18th May 2005 07:00
Iomart Group PLC18 May 2005 IOMART GROUP PLC Final results for the year ended 31 March 2005 Financial highlights • turnover of £16.6m (2004 - £7.4m) with annualised sales running at £20m• operating profits of £1.8m compared to loss of £0.8m• basic underlying earnings per share, before deferred tax credit, of 2.7p (2004 - loss per share 1.1p)• maiden dividend of 1.25p recommended• deferred tax asset increases post tax profit to £3.1m and shareholders' funds to £14.6m Operational highlights • successful integration of Easyspace acquisition• web-services business with 200,000 customers• launch of UfindUs directory and TV consumer advertising• Netintelligence contract with BT Wholesale Contact: Nick Kuenssberg Non-executive Chairman 07860 635191 Angus MacSween Chief Executive Officer 0141 931 6400 REPORT AND FINANCIAL STATEMENTS 2005 CHAIRMAN'S STATEMENT The year 2004/05 has seen your company make real progress in revenue and profitterms, establishing a solid platform for the start of a dividend flow, forfuture growth and proving the robust nature of its business model. The group has achieved substantial revenue growth from £7.4m to £16.6m includingan 87% increase in continuing operations; current revenues are running at c £20mon an annualised basis. Arising from the ongoing success of the web servicesbusiness and the successful integration of the September 2004 acquisition ofEasyspace which continues to perform up to expectations, the group has achievedan operating profit of £1.8m compared with operating losses of £0.8m in theprevious year. Cashflow has held up well with an outflow restricted to £1.0m after the £12.2mpaid for Easyspace, partly funded by a £6.2m share exchange and the cashbalances of £2m acquired. The utilisation of tax losses on current and forecast profits restricts the taxcharge and creates a deferred tax asset of £1.2m that is recognised inaccordance with generally accepted accounting practice. This increases post taxprofit to £3.1m and shareholders' funds to £14.6m. Following shareholder approval at the 2004 annual general meeting and courtapproval in January 2005 the share premium of the company has been substantiallyreduced facilitating the elimination of accumulated losses. Taking into accountthe profit achieved in the second half of the year and the prospects for thecurrent year the board is delighted to recommend a maiden dividend of 1.25p pershare payable on 22 July 2005 to shareholders on the register at 24 June 2005. It was believed appropriate after six years with the original firm of auditorsto reconsider the relationship. It was decided to put the audit and tax servicesout to tender, a process that was completed by end January 2005 in time for thefinal audit of the accounts for 2004/05. The audit committee decided that GrantThornton UK LLP offered the best fit of service, understanding and value and theboard is recommending their reappointment to the members. Similarly five years after coming to the stock exchange, it was appropriate toreview the board structure. Your board is recommending the appointment of two ofthe senior executives of the group, Stuart Forrest and Mark Hallam, this to beeffected at the annual general meeting. At the same time Bill Dobbie will beretiring and we would like to thank him for his commitment, inspiration andsupport as founder, executive and non executive director of the company. Theboard is recruiting a new non executive director with relevant experience andanticipates making an early announcement. I would take the opportunity to acknowledge the drive and imaginationdemonstrated by Angus MacSween, his colleagues and all staff during thischallenging year and to thank them in the full confidence that this will besustained and the results further enhanced. Nick KuenssbergNon-executive chairman 17 May 2005 REPORT AND FINANCIAL STATEMENTS 2005 CHIEF EXECUTIVE OFFICER'S REPORT The past year has seen good progress on all fronts. We have almost doubled our like for like sales, successfully integrated asignificant acquisition and strengthened the positioning of our Netintelligenceproduct set. We have extended our webservices business further through the launch of our ownproprietary UK local directory/search product, UfindUs, which we intend toinvest in to create both brand recognition and value. The web services business is now split into two parts. • UfindUs which is our own directory service where we provide a web and directory presence to the small and micro business community using our direct telesales force. We have four sales offices in Lancaster, Barrow, Blackpool and Glasgow and in total we employ over 200 direct sales staff. • Easyspace Limited is the web based domain name and hosting business acquired last autumn which has c.142,000 customers run from our new head office in Glasgow (following the closure of the West Byfleet office) and with a small but effective support office in Bangkok, Thailand. This is a marketing led business which attracts existing and new customers to its web site for a self serve range of web products. Your board is excited at the launch of the UfindUs localised directory whichshould build significant shareholder value in the future. We have worked hard toimprove the product offering and customer service in Easyspace and continue toeffect cost savings identified at acquisition. We are also steadily winning more complex hosting customers as we gain theconfidence of larger organisations across the UK. The Netintelligence product suite for security and content management has beendeveloped further to address home, SME and corporates. The most significantdevelopment has been to establish Netintelligence as a hosted service for thesethree market segments. We have also improved our mailfilter hosted service andwe are launching a mailfilter appliance in the first quarter. This means we haveeffectively moved away from a perpetual license model to a recurring revenueservice model in line with our other lines of business. We have also changed tofocus on delivering through a small number of active and motivated resellers. We are very pleased to have established a very close contractual workingrelationship with BT Wholesale who are targeting the UK broadband market wherethey provide over five million connections in the UK. BT have signed 5 contractswith smaller ISPs and negotiations are underway with a number of othersincluding several of the top 10. The SME version of the hosted service launches at the end of May and there isconsiderable interest from a number of ISPs for this higher value product. Results Turnover for the year of £16.6m is made up of £13.8m from ongoing operations,network security and webservices (co-location, hosting, domain names and mail),and £2.8m from acquisitions. This represents over 87% growth in revenues on alike for like basis, the bulk of which has come from our direct sales operationin webservices. Gross margin at 78.8% overall is consistent with our expectations. Administrative expenses (excluding restructuring expenses) were £11.3m against£6.6m last year the increase being primarily the costs of additional directsales staff. Restructuring costs of £0.1m (2004 - £0.04m) were incurred, themajority of which relates to the transfer of the business of Easyspace fromtheir previous base in West Byfleet to Glasgow. During the year we openedanother new telesales office in Blackpool and in April of this year theLancaster sales office moved to larger premises. A total of £0.8m of capital expenditure was incurred during the year, mainly inrespect of the new telesales operation, replacement of older more expensiveequipment and additional servers to support the increased levels of businessduring the year. The group operating profit was £1.8m compared with a loss of £0.8m in theprevious year. The profit for the year before taxation was £1.7m. There is no liability tocorporation tax on the results for the year and research and development taxcredits totalling £0.1m are due to be refunded. A deferred tax asset of £1.2mhas been recognised in the consolidated accounts in respect of tax losses withinone of the subsidiary companies in the expectation that the subsidiary willgenerate taxable profits in the near future. This has resulted in a profit after taxation for the year of £3.1m (2004 - loss£0.6m). Minority interests in the profit of iomart Internet Limited, prior to theacquisition of the minority interest amounted to £0.01m, giving a post taxprofit for the financial year of £3.1m. Basic earnings per share for the year were 4.4p compared to a 1.1p loss pershare for the previous year and fully diluted earnings per share were 4.3p.Basic underlying earnings per share, excluding the deferred tax credit, were2.7p. The directors have proposed a maiden dividend for the year of 1.25p per share. Cash and borrowings Cash balances at 31 March 2005 were £2.0m. Borrowings under finance leasesamounted to £0.1 m and bank loans totalled £3.0m. The group had no othersignificant debt outstanding. Financial instruments The group's financial instruments comprise cash and liquid resources, bank loansand finance leases together with various items such as trade debtors and tradecreditors that arise directly from its operations. The main purpose of thesefinancial instruments is to provide finance for the group's operations. The mainrisk to the group is interest rate risk arising from floating rate interestrates. The group's borrowings at 31 March 2005 comprise a bank loan of £3.0m andfinance leases totalling £0.1m. The interest rate payable on the bank loan is2.5% above the base rate of Bank of Scotland plc. The interest rate at 31 March2005 was 7.25% and the average interest rate since the loan was drawn was 7.25%.The interest rate on the finance leases is fixed for the term of the lease andis between 8.83% and 9.25%. All transactions of the holding company and the UKsubsidiaries are in UK sterling and the group does not use derivativeinstruments. Financial Position The group's financial position remains strong with sufficient resources to fundthe current business plan. Prospects Our business model gives us a powerful platform for the future. With the launchof UfindUs as a branded directory we believe our strong organic growth willcontinue. We are committing to a significant marketing budget to achieve thebrand awareness we need and our 200 direct telesales staff facilitate a highlevel of penetration into the SME business community. The recurring revenue element within the model remains a powerful driver ofgrowth going forward. Netintelligence has continued to evolve and is now being taken to market by agrowing number of partners, particularly BT who have put significant dedicatedresource into this joint opportunity. The potential in the Telco market is verylarge and not constrained geographically. We look forward to another year of continuing growth. Angus MacSweenChief executive officer 17 May 2005 CONSOLIDATED PROFIT AND LOSS ACCOUNT Year ended 31 March 2005 Year ended 31 March 31 March 2005 2004 £'000 £'000TURNOVERAcquisitions 2,828 771Continuing operations 13,775 6,592 ---------- --------- Total turnover 16,603 7,363 Cost of sales (3,513) (1,589) ---------- --------- Gross profit 13,090 5,774 ---------- --------- Administrative expenses (11,176) (6,560)Restructuring expenses (113) (43) ---------- --------- Total administrative expenses (11,289) (6,603) ---------- --------- OPERATING PROFIT/(LOSS)Acquisitions 664 109Continuing operations 1,137 (938) ---------- --------- Operating profit/(loss) 1,801 (829) Net interest (77) 109 ---------- --------- PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 1,724 (720) Tax credit on profit/(loss) on ordinary activities 1,415 123 ---------- --------- PROFIT/(LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION FORTHE YEAR 3,139 (597)Equity minority interests (11) (59) ---------- --------- PROFIT/(LOSS) FOR THE FINANCIAL YEAR 3,128 (656)Proposed dividend 958 - ---------- --------- RETAINED PROFIT/(LOSS) FOR THE FINANCIAL YEAR TRANSFERRED TO/(FROM) RESERVES 2,170 (656) ========== ========= Earnings/(loss) per ordinary share (pence)Basic 4.4p (1.1p)Diluted 4.3p Underlying earnings/(loss) per ordinary share (pence)Basic 2.7p (1.1p)Diluted 2.6p There have been no recognised gains and losses attributable to the shareholdersother than the profit/(loss) for the current financial year and precedingfinancial year and, accordingly, no statement of total recognised gains andlosses is shown. CONSOLIDATED BALANCE SHEET 2005 2004 £'000 £'000 FIXED ASSETSIntangible assets 14,289 748Tangible assets 885 517 ---------- --------- 15,174 1,265 ---------- --------- CURRENT ASSETSDebtors 5,256 2,145Deferred tax asset 1,200 -Cash at bank and in hand 2,033 3,025 ---------- --------- 8,489 5,170 ---------- ---------CREDITORS: amounts falling due (6,891) (2,070)within one year ---------- --------- NET CURRENT ASSETS 1,598 3,100 ---------- --------- TOTAL ASSETS LESS CURRENT LIABILITIES 16,772 4,365 CREDITORS: amounts falling due after more than one year (2,201) (220) EQUITY MINORITY INTERESTS - (129) ---------- --------- NET ASSETS 14,571 4,016 ========== ========= CAPITAL AND RESERVESCalled up share capital 767 598Capital redemption reserve 1,200 1,200Share premium account 6,108 19,907Profit and loss account 6,496 (17,689) ---------- --------- TOTAL EQUITY SHAREHOLDERS' FUNDS 14,571 4,016 ========== =========31 March 2005 Year ended 31 March 31 March 2005 2004 £'000 £'000 Net cash inflow/(outflow) from operating activities 1,057 (1,311) Returns on investments and servicing of finance (94) 75 Taxation 4 334 Capital expenditure and financial investment (765) (442) Acquisitions and disposals (4,103) (403) ---------- --------- Cash outflow before financing (3,901) (1,747) Financing 2,909 730 ---------- --------- Decrease in cash in the year (992) (1,017) ========== ========= Reconciliation of net cash flow to movement in net (debt)/funds Decrease in cash in the year (992) (1,017) Cash (inflows)/outflows from debt and lease financing (2,846) 250 ---------- --------- Change in net (debt)/funds from cash flows (3,838) (767) Opening net funds 2,734 3,501 ---------- --------- Closing net (debt)/funds (1,104) 2,734 ========== ========= CONSOLIDATED CASH FLOW STATEMENT Year ended 31 March 2005 NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2005 1. BASIS OF PREPARATION The financial information set out above does not constitute the company'sstatutory financial statements for the year ended 31 March 2005 or the yearended 31 March 2004 but is derived from those financial statements. Thosefinancial statements have been reported on by the Company's auditors. The reportof the auditors was unqualified and did not contain a statement under S.237 (2)or (3) Companies Act 1985. The statutory financial statements for the year ended31 March 2004 have been delivered to the Registrar of Companies. The statutoryfinancial statements for the year ended 31 March 2005 will be delivered to theRegistrar of Companies following the Company's Annual General Meeting. 2. ACCOUNTING POLICIES The financial statements have been prepared on the basis of the accountingpolicies set out in the Group's statutory financial statements for the yearended 31 March 2004. 3. SEGMENTAL ANALYSIS The analysis of turnover by destination is as follows: Year ended Year ended 31 March 2005 31 March 2004 £'000 £'000Geographical analysisUnited Kingdom 16,245 7,363European Union 126 -USA 140 -Other 92 - ----------- ----------- 16,603 7,363 =========== =========== The analysis of profit before tax and net assets by geographical segment has notbeen disclosed as the group's operations comprise one activity. NOTES TO THE FINANCIAL STATEMENTS YEAR ENDED 31 MARCH 2005 4. ANALYSES OF OPERATIONS Continuing Acquisitions Total Continuing Acquisitions Total Year Year Year Year Year Year Ended 31 ended 31 ended 31 ended 31 ended 31 ended 31 March March March March March March 2005 2005 2005 2004 2004 2004 £'000 £'000 £'000 £'000 £'000 £'000 Turnover 13,775 2,828 16,603 6,592 771 7,363Cost of (2,657) (856) (3,513) (1,398) (191) (1,589)sales -------- -------- -------- -------- -------- -------- Gross profit 11,118 1,972 13,090 5,194 580 5,774 -------- -------- -------- -------- -------- -------- Administrativeexpenses (9,949) (1,227) (11,176) (6,132) (428) (6,560)Restructuringexpenses (32) (81) (113) - (43) (43) -------- -------- -------- -------- -------- -------- Totaladministrativeexpenses (9,981) (1,308) (11,289) (6,132) (471) (6,603) -------- -------- -------- -------- -------- -------- Operatingprofit/(loss) 1,137 664 1,801 (938) 109 (829) ======== ======== ======== ======== ======== ======== Turnover from continuing operations comprises revenue from network security andwebservices, excluding VAT. 5. OPERATING PROFIT/(LOSS) Year ended Year ended 31 March 2005 31 March 2004 £'000 £'000Operating profit/(loss) is after charging/(crediting)Depreciation of tangible fixed assets:Owned assets 405 293Leased assets 7 27Amortisation of intangible fixed assets 547 59Rentals under operating leasesLand and buildings 256 165Plant and machinery 437 128Amortised deferred grant income (60) (5)Auditors' remuneration - company audit fees 12 11 - group audit fees 19 19 - other services 30 24 ============= ============= In addition to the above, fees of £25,000 were charged by the former auditors inconnection with the acquisition of Easyspace Limited. 6. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES Year ended Year ended 31 March 2005 31 March 2004 £'000 £'000 Research and development tax credit 141 123Tax credit 74 -Deferred tax credit 1,200 - ------------- ------------- 1,415 123 ============= ============= A deferred tax asset has been recognised in the consolidated accounts in respectof tax losses within one of the subsidiary companies in the expectation that thesubsidiary will generate taxable profits in the near future. The differences between the total current tax shown above and the amountcalculated by applying the standard rate of UK corporation tax to the profit/(loss) before tax is as follows. Year ended Year ended 31 March 2005 31 March 2004 £'000 £'000 Profit/(loss) on ordinary activities beforetax 1,724 (720) ------------- ------------- Tax charge/(credit) @ 30% 517 (216) Non qualifying depreciation 7 24Disallowed expenditure 87 4Deferred tax movement not provided 658 108Movement in short term timing differences 14 (2)Consolidation adjustments 2 (18)Utilisation of tax losses (2,291) -Rate differences 124 31Capital allowances in excess of depreciation (53) 10Statutory deductions on exercise of shareoptions (480) (64) ------------- ------------- (1,415) (123) ============= ============= There is no tax charge in the year due to the availability of losses. Unrelievedlosses of £12.1 million (2004 - £13.8 million) are carried forward and areavailable to reduce the tax liability in respect of suitable future tradingprofits. Research and development tax credits have been claimed in respect of expenditureincurred on the development of the group's NetIntelligence software. Thesecredits are at the rate of 16% of the amount of expenditure allowed as adeduction from taxable income, which is 150% of the development expenditureincurred. 7. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES (CONTINUED) Deferred tax The group had recognised deferred tax assets and potential unrecognised deferredtax assets as follows: Year ended 31 March Year ended 31 March 2005 2004 Recognised Unrecognised Recognised Unrecognised £'000 £'000 £'000 £'000 Tax losses carriedforward 1,200 2,430 - 4,500 ======== ========= ======== ========= 8. EARNINGS/(LOSS) 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. FRS 14 requires presentation of diluted EPS to reflect all outstanding shareoptions where their future exercise would decrease net profit or increase netloss per share. For a loss making company with outstanding share options, netloss per share would only be increased by the exercise of out-of-the-moneyoptions. Since it seems inappropriate to assume that option holders would actirrationally and there were no other diluting future share issues, diluted EPShas not been presented for the year ended 31 March 2004. Year ended Year ended 31 March 2005 31 March 2004 £'000 £'000 Profit/(loss) for the financial period andbasic earnings attributed to ordinaryshareholders 3,128 (656)Less deferred tax credit (1,200) - ------------- ------------- Underlying earnings/(loss) 1,928 (656) ============= ============= No No 000 000Weighted average number of ordinary shares:For basic earnings/(loss) per share 70,318 57,649 =============Exercise of share options 3,067 ------------- For diluted earnings per share 73,385 ============= Basic earnings/(loss) per share 4.4p (1.1p) ============= ============= Fully diluted earnings per share 4.3p ============= Basic underlying earnings/(loss) per share 2.7p (1.1p) ============= ============= Fully diluted underlying earnings per share 2.6p ============= 9. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT Year Year ended 31 March ended 31 March 2005 2004 £'000 £'000Returns on investments and servicing of financeOther interest receivable 65 112Bank overdraft and other borrowings (142) -Finance leases and hire purchase contracts (17) (37) ------------- ------------- (94) 75 ============= ============= TaxationResearch and development tax creditsreceived - 334Corporation tax refund 4 - ------------- ------------- 4 334 ============= ============= Capital expenditure and financial investmentPayments to acquire tangible fixed assets (765) (444)Proceeds of disposal of fixed assets - 2 ------------- ------------- (765) (442) ============= ============= AcquisitionsPurchase of subsidiary undertakings (note 27) (5,852) (576)Professional fees in connection withacquisitions (182) -Payment of deferred consideration (117) -Net cash acquired with subsidiaries 2,048 173 ------------- ------------- (4,103) (403) ============= ============= FinancingIssue of ordinary shares 327 880Issue of shares to minority interest - 100Professional fees in connection with shareexchanges (236) -Expenses of capital reduction (28) -Bank loan 3,465 -Repayment of bank loan (429) -Capital element of finance lease rentals (190) (250) ------------- ------------- 2,909 730 ============= ============= 10 ANALYSIS OF CHANGE IN NET FUNDS/(DEBT) At 31 March Cash flow At 31 March 2004 2005 £'000 £'000 £'000 Cash at bank and in hand 3,025 (992) 2,033Bank loan - (3,036) (3,036)Finance leases and hirepurchase (291) 190 (101) ----------- ---------- ----------- Net funds/(debt) 2,734 (3,838) (1,104) =========== ========== =========== 11. PURCHASE OF SUBSIDIARY UNDERTAKINGS On 9 September 2004 the company acquired the whole of the issued capital ofEasyspace Limited, being 100% of its nominal share capital, for a considerationof £12,150,000 satisfied by the issue of 11,574,075 ordinary shares at 54p pershare, £5,750,000 in cash and professional fees in connection with theacquisition of £150,000. Goodwill arising on acquisition has been capitalised.The purchase has been accounted for by the acquisition method of accounting. On 19 April 2004 the company acquired 100,000 ordinary shares of £1 in UfindusLimited, being the remaining 25% of the nominal share capital, for aconsideration of £2,206,000 satisfied by the issue of 3,200,000 ordinary sharesat 64.75p per share, £102,000 in cash and professional fees in connection withthe acquisition of £32,000. Goodwill arising on acquisition has beencapitalised. The purchase has been accounted for by the acquisition method ofaccounting. Ufindus Limited Easyspace Limited Total Net book Fair value Fair Net book Fair value Fair Fair value adjustments value value adjustments value value £'000 £'000 £'000 £'000 £'000 £'000 £'000Net assets acquired:Goodwill 88 - 88 - - - 88Tangiblefixed 17 - 17 15 - 15 32assetsInvestment 186 - 186 30 (30) - 186Debtors 493 - 493 262 (44) 218 711Cash at bankand in hand 101 - 101 2,048 - 2,048 2,149Creditors (745) - (745) (2,153) - (2,153) (2,898) ------- -------- ------- ------- -------- ------- ------- 140 - 140 202 (74) 128 268 ======= ======== ======= ======== Goodwill 2,066 12,022 14,088 ------- ------- ------- 2,206 12,150 14,356 ======= ======= ======= Satisfied by:Cash 102 5,750 5,852Shares issued 2,072 6,250 8,322Professional fees 32 150 182 ------- ------- 2,206 12,150 14,356 ======= ======= ======= Easyspace Limited The fair value of the net assets acquired has been considered and an adjustmentfrom £202,000 to £128,000 has been made. This is due to the write off of thecompany's investment and of debtors not considered recoverable. Ufindus Limited No fair value adjustments were deemed to be necessary on the purchase of theremaining minority interest in Ufindus Limited. The summarised profit and loss account of Easyspace Limited for the period priorto acquisition and the previous accounting period are set out below: Easyspace Limited Year ended Period from 1 January 2004 31 December 2003 to 8 September 2004 £'000 £'000 Turnover 4,961 3,568 =============== =============== Operating profit 1,801 1,194Net interest 30 31 --------------- --------------- Profit for thefinancial period 1,831 1,225 =============== =============== There were no recognised gains and losses other than the profit for thefinancial period. During the year Easyspace Limited contributed £697,000 to the group's operatingcash flows, £4,000 in respect of corporation tax refunds and £22,000 in respectof returns on investments and servicing of finance and utilised £42,000 inrespect of capital expenditure. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Iomart