Final Results
Iomart Group PLC
22 May 2002
iomart Group Plc
Preliminary Results for the 15 months ended 30th March 2002
iomart clears the decks
• Sale of ISP & broadband businesses for £5 million
• Exit from German subsidiary determined
• 2 Divisions - NetIntelligence and web-hosting
• Cash balances of £6.5 million at period end
• Loss per share 14.7p (10.9p)
Today iomart announces its results for the period 1 January 2001 to 31 March
2002 with total sales of £5.4 million (£3.6 million) and total pre-tax losses of
£7.9 million (£5.1 million) and loss per share of 14.7p (10.9p).
During this period there were three acquisitions (the Actis Technology's
NetIntelligence, OnCue and Canbox), two disposals (Madasafish and broadband), a
decision to close a subsidiary (Canbox) and a relaunch of web-hosting and
related activity (iomart Internet).
The consequence of this proactive programme in a fast-changing market is a clear
focus on NetIntelligence and web-hosting, which represent the ongoing
businesses.
Chairman Nick Kuenssberg said: 'With our new concentration on two markets, a
reduced cost base and cash balances of £6.5 million at the period end, we are
better placed to provide long-term capital growth for our shareholders.'
Contact: Angus MacSween, Chief Executive Officer 0141 931 7025
'Chairman's statement'
The period ended 31 March 2002 has seen 'the longest year' with a very high
level of activity in terms of strategic direction as the various markets in
which your company has operated have changed. The actual figures showing sales
of £5.4 million and losses of £7.9 million are factually correct but are largely
irrelevant to our ongoing business. iomart today is effectively in 'start-up'
mode as a software company in the enterprise security sector.
We acquired the On.Cue DSL broadband business at a time when this appeared to
make sense to create critical mass. We exited from both the retail ISP and the
broadband businesses in the course of the period as the valid business case for
them was eroded. Our acquisition of CANBOX Technologies GmbH in Germany,
originally intended to develop web mail and unified messaging businesses, has
not proved a success. The German market has been under pressure and the
inability to achieve satisfactory pricing has led to our decision to exit this
business. The cost of this is provided in the accounts presented to you along
with all known liabilities. There will be no continuing significant costs other
than those relevant to our ongoing software and web-hosting business.
We are now focusing on the NetIntelligence product portfolio in this potentially
large but demanding corporate market for enterprise security products.
Your company also has the small web hosting and co-location business based on
iomart and NSL activities together with a high capacity infrastructure. In
order to exploit this rather than simply abandon it, we have acquired a
controlling interest in a new company focused on the SME sector with
complementary activities, now re-named iomart Internet. Based in Lancaster and
founded by two entrepreneurs who built up Business Serve, this company is
supported by the back office in Glasgow. Sales have begun well, currently
running at approximately £400k per year and growing with breakeven planned to be
achieved by the end of the current fiscal year.
As suggested the figures for the year include significant discontinued
operations and do not reflect the business going forward. It is more
appropriate to consider that we are now a small software company with a
market-leading software product in NetIntelligence and with a controlling
interest in a hosting company run by a separate management team. Our cost
structure now respects this and, depending on the speed with which the corporate
sector takes up NetIntelligence and the rate of growth of our new web-hosting
company, we anticipate success within the next two years.
I would like to pay tribute to the substantial contributions made by Neil
Finlayson, a founder director, and David Harrison, finance director, both of
whom are standing down at the AGM in response to the revised levels of business
and our new focus. At the same time it is appropriate to thank those who have
dedicated themselves to the company since flotation and to acknowledge the
commitment demonstrated by the current team.
The past three years has been an extraordinary interlude in economic terms and
your company has ridden an acknowledged roller-coaster. The collective madness
in the telecoms and dotcom worlds, the 'free' business models, downward
pressures on prices and optimistic views of uptake, supported by researchers,
commentators, funders and analysts alike, have all combined to create an
extremely difficult economic environment. With our new concentration on two
markets, a reduced cost base and cash balances of £6.5m at the period end, we
are better placed to provide long-term capital growth for our shareholders.
Nick Kuenssberg
Non-executive chairman
21 May 2002
'Chief Executive's Review'
As I reported in my review of 26 February for the 6 months to 31 December 2001,
the 15 month period to 31 March 2002 has been one of transformation.
The sale of our ADSL business to Centrica for £2 million cash concluded our
withdrawal from the Telco marketplace following the sale of our consumer ISP
Madasafish in May 2001 for £3 million cash. The ADSL sale also concluded the
transfer of all obligations of our Stornoway call centre to Centrica PLC. This
included the lease and all support staff. During April 2002 we also terminated
the office lease in Edinburgh.
iomart's German business Canbox which had a significant revenue stream in mail
and messaging has suffered from the ongoing collapse of the internet services
and portal markets in Germany; we have taken the decision to exit from this
operation with effect from the end of June 2002.
It has become clear that the messaging sector we believed would flourish has not
emerged as any commentator envisaged.
Given the much stronger interest in our NetIntelligence software it makes sense
to redouble our efforts here. NetIntelligence includes a sophisticated mail
filter component which we have developed as part of our mail product set, and
gives us distinct unique selling points. Our prospect pipeline for
NetIntelligence has continued to grow strongly in the final quarter with many
blue chip companies, particularly in the finance sector, showing very keen
interest. However the corporate sales cycle for this type of product is
typically anywhere between six and twelve months.
Although we disposed of our two largest business streams, iomart has retained a
web hosting infrastructure and customer base and we have been working to grow
and increase the value of this business. We opened a telesales office for web
hosting services in the north of England in late March 2002. This is managed by
the ex founders of Businessserve PLC, a web hosting company that grew
aggressively in the years 1997 - 2000 before being sold privately in March 2000.
We are achieving sales success in a market which is consolidating and where
competitors are disappearing. Whilst still in its infancy the sales results
give us reason to believe that we can build a significant and profitable
business in this area using our residual infrastructure and internet skills.
Results
Turnover for the period of £5.40 million is made up of £1.72 million from
ongoing operations, network security and web services (co-location, hosting,
domain names and mail), £0.21 million from the discontinuing operations in
Germany and £3.47 million from our discontinued ADSL and dial up access.
It should be noted that the gross profit margin for the period was 38% overall
but 67% from ongoing operations.
Administrative expenses of £11.08 million comprise £5.69 million for ongoing
operations, £1.02 millon from discontinuing operations and £4.37 million from
discontinued operations. In addition, restructuring costs of £3.02 million were
incurred. Other operating income of £0.20 million relates primarily to grants
received. We have continued to reduce our administrative expenses to reflect our
current business.
The total operating loss of £11.84 million is attributable to £6.09 million from
ongoing operations, including £0.57 million from acquisitions, £0.89 million
from discontinuing operations and £4.86 million from discontinued operations.
The net profit on sale of the group's dial up access business was £1.83 million
and of the ADSL business £1.78 million. Bank interest receivable amounted to
£0.59 million. Interest payable on finance leases and hire purchase contracts
was £0.26 million. The loss for the year was £7.90 million and no tax charge
arises in respect of the group's trading.
Cash and borrowings
Cash balances at 31 March 2002 were £6.52 million. Borrowings under finance
leases amounted to £1.28 million. The group had no other debt outstanding.
Financial instruments
The group's financial instruments comprise cash and liquid resources and various
items such as trade debtors and trade creditors that arise directly from its
operations. The main purpose of these financial instruments is to provide
finance for the group's operations. The main risk to the group is interest rate
risk arising from floating rate interest rates. The group has one subsidiary,
which operates in Germany, whose revenue and expenses are denominated in Euros.
All transactions of the holding company and the UK subsidiaries are in UK
sterling and the group does not use derivative instruments.
Financial Position
The group's financial position remains strong with sufficient cash reserves to
fund the current business plan and take the group through to profitability.
Prospects
With this set of results we have put behind us the majority of the capital
intensive business areas we were operating in and we have reduced our cash cost
base to around £275,000 per month, of which £220,000 are variable costs.
We now have two distinct areas of business, with strong management and clear
objectives in each area. NetIntelligence provides us with considerable IPR and
significant barriers to entry for competitors, targeted at the corporate sector,
where although sales cycles are long the rewards for success are potentially
substantial.
On the other hand, our web services business, targeted at the SME sector
provides immediate growth and cashflow whilst building a valuable long term
business.
iomart now has the ability to flex its cost base as required to either fund
growth or conserve cash dependent on demand for our products and services. We
remain confident that we can deliver success and profitability in the coming
years.
Angus MacSween
Chief Executive Officer
21 May 2002
'Consolidated profit and loss account' 15 Months Year
ended 31 ended 31
March December
2002 2000
Note £'000 £'000 £'000
TURNOVER
Acquisitions 3 37 -
Discontinuing operations 3 210 -
Total Acquisitions 247 -
Continuing operations 3 1,682 1,389
1,929 1,389
Discontinued operations 3 3,470 2,192
Total turnover 5,399 3,581
Cost of sales 3 (3,339) (1,424)
Gross profit 3 2,060 2,157
Administrative expenses (11,079) (7,663)
Restructuring expenses (3,021) -
Total administrative expenses (14,100) (7,663)
Other operating income 203 219
Net operating expenses 3 (13,897) (7,444)
OPERATING LOSS
Acquisitions 3 (574) -
Discontinuing operations 3 (891) -
Total Acquisitions (1,465) -
Continuing operations 3 (6,402) (2,942)
(7,867) (2,942)
Discontinued operations 3 (3,970) (2,345)
Group operating loss 4 (11,837) (5,287)
Profit on sale of businesses 3,609 -
(8,228) (5,287)
Net interest 6 327 185
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION (7,901) (5,102)
Tax on loss on ordinary activities 7 - -
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION
FOR THE PERIOD (7,901) (5,102)
Equity minority interests 5 -
LOSS FOR THE FINANCIAL PERIOD 19 (7,896) (5,102)
Loss per ordinary share (pence)
Basic 9 (14.7p) (10.9p)
There have been no recognised gains and losses attributable to the shareholders
other than the loss for the current financial year and accordingly, no statement
of total recognised gains and losses is shown.
'Consolidated balance sheet' Note 31 March 31 December
2002 2000
£'000 £'000
FIXED ASSETS
Intangible assets 10 279 1,174
Tangible assets 11 1,011 3,960
1,290 5,134
CURRENT ASSETS
Debtors 13 927 1,792
Cash at bank and in hand 6,519 12,026
7,446 13,818
CREDITORS: amounts falling due
within one year 14 (2,513) (3,772)
NET CURRENT ASSETS 4,933 10,046
TOTAL ASSETS LESS CURRENT LIABILITIES 6,223 15,180
CREDITORS: amounts falling due after more
than one year 15 (571) (1,620)
EQUITY MINORITY INTERESTS 17 12 -
NET ASSETS 5,664 13,560
CAPITAL AND RESERVES
Called up share capital 18 538 538
Capital redemption reserve 19 1,200 1,200
Share premium account 19 19,087 19,087
Profit and loss account 19 (15,161) (7,265)
TOTAL EQUITY SHAREHOLDERS' FUNDS 20 5,664 13,560
These financial statements were approved by the board of directors on 21 May
2002.
Signed on behalf of the board of directors
Angus MacSween
Director
'Consolidated cash flow statement' Note 15 Months Year
ended 31 ended 31
March December
2002 2000
£'000 £'000
Net cash outflow from operating
activities 21 (7,833) (4,681)
Returns on investments and servicing of
finance 22 327 185
Capital expenditure and financial 22 (577) (1,206)
investment
Acquisitions and disposals 22 4,030 5
Cash outflow before financing (4,053) (5,697)
Financing 22 (1,454) 17,248
(Decrease)/increase in cash in the period (5,507) 11,551
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash in the period (5,507) 11,551
Cash outflows from debt and lease 23 1,454 2,077
financing
Change in net funds from cash flows 23 (4,053) 13,628
New hire purchase and finance leases 23 (101) (2,723)
Hire purchase and finance leases acquired
with subsidiary 23 - (42)
Opening net funds/(debt) 9,398 (1,465)
Closing net funds 23 5,244 9,398
1.ANALYSES OF CONTINUING OPERATIONS AND ACQUISITIONS
Dis- Dis-
Continuing continued Total Continuing continued Total
15 months 15 months 15 months Year Year Year
ended 31 ended 31 ended 31 ended 31 ended 31 ended 31
March March March December December December
2002 2002 2002 2000 2000 2000
£'000 £'000 £'000 £'000 £'000 £'000
Turnover 1,719 3,680 5,399 1,389 2,192 3,581
Cost of sales (559) (2,780) (3,339) (747) (677) (1,424)
Gross profit 1,160 900 2,060 642 1,515 2,157
Administrative expenses (6,712) (4,367) (11,079) (3,584) (4,079) (7,663)
Restructuring expenses (1,572) (1,449) (3,021) - - -
Other operating income 148 55 203 - 219 219
Net operating expenses (8,136) (5,761) (13,897) (3,584) (3,860) (7,444)
Operating loss (6,976) (4,861) (11,837) (2,942) (2,345) (5,287)
The total figures for continuing operations in the 15 months ended 31 March 2002
include the following amounts relating to acquisitions; turnover £37,000, cost
of sales £3,000, gross profit £34,000, administrative expenses £608,000 and
operating loss £574,000.
Amounts relating to discontinuing operations; turnover £210,000, cost of sales
£77,000; gross profit £133,000, administrative expenses £1,024,000 and operating
loss £891,000. The discontinuing operations relate to the acquired CANBOX
Technologies GmbH business, which cannot be treated as discontinued activities
under FRS 3 as it is planned to cease activities at the end of June. The
directors believe that this information is relevant to the understanding of the
accounts and the business.
Turnover comprises revenue from network security, web services, e-mail
management, dial up access and ADSL, excluding VAT.
2 OPERATING LOSS
15 Months Year
ended 31 ended 31
March December
2002 2000
£'000 £'000
Operating loss is after charging/(crediting)
Depreciation of tangible fixed assets:
Owned assets 432 117
Leased assets 1,117 709
Write down of tangible fixed assets 1,452 -
Amortisation of intangible fixed assets 499 219
Write down of intangible assets 506 -
Loss on sale of assets 15 24
Rentals under operating leases 492 145
Revenue grants (55) (120)
Amortised deferred grant income (148) (89)
Auditors' remuneration - company audit fees 7 10
- group audit fees 18 26
- other services 56 134
3. NET INTEREST
15 Months Year
ended 31 ended 31
March December
2002 2000
£'000 £'000
Investment income:
Bank interest receivable 587 667
Interest payable and similar charges:
Bank overdraft and other borrowings (3) (13)
Finance leases and hire purchase contracts (257) (136)
Exceptional charge on early redemption of loan - (333)
(260) (482)
Net interest 327 185
LOSS PER ORDINARY 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 period.
FRS 14 requires presentation of diluted EPS when a company could be called upon
to issue shares that would decrease net profit or increase net loss per share.
For a loss making company with outstanding share options, net loss per share
would only be increased by the exercise of out-of-the-money options. Since it
seems inappropriate to assume that option holders would act irrationally and
there are no other diluting future share issues, diluted EPS has not been
presented.
15 Months Year
ended 31 ended 31
March December
2002 2000
£'000 £'000
Loss for the financial period and basic earnings
attributed to ordinary shareholders (7,896) (5,102)
No No
'000 '000
Weighted average number of ordinary shares 53,796 46,709
Loss per share (14.7p) (10.9p)
4 RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES
15 Months Year
ended 31 ended 31
March December
2002 2000
£'000 £'000
Operating loss (11,837) (5,287)
Depreciation 1,549 826
Amortisation of intangible assets 499 219
Write down of tangible fixed assets 1,452 -
Write down of intangible fixed assets 506 -
Loss on sale of assets 15 24
Foreign exchange translation differences 18 -
Decrease/(increase) in debtors 907 (1,283)
(Decrease)/increase in creditors (942) 820
Net cash outflow from operating activities (7,833) (4,681)
4 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
15 Months Year
ended 31 ended 31
March December
2002 2000
£'000 £'000
Returns on investments and servicing of finance
Other interest receivable 587 667
Bank overdraft and other borrowings (3) (13)
Finance leases and hire purchase contracts (257) (136)
Charge on early redemption of bank loan - (333)
327 185
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (656) (695)
Proceeds of disposal of fixed assets 135 -
Payments to acquire intangible fixed assets (56) (511)
(577) (1,206)
Acquisitions
Purchase of subsidiary undertakings (310) (25)
Purchase of businesses (907) -
Net cash acquired with subsidiary 310 30
(907) 5
Sale of businesses
Sale of dial up access 2,960 -
Sale of ADSL 1,977 -
4,937 -
Total acquisitions and disposals 4,030 5
5 ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
(CONTINUED)
15 Months Year
ended 31 ended 31
March December
2002 2000
£'000 £'000
Financing
Issue of ordinary shares - 20,073
Expenses of share issue - (748)
Repayment of borrowings - (1,000)
Capital element of finance lease rental
and hire purchase contract payments
(1,454) (1,077)
(1,454) 17,248
6 ANALYSIS OF CHANGES IN NET FUNDS
At 31 December Other At 31 March
2000 non-cash 2002
changes
Cash flow
£'000 £'000 £'000 £'000
Cash at bank and in hand 12,026 (5,507) - 6,519
Finance leases and hire purchase (2,628) 1,454 (101) (1,275)
Net funds 9,398 (4,053) (101) 5,244
7 SALE OF BUSINESSES
Dial up ADSL Total Year
access 15 Months
ended 31
ended 31 December
March
2002 2000
£'000 £'000
Tangible fixed assets - 163 163 -
Debtors - 85 85 -
Creditors - (51) (51) -
- 197 197 -
Write down of tangible fixed assets 892 - 892 -
Write down of intangible assets 239 - 239 -
1,131 197 1,328 -
Profit on disposal 1,829 1,780 3,609 -
2,960 1,977 4,937 -
Satisfied by:
Cash 2,960 1,977 4,937 -
This information is provided by RNS
The company news service from the London Stock Exchange
Monday, 20th May 2024
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