21st Jun 2007 07:01
Iomart Group PLC21 June 2007 IOMART GROUP PLC ("iomart" or the "Company") Final Results for the year ended 31 March 2007 iomart Group plc, the web-services and hosting company, is pleased to report itspreliminary results for the year ended 31 March 2007. Financial Highlights (accounts presented under IFRS convention) • Turnover of £21.1m (2006: £18.0m), an increase of 16.9% • Operating profit of £565,000 (2006: £140,000) • Pretax profit of £218,000 (2006: loss £74,000) • Profit after tax including deferred tax credit £2,180,000 (2006: £11,000) Corporate Highlights • Entry into the datacentre market through successful acquisition of Easyspace Datacentres, funded by £11m placing • Reduced cost of option to buy minority stake in Easyspace Datacentres • Ufindus and Easyspace performing well Angus MacSween, Chief Executive Officer commented, "Our timely entry into thedatacentre market and the very encouraging response we have had so far to ourinitial marketing reinforces our view that there is significant growth potentialwhich can be delivered in the medium term. We have generated substantialinterest, mainly from large enterprises interested in long term commitmentswhich should form the backbone of future sales revenues. Additionally our corebusiness continues to perform in line with expectations and we look forward to avery rewarding year." For further information: iomart Group plc Tel. 0141 931 6400Angus MacSween, Chief ExecutiveNick Kuenssberg, Non-executive Chairman KBC Peel Hunt Tel. 020 7418 8900Oliver ScottRichard Kauffer ICIS Tel. 020 7651 8688Tom MoriartyCaroline Evans-Jones CHAIRMAN'S STATEMENT This has been a pivotal year in our development, particularly with the raisingof £11m through a share placement to acquire a controlling stake in significantdatacentre assets. The Group is now well positioned to take advantage of theexciting market opportunities in colocation and complex hosting more easilyfacilitated by the datacentre business. Boosted by the reduced cost of theoption to acquire the minority stake, this will deliver significant shareholderreturns in the medium term. You will note that our figures are presented under the new IFRS convention,introduced one year earlier than required; while the figures may look different,your Group has performed generally in line with expectations. Sales revenue wasup 16.9% at £21,086,000 and profit before tax increased to £218,000 (2006 - lossof £74,000). The effect of the deferred tax credit through the recovery of lossesincreased profit after tax to £2,180,000 (2006 - £11,000). We have not recommended a dividend. The management team under Angus MacSween has successfully improved internalsystems and processes. Ufindus is increasingly self-sufficient, collectionmethods are better, Easyspace is more robust and the welcome appointment ofRichard Logan as finance director has been effective. Dominic Marrocco, the previous owner and managing director of the datacentrebusiness, resigned on 20 June 2007 with immediate effect, but we have a newhighly experienced team under the leadership of Sarah Haran driving theintegrated Easyspace and Easyspace Datacentres business. On a personal note, having been chairman of your Group since the AIM flotationin April 2000, I believe that it is appropriate that I plan to step down. Wehave therefore commissioned a search firm to identify suitably experiencedcandidates with a view to appointing a non-executive director who will take overas chairman in due course. The Group is now poised to deliver significant shareholder returns and I lookforward to the increasing value which Angus and his team will deliver. Nick KuenssbergChairman20 June 2007 CHIEF EXECUTIVE'S REVIEW Easyspace Datacentres Ltd The highlight of 2006/7 has been our entry into the datacentre marketplace withthe successful placing and acquisition of a controlling interest in EasyspaceDatacentres (UK) Ltd (formerly Ezee DSL Limited). Since the acquisition we havemade good progress in making the datacentres operational and recruiting keysenior personnel. The reaction to our initial marketing of the London datacentrehas been very encouraging and we remain convinced that our strategic move intothe datacentre market at this stage of the cycle will provide additional growthand profit for the Group. I am also pleased to report that, as a result of 186k Ltd, the vendor, notfunding their share of the working capital requirement; iomart group willacquire 100% of the equity for a maximum payment of £4.8m in 2 years time. Sincewe had expected to pay up to £20m to acquire the 49%, based on the business planand formula in the purchase agreement we believe this represents significantadditional value for shareholders. Having our own datacentre capacity allows us to reshape our strategy in thehosting environment , building on our existing experience, to be able to deliverthe complete set of vertical components in the hosting arena from domain names,virtual webspace, websites, dedicated servers through to complex managed hostingsolutions, colocation space, power, cooling and bandwidth. As more and more mission critical business applications move on to the web, soorganisations need more resilience, security and 24 hour management; the marketfor managed hosting services and datacentre capacity is expected to growsignificantly over the next few years. We will leverage the skills andexperience within Easyspace to provide a comprehensive set of services. Easyspace The existing Easyspace business continued to provide a solid platform ofrevenue, cash generation and profit providing £1.9m of operating profit fromrevenues of £6.6m. Whilst we have seen some downward pressure on pricing at thevery low end of the market, gross margins remain good at 60% and we are winninghigher margin business in the corporate hosting market where business continuityis becoming ever more important. Ufindus The continuing shift from traditional media advertising and paper directoryservices to internet driven services is, if anything, accelerating and ouronline directory business UfindUs is benefiting from that with a growing numberof users generating 9 million searches and visits to customer websites permonth. Despite the impact on revenues of the adoption of IFRS, explained in the FinanceDirectors report and in the notes to the financial statements, we have seenUfindUs revenues grow 30% from £10.9m to £14.1m providing an operating profit of£1.5m. Gross margins have also improved. The business is in much better shapeoperationally than was the case six months ago with well established and morerobust systems around billing and collections and over 75% of new customerssigning up to pay by direct debit. UfindUs is gaining credibility in the search and directory market and, with anumber of initiatives ready to launch to improve the product, is set to providemore and more business opportunities for our customers. Netintelligence Netintelligence is a highly developed leading edge product set in the 'Softwareas a Service' arena. We have had a disappointing year with Netintelligence butcontinue to develop the IPR to ensure that we remain competitive and can exploitpotential opportunities. The strategy is to use indirect channels to market andwe have taken steps to ensure our costs going forward are in line with ourrevenues. Results Revenue increased in the year by 16.9% to £21,086,000 (2006 - £18,032,000)principally due to the continued growth achieved by our internet directorybusiness Ufindus. Encouragingly, our gross profits increased by 20% to £16,400,000 (2006 -£13,671,000) meaning our gross margin percentage in the year of 78% was higherthan the 76% achieved in 2006. Again the main reason for this was the increasein gross margin delivered by Ufindus due to the favourable impact of recurringrevenue from customers for which there is very little cost of sale to berecognised. Administrative expenses were 17% higher at £15,835,000 (2006 - £13,531,000). Themajor reason for the increase is staff costs reflecting the additional personnelwe have employed to service our growing Ufindus business and also increasedsales resources for part of the year in both Ufindus and Netintelligence. Inaddition, due to debt collection issues at Ufindus there has been an increasedlevel of bad debt expense charged in the current year. Operating profit for the year of £565,000 was four times greater than thatachieved in 2006. After financing costs, which have increased this year due to the additional debtthat we have serviced, pre-tax profits for the year were £218,000 compared to aloss for last year of £74,000. The deferred taxation credit of £1,962,000 is primarily due to the recognitionof a deferred tax asset in respect of tax losses relating to Ufindus which wenow expect to utilise against the future profits of that operation. As a result our profit for the year from continuing operation is £2,180,000compared to a profit in 2006 of £11,000. Basic earnings per share for the yearof 2.78p compared to 0.01p in 2006. Cash There was a cash inflow for the year of £245,000 from operating activities. During the year the Group invested £464,000 in acquiring property plant andequipment and £311,000 on developing and acquiring software. We also madedividend payments of £1,284,000, bank loan repayments of £865,000, net interestpayments of £347,000, finance lease repayments of £109,000 and net corporationtax of £18,000. To fund this, after receiving proceeds of £43,000 from the issue of shares, theGroup increased its net bank overdraft by £3,111,000 over the year. At the year end cash balances were £999,000 borrowings under finance leasesamounted to £373,000, bank loans totalled £1,308,000 and overdrafts totalled£4,151,000 resulting in an overall net borrowings position of £4,833,000 whichhas increased by £2,555,000 over the year. The cash position of the Groupchanged significantly immediately after the year end with the receipt, net ofexpenses, of £10,466,000 from the issue of shares to fund the acquisition amajority stake in Ezee DSL Limited. Acquisitions On 30 March 2007 we acquired a controlling interest of 51% in Ezee DSL Limitedfor £4,890,000 including certain costs of acquisition. This was funded by theissue of 20 million shares which raised a total of £10,466,000 net of expensesand we received these funds, which had been underwritten by KBC Peel Hunt, on 2April. The book value of the Ezee DSL datacentre assets at the time ofacquisition was £8,870,000 and based on a report on the London datacentre,commissioned immediately prior to acquisition, we would estimate the replacementcost of such assets to be in the region of £28,000,000. Financial Position With funding raised through the share placement, the availability of ourcommitted overdraft facility and the anticipated cash generation from theexisting operations the Group's financial position is sufficient to fund ourcurrent business plans. We believe we are now entering an important growth phasein our continued development which will place demands on our cash resourcesincluding the obligation to fully fund the Easyspace Datacentres (UK) operationand we have not recommended a dividend be paid at this time. We will continue toreview this position and intend to be in a position to re-establish dividendpayments in future years. International Financial Reporting Standards Once the impact of the introduction of IFRS had been assessed we made thedecision to adopt IFRS as we felt in the circumstances it was the mostappropriate basis for the preparation of these accounts. Consequently IFRS hasbeen implemented one year ahead of our original plan and indeed one year aheadof its mandatory adoption. In note 8 there is an explanation of the impact of adopting IFRS on the Group'sresults including the impact on prior years the results of which have beenrestated and I would encourage you to review the details of that note to gain afull understanding of the position. The major impact has been in relation to the revenues of our internet directorybusiness Ufindus. Under UK GAAP we recognised Ufindus revenue at the time ofsale, on the basis that the service had been delivered and all significantobligations of the sale fulfilled. Since the vast majority of our customers takeadvantage of the deferred payment terms which we offer our revenue wasrecognised in advance of actual invoicing to customers. Under IFRS we arerequired to recognise revenue from the customers' perspective and thereforespread the revenue over the period of use by the customer. For a Groupexperiencing substantial growth in revenues, such as iomart, the impact of thishas been to reduce revenues and profitability previously reported. Under IFRSthe Group will continue to invoice and recognise as revenue the remaining sumsdue from customers in respect of contractual commitments. Current trading and outlook Across the group we have taken steps to strengthen and deepen the seniormanagement team. Our timely entry into the datacentre market and the very encouraging response toour initial marketing reinforces our view that there is significant growthpotential which can be delivered in the medium term. We have generatedsubstantial interest, mainly from large enterprises interested in long termcommitments, which should form the backbone of future sales revenues.Additionally our core business continues to perform in line with expectationsand we look forward to a rewarding year. Angus MacSweenChief Executive Officer20 June 2007 CONSOLIDATED INCOME STATEMENTYear ended 31 March 2007Continuing Note 2007 2006 £'000 £'000 -------- -------- -------Revenue 2 21,086 18,032 Cost of sales 3 (4,686) (4,361)------------------------- -------- -------- ------- Gross profit 16,400 13,671 Administrative expenses 3 (15,835) (13,531)------------------------- -------- -------- ------- Operating profit 565 140 Finance income 11 29Finance costs (358) (243)------------------------- -------- -------- ------- Profit/(loss) before taxation 218 (74) Taxation 4 1,962 85------------------------- -------- -------- ------- Profit for the year from continuing operations 2,180 11------------------------- -------- -------- -------Basic and diluted earnings per shareBasic 6 2.78p 0.01pDiluted 6 2.72p 0.01p------------------------- -------- -------- ------- CONSOLIDATED BALANCE SHEETAs at 31 March 2007 2007 2006 Note £'000 £'000 ------- -------- --------ASSETSNon-current assetsIntangible assets - goodwill 14,475 14,289Intangible assets - development costs 310 116Intangible assets - software 39 35Deferred tax asset (non-current element) 5 1,137 -Property, plant and equipment 10,615 883--------------------- ------- -------- -------- 26,576 15,323Current assetsTrade and other receivables 2,989 2,531Deferred tax asset (current element) 5 848 -Amount due from share placing 10,466 ---------------------- ------- -------- -------- 14,303 2,531 ------- -------- --------Total assets 40,879 17,854 LIABILITIESNon-current liabilitiesDeferred grants - (26)Minority interest payable (4,800) -Non-current borrowings 7 (649) (1,347)--------------------- ------- -------- -------- (5,449) (1,373) Current liabilitiesCash and cash equivalents (3,152) (41)Trade and other payables (4,336) (4,829)Current income tax liabilities - (169)Current borrowings (1,032) (890)Amount due in relation to acquisition (4,800) ---------------------- ------- -------- -------- (13,320) (5,929) ------- -------- --------Total liabilities (18,769) (7,302) ------- -------- --------Net assets 22,110 10,552--------------------- ------- -------- -------- EQUITYShare capital 994 773Capital Redemption reserve 1,200 1,200Share premium 17,541 6,203Profit and loss reserve 2,375 2,376--------------------- ------- -------- -------- Total equity 22,110 10,552--------------------- ------- -------- -------- CONSOLIDATED CASH FLOW STATEMENTAs at 31 March 2007 2007 2006 £'000 £'000--------------------- -------- -------- -------- -------- Operating profit 565 140Depreciation 653 501Amortisation 113 44Share based payments 153 168Recognition of deferred grants (48) (16)Movement in trade receivables (631) (355)Movement in trade payables (562) (13)--------------------- -------- -------- -------- --------Cash flow from operations 243 469Research and development tax credit received 142 123Corporation tax paid (160) ---------------------- -------- -------- -------- --------Net cash flow from operating activities 225 592 Cash flow from investing activitiesPurchase of property, plant and equipment (463) (470)Capitalisation of development costs (282) (140)Purchase of intangible assets - software (29) (8)--------------------- -------- -------- -------- --------Net cash used in investing activities (774) (618) Cash flow from Financing ActivitiesIssue of shares 43 101Repayment of finance lease (109) (113)Repayment of borrowings (865) (864)Dividends (1,284) (958)Interest received 11 29Interest paid (358) (243)--------------------- -------- -------- -------- --------Net cash used in financing activities (2,562) (2,048) -------- ----------------------------------- -------- -------- --------Net decrease in cash and cash equivalents (3,111) (2,074) Cash and cash equivalents at the beginning of theyear (41) 2,033--------------------------- -------- -------- -------- Cash and cash equivalents at the end of the year (3,152) (41)-------------------------------- -------- -------- NOTES TO THE FINANCIAL STATEMENTSYear ended 31 March 2007 1. The financial information set out above does not constitute the statutoryaccounts for the years ended 31 March 2007 and 31 March 2006. Statutoryaccounts for 2006 have been delivered to the Registrar of Companies and thosefor 2007 will be delivered following the Company's Annual General Meeting. Theauditors have reported on these accounts, their reports were unqualified and didnot contain statements under section 237 (2) or (3) of the Companies Act 1985. 2. Segmental analysis As at 31 March 2007 the Group is primarily organised into three main businesssegments: •Ufindus - an internet Business Directory, providing a web marketing presence to the business community. •Easyspace - a range of managed web hosting services, domain name registration services and the provision of datacentres. •Netintelligence - provides 'software as a service' products for a range of internet control and security services There are no other services provided by the Group which would constitute aseparately disclosable segment. Primary Reporting Segment - BusinessAssets and Liabilities by Primary Segment 2007 2006 ------------------------------------- ------------------------------------- Total Liabilities Net Assets Total Liabilities Net Assets Assets (Liabilities) Assets (Liabilities) £000's £000's £000's £000's £000's £000's---------------- ------- ------- ------- ------- ------- -------Netintelligence 468 (5,427) (4,959) 735 (4,674) (3,939)Easyspace 29,184 (6,745) 22,439 17,039 (2,216) 14,823Ufindus 7,650 (4,992) 2,658 4,634 (3,435) 1,199 37,302 (17,164) 20,138 22,408 (10,325) 12,083---------------- ------- ------- ------- ------- ------- -------Group assets/(liabilities) 1,972 (1,531)---------------- ------- ------- ------- ------- ------- ------- 22,110 10,552---------------- ------- ------- ------- ------- ------- ------- The assets and liabilities of each business segment are derived using the sameclassifications as management reporting, including gross inter-segment balances,but net of inter-segment dividends paid. Non-current assets acquired in the period by Primary Segment 2007 2006 ------------------------------------------ --------------------------------------- Tangible Intangible Total Tangible Intangible Total non-current non-current non-current non-current assets acquired assets acquired assets acquired assets acquired in period in period in period in period £000's £000's £000's £000's £000's £000's--------------- -------- ------- -------- --------- -------- --------Netintelligence 82 29 111 39 4 43Easyspace 9,554 186 9,740 13 - 13Ufindus 799 282 1,081 494 144 638--------------- -------- ------- -------- --------- -------- -------- 10,435 497 10,932 546 148 694--------------- -------- ------- -------- --------- -------- -------- Revenue by Primary Segment 2007 2006 --------------------- --------------------- External Internal Total External Internal Total £000's £000's £000's £000's £000's £000's--------------- -------- -------- -------- --------- -------- --------Netintelligence 382 520 902 669 514 1,183Easyspace 6,609 - 6,609 6,417 - 6,417Ufindus 14,095 - 14,095 10,946 - 10,946--------------- -------- -------- -------- --------- -------- -------- 21,086 520 21,606 18,032 514 18,546--------------- -------- -------- -------- --------- -------- -------- Profit by Primary Segment 2007 2006 ------------------------------- ------------------------------- EBITDA Depreciation Operating EBITDA Depreciation Operating & amortisation profit & amortisation profit £000's £000's £000's £000's £000's £000's-------------- ------- ------- ------- ------- ------- -------Netintelligence (918) (101) (1,019) (382) (85) (467)Easyspace 2,011 (66) 1,945 2,175 (88) 2,087Ufindus 2,056 (599) 1,457 335 (372) (37)Group overheads (1,818) - (1,818) (1,443) - (1,443)-------------- ------- ------- ------- ------- ------- ------- 1,331 (766) 565 685 (545) 140Group interestand tax 1,615 (129)-------------- ------- ------- ------- ------- ------- -------Profit for theyear 1,331 (766) 2,180 685 (545) 11-------------- ------- ------- ------- ------- ------- ------- Group overheads, interest and tax are not allocated to segments. 3. Operating costs Included within operating costs from continuing operations are the followingitems: 2007 2006 £'000 £'000 -------- -------- Staff cost 12,394 10,496Depreciation of property plant and equipment- Owned assets 568 493- Leased assets 85 8Property, plant and equipment hire- Land and buildings 586 491- Plant and machinery 192 258Amortisation of intangible assets 113 44R&D written to income statement 796 670Marketing and sales 1,197 1,592Infrastructure 348 228Provision for doubtful debts 400 144Premises and Office 2,033 1,420Other expenses 1,809 2,048 -------- -------- 20,521 17,892 -------- -------- Cost of sales 4,686 4,361Administrative expenses 15,835 13,531--------------------------- -------- -------- 20,521 17,892 -------- -------- Included within other expenses are fees paid to the Group's auditors, ananalysis of which is provided below: Auditors' remuneration 2007 2006 £'000 £'000---------------------------- --------- --------- audit fees 44 39- tax compliance fees 8 13- corporate finance and advisory transactions 25 11 --------- -------- 77 63---------------------------- --------- -------- 4. Tax on profit on ordinary activities -------- -------- 2007 2006 £'000 £'000 -------- -------- Research and development tax credit - 85Tax (charge)/credit for the current year - 85Deferred tax credit 1,985 -Under provision in prior year (23) ----------------------------- --------- -------- 1,962 85---------------------------- --------- -------- The Group has a deferred tax asset which has been recognised in respect of thetotality of tax losses within one of the subsidiary companies, which hasgenerated taxable profits and is expected to continue to do so.The differences between the total current tax shown above and the amountcalculated by applying the standard rate of UK corporation tax to the profitbefore tax is as follows: -------- -------- 2007 2006 £'000 £'000 -------- -------- Profit/(loss) on ordinary activities before tax 218 (74)--------------------------- -------- -------- Tax charge @ 30% 66 (22) Disallowed expenditure 1 (94)Deferred tax credit not recognised 345 245Movement in short term timing differences (23) (11)Consolidation adjustments (15) (15)Utilisation of tax losses (255) (60)Rate differences 44Depreciation in excess of capital allowances 8 (15)Statutory deductions on exercise of share options (127) (157)--------------------------- -------- -------- - (85)--------------------------- -------- -------- The weighted average applicable tax rate for the year end 31 March 2007 was 30%(2006: 30%) 5. Deferred Tax The Group had recognised deferred tax assets and potential unrecognised deferredtax assets as follows: 2007 2006 --------------------------- ----------------------- Recognised Unrecognised Recognised Unrecognised £'000 £'000 £'000 £'000 ---------- ------------ ---------- ------------Tax losses carried forward 1,985 1,755 - 4,767--------------------- --------- ---------- -------- --------- The deferred tax included in the balance sheet is as follows: -------- -------- 2007 2006 £'000 £'000 -------- --------Included in non-current assets 1,137 -Included in current assets 848 ---------------------- -------- -------- 1,985 - -------- -------- The movement in the deferred tax account during the year was: Balance brought forward - -Profit and loss account movementarising during the year 1,985 --------------------------------- -------- -------- -------- --------Balance carried forward 1,985 ---------------------- -------- -------- The deferred tax asset is in relation to unutilised losses in the Ufindussubsidiary company. This has been recognised in line with budgets and futureprojections of the company over a three year period. The basis of theseprojections and budgets are: • The consistent success of sales teams in generating new business • The volume of traffic generated through Ufindus websites • Expectations about the retention of customers • Continuing development of the Ufindus product • Expectations of continued growth in market prospects in relation to the internet generally and online directories in particular. At 31 March 2006 it was deemed that the historic performance did not providesignificant certainty to justify this recognition, but the performance of thecompany during the year to 31 March 2007, along with the business developmentsdetailed above has lead to the expectation that sustainable profits are probablein the long term. Ufindus became profitable in the current year, and based onthe foregoing assessment of budgets and projections and the expectation ofsustainable profits in future years, the full deferred tax asset in relation tothe utilisation of these losses is recognised in line with IAS 12 Income Taxes. 6. Earnings Per Ordinary Share Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the year. Fully diluted earnings per share is calculated by dividing theearnings attributable to ordinary shareholders by the total of the weightedaverage number of ordinary shares in issue during the year and the dilutivepotential ordinary shares relating to share options. 2007 2006 £'000 £'000 -------- --------Profit for the financial period and basic earningsattributed to ordinary shareholders 2,180 11 No No 000 000Weighted average number of ordinary shares:For basic earnings per share 78,558 76,933Exercise of share options 1,683 3,155--------------------- -------- --------For diluted earnings per share 80,241 80,088--------------------- -------- -------- Basic earnings per share 2.78p 0.01pFully diluted earnings per share 2.72p 0.01p-------------------------------- -------- -------- 7. Borrowings -------- -------- 2007 2006 £'000 £'000 -------- -------- Current:Obligations under finance leases (161) (24)Bank loan (871) (866)--------------------------- -------- --------Current borrowings (1,032) (890) Bank overdraft (included in cash and cashequivalents note 14) (4,151) (1,320) Non-current:Obligations under finance leases (212) (40)Bank loan (437) (1,307)--------------------- -------- --------Total non-current borrowings (649) (1,347) -------- --------Total borrowings (5,832) (3,557)--------------------- -------- -------- The obligations under finance leases are secured by the related assets and arerepayable as follows: 2007 2006 ---------------- ---------------- Capital Interest Total Capital Interest Total £'000 £'000 £'000 £'000 £'000 £'000 -------------------- ------ ------- ------- ------- ------- ------Due within one year 161 20 181 24 4 28Due between one andfive years 212 10 222 40 2 42-------------------- ------ ------- ------- ------- ------- ------ 373 30 403 64 6 70 -------------------- ------ ------- ------- ------- ------- ------ The Group in its ordinary course of business enters into hire purchase andfinance lease agreements to fund or re-finance the purchase of computerequipment and software. The lease agreements are typically for periods of 2 to 3years and do not have contingent rent or escalation clauses. The agreements haveindustry standard terms and do not contain any restrictions on dividends,additional debt or further leasing. The finance lease liability has an effective interest rate of 7.3% (2006: 8.0%).Lease payments are made on a monthly basis. The future lease obligation of£403,000 (2006: £70,000) has present value of £363,000 (2006: £65, 000). The bank loan and overdrafts are secured by debentures and floating charges overall the assets of the company and each of its subsidiaries and by crossguarantees by all Group companies and are repayable as follows: -------- -------- 2007 2006 £'000 £'000 -------- -------- Due within one year (5,022) (2,186)Due between one and two years (437) (871)Due between two and three years (436)--------------------- -------- -------- (5,459) (3,493) -------- -------- The bank overdrafts are repayable on demand. The bank loan and the bankoverdrafts bear interest between 2.5% and 2.75% above the Bank of Scotland baserate. 8. Adoption of IFRS As of 1 April 2005, the Group's accounting policies have been changed to complywith International Financial Reporting Standards (IFRS). The date of transitionis 1 April 2005 and all comparative figures at 1 April 2005 and for the yearended 31 March 2006 have been restated. The Group has taken the optional exemption available under IFRS 1 First timeadoption of IFRS, and has not reclassified business combinations that took placebefore 1 April 2005, the date of transition. Therefore purchase price in excessof assets and liabilities acquired previously recorded as goodwill has not beenreclassified into goodwill and other intangible assets. The adoption of IFRS results in changes to the accounting policies in thefollowing areas: (a) Revenue recognitionPreviously under UK GAAP revenue relating to Ufindus was recognised once theservice had been delivered and all significant obligations in relation to thesale had been fulfilled. Under this policy revenue was recognised in advance ofinvoice and recorded as an amount due on deferred payment terms and was includedwithin debtors in the balance sheet. Under IAS 18 Revenue, revenue is recognisedover the period which the customer uses the service and only where it isprobable that future economic benefit will flow from the transaction. This hasthe effect of removing the debtor balance representing the amount due ondeferred payment terms from the balance sheet and reducing the amount of tradedebtors recorded in the balance sheet in both cases net of any applicableprovisions for doubtful debts which had been established. (b) Share-based paymentsIn accordance with IFRS 2 Share-based payments, the fair value of employeeservices received in exchange for the grant of share based compensation plans isrecognised as an expense, and allocated over the vesting period. (c) Share based payments prior to November 2002The Group operates a variety of share-based employee incentive arrangementswhich typically include the grant of share options. Under UK GAAP, the intrinsicvalue of an award under the Group's share plans was charged as an operating costover the period of performance of the employee receiving the award. InlandRevenue approved SAYE schemes (and their overseas equivalents) were outside thescope of UITF Abstract 17, and a charge was therefore not recorded in respect ofthese schemes even where the options were granted at a discount to the marketprice at the date of invitation. IFRS 2 Share Based Payments requires that an expense is recognised in the incomestatement based on the fair value of an award at the date of grant for allshare-based incentive schemes. The expense is spread over the period for whichservices are received from employees, which is assumed to be the vesting periodof the award. The impact of adopting IFRS is to increase the share-based paymentcharge in the income statement, primarily because IFRS 2 Share Based Paymentscovers market value schemes and schemes which were outside the scope of UITF 17. In line with the provisions of IFRS 2 Share Based Payments a separate sharebased payment reserve has not been set up, and the credit is instead taken toProfit and Loss reserves. (d) Development costsUnder UK GAAP the Group elected to expense development costs of Ufindusdirectory products to the profit and loss, but in accordance with IAS38Intangible Assets, these are now capitalised on the Balance Sheet as intangibleassets. (e) Income taxesIn accordance with both UK GAAP and IFRS the Group recognises a deferred taxasset in respect of tax losses to the extent that it is probable that theselosses will be utilised. The deferred tax asset at March 2005 and March 2006previously reported on the basis of the expected tax loss utilisation arisingfrom profitability measured under UK GAAP, have been restated to reflect theexpected utilisation arising from profitability measured under IFRS. (f) Business combinationsIFRS 3 Business combinations prohibits merger accounting and the amortisation ofgoodwill. The standard requires goodwill to be carried at cost with impairmentreviews both annually and when there are indications that the carrying value maynot be recoverable. IFRS 3 requires certain intangible assets to be recognisedat the date of acquisition and to be amortised on a systematic basis over theireconomic lives. As required by IFRS 1, goodwill recognised under previous UK GAAP has beentested for impairment at the date of transition to IFRS. No impairment loss wasrequired to be recognised. In accordance with IFRS 1, this amount has beenconsidered the carrying amount of goodwill in the opening IFRS balance sheet. (g) Fair Value of Property, Plant and EquipmentUnder UK GAAP computer software was classified as property, plant and equipment,however under IAS 38 this is to be classified as an Intangible Asset. Thisreclassification is the only change in the figures as a result of the adoptionof IAS 16 Property, Plant and Equipment. (h) SoftwareCosts of software and software licences purchased for internal use have beenreclassified from property, plant and equipment to intangible assets. (i) IFRS cash flow statement adjustmentsThe overall cash flows of the Group do not change as a result of adopting IFRS.The IFRS cash flow format includes various cash flows in different categoriesand in a different order to UK GAAP. Development costs which were written-off asoperating costs under UK GAAP are capitalised and amortised under IFRS and areclassified as investing activities in the cash flow statement. Dividends andinterest are reported as financing costs. Tax is reported as an operating cashflow. Certain leasehold properties accounted for as operating leases under UKGAAP are accounted for as finance leases under IFRS. The cash flowcategorisation changes accordingly. Reconciliation of profit reported under UK GAAP for the year ended 31 March 2006to profit reported under IRFS Year ended 31 March 2006 -------------------------------------------------------------------- UK GAAP Revenue Amortisation Tax Development Share based IFRS Recognition costs payments £'000 £'000 £'000 £'000 £'000 £'000 £'000---------------- ------- -------- --------- ------- -------- -------- ------- Turnover 24,306 (6,274) - - - - 18,032Cost of sales (4,361) - - - - - (4,361)---------------- ------- -------- --------- ------- -------- -------- ------- Gross profit 19,945 (6,274) - - - - 13,671Admin expenses (15,547) 1,249 819 - 116 (168) (13,531)---------------- ------- -------- --------- ------- -------- -------- -------Operating profit 4,398 (5,025) 819 - 116 (168) 140Net interest (214) - - - - - (214)---------------- ------- -------- --------- ------- -------- -------- ------- (Loss)/profitbefore tax 4,184 (5,025) 819 - 116 (168) (74)Tax (170) - - 255 - - 85----------- ----- ------- -------- --------- ------- -------- -------- ------- Profitafter tax 4,014 (5,025) 819 255 116 (168) 11 ----- ------- -------- --------- ------- -------- -------- ------- To ensure complete focus on the appropriate revenue whilst the Group could havecontinued to recognise Ufindus revenue under UK GAAP on the basis previouslyused it has decided to alter UK GAAP revenue recognition to a basis consistentwith IFRS. The accounts of Ufindus Limited have been prepared on the basis ofthe revised revenue recognition policy. As at 1 April 2005 --------------------------------- Reported Revenue Software Share based Tax Restated under recognition intangible payments under UK GAAP asset IFRS £'000 £'000 £'000 £'000 £'000 £'000------------------ -------- ------- -------- ------- ------- --------Non-current assetsIntangible assets 14,289 - 47 - - 14,336Tangible assets 885 - (47) - - 838------------------ -------- ------- -------- ------- ------- -------- 15,174 - - - - 15,174Current assetsDebtors 5,256 (3,042) - - - 2,214Deferred tax 1,200 - - - (1,200) -Cash at bankand in hand 2,033 - - - - 2,033------------------ -------- ------- -------- ------- ------- -------- 8,489 (3,042) - - (1,200) 4,247 Current liabilities (5,933) (57) - - - (5,990)Bank overdraft - - - - ------------------- -------- ------- -------- ------- ------- -------- (5,933) (57) - - - (5,990) Total assets less current liabilities 17,730 (3,099) - - (1,200) 13,431Non-currentliabilities (2,201) - - - - (2,201)------------------ -------- ------- -------- ------- ------- --------Net assets 15,529 (3,099) - - (1,200) 11,230------------------ -------- ------- -------- ------- ------- --------Capital and reservesShare capital 767 - - - - 767Redemption reserve 1,200 - - - - 1,200Share premium 6,108 - - - - 6,108Share based payments 69 69Profit andloss account 7,454 (3,099) - (69) (1,200) 3,086------------------ -------- ------- -------- ------- ------- --------Total equity 15,529 (3,099) - - (1,200) 11,230------------------ -------- ------- -------- ------- ------- -------- As at 31 March 2006 ---------------------------------------------------------------------------------------------- Reported Revenue Share Software Amortisation Development Tax Restated under recognition based intangible of goodwill costs under UK GAAP payments IFRS £'000 £'000 £'000 £'000 £'000 £'000------------ ------- ------ ------- ------- ------ ------- ------ -------Non-current assetsIntangible assets 13,470 - - 35 819 116 - 14,440Tangible assets 918 - - (35) - - - 883------------ ------- ------ ------- ------- ------ ------- ------ ------- 14,388 - - - 819 116 - 15,323Current assetsDebtors 10,614 (8,083) - - - - 2,531Deferred tax 945 - - - - - (945) 0Cash at bankand in hand 1,279 - - - - - - 1,279------------ ------- ------ ------- ------- ------ ------- ------ ------- 12,838 (8,083) - - - - (945) 3,810 Current liabilities (5,847) (41) - - - - - (5,888)Bank overdraft (1,320) - - - - - - (1,320)------------ ------- ------ ------- ------- ------ ------- ------ ------- (7,167) (41) - - - - - (7,208) Total assets less current liabilites 20,059 (8,124) - - 819 116 (945) 11,925Non-currentliabilities (1,373) - - - - - - (1,373)------------ ------- ------ ------- ------- ------ ------- ------ -------Net assets 18,686 (8,124) - - 819 116 (945) 10,552------------ ------- ------ ------- ------- ------ ------- ------ -------Capital and reservesShare capital 773 - - - - - - 773Redemption reserve 1,200 - - - - - - 1,200Share premium 6,203 - - - - - - 6,203Share based payments - 237 - - - - 237Profit and loss account 10,510 (8,124) (237) - 819 116 (945) 2,139------------ ------- ------ ------- ------- ------ ------- ------ -------Total equity 18,686 (8,124) - - 819 116 (945) 10,552------------ ------- ------ ------- ------- ------ ------- ------ ------- 9. The Annual Report and Accounts for 2007 will be posted to shareholders 4 July2007 and will also be available free of charge on request from the Company'sregistered office; Lister Pavilion, Kelvin Campus, West of Scotland SciencePark, Glasgow G20 0SP. 10. The Annual General Meeting of the Company will be held at 2.30pm on 27 July2007 at the Company's registered office. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Iomart