20.2m (H1 2018: £18.0m). The improvement in adjusted EBITDA is due to the additional gross margin contribution arising from our organic sales growth, further complemented by a full period of contribution from Simple Servers, Sonassi and Dediserve. In percentage terms the margin increased to 45.6% (H1 2018: 44.6%), the improvement driven by a reduction in staff costs gained by efficiency improvements offset slightly by higher software licence costs.


The adjusted EBITDA of Easyspace was maintained at £3.1m (H1 2018: £3.1m). In percentage terms the margin increased slightly to 46.6% (H1 2018: 45.9%) due in part to the mix of revenue over the period.

 

Group overheads, which are not allocated to segments, include the cost of the Board, all the running costs of the headquarters in Glasgow, and Group led functions such as human resources, marketing, finance and design. Group overheads of £2.2m have increased modestly in the period (H1 2018: £1.9m).

Adjusted profit before tax

Depreciation charges of £7.0m (H1 2018: £6.0m) have increased due to a combination of investment in our datacentre estate and the purchase of equipment to provide services to our new and existing customers. The charge for the amortisation of intangible assets, excluding amortisation of intangible assets resulting from acquisitions ("amortisation of acquired intangible assets") has remained static at £1.1m (H1 2018: £1.1m).

 

Net finance costs, excluding the mark to market adjustment on interest swaps on the Company's loans and the interest charge on contingent consideration due, were £0.7m (H1 2018: £0.6m).

 

After deducting the charges for depreciation, amortisation, excluding the amortisation of acquired intangible assets, and finance costs, excluding the interest charges and the (loss)/gain in respect of contingent consideration due and the mark to market adjustment on interest rate swaps, from adjusted EBITDA the adjusted profit for the period before tax increased by 7% to £12.4m (H1 2018: £11.6m).

 

The adjusted profit before tax margin for the period remains very stable at 24.4% (H1 2018: 24.6%).

 

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 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 tax to profit before tax

 

 6 months to 30/09/2018

6 months to 30/09/2017

 Year to 31/03/2018

Adjusted profit before tax

 

12,439

11,580

24,130

Less: Share based payments

 

(226)

(398)

(1,206)

Less: Amortisation of acquired intangible assets

 

(3,294)

(2,831)

(6,449)

Less: Acquisition costs

 

(130)

(573)

(774)

Less: Accelerated write-off of arrangement fees on restructuring of banking facility

 

(63)

-

-

Add: Mark to market adjustment on interest rate swaps

 

-

28

46

Less: Interest on contingent consideration

 

-

(51)

(51)

(Less)/Add: (Loss)/gain on revaluation of contingent consideration

 

(1,394)

-

1,335

Less: Non-recurring software license fees relating to prior years

 

-

-

(2,143)

Profit before tax

 

7,332

7,755

14,888

 

The adjusting items are:

 

·      share based payment charges in the period which decreased to £0.2m (H1 2018: £0.4m) as a result of options granted in previous periods not vesting, offset by the issue of additional share options;

·      charges for the amortisation of acquired intangible assets of £3.3m (H1 2018: £2.8m) which have increased as a result of the net impact of a full period effect of acquisitions made in previous periods;

·      costs of £0.1m (H1 2018: £0.6m) as a result of acquisitions; and

·      finance charges of £0.06m (H1 2018: £nil) due to the accelerated release of arrangement fees on the bank borrowing facility which was increased during the period.

 

A further adjusting item in this period with no comparable amount is a net loss on the revaluation of contingent consideration of £1.4m (H1 2018: £nil). As reported at the year end, the structure of the Sonassi earn-out arrangement, with a high multiple factor under a ratchet mechanism, meant that a modest change in profitability within a certain range could result in a substantial change in the amount due under the earn-out terms. The brand's performance exceeded management expectations in the final months of the earn-out period. As a result, the final payment due on Sonassi of £2.6m, was £1.8m higher than our previous estimate. Offsetting this loss is a gain of £0.4m on the revaluation of the Bytemark contingent consideration with settlement now paid in full.

After deducting the charges for share based payments, the amortisation of acquired intangible assets, acquisition costs, the mark to market adjustment on interest rate swaps, interest charges in respect of contingent consideration, and the (loss)/gain on revaluation of contingent consideration, the reported profit before tax is £7.3m (H1 2018: £7.8m).

 

Taxation and profit for the period from total operations

 

There is a tax charge in the period of £1.5m (H1 2018: £1.4m), which comprises a current taxation charge of £2.3m (H1 2018: £2.5m), and a deferred taxation credit of £0.8m (H1 2018: £1.1m). The tax charge for the period has increased because of the net loss recognised on the revaluation of contingent consideration of £1.4m, which is disallowable for tax purposes. This results in a profit for the period from total operations of £5.9m (H1 2018: £6.3m).

 

Earnings per share

Adjusted diluted earnings per share, which is based on profit for the period attributed to ordinary shareholders before share based payment charges, amortisation of acquired intangible assets, the mark to market adjustment on interest rate swaps, the interest charges in respect of contingent consideration due, acquisition costs and the tax effect of these items, and the (loss)/gain on revaluation of contingent consideration, was 9.23p (H1 2018: 8.71p), an increase of 6%.

 

The measure of adjusted earnings per share as described above is a non-statutory measure which is commonly used to analyse the performance of companies where M&A activity forms a significant part of their activities. Basic earnings per share from continuing operations was 5.48p (H1 2018: 5.85p). The calculation of both adjusted diluted earnings per share and basic earnings per share is included at note 3.

 

Cash flow

The Group generated cash from operations in the period of £14.5m (H1 2018: £17.0m). The period included a payment of £2.3m in relation to a software licence audit for which an exceptional provision was recorded at 31 March 2018. In addition, we paid £1.6m upfront for three years software maintenance, made in order to receive a discount going forward, on a product where we are seeing increasing customer demand. Excluding this triennial invoice and payment of the £2.3m software licence audit fee, cash flow from operations of 87% of our adjusted EBITDA is comparable to the previous reporting period. Expenditure on taxation in the period remained static at £2.4m (H1 2018: £2.4m), resulting in net cash flow from operating activities in the period of £12.0m (H1 2018: £14.6m).

 

Expenditure on investing activities of £12.9m (H1 2018: £20.9m) was incurred in the period. £5.8m (H1 2018: £8.4m) was incurred on the acquisition of property, plant and equipment, principally to provide services to our customers. We made purchases of intangible assets of £0.5m (H1 2018: £0.7m) plus £0.6m (H1 2018: £0.9m) in respect of the capitalisation of development costs during the period. In respect of M&A activity, £1.9m (H1 2018: £2.0m) was paid out for contingent consideration due on acquisitions made in previous periods and £4.2m (H1 2018: £8.9m 2018 various acquisitions) was incurred on the acquisition of Bytemark in August 2018, net of cash acquired of £0.5m.


There was net cash generated from financing activities of £0.8m (H1 2018: £4.5m net cash used). We generated £0.1m (H1 2018: £0.1m) from the issue of shares as a result of the exercise of options by staff. We made drawdowns under our bank facility of £10.0m (H1 2018: £15.0m) and we made repayments of £3.0m (H1 2018: £3.0m). We repaid £0.2m (H1 2018: £0.2m) of finance leases and incurred £0.8m (H1 2018: £0.9m) of finance charges and made a dividend payment of £5.4m (H1 2018: £6.5m). As a result, cash and cash equivalent balances at the end of the period were £9.4m (H1 2018: £7.1m).

 

Net Debt

The net debt position of the Group at the end of the period was £33.6m (H1 2018: £24.5m). This represents a multiple of much less than one times our annual adjusted EBITDA which we believe is a very comfortable level of debt to carry. We still have a significant undrawn amount from our £80m credit facility which matures in June 2022.

 

Dividend

 

Maintaining our progressive dividend policy, we will pay an interim dividend of 2.45p per share (H1 2018: 2.25p) on 31 January 2019 to shareholders on the register on 21 December 2018, with an ex-dividend date of 20 December 2018. This dividend represents an increase of 9% on the interim dividend of last year and a pay-out ratio of 27% of the adjusted diluted earnings per share for the interim period. 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 can be found by visiting our website at the following address www.iomart.com/investors and clicking on the Shareholder Services icon.

 

Current trading and outlook

iomart's continued strong trading performance is a reflection of the strength of our cloud capabilities and business model, the breadth of our customer base and the ongoing growth of our total addressable market. We help companies at all stages of their journey, with a wide portfolio of managed cloud services, which makes us confident about the significant and sustainable market opportunity ahead.

 

The high levels of visibility within our recurring revenue business model and strong cost control provides stability to our trading performance for the second half of the year, ensuring the full year should deliver a similar overall year on year progression as we have reported in the first half. We remain very confident in the Group's long term prospects.

 

 

 

Angus MacSween

CEO

3 December 2018

 

 

 

 

Consolidated Interim Statement of Comprehensive Income        

Six months ended 30 September 2018

 

 

 

 Unaudited

 Unaudited

Audited

 

 

 6 months to 30 September 2018

 6 months to 30 September 2017 (restated note 1)

 Year to 31 March 2018 (restated note 1)

 

 

£'000

£'000

£'000

 

 

 

 

 

 Revenue

 

50,947

47,023

97,804

 

 

 

 

 

 Cost of sales

 

 (18,425)

 (16,988)

(34,785)

 

 

 

 

 

 Gross profit

 

32,522

 30,035

63,019

 

 

 

 

 

 Administrative expenses

 

 (23,113)

 (21,726)

(46,154)

 Administrative expenses - exceptional non-recurring costs

 

 -

 -

(2,143)

 

 

 

 

 

 

 

 

 

 

 Operating profit

 

 9,409

 8,309

14,722

 

 

 

 

 

 Analysed as:

 

 

 

 

 Earnings before interest, tax, depreciation, amortisation, acquisition  costs, share based payments and non-recurring costs

 

21,122

19,155

 39,934

 Administrative expenses - exceptional non-recurring costs

 

-

-

(2,143)

 Share based payments

 

(226)

(398)

(1,206)

 Acquisition costs

4

(130)

(573)

(774)

 Depreciation

8

 (6,953)

 (5,953)

 (12,536)

 Amortisation - acquired intangible assets

7

(3,294)

(2,831)

(6,457)

 Amortisation - other intangible assets

7

  (1,110)

  (1,091)

(2,096)

 

 

 

 

 

(Loss) / gain on revaluation of contingent consideration

 

(1,394)

-

1,335

 

 Finance income

 

 9

 5

13

 Finance costs

5

 (692)

 (559)

(1,182)

 

 

 

 

 

 Profit before taxation

 

7,332

7,755

 14,888

 

 

 

 

 

 Taxation

6

 (1,470)

 (1,352)

(2,510)

 

 

 

 

 

 Profit for the period from total operations

 

5,862

6,403

12,378

 

 

 

 

 

 

 

 

 

 

 Other comprehensive income

 

 

 

 

 

 Currency translation differences

 

 

70

(100)

(25)

 Other comprehensive income/(expense) for the period

 

70

(100)

(25)

 

 

 

 

 

 Total comprehensive income for the period attributable to equity

 holders of the parent

 

5,932

6,303

12,353

 

 

 

 

 

 

Basic and diluted earnings per share

 

 

 

 

 

 

 

 

 

 Total operations

 

 

 

 

 Basic earnings per share 

3

5.48 p

5.85 p

11.47 p

 Diluted earnings per share

3

 5.43 p

 5.77 p

 11.27 p

 

 

Consolidated Interim Statement of Financial Position

As at 30 September 2018

 

 

 Unaudited

 Unaudited

 Audited

 

 

30 September 2018

 30 September 2017 (restated note 1)

 31 March 2018 (restated note 1)

 

 

£'000

£'000

£'000

 

 

 

 

 

 ASSETS

 

 

 

 

 Non-current assets

 

 

 

 

 Intangible assets - goodwill

7

79,157

68,461

75,837

 Intangible assets - other

7

24,649

22,782

26,926

 Lease deposit

 

 2,760

 2,760

 2,760

 Property, plant and equipment

8

 40,919

 38,648

 40,686

 

 

147,485

132,651

 146,209

 Current assets

 

 

 

 

 Cash and cash equivalents

 

9,424

 7,128

 9,495

 Trade and other receivables

 

17,708

16,323

 18,508

 

 

 27,132

 23,451

28,003

 

 

 

 

 

 Total assets

 

174,617

156,102

174,212

 

 

 

 

 

 LIABILITIES

 

 

 

 

 Non-current liabilities

 

 

 

 

 Non-current borrowings

 

 (442)

 (664)

 (503)

 Provisions for other liabilities and charges

 

(1,801)

(1,750)

(1,775)

 Deferred tax liability

 

(952)

(750)

(1,319)

 

 

 (3,195)

 (3,164)

 (3,597)

 Current liabilities

 

 

 

 

 Contingent consideration due on acquisitions

9

(2,826)

(1,741)

(2,694)

 Deferred consideration due on acquisitions

 

-

(456)

-

 Trade and other payables

 

 (26,063)

 (23,852)

 (29,688)

 Provisions

 

-

-

(2,587)

 Current income tax liabilities

 

(1,045)

(2,198)

(1,608)

 Current borrowings

 

 (42,138)

 (30,959)

 (35,566)

 

 

 (72,072)

 (59,206)

 (72,143)

 

 

 

 

 

 Total liabilities

 

 (75,267)

(62,370)

(75,740)

 Net assets

 

99,350

93,732

98,472

 

 

 

 

 

 EQUITY

 

 

 

 

 Share capital

 

 1,084

 1,078

 1,080

 Own shares

 

(70)

(70)

(70)

 Capital redemption reserve

 

 1,200

 1,200

 1,200

 Share premium

 

 21,283

 21,067

 21,231

 Merger reserve

 

 4,983

 4,983

 4,983

 Foreign currency translation reserve

 

30

(115)

(40)

 Retained earnings

 

 70,840

 65,589

 70,088

 Total equity

 

99,350

 93,732

 98,472

 

Consolidated Interim Statement of Cash Flows

Six months ended 30 September 2018

 

 

 Unaudited

 Unaudited

 Audited

 

 

6 months to 30 September 2018

 6 months to 30 September 2017 (restated note 1)

 Year to 31 March 2018 (restated note 1)

 

 

£'000

£'000

£'000

 

 

 

 

 

Profit before tax

 

7,332

7,755

14,888

Loss/(gain) on revaluation of contingent consideration

 

1,394

-

(1,335)

Finance costs - net

 

683

554

1,169

Depreciation

 

 6,953

 5,953

 12,536

Amortisation

 

 4,404

 3,922

 8,553

Share based payments

 

226

398

 1,206

Movement in trade receivables

 

 250

 (440)

 (2,245)

Movement in trade payables

 

(4,409)

(1,096)

6,060

Cash flow from operations (before payment of exceptional non-recurring cost)

 

 16,833

 17,046

 40,832

Payment of exceptional non-recurring cost

 

(2,312)

-

-

Cash flow from operations

 

 14,521

 17,046

 40,832

Taxation paid

 

(2,444)

(2,405)

(5,236)

Net cash flow from operating activities

 

 12,077

 14,641

35,596

 

 

 

 

 

Cash flow from investing activities

 

 

 

 

Purchase of property, plant and equipment

 

 (5,786)

 (8,430)

 (16,092)

Capitalisation of development costs

 

 (634)

 (850)

 (1,577)

Purchase of intangible assets

 

 (476)

 (738)

 (1,223)

Payment for acquisition of subsidiary undertakings net of cash acquired

 

(4,166) 

(8,903) 

(20,143) 

Contingent consideration paid

 

(1,862)

(1,965)

(2,475)

Finance income received

 

9

5

13

Net cash used in investing activities

 

 (12,915)

 (20,881)

 (41,497)

 

 

 

 

 

Cash flow from financing activities

 

 

 

 

Issue of shares

 

56

 58

224 

Drawdown of bank loans

 

10,050

14,956

24,956

Repayment of bank loans

 

(3,000)

(3,000)

(8,500)

Repayment of finance leases

 

 (231)

 (164)

 (276)

Finance costs paid

 

 (772)

 (929)

 (1,029)

Dividends paid

 

(5,336)

(6,459)

(8,885)

Net cash generated from financing activities

 

767

4,462

6,490

 

 

 

 

 

Net (decrease)/increase in cash and cash equivalents

 

 (71)

 (1,778)

589

 

 

 

 

 

Cash and cash equivalents at the beginning of the period

 

9,495

8,906

8,906

 

 

 

 

 

Cash and cash equivalents at the end of the period

 

9,424

7,128

 9,495

 

 

 

Consolidated Interim Statement of Changes in Equity

Six months ended 30 September 2018

 

 

 

 

 Share capital

 

Own

shares EBT

 

Own

shares Treasury

Foreign currency translation reserve

 

Capital redemption reserve

 

 Share premium account

 

 

Merger reserve

 

 

Retained earnings

 

 

 

 Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000

Balance at 1 April 2017

1,078

(70)

(50)

(15)

1,200

21,067

4,983

65,322

93,515

 

 

 

 

 

 

 

 

 

 

Adoption of IFRS 15

-

-

-

-

-

-

-

(84)

(84)

Profit in the period (restated note 1)

-

-

-

-

-

-

-

6,403

6,403

Currency translation differences

-

-

-

(100)

-

-

-

-

(100)

Total comprehensive income

-

-

-

(100)

-

-

-

6,319

6,219

 

 

 

 

 

 

 

 

 

 

Dividends

 

-

-

-

-

-

-

-

(6,459)

(6,459)

Share based payments

 

-

-

-

-

-

-

-

398

398

Issue of own shares for option redemption

 

-

-

50

-

-

-

-

9

59

Total transactions with owners

-

-

50

-

-

-

-

(6,052)

(6,002)

 

 

 

 

 

 

 

 

 

 

Balance at 30 September 2017

1,078

(70)

-

(115)

1,200

21,067

4,983

65,589

93,732

 

 

 

 

 

 

 

 

 

 

Profit in the period (restated note 1)

-

-

-

-

-

-

-

5,974

5,974

Currency translation differences

-

-

-

75

-

-

-

-

75

Total comprehensive income

-

-

-

75

-

-

-

5,974

6,049

 

 

 

 

 

 

 

 

 

 

Dividends

-

-

-

-

-

-

(2,426)

(2,426)

Share based payments

 

-

-

-

-

-

-

-

808

808

Deferred tax on share based payments

 

-

-

-

-

-

-

-

143

143

Issue of share capital

2

-

-

-

-

164

-

-

166

Total transactions with owners

2

-

-

-

-

164

-

(1,475)

(1,309)

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2018

1,080

(70)

-

(40)

1,200

21,231

4,983

70,088

98,472

 

 

 

 

 

 

 

 

 

 

Profit in the period

-

-

-

-

-

-

-

5,862

5,862

Currency translation differences

-

-

-

70

-

-

-

-

70

Total comprehensive income

-

-

-

70

-

-

-

5,862

5,932

 

 

 

 

 

 

 

 

 

 

Dividends

 

-

-

-

-

-

-

-

(5,336)

(5,336)

Share based payments

 

-

-

-

-

-

-

-

226

226

Issue of own shares for option redemption

 

4

-

-

-

-

52

-

-

56

Total transactions with owners

4

-

-

-

-

52

-

(5,110)

(5,054)

 

 

 

 

 

 

 

 

 

 

Balance at 30 September 2018

1,084

(70)

-

30

1,200

21,283

4,983

70,840

99,350

 

 

 

 

Notes to the Half Yearly Financial Information            

Six months ended 30 September 2018

 

 

1.              Accounting policies

 

The financial information for the year ended 31 March 2018 set out in this half yearly report does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The figures for the year ended 31 March 2018 have been extracted from the Group financial statements for that year restated for the effects of adopting IFRS 15. Those financial statements have been delivered to the Registrar of Companies and included an independent auditor's report, which was unqualified and did not contain a statement under section 493 of the Companies Act 2006.

 

The half yearly financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 31 March 2019. The Group financial statements for the year ended 31 March 2018 were prepared under International Financial Reporting Standards as adopted by the European Union. These half yearly financial statements have been prepared on a consistent basis and format with the Group financial statements for the year ended 31 March 2018, with the exception of the adoption of IFRS 15 and IFRS 9. IFRS 9 has brought in changes to the measurement and disclosure of financial instruments and introduced a new expected credit loss impairment model. The adoption of IFRS 9 does not have a material impact on the Group financial statements. Full disclosure of the impact of IFRS 9 will be reported in our annual report to 31 March 2019. The impact of adopting IFRS 15 is discussed further below. The provisions of IAS 34 'Interim Financial Reporting' have not been applied in full.

New accounting standards and interpretations


IFRS 15 - Revenue from Contracts with Customers

In the current financial period, the Group has adopted IFRS 15 Revenue from Contracts with Customers. The Group has elected to apply the full retrospective method and restate comparative information from prior periods upon adoption of IFRS 15. The Group has not applied any practical expedients in calculating the impact of IFRS 15 as they are not applicable to the Group's revenue streams.

 

The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to exchange for those goods or services.

 

During the year ended 31 March 2018, the Group carried out a detailed review of the recognition criteria for revenue on all aspects of the business and the various revenue streams applying the requirements of IFRS 15 to ensure the same principles were being applied consistently across the Group.

 

On application of IFRS 15, some changes in accounting policy resulted, principally in the following areas:

·      Set-up fees charged on contracts, which were previously recognised upfront when the set-up was complete, are now spread over the life of the contract under IFRS 15 impacting revenue and deferred revenue disclosed within trade and other payables.  

·      In line with the recognition of revenue, sales commission earned on revenue was previously spread over a twelve-month period, however, is now spread over the life of the contract to which the commission relates impacting cost of sales and deferred commission costs disclosed within trade and other receivables.

·      Revenue from the provision of domain names was previously recognised at the point of sale when the title to the domain name passed to the customer. Under IFRS 15, revenue is now split between the registration of the domain and the ongoing services over the period of registration of the domain impacting revenue and deferred revenue disclosed within trade and other payables.  

 

The tables below show the effect of IFRS 15 on the consolidated income statement for the six months to 30 September 2017 and the year to 31 March 2018 and the effect on the statement of financial position as at 30 September 2017 and 31 March 2018.  The table also presents the impact on the current period interim results as at 30 September 2018 on adoption of the new accounting policies under IFRS 15. 

 

 

 

 

6 months to 30/09/2018

6 months to 30/09/2017

Year to 31/03/2018

 

 

Pre IFRS 15

IFRS 15 impact

Total

Originally reported

IFRS 15 impact

Restated

Originally reported

IFRS 15 impact

Restated

Consolidated income statement (extract)

£'000

£'000

£'000

£'000

£'000

£'000

 £'000

 £'000

£'000

Revenue

50,923

24

50,947

47,036

(13)

47,023

97,669

135

97,804


Cost of sales

(18,284)

(141)

(18,425)

(16,992)

4

(16,988)

(34,741)

(44)

(34,785)


EBITDA

21,239

(117)

21,122

19,164

(9)

19,155

39,843

91

39,934

 

 

 

6 months to 30/09/2018

6 months to 30/09/2017

Year to 31/03/2018

 

 

Pre IFRS 15

IFRS 15 impact

Total

Originally reported

IFRS 15 impact

Restated

Originally reported

IFRS 15 impact

Restated

Statement of financial position (extract)

£'000

£'000

£'000

£'000

£'000

£'000

 £'000

 £'000

£'000


Trade & other receivables

17,299

409

17,708

15,725

598

16,323

17,958

550

18,508


Trade & other payables

(25,544)

(519)

(26,063)

(23,161)

(691)

(23,852)

(29,145)

(543)

(29,688)


Retained earnings

70,950

(110)

70,840

65,682

(93)

65,589

70,081

7

70,088

  *retained earnings movement is based on the cumulative impact on adoption of IFRS 15 under the full retrospective method.


Following the adoption of IFRS 15, our revenue recognition policies in our operating segments are as follows:

 

Cloud Services

This operating segment provides managed cloud computing facilities and services including consultancy. Revenue from the sale of cloud computing facilities and managed services is spread evenly over the period of the agreement and only after the service has been established. Set-up fees charged on contracts are spread over the life of the contract. Any unearned portion of revenue is included in payables as deferred revenue. Consultancy services are generally provided on a "time and materials" basis and therefore revenue is recognised as these services are rendered. Revenue from the supply of hardware or software, and the provision of services in respect of installation or training, is recognised when delivery and installation of the equipment is completed. Revenue from the sale of cloud computing facilities and support services is spread evenly over the period of the agreement and only after the service has been established. Any unearned portion of revenue is included in payables as deferred revenue.

 

Easyspace

This operating segment provides domain name registration and hosting services. Revenue from the provision of domain names is split between the registration of the domain and the ongoing services associated with each domain registration. The ongoing service associated with each domain registration is spread over the length of the registration, whilst the provision of the initial domain registration is recognised at the point of sale. Revenue from the provision of hosting services is recognised evenly over the period of the service and only after the service has been established. Any unearned portion of revenue is included in payables as deferred revenue.

 

 

 

2.              Operating segments

 

Revenue by Operating Segment

 

 

6 months to 30/09/2018

6 months to 30/09/2017 (restated)

Year to 31/03/2018 (restated)

 

External

Internal

Total

External

Internal

Total

External

Internal

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

 £'000

 £'000

£'000

Easyspace

6,676

-

6,676

6,700

2

6,702

13,579

2

13,581

Cloud Services

44,271

991

45,262

40,323

716

41,039

84,225

1,389

85,614

 

50,947

991

51,938

47,023

718

47,741

97,804

1,391

99,195

 

Geographical Information

In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. The United Kingdom is the place of domicile of the parent company, iomart Group plc. No individual country other than the United Kingdom contributes a material amount of revenue therefore revenue from outside the United Kingdom has been shown as from Rest of the World.

 

Analysis of Revenue by Destination

 

 

 

 

6 months to 30/09/2018

6 months to 30/09/2017

Year to 31/03/2018

 

 

 

 

£'000

£'000

£'000

United Kingdom

 

 

 

42,943

38,864

79,735

Rest of the World

 

 

 

8,004

8,159

18,069

Revenue from operations

 

 

50,947

47,023

97,804

Profit by Operating Segment

 

 

6 months to 30/09/2018

6 months to 30/09/2017 (restated)

Year to 31/03/2018 (restated)

 

 

 

EBITDA before share based payments and acquisition costs

 

Share based payments, acquisition costs, depreciation & amortisation

 

 

 

 

 

Operating profit/(loss)

 

 

EBITDA before share based payments and acquisition costs

 

Share based payments, acquisition costs, depreciation & amortisation

 

 

 

 

Operating profit/(loss)

 

 

EBITDA before share based payments and acquisition costs

Share based payments, acquisition costs, depreciation & amortisation

 

 

 

 

 

Operating profit/(loss)

 

£'000

£'000

£'000

 £'000

£'000

£'000

£'000

£'000

£'000

Easyspace

3,109

(753)

2,356

3,073

(814)

2,259

6,416

(1,636)

4,780

Cloud Services

20,172

(10,604)

9,568

17,974

(9,061)

8,913

37,148

(21,596)

15,552

Group overheads

(2,159)

-

(2,159)

(1,892)

-

(1,892)

(3,630)

-

(3,630)

Share based payments

-

(226)

(226)

-

(398)

(398)

-

(1,206)

(1,206)

Acquisition costs

-

(130)

(130)

-

(573)

(573)

-

(774)

(774)

Profit before tax and interest

21,122

(11,713)

9,409

19,155

(10,846)

8,309

39,934

(25,212)

14,722

(Loss)/gain on revaluation of contingent consideration

 

 

(1,394)

 

 

-

 

 

1,335

Group interest and tax

 

 

(2,153)

 

 

(1,906)

 

 

(3,679)

Profit for the period

21,122

(11,713)

5,862

19,155

(10,846)

6,403

39,934

(25,212)

12,378

 

Group overheads, share based payments, acquisition costs, interest and tax are not allocated to segments. 

3.              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.  The calculations of earnings per share are based on the following results:

 

 6 months to 30/09/2018

 6 months to 30/09/2017

(restated)

 Year to 31/03/2018

(restated)

 

 

 

 

Total Operations

 

 

 

 

 

 

 

 

 £'000

 £'000

 £'000

Profit for the period and basic earnings attributed to ordinary shareholders

5,932

6,303

12,353

 

 

 

 

 

 No

 No

 No

Weighted average number of ordinary shares:

 000

 000

 000

Called up, allotted and fully paid at start of period

107,990

107,803

107,803

Own shares held in Treasury

-

(54)

(28)

Shares held by Employee Benefit Trust

(141)

(141)

(141)

Issued share capital in the period

292

-

70

Weighted average number of ordinary shares - basic

108,141

107,608

107,704

Dilutive impact of share options

1,140

1,621

1,857

Weighted average number of ordinary shares - diluted

 109,281

 109,229

109,561

 

 

 

 

Basic earnings per share

5.48 p

5.85 p

 11.47 p

Diluted earnings per share

5.43 p

5.77 p

 11.27 p

 

iomart Group plc assess the performance of the Group by adjusting earnings per share, calculated in accordance with IAS 33, to exclude certain non-trading items.  The calculation of the earnings per ordinary share on a basis which excludes such items is based on the following adjusted earnings:

 

Adjusted earnings per share

 6 months to 30/09/2018

 6 months to 30/09/2017

(restated)

 Year to 31/03/2018

(restated)

 

 

 

 

 

 £'000

 £'000

 £'000

 

Profit for the financial and basic earnings attributed to ordinary shareholders

5,932

6,303

12,353

-   Amortisation of acquired intangible assets

3,291

2,831

6,449

-   Acquisition costs

130

573

774

-   Share based payments

226

398

1,206

-   Accelerated write-off of arrangement fees on restructuring of banking facility

63

-

-

-   Loss/(gain) on revaluation of contingent consideration

1,394

 

(1,335)

-   Non-recurring software licence fees

-

-

2,143

-   Mark to market interest adjustment

-

(28)

(46)

-   Finance charge on contingent consideration

-

51

51

-   Tax impact of adjusted items

(945)

(608)

(1,850)

Adjusted profit for the period and adjusted basic earnings attributed to ordinary shareholders

10,091

9,520

19,745

 

 

 

 

Adjusted basic earnings per share

9.33 p

8.84 p

 18.33 p

Adjusted diluted earnings per share

 9.23 p

 8.71 p

18.02 p

 

 

4.              Acquisition costs

 

 

 

 6 months to 30/09/2018

£'000

 6 months to 30/09/2017

£'000

 Year to 31/03/2018

£'000

 

 

 

 

Professional fees

 

130

573

774

Total acquisition costs for the period

 

130

573

774

During the period costs of £130,000 (H1 2018: £573,000) were incurred in respect of professional fees on acquisitions and there were no costs (H1 2018: £nil) directly related to the integration of acquisitions into the Group.

 

 

5.              Finance costs

 

 

 

 6 months to 30/09/2018

£'000

 6 months to 30/09/2017

£'000

 Year to 31/03/2018

£'000

 

 

 

 

 

Bank loans

 

(561)

(439)

(1,000)

Finance leases

 

(40)

(70)

(124)

Other interest charges                

 

(28)

(27)

(53)

 

 

(629)

(536)

(1,177)

 

 

 

 

 

Items affecting adjusted profit before tax calculation:

 

 

 

 

Mark to market adjustment on interest rate swaps

 

-

28

46

Accelerated write-off of arrangement fees on restructuring of banking facility

 

(63)

-

-

Finance charge on contingent consideration

 

-

(51)

(51)

Finance costs for the period

 

(692)

(559)

(1,182)

 

 

6.              Taxation

 

 

 

 6 months to 30/09/2018

£'000

 6 months to 30/09/2017

£'000

 Year to 31/03/2018

£'000

 

 

 

 

Tax charge for the period

 

(2,313)

(2,468)

(4,364)

Effect of different statutory tax rates of overseas jurisdictions

 

(25)

21

-

Adjustment relating to prior periods

 

-

-

68

Total current taxation charge

 

(2,338)

(2,447)

(4,296)

Deferred Tax:

 

 

 

 

Origination and reversal of temporary differences

 

926

1,013

1,900

Adjustment relating to prior periods

 

(58)

84

(15)

Effect of different statutory tax rates of overseas jurisdictions

 

-

3

(70)

Effect of changes in tax rates

 

-

(5)

(29)

 

868

1,095

1,786

 

 

 

 

 

Total taxation charge for the period

 

(1,470)

(1,352)

(2,510)

 

The headline effective rate of tax for the six months to 30 September 2018, based on the taxation charge for the period as a percentage of the profit before tax is 20% (H1 2018: 17%). The main factor which has caused the change period on period is the movement in the loss/(gain) on revaluation of contingent consideration.  Excluding this item indicates that 18% would be a more representative effective tax rate for the underling business being broadly consistent with the current UK corporation tax rate.

 

 

7.              Intangible assets

 

Goodwill

 Acquired Customer relationships

Acquired Beneficial contracts

Development costs

Software

Domain names & IP addresses

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Cost:

 

 

 

 

 

 

 

At 1 April 2017

62,000

35,965

86

6,204

4,847

280

109,382

Additions in the period

-

-

-

-

662

-

662

Disposals in the period

-

-

-

-

(10)

-

(10)

Currency translation differences

-

(51)

-

-

(26)

-

(77)

Acquired on acquisition of subsidiary

6,461

5,501

-

-

-

-

11,962

Development costs capitalised

-

-

-

850

-

-

850

At 30 September 2017

68,461

41,415

86

7,054

5,473

280

122,769

Additions in the period

-

221

-

-

243

-

464

Currency translation differences

-

(40)

-

-

(16)

-

(56)

Acquired on acquisition of subsidiary

7,376

6,403

-

-

1,243

-

15,022

Development costs capitalised

-

-

-

727

-

-

727

At 31 March 2018

75,837

47,999

86

7,781

6,943

280

138,926

Additions in the period

-

-

-

-

541

-

541

Currency translation differences

-

46

-

 

-

-

-

46

Acquired on acquisition of subsidiary

3,320

974

-

 

-

14

-

4,308

Development costs capitalised

-

-

-

634

-

-

634

At 30 September 2018

79,157

49,019

86

8,415

7,498

280

144,455

 

 

 

 

 

 

 

 

Accumulated amortisation:

 

 

 

 

 

 

 

At 1 April 2017

-

(20,936)

(33)

(4,183)

(2,297)

(226)

(27,675)

Disposals in the period

-

-

-

-

10

-

10

Currency translation differences

-

44

-

-

17

-

61

Charge for the period

-

(2,827)

(4)

(588)

(476)

(27)

(3,922)

At 30 September 2017

-

(23,719)

(37)

(4,771)

(2,746)

(253)

(31,526)

Currency translation differences

-

38

-

-

(44)

-

(6)

Charge for the period

-

(3,622)

(4)

(653)

(325)

(27)

(4,631)

At 31 March 2018

-

(27,303)

(41)

(5,424)

(3,115)

(280)

(36,163)

Currency translation differences

-

-

-

-

(82)

-

(82)

Charge for the period

-

(3,291)

(3)

(656)

(454)

-

(4,404)

At 30 September 2018

-

(30,594)

(44)

(6,080)

(3,651)

(280)

(40,649)

 

 

 

 

 

 

 

 

Carrying amount:

 

 

 

 

 

 

 

At 30 September 2018

79,157

18,425

42

2,335

3,847

-

103,806

 

 

 

 

 

 

 

 

At 31 March 2018

75,837

20,696

45

2,357

3,828

-

102,763

 

 

 

 

 

 

 

 

At 30 September 2017

68,461

17,696

49

2,283

2,727

27

91,243

 

 

 

 

8.              Property, plant and equipment

 

 

Freehold property

Leasehold improve-ments

Datacentre equipment

Computer equipment

Office equipment

Motor vehicles

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Cost:

 

 

 

 

 

 

 

At 1 April 2017

2,062

7,967

21,169

55,603

2,614

68

89,483

Additions in the period

-

670

600

7,362

10

-

8,642

Acquisition of subsidiary

-

-

-

945

2

-

947

Disposals in the period

-

-

-

(908)

(100)

(48)

(1,056)

Currency translation differences

-

-

-

(103)

-

-

(103)

At 30 September 2017

2,062

8,637

21,769

62,899

2,526

20

97,913

Additions in the period

-

97

911

6,935

86

11

8,040

Acquisition of subsidiary

-

-

-

330

(1)

-

329

Disposals in the period

-

(194)

-

(283)

(213)

-

(690)

Currency translation differences

-

-

-

162

-

-

162

At 31 March 2018

2,062

8,540

22,680

70,043

2,398

31

105,754

Additions in the period

-

-

397

4,475

31

-

4,903

Acquisition of subsidiary

1,149

-

-

752

461

-

2,362

Currency translation differences

-

2

-

(2)

4

-

4

At 30 September 2018

3,211

8,542

23,077

75,268

2,894

31

113,023

 

 

 

 

 

 

 

 

Accumulated depreciation:

 

 

 

 

 

 

 

At 1 April 2017

(258)

(2,774)

(9,763)

(39,942)

(1,629)

(68)

(54,434)

Charge for the period

(24)

(248)

(959)

(4,591)

(131)

-

(5,953)

Disposals in the period

-

-

-

908

100

48

1,056

Currency translation differences

-

-

-

66

-

-

66

At 30 September 2017

(282)

(3,022)

(10,722)

(43,559)

(1,660)

(20)

(59,265)

Charge for the period

(24)

(308)

(1,025)

(4,947)

(278)

(1)

(6,583)

Disposals in the period

-

192

-

283

213

-

688

Currency translation differences

-

-

(8)

100

-

-

92

At 31 March 2018

(306)

(3,138)

(11,755)

(48,123)

(1,725)

(21)

(65,068)

Charge for the period

(30)

(283)

(973)

(5,574)

(91)

(2)

(6,953)

Currency translation differences

-

-

7

(86)

(4)

-

(83)

At 30 September 2018

(336)

(3,421)

(12,721)

(53,783)

(1,820)

(23)

(72,104)

 

 

 

 

 

 

 

 

Carrying amount:

 

 

 

 

 

 

 

At 30 September 2018

2,875

5,121

10,356

21,485

1,074

8

40,919

 

 

 

 

 

 

 

 

At 31 March 2018

1,756

5,402

10,925

21,920

673

10

40,686

 

 

 

 

 

 

 

 

At 30 September 2017

1,780

5,615

11,047

19,340

866

-

38,648

                 

 

 

 

 

9.              Contingent consideration due on acquisitions

 

 

 

30/09/2018

30/09/2017

31/03/2018

 

 

 

 £'000

 £'000

 £'000

 

 

 

 

Contingent consideration due on acquisitions

 

 

 

 

-       Sonassi Holding Company Limited

 

(2,639)

-

(832)

-       Bytemark Holdings Limited (Note 11)

 

(187)

-

-

-       Tier 9 Limited

 

-

(1,741)

(1,862)

 

 

 

 

 

Total contingent consideration due on acquisitions

 

(2,826)

(1,741)

(2,694)

 

The Tier 9 Limited contingent consideration of £1,862,000 was paid during the period to 30 September 2018. Sonassi Holdings Company Limited deferred consideration was revalued in the period to 30 September 2018 to reflect the higher than expected profitability of the business during the final earn-out period. This element of the post-acquisition earnings attracted a high multiple factor under the ratchet mechanism with the associated sale and purchase agreement. This resulted in a loss of £1,807,000 being included in the Group's consolidated statement of comprehensive income for the six months ended 30 September 2018, which has been partially offset by the gain of £413,000 relating to Bytemark in the period (note 11).

 

Subsequent to the 30 September 2018, contingent considerations for Sonassi Holdings Company Limited and Bytemark Holdings Limited were settled fully in cash at the 30 September 2018 balance sheet values noted above.

 

 

 

10.            Analysis of change in net debt

 

 

 

Cash and cash equivalents

£'000

 

 

Bank

loans

£'000

Finance leases and hire purchase

£'000

Total

£'000

 

 

 

 

 

 

At 1 April 2017

 

8,906

(18,639)

(858)

(10,591)

 

 

 

 

 

 

New bank loans

 

-

(14,956)

-

(14,956)

Repayment of bank loans

 

-

3,000

-

3,000

Impact of effective interest rate

 

-

139

-

139

Acquired on acquisition of subsidiary

 

718

-

(283)

435

Currency translation difference

 

-

-

(190)

(190)

Cash flow

 

(2,496)

-

164

(2,332)

At 30 September 2017

 

7,128

(30,456)

(1,167)

(24,495)

 

 

 

 

 

 

New bank loans

 

-

(10,000)

-

(10,000)

Repayment of bank loans

 

-

5,500

-

5,500

Impact of effective interest rate

 

-

(283)

-

(283)

Acquired on acquisition of subsidiary

 

3,435

-

566

4,001

Currency translation difference

 

-

-

211

211

Cash flow

 

(1,068)

-

(440)

(1,508)

At 31 March 2018

 

9,495

(35,239)

(830)

(26,574)

 

 

 

 

 

 

New bank loans

 

-

(10,050)

-

(10,050)

Repayment of bank loans

 

-

3,000

-

3,000

Repayment of finance leases

 

-

-

231

231

Impact of effective interest rate

 

-

283

-

283

Acquired on acquisition of subsidiaries

 

546

-

(430)

116

Currency translation difference

 

-

-

(4)

(4)

Cash flow

 

(617)

-

-

(617)

At 30 September 2018

 

9,424

(42,006)

(1,033)

(33,615)

 

 

 

11.            Acquisitions

 

Bytemark Holdings Limited

The Group acquired 100% of the issued share capital of Bytemark Holdings Limited on 24 August 2018.   Bytemark Holdings Limited (Holdings) is principally a holding company which owns 100% of the issued share capital of Bytemark Limited (Bytemark).

The Bytemark group provides managed and cloud based hosting services via its owned datacentre in York to a wide range of customers in 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 additional datacentre space and another customer base.

During the current period the Group incurred £122,000 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 six months ended 30 September 2018. 

The following table summarises the consideration to acquire Bytemark and the amounts of identified assets acquired and liabilities assumed at the acquisition date and are provisional.

 

£'000

Recognised amounts of net assets acquired and liabilities assumed (provisional):

 

Cash and cash equivalents

546

Trade and other receivables

205

Property, plant and equipment

2,362

Intangible assets

988

Trade and other payables

(1,470)

Current borrowings

(290)

Borrowings due after more than 1 year

(140)

Deferred tax liability

(209)

Identifiable net assets

1,992

Goodwill

3,320

Total consideration

5,312

 

 

Satisfied by:

 

Cash - paid on acquisition

4,712

Contingent consideration - payable

600

Total consideration to be transferred

5,312


The acquisition of Bytemark was completed using a "locked box" mechanism, on a no cash, no debt, and normalised working capital basis. An initial payment of £4,712,000 was made at completion. This initial payment included an amount of £62,000 to settle the adjustments required to the locked box accounts.

The share purchase agreement (SPA) included a provision requiring the Company to pay the former shareholders of Bytemark an additional amount contingent on the level of profitability delivered by Bytemark in the year ending 31 March 2019 ("the earn-out payment").

The potential undiscounted amount of the earn-out payment that the Company could be required to pay is between £nil and £1,000,000.  The amount of contingent consideration payable, which was recognised as of the acquisition date, was £600,000. 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 £289,000 to £928,000. 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 £600,000 as of the acquisition date.

Subsequently, while not part of the original plan, during November 2018, the previous director shareholders of Bytemark indicated that they wished to consider leaving the business early. Driven by this a negotiated settlement on the earn-out payment was agreed. The amount due to be paid by the company, in full and final settlement of all its liabilities to the former shareholders, under the SPA, was fixed at £187,000 and the resulting gain of £413,000 has been included in the Group's consolidated statement of comprehensive income for the six months ended 30 September 2018.

Bytemark earned revenue of £272,000 and generated profits, before allocation of group overheads, share based payments and tax, of £37,000 in the short period since acquisition.

 


12.             Availability of half yearly reports

 

The Company's Interim Report for the six months ended 30 September 2018 will shortly be available to view on the Company's website (www.iomart.com).

 

INDEPENDENT REVIEW REPORT TO IOMART GROUP PLC

 

Introduction

 

We have been engaged by the company to review the financial information in the half yearly financial report for the six months ended 30 September 2018 which comprises the consolidated interim statement of comprehensive income, the consolidated interim statement of financial position, the consolidated interim statement of cash flows, the consolidated interim statement of changes in equity and the related notes 1 to 12. We have read the other information contained in the half yearly financial report which comprises only the interim results announcement, the chairman's statement and the chief executive's statement and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.

 

This report is made solely to the company in accordance with guidance contained in Independent Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our review work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review report and for no other purpose.  To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company for our review work, for this report, or for the conclusion we have formed.

 

Directors' Responsibilities

 

The half yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules for Companies of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half yearly report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

 

As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The financial information in the half yearly financial report has been prepared in accordance with the basis of preparation in Note 1.

 

Our Responsibility

 

Our responsibility is to express to the Company a conclusion on the financial information in the half yearly financial report based on our review.

 

Scope of Review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half yearly financial report for the six months ended 30 September 2018 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 1.

 

 

 

 

 

GRANT THORNTON UK LLP

Statutory auditor, Chartered Accountants

Glasgow

 

3 December 2018


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
 
 
IR FKNDQCBDDPBK
Close


London Stock Exchange plc is not responsible for and does not check content on this Website. Website users are responsible for checking content. Any news item (including any prospectus) which is addressed solely to the persons and countries specified therein should not be relied upon other than by such persons and/or outside the specified countries. Terms and conditions, including restrictions on use and distribution apply.

 


Half-year Report - RNS