Half Yearly Report

RNS Number : 1881Z
Iomart Group PLC
09 December 2014
 

 

9 December 2014

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 2014.

 

FINANCIAL HIGHLIGHTS

 

·      Revenue growth of 28% to £31.5m (H1 2014: £24.6m)

·      Adjusted EBITDA1 growth of 44% to £14.0m (H1 2014: £9.8m)

·      Adjusted profit before tax2 growth of 27% to £8.0m (H1 2014: £6.3m)

·      Adjusted basic earnings per share3 from operations increased by 26% to 6.15p (H1 2014: 4.89p)

·      Cashflow from operations increased by 49% to £13.5m (H1 2014: £9.1m)

·      Cashflow from operations 96% of adjusted EBITDA1 (H1 2014: 93%)

·      Adjusted EBITDA1 margins increased to 44% (H1 2014: 40%)

 

OPERATIONAL HIGHLIGHTS

 

·      Development of relationships with strategic Tier 1 providers such as Microsoft, EMC and Dell

·      Creation of cloud infrastructure and backup operation in the USA

·      Acquisition of ServerSpace after end of period for a maximum consideration of £4.25m

 

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 26% to £5.5m (H1 2014: £4.4m)

·      Basic earnings per share from operations increased by 25% to 4.25p (H1 2014: 3.39p)

 

Angus MacSween, CEO commented,

 

"We have demonstrated a further strong performance as we continue to benefit from last year's acquisitions of Redstation and Backup Technology, and we have made a good start to the second half of the year.

The market opportunity remains large and long term and, in a fast moving and ever evolving industry we have the skills and experience to continue to perform well. Our focus going forward is on continuing to deepen our relationships with the large Tier 1 vendors and their growing trust in our abilities gives me confidence for iomart' s prospects in the years ahead."

 

 

 

 

 

Throughout this statement adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges and acquisition costs. Throughout this statement acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

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 and in the prior year the accelerated write off of arrangement fees on the bank borrowing facility which was repaid early.

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 and in the prior year the accelerated write off of arrangement fees on the bank borrowing facility which was repaid early including the taxation effect of these.

 

 

 

 

 



For further information:

 

iomart Group plc      

Tel: 0141 931 6400

Angus MacSween       

                

Richard Logan            




Peel Hunt LLP

(Nominated Adviser and Broker)

Tel: 020 7418 8900

 

Richard Kauffer

Daniel Harris




Newgate Threadneedle

Tel: 020 7653 9850

Hilary Buchanan


John Coles

Edward Treadwell




 

About iomart Group plc

iomart Group is one of the UK's leading providers of cloud computing services. From a single server through to private cloud networks, iomart specialises in the delivery and management of mission-critical cloud services, enabling customers to reduce the costs, complexity and risks associated with maintaining their own cloud applications.

By physically owning and managing its own infrastructure, including state-of-the-art data centres in eight locations across the UK, and a private fast fibre network, iomart offers world-beating levels of service to its customers. The Group offers a unique 100% uptime guarantee with all hosting services being engineered to ensure no single point of failure.

iomart Group operates in its chosen markets through a number of subsidiaries: iomart Hosting, RapidSwitch, Melbourne Server Hosting, Easyspace, Redstation, Backup Technology and iomartcloud. The Group is listed on the London Stock Exchange's Alternative Investment Market (AIM:IOM).  www.iomart.com



 

Chief Executive's Statement

 

Introduction

 

We have again enjoyed a very good trading period with Group revenue having grown by 28% to £31.5m (H1 2014: £24.6m). As we have developed our cloud operations we have always been very focussed on profitability and cash generation. In this period our overall group adjusted EBITDA percentage margin has grown to 44% (H1 2014: 40%) and our Hosting segment adjusted EBITDA percentage margin is now over 50% from a level of 46% in the previous period. We continue to generate very high levels of cash from our operations and in the period our operating cash was 96% of our adjusted EBITDA (H1 2014: 93%).

 

Operational Review

 

Whilst all our activities involve the provision of cloud services we currently report in two segments.

 

Cloud Hosting

 

The Cloud Hosting operation continues to perform well.

 

As I have stated previously there is no 'one size fits all' cloud company. There is a level of complexity and a myriad of different requirements and solutions that makes that extremely unlikely.  The landscape within which we operate continues to evolve and iomart needs to evolve with it. The most significant trend we are seeing is the maturing and adoption of the large 'public cloud' offerings, primarily Amazon Web Services (AWS) and Microsoft through Azure and Office 365. EMC and VMware are also joining the fray. Whilst the UK is behind the USA in adopting these public clouds they will inevitably be major players in Europe. There is still a huge requirement for physical infrastructure both on and off premise as the shift to the cloud continues to move project by project in line with our 'dripping roast' analogy and we see continuing demand for these 'private' clouds.

 

The 'hybrid' solution will in our view dominate the cloud scene for the foreseeable future where organisations large and small will use a variety and mixture of solutions to meet their business needs, using both public and private clouds. The combinations are driven by a large number of factors; data security and data sovereignty amongst them, alongside global reach and speed to market within different regulatory environments which can often mean contrarian requirements in this new cloud environment. Our strategy is to ensure we can provide every flavour of cloud, be it Microsoft Azure, Office 365, AWS, vCloud Air, as well as private ring fenced infrastructure, or a mix of more than one of these. iomart's challenge is continuing to position itself as the 'agnostic cloud company', whereby we can centrally control a customer's data and environments and subsequently manage and move seamlessly between any and all of these platforms with a consultative level of knowledge and expertise.

 

To achieve this we are deepening our relationships with all of the large providers.

 

·      We have become a cloud solution provider (CSP) under Microsoft's new cloud programme;

·      We are now a premium Dell partner with active dual marketing campaigns underway;

·      We have a number of programmes active with EMC among them being chosen as their exclusive European partner for EMC Hybrid Cloud during the launch phase;

·      We have designed our first AWS solutions for potential customers.

 

The added value of this resides in the software layer, both within these platforms but more importantly in the ability to manage across them effectively. iomart has built  tools, control panels and processes to achieve  this and this is a big attraction of iomart as far as our partners are concerned. Managing all of the above in a scalable, flexible and efficient manner is complex and is what continues to differentiate iomart in the market.

 

As noted above we have continued to expand our margins over the last few years. We have very deliberately eschewed revenue without profit opportunities and continue to do so. However, in the longer term, as we begin to mix more public cloud into our offerings we are likely to see an increase in operating expenditure as we pay for the use of the public cloud but this should be offset by lower capital expenditure and therefore as a consequence lower depreciation charges with little net effect on our adjusted profit before tax margins.

 

This market opportunity remains large and long term. In the past we have described iomart as the Company providing the 'picks and shovels' in this cloud goldrush and the vast bulk of our customers are currently providing or attempting to launch some kind of web facing service or application onwards to their end customers. We see all kinds of companies at all stages of development. Of course as in any goldrush, not everyone finds gold and as we go through an entire business cycle with our customers we have seen casualties amongst our base, some with funding difficulties, some dropping out of markets and some being acquired and integrated elsewhere. Consequently, we have seen a modest increase in customer churn in one of our hosting divisions.

 

On the other hand many of our customers continue to grow their services with us and some have global requirements with which they are asking us to help.

 

The sum of all this is that our organic revenue growth in the Hosting segment, whilst still at a satisfactory level of 8%, is slightly lower than we had forecast but we expect this to have minimal impact on the absolute level of adjusted EBITDA and indeed expect a slightly increased adjusted EBITDA margin percentage.

 

Through our relationship with EMC we have developed a new revenue stream out of the USA whereby we are now managing back up and compute systems in the USA from our Network Operations Centre (NOC) in Glasgow on a 24/7 basis. The customers involved are large organisations with large data requirements and we intend to build on this in the future. We have invested in datacentre space and infrastructure on the east and west coast of the US and in the Far East as well as the Tier 1 relationships talked about earlier. This now gives iomart the necessary tools to establish global reach for our customers.

 

We see opportunities to grow our backup and disaster recovery operations through our strong bases in Backup Technology Ltd (BTL) which we acquired last year and which uses Asigra back up software to manage complex corporate requirements and through our EMC relationship where we are primarily addressing the very large installed EMC customer base.

 

Our aim is to do business with larger organisations with more complex requirements as we have found that developing a trusted adviser relationship with them has been the best path to growth.

 

All of this activity, together with a full period contribution from acquisitions made in the previous period resulted in an increase in the Hosting segment revenue of 37% to £26.1m (H1 2014: £19.1m).

 

Easyspace

 

Easyspace has performed well over the period.

 

The new top-level domains (TLD) which have come on the market have not played out as many in the industry expected but it has had a positive impact on Easyspace as existing customers defensively buy their own names.

 

Easyspace continues to deliver extremely strong cashflows and profits to the Group.

 

As a consequence of our activities in the period together with a full period contribution from acquisitions made in previous periods the Easyspace segment revenue remained static at £5.5m (H1 2014: £5.5m).

 

M&A Activity

 

There are still opportunities to make attractive acquisitions and if anything the market has been more active of late. As ever we remain focused on making the "right" acquisitions and I'm pleased to report that we completed the acquisition of ServerSpace Limited ("ServerSpace") last week. This has an initial cost of £2.6m with a further maximum contingent amount of £1.65m due on the achievement of certain levels of performance over the period until September 2015. ServerSpace is a London based cloud hosting provider and will be a good acquisition for the Group.

 

We remain committed to continuing to complement our organic growth through further acquisitions in the future.

 

Financial Performance

 

Revenue

 

Overall revenues from our operations grew 28% to £31.5m (H1 2014: £24.6m).

 

Our Hosting segment grew revenues by 37% to £26.1m (H1 2014: £19.1m). The majority of this increase was due to the contribution for the full six month period from the acquisitions of Redstation Limited and BTL in September 2013. Organic growth in the period was 8%.

 

The Easyspace segment revenues at £5.5m (H1 2014: £5.5m) were the same as in the previous period.

 

Gross Margin

 

The gross profit in the period, which is calculated by deducting from revenue variable cost of sales such as domain costs, power and sales commission and the relatively fixed costs of operating our datacentres, increased by 28% to £21.4m (H1 2014: £16.7m). This substantial increase in 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 68%.

 

Adjusted EBITDA

 

The Group's adjusted EBITDA grew by 44% to £14.0m (H1 2014: £9.8m) reflecting a significantly improved performance. Both segments contributed to the improvement although the vast majority of the improvement was delivered by the Hosting segment. In percentage terms the adjusted EBITDA margin increased to 44% (H1 2014: 40%) due to an improved margin in the Hosting segment and a relatively static level of Group overheads.

 

Hosting improved its adjusted EBITDA by 51% to £13.2m (H1 2014: £8.7m) and also its percentage margin to 51% from 46%. The continued improvement in adjusted EBITDA is largely due to the additional gross margin contribution arising from our sales growth. We continue to add to our staffing levels as we put in place the structure to allow us to continue to grow whilst providing the level of service our customers expect. That investment together with the impact of acquisitions has led to an increase in administrative expenses over the previous period.

 

Easyspace improved its adjusted EBITDA slightly to £2.43m (H1 2014: £2.42m) and its percentage margin was also slightly higher at 44.6% (H1 2014: 44.3%).

 

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 £1.6m have increased modestly in the period (H1 2014: £1.4m).

 

Adjusted profit before tax

 

Depreciation charges of £4.9m (H1 2014: £2.9m) have increased substantially as we depreciate our Maidenhead datacentre fit out, the equipment purchased to provide services to our new customers, as a consequence of depreciation charges in the operations we acquired in previous periods and the cloud infrastructure and backup assets we acquired in the USA. The charge for the amortisation of intangible assets, excluding amortisation of intangible assets resulting from acquisitions ("amortisation of acquired intangible assets") has increased to £0.5m (H1 2014: £0.3m) as a result of charges for backup software licenses and the additional development activity within the enlarged Group.

 

Net finance costs, excluding the mark to market adjustment on an interest swap on the Company's loans, were £0.7m in the period (H1 2014: £0.3m which also excluded the accelerated write off of arrangement fees on the bank borrowing facility which was repaid early in the prior period) as we reflect the costs of the additional loan facilities obtained during the period and the actual usage of these facilities to fund acquisitions.

 

After deducting the charges for depreciation, amortisation, excluding the amortisation of acquired intangible assets, and finance costs, excluding the accelerated write off of arrangement fees and the mark to market interest rate swap adjustment, from adjusted EBITDA the adjusted profits for the period before tax increased by 27% to £8.0m (H1 2014: £6.3m).

 

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 30/09/2014

6 months to 30/09/2013

 Year to 31/03/2014

Adjusted profit before tax


8,033

6,313

14,612

Share based payments


(365)

(598)

(1,257)

Amortisation of acquired intangible assets


(2,068)

(862)

(3,093)

Acquisition costs


(67)

(351)

(374)

Accelerated write off of arrangement fees on early repayment of facilities


-

(153)

(153)

Mark to market adjustment on interest rate swap


(30)

21

(20)

Profit before tax


5,503

4,370

9,715

 

The adjusting items are: share based payment charges in the period which decreased to £0.4m (H1 2014: £0.6m) as a result of the charges for share options issued in previous years coming to an end; costs of £0.1m (H1 2014: £0.4m) as a result of acquisitions; charges for the amortisation of acquired intangible assets of £2.1m (H1 2014: £0.9m) which have increased substantially as a result of the full period effect of acquisitions made in previous periods; finance charges of £nil (H1 2014: £0.2m) due to the accelerated release of arrangement fees on bank borrowing facilities which were repaid early during the previous period and finance costs of £0.03m (H1 2014: £0.02m credit) in respect of mark to market adjustments relating to interest rate swaps on the Group's loans.

 

After deducting the charges for share based payments, the amortisation of acquired intangible assets,  acquisition costs and the mark to market adjustment on interest rate swaps from the adjusted profit before tax, the reported profit before tax increased by 26% to £5.5m (H1 2014: £4.4m).

 

Profit for the period from total operations

 

There is a tax charge in the period of £1.0m (H1 2014: £0.8m), which comprises a current taxation charge of £1.4m (H1 2014: £1.2m), and a deferred taxation credit of £0.4m (H1 2014: £0.4m). This results in a profit for the period from total operations of £4.5m (H1 2014: £3.6m), an increase of 28%.

 

Earnings per share

 

Adjusted basic 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 accelerated write off of arrangement fees on early repayment of bank facilities in the previous period, the mark to market adjustment on an interest rate swap and acquisition costs and the tax effect of these items, was 6.15p (H1 2014: 4.89p) an increase of 26%.

 

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 4.25p (H1 2014: 3.39p) an increase of 25%.

 

The calculation of both adjusted 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 £13.5m (H1 2014: £9.1m), which is 96% of our adjusted EBITDA (H1 2014: 93%). Expenditure on taxation in the period was £1.3m (H1 2014: £0.5m) resulting in net cash flow from operating activities in the period of £12.2m (H1 2014: £8.6m).

 

Expenditure on investing activities of £8.3m (H1 2014: £23.6m) was incurred in the period. £6.5m (H1 2014: £6.5m), net of related finance lease drawdown and trade creditors, was incurred on the acquisition of property, plant and equipment principally to provide services to our customers, to acquire cloud infrastructure and backup assets in the USA and to fit out additional datacentre facilities. In respect of M&A activity £1.3m (H1 2014: £0.1m) was paid out for contingent consideration due on acquisitions made in previous periods and £nil (H1 2014: £16.8m) was incurred on acquisitions in the period. We also incurred £0.5m (H1 2014: £0.3m) in respect of the capitalisation of development costs during the period.

 

There was net cash spent on financing activities of £8.1m (H1 2014: £15.0m cash generated). The Company's borrowing facilities were restructured in the period. Our revolving credit facility was increased from £20m to £35m. From the increased facility we drew down £13.5m (H1 2014: £37.5m) out of which we repaid the outstanding amount of £13.5m on our term loan facility in full and in addition we made other repayments in the period of £1.5m against our term loan facility and £3.5m against our revolving credit facility resulting in total bank loan repayments in the period of £18.5m (H1 2014: £14.0m). We repaid £nil of borrowings in acquired businesses (H1 2014: £5.7m); £0.6m (H1 2014 £0.7m) of finance leases and incurred £0.7m (H1 2014 £0.6m) of finance charges. We also made a dividend payment of £1.9m (H1 2014: £1.5m). As a result cash and cash equivalent balances at the end of the period were £8.8m (H1 2014: £11.4m).

 

Net Cash/Debt

 

The net debt position of the Group at the end of the period was £18.9m (H1 2014: £23.5m). This represents a multiple of less one times our annual adjusted EBITDA which we believe is a comfortable level of debt to carry.

 

Current trading and outlook

 

The market opportunity remains large and long term and, in a fast moving and ever evolving industry we have the skills and experience to continue to perform well. Our focus going forward is on continuing to deepen our relationships with the large Tier 1 vendors and their growing trust in our abilities gives me confidence for iomart' s prospects in the years ahead.

 

 

Angus MacSween

CEO

8 December 2014

 

 

 

 

 

 

 



 

Consolidated Interim Statement of Comprehensive Income        

Six months ended 30 September 2014

 



 Unaudited

 Unaudited

Audited



 6 months to 30/09/2014

 6 months to 30/09/2013

 Year to 31/03/2014



£'000

£'000

£'000






 Revenue


31,527

24,551

 55,618






 Cost of sales


 (10,108)

 (7,821)

 (17,794)






 Gross profit


 21,419

 16,730

 37,824






 Administrative expenses


 (15,250)

 (11,906)

 (26,767)






 Operating profit


 6,169

 4,824

 11,057






 Analysed as:





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


14,026

9,768

 23,611

 Share based payments


(365)

(598)

(1,257)

 Acquisition costs

4

(67)

(351)

(374)

 Depreciation


 (4,872)

 (2,878)

 (7,170)

 Amortisation - acquired intangible assets


(2,068)

(862)

(3,093)

 Amortisation - other intangible assets


 (485)

 (255)

 (660)






 Finance income


 21

 32

68

 Finance costs

5

 (687)

 (486)

 (1,410)






 Profit before taxation


5,503

4,370

 9,715






 Taxation

6

 (964)

 (818)

(1,995)






 Profit for the period from total operations


4,539

3,552

7,720
















 Other comprehensive income

 





 Currency translation differences

 


(11)

3

3

 Other comprehensive expense for the period


-

3

3






 Total comprehensive income for the period


4,528

3,555

7,723
















 Attributable to equity holders of the parent


4,528

3,555

7,723











 

Basic and diluted earnings per share










 Total operations





 Basic earnings per share 

3

4.25 p

3.39 p

7.30 p

 Diluted earnings per share

3

 4.22 p

 3.37 p

 7.23 p

 

 



 

Consolidated Interim Statement of Financial Position

As at 30 September 2014

 



 Unaudited

 Unaudited

 Audited



30/09/2014

30/09/2013

31/03/2014



£'000

£'000

£'000






 ASSETS





 Non-current assets





 Intangible assets - goodwill

7

44,879

44,590

 44,879

 Intangible assets - other

7

18,272

21,821

19,488

 Lease deposit


 2,416

 2,416

 2,416

 Property, plant and equipment

8

 34,191

 30,249

 32,533



99,758

99,076

 99,316

 Current assets





 Cash and cash equivalents


 8,829

 11,377

 13,025

 Trade and other receivables


 8,260

 7,662

 7,696



 17,089

 19,039

 20,721






 Total assets


 116,847

 118,115

 120,037






 LIABILITIES





 Non-current liabilities





 Non-current borrowings


(1,618)

(16,195)

(13,716)

 Provisions for other liabilities and charges


(1,592)

(1,117)

(1,566)

 Deferred tax liability


(2,029)

(2,928)

(2,443)



(5,239)

(20,240)

(17,725)

 Current liabilities





 Contingent consideration due on acquisitions

9

-

(1,432)

(1,271)

 Deferred consideration due on acquisitions

10

-

(2,242)

-

 Trade and other payables


(15,651)

(13,731)

(15,158)

 Current income tax liabilities


(1,975)

(2,126)

(1,868)

 Current borrowings


(26,075)

(18,673)

(19,128)



 (43,701)

 (38,204)

 (37,425)






 Total liabilities


(48,940)

(58,444)

(55,150)






 Net assets


67,907

59,671

64,887






 EQUITY





 Share capital


1,078

1,078

1,078

 Own shares


(549)

(576)

(556)

 Capital redemption reserve


1,200

1,200

1,200

 Share premium


21,067

21,053

21,067

 Merger reserve


4,983

4,983

4,983

 Foreign currency translation reserve


(9)

2

2

 Retained earnings


40,137

31,931

37,113

 Total equity


67,907

59,671

64,887



Consolidated Interim Statement of Cash Flows

Six months ended 30 September 2014



 Unaudited

 Unaudited

Audited



 6 months to 30/09/2014

 6 months to 30/09/2013

 Year to 31/03/2014



£'000

£'000

£'000






Profit before tax


5,503

4,370

9,715

Finance costs - net


666

454

1,342

Depreciation


4,872

2,878

7,170

Amortisation


2,553

1,117

3,753

Share based payments


365

598

1,257

Exchange movements


-

3

-

Movement in trade receivables


 (420)

 352

250

Movement in trade payables


(7)

(696)

503

Cash flow from operations


13,532

9,076

23,990

Taxation paid


(1,288)

(520)

(2,277)

Net cash flow from operating activities


12,244

8,556

21,713






Cash flow from investing activities





Purchase of property, plant and equipment


(6,538)

(6,511)

(11,651)

Capitalisation of development costs


(480)

(260)

(557)

Purchase of  intangible assets - software


(55)

(18)

(24)

Proceeds on disposal of property, plant and equipment


-

-

22

Payment for acquisition of subsidiary undertakings net of cash acquired


-

(16,775)

(19,016)

Deferred consideration paid on prior period acquisitions


-

-

(201)

Contingent consideration paid on prior period acquisitions


(1,271)

(125)

(125)

Finance income received


21

70

91

Net cash used in investing activities


(8,323)

(23,619)

(31,461)






Cash flow from financing activities





Issue of shares


13

120

154

Draw down of bank loans


13,500

37,500

37,500

Repayment of finance leases


(580)

(724)

 (1,384)

Repayment of bank loans


(18,500)

(14,000)

(16,503)

Repayment of borrowings on acquisition of business


-

(5,731)

(5,731)

Finance costs paid


(683)

(634)

(1,172)

Dividends paid


(1,867)

(1,483)

(1,483)

Net cash (used in)/generated from financing activities


(8,117)

15,048

11,381






Net (decrease)/increase in cash and cash equivalents


(4,196)

1,633






Cash and cash equivalents at the beginning of the period


13,025

11,392

11,392






Cash and cash equivalents at the end of the period


8,829

11,377

13,025

 

 



Consolidated Interim Statement of Changes in Equity

Six months ended 30 September 2014

 

Changes in equity

 

 

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 2013

1,058

(70)

(506)

(1)

1,200

20,936

-

29,599

52,216











Profit in the period

-

-

-

-

-

-

-

3,552

3,552

Currency translation differences

-

-

-

3

-

-

-

-

3

Total comprehensive income

-

-

-

3

-

-

-

3,552

3,555











Dividends

 

-

-

-

-

-

-

-

(1,483)

(1,483)

Share based payments

 

-

-

-

-

-

-

-

598

598

Deferred tax on share based payments

 

-

-

-

-

-

-

-

(335)

(335)

Issue of new shares for option redemption

 

3

-

-

-

-

117

-

-

120

Issue of new shares for business acquisition

 

17

-

-

-

-

-

4,983

-

5,000

Total transactions with owners

20

-

-

-

-

117

4,983

(1,220)

3,900











Balance at 30 September 2013

1,078

(70)

(506)

2

1,200

21,053

4,983

31,931

59,671











Profit in the period

-

-

-

-

-

-

-

4,168

4,168

Currency translation differences

-

-

-

-

-

-

-

-

-

Total comprehensive income

-

-

-

-

-

-

-

4,168

4,168











Share based payments

 

-

-

-

-

-

-

-

659

659

Deferred tax on share based payments

 

-

-

-

-

-

-

-

354

354

Issue of own shares for option redemption

 

-

-

20

-

-

-

-

1

21

Issue of new shares for option redemption

 

-

-

-

-

-

14

-

-

14

Total transactions with owners

-

-

20

-

-

14

-

1,014

1,048











Balance at 31 March 2014

1,078

(70)

(486)

2

1,200

21,067

4,983

37,113

64,887











Profit in the period

-

-

-

-

-

-

-

4,539

4,539

Currency translation differences

-

-

-

(11)

-

-

-

-

(11)

Total comprehensive income

-

-

-

(11)

-

-

-

4,539

4,528











Dividends

 

-

-

-

-

-

-

-

(1,867)

(1,867)

Share based payments

 

-

-

-

-

-

-

-

365

365

Deferred tax on share based payments

 

-

-

-

-

-

-

-

(19)

(19)

Issue of own shares for option redemption

 

-

-

7

-

-

-

-

6

13

Total transactions with owners

-

-

7

-

-

-

-

(1,515)

(1,508)











Balance at 30 September 2014

1,078

(70)

(479)

(9)

1,200

21,067

4,983

40,137

67,907

 

 

 

Notes to the Half Yearly Financial Information

Six months ended 30 September 2014

 

 

1.              Accounting policies

 

The financial information for the year ended 31 March 2014 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 2014 have been extracted from the Group financial statements for that year. 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 2015. The Group financial statements for the year ended 31 March 2014 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 2014. The provisions of IAS 34 'Interim Financial Reporting' have not been applied in full.

 

 

 

2.              Operating segments

 

Revenue by Operating Segment

 


6 months to 30/09/2014

6 months to 30/09/2013

Year to 31/03/2014


External

Internal

Total

External

Internal

Total

External

Internal

Total


£'000

£'000

£'000

£'000

£'000

£'000

 £'000

 £'000

£'000

Easyspace

5,455

-

5,455

5,452

-

5,452

10,959

-

10,959

Hosting

26,072

476

26,548

19,099

464

19,563

44,659

932

45,591


31,527

476

32,003

24,551

464

25,015

55,618

932

56,550

 

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 30/09/2014

6 months to 30/09/2013

Year to 31/03/2014





£'000

£'000

£'000

United Kingdom




26,029

21,832

48,005

Rest of the World




5,498

2,719

7,613

Revenue from operations



31,527

24,551

55,618



 


2.              Operating segments (continued)

 

Profit by Operating Segment

 


6 months to 30/09/2014

6 months to 30/09/2013

Year to 31/03/2014


 

 

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

2,432

(210)

2,222

2,417

(309)

2,108

4,953

(605)

4,348

Hosting

13,208

(7,215)

5,993

8,735

(3,686)

5,049

21,700

(10,318)

11,382

Group overheads

(1,614)

-

(1,614)

(1,384)

-

(1,384)

(3,042)

-

(3,042)

Share based payments

-

(365)

(365)

-

(598)

(598)

-

(374)

(374)

Acquisition costs

-

(67)

(67)

-

(351)

(351)

-

(1,257)

(1,257)


14,026

(7,857)

6,169

9,768

(4,944)

4,824

23,611

(12,554)

11,057

Group interest and tax



(1,630)



(1,272)

 

 

(3,337)

Profit for the period

14,026

(7,857)

4,539

9,768

(4,944)

3,552

23,611

(12,554)

7,720

 

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


3.              Earnings per share

The calculations of earnings per share are based on the following results and numbers:


 6 months to 30/09/2014

 6 months to 30/09/2013

 Year to 31/03/2014





Total Operations









£'000

£'000

£'000

Profit for the financial period and basic earnings attributed to ordinary shareholders

4,539

3,552

7,720






No

No

No

Weighted average number of ordinary shares:

000

000

000

Called up, allotted and fully paid at start of period

107,803

105,760

105,760

Own shares held in Treasury

(983)

(1,023)

(1,016)

Shares held by Employee Benefit Trust

(141)

(141)

(141)

New shares issued during the period (weighted average)

10

166

1,101

Weighted average number of ordinary shares - basic

106,689

104,762

105,704

Dilutive impact of share options

980

698

1,005

Weighted average number of ordinary shares - diluted

107,669

105,460

106,709





Basic earnings per share

4.25 p

3.39 p

7.30 p

Diluted earnings per share

4.22 p

3.37 p

7.23 p

 

Adjusted earnings per share

 6 months to 30/09/2013

 Year to 31/03/2014






 £'000

 £'000

 £'000

 

Profit for the financial period and basic earnings attributed to ordinary shareholders

4,539

3,552

7,720

-   Amortisation of acquired intangible assets

2,068

862

3,093

-   Acquisition costs

67

351

374

-   Share based payments

365

598

1,257

-   Mark to market interest adjustment

30

(21)

20

-   Accelerated finance cost due to refinancing

-

153

153

-   Tax impact of adjusted items

(511)

(374)

(1,039)

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

6,558

5,121

11,578





Adjusted basic earnings per share

6.15 p

4.89 p

10.95 p

Adjusted diluted earnings per share

 6.09 p

 4.86 p

10.85 p

 

 



 

4.              Acquisition costs




 6 months to 30/09/2014

£'000

 6 months to 30/09/2013

£'000

 Year to 31/03/2014

£'000






Professional fees


67   

351   

374   






Total acquisition costs for the period


67   

351   

374   

During the period costs of £67,000 (H1 2014: £351,000) were incurred in respect of professional fees on acquisitions.

 

 

5.              Finance costs




 6 months to 30/09/2014

£'000

 6 months to 30/09/2013

£'000

 Year to 31/03/2014

£'000






Bank loans


(467)   

(224)   

(962)   

Finance leases


(116)   

(110)   

(235)   

Other interest charges                


(74)   

(20)   

(40)   

Mark to market adjustment on interest rate swap


(30)   

21   

(20)   

Accelerated write off of arrangement fees on early repayment of facilities


-   

(153)   

(153)   






Finance costs for the period


(687)   

(486)   

(1,410)   

 

 

6.              Taxation




 6 months to 30/09/2014

£'000

 6 months to 30/09/2013

£'000

 Year to 31/03/2014

£'000






Tax charge for the period


(1,395)   

(1,231)   

(3,002)   

Adjustment relating to prior periods


-   

18   

480   

Total current taxation


(1,395)   

(1,213)   

(2,522)   






Origination and reversal of temporary differences


431   

295   

486   

Effect of changes in tax rates


-   

100   

41   

Total deferred taxation credit


431   

395   

527   






Taxation charge for the period


(964)   

(818)   

(1,995)   

The Group has unused tax losses of £2.1m (H1 2014: £4.2m) available for offset against future profits. A deferred tax asset has been recognised in respect of all £2.1m (H1 2014: £4.2m) of these tax losses as they are expected to be used up by taxable profits by the end of the period covered by future projections.

 


 

7.              Intangible assets


Goodwill

Development costs  Customer relationships

Software

Beneficial contracts Domain names & IP addresses

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000









Cost:








At 1 April 2013

31,781

2,111

9,644

600

86

31

44,253

Additions in the period

12,809

-

-

18

-

-

12,827

Acquisition of subsidiaries

-

-

13,335

1,048

-

249

14,632

Development costs capitalised

-

260

-

-

-

-

260

At 30 September 2013

44,590

2,371

22,979

1,666

86

280

71,972

Additions in the period

289

-

-

6

-

-

295

Disposal

-

-

-

(15)

-

-

(15)

Development costs capitalised

-

297

-

-

-

-

297

At 31 March 2014

44,879

2,668

22,979

1,657

86

280

72,549

Additions in the period

-

-

598

237

-

-

835

Currency translation differences

-

-

18

5

-

-

23

Development costs capitalised

-

480

-

-

-

-

480

At 30 September 2014

44,879

3,148

23,595

1,899

86

280

73,887









Accumulated amortisation:








At 1 April 2013

-

(1,396)

(2,478)

(534)

(5)

(31)

(4,444)

Charge for the period

-

(228)

(858)

(24)

(4)

(3)

(1,117)

At 30 September 2013

-

(1,624)

(3,336)

(558)

(9)

(34)

(5,561)

Disposal

-

-

-

15

-

-

15

Charge for the period

-

(245)

(2,228)

(132)

(3)

(28)

(2,636)

At 31 March 2014

-

(1,869)

(5,564)

(675)

(12)

(62)

(8,182)

Currency translation differences

-

-

(1)

-

-

-

(1)

Charge for the period

-

(300)

(2,065)

(158)

(3)

(27)

(2,553)

At 30 September 2014

-

(2,169)

(7,630)

(833)

(15)

(89)

(10,736)









Carrying amount:








At 30 September 2014

44,879

979

15,965

1,066

71

191

63,151









At 31 March 2014

44,879

799

17,415

982

74

218

64,367









At 30 September 2013

44,590

747

19,643

1,108

77

246

66,411

 

 

 

 

 

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 2013

837

5,180

11,215

17,138

1,251

43

35,664

Additions in the period

-

4,242

140

1,958

101

-

6,441

Acquisition of subsidiaries

1,225

357

325

4,831

59

5

6,802

Disposals in the period

-

-

-

(138)

-

-

(138)

At 30 September 2013

2,062

9,779

11,680

23,789

1,411

48

48,769

Additions in the period

-

1,964

154

4,332

148

-

6,598

Disposals in the period

-

-

-

(54)

-

-

(54)

Reclassification

-

(5,011)

5,011

-

-

-

-

At 31 March 2014

2,062

6,732

16,845

28,067

1,559

48

55,313

Additions in the period

-

700

246

5,230

333

-

6,509

Disposals in the period

-

-

-

(36)

-

-

(36)

Currency translation differences

-

-

-

21

-

-

21

At 30 September 2014

2,062

7,432

17,091

33,282

1,892

48

61,807









Accumulated depreciation:








At 1 April 2013

(79)

(1,097)

(3,675)

(10,218)

(679)

(32)

(15,780)

Charge for the period

(11)

(154)

(500)

(2,140)

(71)

(2)

(2,878)

Disposals in the period

-

-

-

138

-

-

138

At 30 September 2013

(90)

(1,251)

(4,175)

(12,220)

(750)

(34)

(18,520)

Charge for the period

(26)

(167)

(609)

(3,363)

(93)

(2)

(4,260)

At 31 March 2014

(116)

(1,418)

(4,784)

(15,583)

(843)

(36)

(22,780)

Charge for the period

(25)

(279)

(613)

(3,838)

(114)

(3)

(4,872)

Disposals in the period

-

-

-

36

-

-

36

At 30 September 2014

(141)

(1,697)

(5,397)

(19,385)

(957)

(39)

(27,616)









Carrying amount:








At 30 September 2014

1,921

5,735

11,694

13,897

935

9

34,191









At 31 March 2014

1,946

5,314

12,061

12,484

716

12

32,533









At 30 September 2013

1,972

8,528

7,505

11,569

661

14

30,249

 

 

 

9.              Contingent consideration due on acquisitions




30/09/2014

30/09/2013

31/03/2014




 £'000

 £'000

 £'000






Contingent consideration due on acquisitions





-       Redstation Limited


(1,200) 

(1,239) 

-       Skymarket Limited


(232) 

(32) 






Total contingent consideration due on acquisitions


(1,432) 

(1,271) 

 

 

 



 

10.             Deferred consideration due on acquisitions




30/09/2014

30/09/2013

31/03/2014




 £'000

 £'000

 £'000






Deferred consideration due on acquisitions





-       Backup Technology Holdings Limited


(2,000) 

-       Redstation Limited


(242) 






Total deferred consideration due on acquisitions


(2,242) 

 

11.            Analysis of change in net cash/(debt)


 

Cash and cash equivalents

£'000

 

 

Bank

loans

£'000

 

 

Other

loans

£'000

Finance leases and hire purchase

£'000

Total

£'000







At 1 April 2013

11,392 

(8,848) 

(2,972) 

(428) 







Repayment of bank loans

14,000 

14,000 

New bank loans

(37,500) 

(37,500) 

Impact of effective interest rate

186 

186 

Inception of finance leases

(120) 

(120) 

Acquired on acquisition of subsidiary

1,355 

(4) 

(5,731) 

(334) 

(4,714) 

Cash flow

(1,370) 

5,731 

724 

5,085 

At 30 September 2013

11,377 

(32,166) 

(2,702) 

(23,491) 







Repayment of bank loans

2,500 

2,500 

Inception of finance leases

(776) 

(776) 

Impact of effective interest rate

(360) 

(360) 

Cash flow

1,648 

660 

2,308 

At 31 March 2014

13,025 

(30,026) 

(2,818) 

(19,819) 







Repayment of bank loans

18,500 

18,500 

New bank loans

(13,500) 

(13,500) 

Impact of effective interest rate

101 

101 

Inception of finance leases

(530) 

(530) 

Cash flow

(4,196) 

580 

(3,616) 

At 30 September 2014

8,829 

(24,925) 

(2,768) 

(18,864) 

 

12.            Acquisitions

 

The fair values of acquired assets and liabilities, including goodwill, previously disclosed as provisional for Redstation Limited and Backup Technology Holdings Limited have been finalised in the current period with no changes to the fair values disclosed in the Annual Report and Accounts 2014.

 

 

13.            Post balance sheet events

 

On 3 December 2014, the Group acquired the entire issued share capital of ServerSpace Limited for a maximum cash consideration of up to £4.25m on no cash, no debt, and normalised working capital basis. Of the maximum consideration of £4.25m, £2.6m was paid on completion and a further contingent amount of up to £1.65m is payable subject to the achievement of certain levels of performance over the period until 30 September 2015.

 

 

14.            Availability of half yearly reports

 

Half yearly reports will be sent to all shareholders on 13 January 2015.  Copies of the half yearly report will be available for collection from the offices of Peel Hunt LLP, 120 London Wall, London, EC2Y 5ET, for a period of one month from the date of despatch and in accordance with Rules 20 and 26 of the AIM Rules, available from the Company's website at 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 2014 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 14 set out on pages 8 to 18. We have read the other information contained in the half yearly financial report which comprises only the interim results announcement and the chief executive's statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity".  Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a 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 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 Ireland) 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 2014 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 1.

 

 

 

GRANT THORNTON UK LLP

REGISTERED AUDITOR

CHARTERED ACCOUNTANTS
Glasgow

 

8 December 2014


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