Interim Results

Iomart Group PLC 17 November 2005 PRESS RELEASE 17 Nov 2005 iomart Group plc Interim Results Announcement @ 30.9.05 iomart Group plc ('iomart'), the Glasgow based software and web-services business, presents its consolidated interim results for the six month period ended 30 September 2005. Financial highlights • total turnover £10.95m, up 70% on previous year (£6.43m) with annualised sales running at £24m • profit before tax £1.42m (£0.11m) and fully diluted EPS of 1.79p (0.24p) • cash balance of £1.39m and net debt of £2.01m (12.5% of shareholders' funds) • gross margin improved to 82.4% (76.7%) Operational highlights • web services business now has 220,000 customers • UfindUs local search directory successfully established • Netintelligence fully fledged ASP model for home, SME and corporate application Prospects • Continuing organic growth in web services business • Netintelligence reseller channel and BT partnership provide platform for growth • Webhosting, online local directories and online security are all growing markets Nick Kuenssberg, chairman, commented: 'These first half year results are good, demonstrating that the company's business model is effective and profitable. Developments in web services, focussed on the UfindUs local search directory, and Netintelligence, the on demand security software which addresses the needs of every business on an ASP basis, provide us with considerable scope for further growth. The second half is historically significantly stronger which, with the impact of recurring growth, gives us confidence for a very good set of results for the full year. The Group's operating performance for the current year may be impacted by delayed sales and the change in revenue recognition for Netintelligence. However, due to a likely lower than expected tax charge, results for the full year are likely to be in line with expectations.' Chief Executive Officer's review The first half has seen continuing organic growth in our webservices business and encouraging progress with Netintelligence. UfindUs aims to become a leading provider of local internet search services to the small and micro business community, providing all that is required to drive business from the web to those customers. We believe that consumer behaviour in sourcing products and services is moving away from traditional paper sources to online local directories and search engines. We expect strong growth in this market for the foreseeable future; DTI figures suggest that there are still 2.7 million small businesses in the UK without a web presence. With over 40,000 customers we are beginning to establish a significant presence in this local search engine market. Our improvements to the Easyspace product set and infrastructure have been rewarded by higher customer retention rates and continued growth of new customers. Netintelligence is now established as an ASP model which provides intelligent security on demand to any computer whenever or wherever that computer connects to the internet. The move to the ASP model and the implied change in revenue recognition defers anticipated turnover. We now have in place multiple channels to market, including telcos, distributors and resellers in addition to web marketing. We have enjoyed limited but important success in both the consumer and business sectors, with growing recurring revenues. We have built good foundations across a wide spectrum, including education, local government and enterprise with a much shorter sales cycle. Our resellers are now becoming active with aggressive sales plans in place alongside training, marketing and technical support. We believe that our 'managed service' platform, which can be white labelled for resellers along with the recurring revenue opportunity, will be appealing to many potential resellers. Netintelligence, through our BT relationship, has been adopted by 15 ISP's of varying sizes to resell into their customer base. Our aim is to convince the ISP community to bundle Netintelligence with their broadband offerings, and we expect the first bundled contracts to go live in the next six months. We are seeing interest from overseas, particularly the USA, and we expect to see this revenue building in 2006 Financials Turnover on continuing operations for the period was £10.95m, up from £6.43m, which represents an increase of 70% over the corresponding period last year. Total gross profit margins have increased to 82.4% from 76.7% for the same period last year. Administrative expenses of £7.50m include a full six months' expenses of Easyspace Limited, which was acquired in September 2004, and reflect the expansion of the webservices business division. The operating profit for the period was £1.52m (previous year £0.08m) and the net profit was £1.42m (£0.17m). Fully diluted earnings per share were 1.79p compared to 0.24p. Cash balances at 30 September were £1.39m and net debt was £2.01m. Prospects Our markets are real and growing. Our products are proven and market ready. Our second half is historically stronger and we look forward to ongoing growth. Our challenges are to continue to execute effectively in our webservices business and to stimulate greater revenue growth in Netintelligence. The Group's operating performance for the current year may be impacted by delayed sales and the change in revenue recognition for Netintelligence. However, due to a likely lower than expected tax charge, results for the full year are likely to be in line with expectations. Angus MacSween Chief Executive Officer 16 November 2005 Consolidated Profit and Loss Account Six months ended 30 September 2005 6 months ended Year ended 30.9.05 30.9.04 31.3.05 Unaudited Unaudited Audited £ 000 £ 000 £ 000 TURNOVER Continuing operations 10,952 6,105 13,775 Acquisitions - 323 2,828 -------- -------- -------- Total turnover 10,952 6,428 16,603 Cost of sales (1,928) (1,496) (3,513) -------- -------- -------- GROSS PROFIT Continuing operations 9,024 4,722 11,118 Acquisitions - 210 1,972 -------- -------- -------- Gross profit 9,024 4,932 13,090 -------- -------- -------- Administrative expenses (7,503) (4,797) (11,176) Restructuring expenses - (50) (113) -------- -------- -------- Total administrative expenses (7,503) (4,847) (11,289) -------- -------- -------- OPERATING PROFIT Continuing operations 1,521 48 1,137 Acquisitions - 37 664 -------- -------- -------- OPERATING PROFIT 1,521 85 1,801 Net interest (104) 22 (77) -------- -------- -------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,417 107 1,724 Taxation - 71 1,415 -------- -------- -------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION FOR THE PERIOD 1,417 178 3,139 Equity minority interests - (11) (11) -------- -------- -------- PROFIT FOR THE FINANCIAL PERIOD TRANSFERRED TO RESERVES 1,417 167 3,128 Proposed dividend - - 958 -------- -------- -------- PROFIT FOR THE FINANCIAL PERIOD 1,417 167 2,170 ======== ======== ======== Earnings per ordinary share (pence) (Note 2) Basic 1.85p 0.26p 4.45p Fully diluted 1.79p 0.24p 4.26p Underlying earnings per ordinary share (pence) (Note 2) Basic 1.85p 0.26p 2.74p Fully diluted 1.79p 0.24p 2.63p There have been no recognised gains or losses attributable to the shareholders other than the profit for the current financial period and the losses for the preceding financial periods and accordingly, no statement of total recognised gains and losses is shown. Consolidated Balance Sheet As at 30 September 2005 30.9.05 30.9.04 31.3.05 Unaudited Unaudited Audited Notes £ 000 £ 000 £ 000 FIXED ASSETS Intangible assets 13,879 14,588 14,289 Tangible assets 905 626 885 -------- -------- -------- 14,784 15,214 15,174 -------- -------- -------- CURRENT ASSETS Debtors 3 7,564 3,554 5,256 Deferred tax asset 1,200 - 1,200 Cash at bank and in hand 1,390 2,094 2,033 -------- -------- -------- 10,154 5,648 8,489 CREDITORS: amounts falling due within one year (6,998) (5,816) (6,891) -------- -------- -------- NET CURRENT ASSETS/(LIABILITIES) 3,156 (168) 1,598 -------- -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 17,940 15,046 16,772 CREDITORS: amounts falling due after more than one year (1,885) (2,674) (2,201) -------- -------- -------- 16,055 12,372 14,571 ======== ======== ======== CAPITAL AND RESERVES Called up share capital 770 754 767 Capital redemption reserve 1,200 1,200 1,200 Share premium account 6,172 27,940 6,108 Profit and loss account 7,913 (17,522) 6,496 -------- -------- -------- TOTAL EQUITY SHAREHOLDERS' FUNDS 16,055 12,372 14,571 ======== ======== ======== The comparative figures for the financial year ended 31 March 2005 are an extract of the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified and did not contain a statement under section 237 (2) or (3) of the Companies Act 1985. This report was approved by the board of directors on 16 November 2005. Consolidated Cash Flow Statement Six months ended 30 September 2005 6 months ended Year ended 30.9.05 30.9.04 31.3.05 Unaudited Unaudited Audited Notes £ 000 £ 000 £ 000 -------- -------- --------- Net cash inflow from operating activities 4 274 82 1,057 -------- -------- --------- Returns on investments and servicing of finance Bank interest received 14 42 65 Bank and other loan interest paid (118) (19) (142) Finance lease and hire purchase interest paid (2) (11) (17) -------- -------- --------- Net cash inflow from returns on investments and servicing of finance (106) 12 (94) -------- -------- --------- Taxation 124 4 4 -------- -------- --------- Capital expenditure Payments to acquire tangible fixed assets (275) (290) (765) -------- -------- --------- Acquisitions and disposals Purchase of subsidiary undertakings - (5,852) (5,852) Professional fees in connection with acquisitions - (182) (182) Payment of deferred consideration (28) (92) (117) Net cash acquired with subsidiary - 2,147 2,048 -------- -------- --------- (28) (3,979) (4,103) -------- -------- --------- Equity dividends paid (959) - - -------- -------- --------- Cash outflow before financing (970) (4,171) (3,901) -------- -------- --------- Financing Issue of ordinary shares 67 103 327 Professional fees in connection with share exchanges - (236) (236) Expenses of capital reduction - - (28) Bank loan (net of arrangement fee) - 3,465 3,465 Repayment of bank loan (438) - (429) Repayment of hire purchase and finance leases (99) (92) (190) -------- -------- --------- Net cash (outflow)/inflow from financing (470) 3,240 2,909 -------- -------- --------- Decrease in cash in the period (1,440) (931) (992) ======== ======== ========= Reconciliation of net cash flow to movement in net debt Decrease in cash in period (1,440) (931) (992) Cash (inflows)/outflows from debt and lease financing 537 (3,373) (2,846) -------- -------- -------- Change in net funds from cash flows (903) (4,304) (3,838) Opening net (debt)/funds (1,104) 2,734 2,734 -------- -------- -------- Closing net debt (2,007) (1,570) (1,104) ======== ======== ======== Notes to the Accounts Six months ended 30 September 2005 1. Accounting policies The interim financial information does not constitute statutory accounts for the purpose of section 240 of the Companies Act 1985. The figures for the year ended 31 March 2005 have been extracted from the Group accounts for that year. Those financial statements have been delivered to the Registrar of Companies and included an auditors' report, which was unqualified. The interim financial information has been prepared using the same accounting policies and estimation techniques as set out in the Group accounts for the year ended 31 March 2005. 2. Earnings per share The calculations of earnings per share are based on the following profits and numbers of shares: 6 months ended Year ended 30.9.05 30.9.04 31.3.05 Unaudited Unaudited Audited £ 000 £ 000 £ 000 Adjusted earnings per share is calculated as follows: Profit for the financial period 1,417 167 4,328 Deferred tax credit - - 1,200 -------- -------- -------- Underlying earnings 1,417 167 3,128 ======== ======== ======== Number of Number of Number of shares shares shares 000 000 000 Weighted average number of shares: For basic earnings per share 76,727 64,712 70,318 Exercise of share options 2,654 3,559 3,067 -------- -------- -------- For diluted earnings per share 79,381 68,271 73,385 ======== ======== ======== 3. Debtors 6 months ended Year ended 30.9.05 30.9.04 31.3.05 Unaudited Unaudited Audited £ 000 £ 000 £ 000 Trade debtors 2,648 1,212 1,907 Amounts due on deferred payment terms 4,068 1,695 2,603 Other debtors 848 647 746 -------- -------- -------- 7,564 3,554 5,256 ======== ======== ======== Notes to the Accounts Six months ended 30 September 2005 4. Reconciliation of operating profit to net cash inflow from operating activities 6 months ended Year ended 30.9.05 30.9.04 31.3.05 Unaudited Unaudited Audited £ 000 £ 000 £ 000 Operating profit 1,521 85 1,801 Depreciation 255 195 412 Amortisation of intangible assets 410 171 547 Increase in debtors (2432) (1,168) (2,752) Increase in creditors 520 799 1,049 --------- -------- --------- Net cash inflow from operating 274 82 1,057 activities ========= ======== ========= 5. Analysis of change in net debt At 31.3.05 Cash flow At 30.9.05 £ 000 £ 000 £ 000 Cash at bank and in hand 2,033 (1,440) 593 Bank loan (3,036) 438 (2,598) Finance leases and hire purchase (101) 99 (2) --------- -------- --------- Net debt (1,104) (903) (2,007) ========= ======== ========= 6. Availability of interim reports Interim reports will be sent to all shareholders on 2 December 2005. Copies of the interim report will be available for collection from the offices of KBC Peel Hunt Ltd, 62 Threadneedle Street, London, EC2R 8HP, for a period of 1 month from the date of despatch. INDEPENDENT REVIEW REPORT TO IOMART GROUP PLC Introduction We have been instructed by the company to review the financial information for the six months ended 30 September 2005 which comprises the consolidated profit and loss account, the consolidated balance sheet, the consolidated cash flow statement, the reconciliation of net cash flow to movement in net funds and related notes 1 to 6. We have read the other information contained in the interim report 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 Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the company those matters we are required to state to them 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 conclusions we have formed. Directors' responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are also responsible for ensuring that the accounting polices and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with United Kingdom auditing standards and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 September 2005. Grant Thornton UK LLP Chartered Accountants Glasgow 16 November 2005 Notes: A review does not provide assurance on the maintenance and integrity of the Group's website, including controls used to achieve this, and in particular on whether any changes may have occurred to the financial information since first published. These matters are the responsibility of the directors but no control procedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination of financial information differs from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock Exchange

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