Final Results

22 June 2015

Daily Internet plc

("Daily Internet" or "the Company" or "the Group")

Final Results for the year ended 31 March 2015

Daily Internet plc (AIM:DAIP) is pleased to announce its final results for the year ended 31 March 2015.

HIGHLIGHTS

Financial

· Revenue growth of 66.9% to £3,891k (2014: £2,331k)

· Gross profit margin increased to 62.2% (2014: 55.2%)

· Maiden adjusted EBITDA* profit of £411k (2014: loss £45k)

· Loss before tax reduced 79.6% to £138k (2014: loss £676k)

· Loss after tax reduced 87.6% to £84k (2014: loss £676k)

Operational

· Extension of UK fibre network footprint bringing more of the datacentres we use "on-net", future proofing margin;

· Acquisition of Evohosting Ltd for £543k. Net of cash £395k;

· Acquisition of Q4Ex Ltd for an initial consideration of £520k and maximum consideration of up to £1,976k;

· Restructuring of Group for operational efficiencies and to maximise future revenue potential;

· Cloud platforms installed in two New York datacentres establishing a foundation in the US market.

*Adjusted EBITDA, which is referred to throughout the announcement, is earnings before interest, taxation, depreciation, amortisation, acquisition costs and fair value adjustments and share based payments

**Adjusted EBITA is earnings before interest, taxation, amortisation, acquisition costs and fair value adjustments

STRATEGIC REPORT

Chairman's Statement

I am delighted to report a year of significant progress together with a number of positive changes within the Group.

We have had a strong year of growth with revenue increasing by 66.9%. As a result I am able to report our maiden adjusted EBITDA profit of £411,000 whilst also reducing our statutory bottom line losses to £84,000, down 87.7% on last year's loss of £676,000.

The increase in revenues largely came from the Managed Hosting division where revenues grew 174% in addition to the 22.5% increase in the SME Hosting division.

We also completed two acquisitions during the year, acquiring Evohosting, whose tightly knit team effortlessly integrated with their Daily counterparts and Q4Ex based in Liverpool. The combination of Netplan's highly qualified staff and the very experienced Q4Ex team was of enormous and immediate benefit to both parties.

We are currently working to integrate the Group further and to make best use of the excellent and highly qualified resource our team possess.

Our new CEO Chris Evans has instigated and overseen this change and has made an immediate impact through his energy, work ethic and ideas. I extend my thanks to all our dedicated staff who have worked tirelessly to help put us into, what we believe, is an increasingly strong position to capitalise on future revenue opportunities.

Michael Edelson

Chairman

Chief Executive Officer's Report

Introduction

I am pleased to provide my first report since taking on the role of Chief Executive from December 2014, having formerly been a Non-Executive member of the Board.

I became Chief Executive following the acquisition by the Group of Q4Ex Ltd, a cloud company which I had founded with two other partners. At this time and following a period of transition, Abby Hardoon the former CEO and founder of the Group moved to a Non-Executive role to allow for an evolvement in direction and to allow Abby to reduce his time commitment to the business.

The change in direction is one of concentrating our efforts on the Managed Hosting segment and a re-aligning of our cost base in support of this.

I am pleased to report a year of significant improvement in both operational and financial performance. Our revenues increased 66.9% to £3,891k from £2,331k a year earlier and we have today reported our maiden adjusted EBITDA profit of £411k versus an EBITDA loss of £45k a year earlier. As a result of this performance our statutory loss after taxation reduced from £676k in 2014 to £84k a reduction of 87.7%.

Operational Review

Daily Internet Plc was founded as a provider of SME hosting solutions to the mass market. Our SME Hosting segment has performed well in the year increasing revenues by 18.2% to £2,039k from £1,665k a year earlier. This was largely due to the contribution of the Evohosting acquisition. Underlying revenue remained at levels consistent with last year although as a result of the continuing re-organisation profitability was vastly improved.

The Group entered the Managed Hosting market in late October 2013 through the acquisition of Netplan Internet Solutions Limited. For the financial period under review, our Managed Hosting segment delivered revenues of £1,852k, up from a contribution of £676k for part of the year.

The Managed Hosting segment is the main focus of the Group as we see the largest current and future potential revenue opportunities arising in this area. Managed Hosting includes a range of Cloud offerings including design, implementation, control and managing environments and solutions for our customers.

The market is currently seeing a number of trends develop, all of which indicate that the shift to Cloud delivered solutions will remain key future focus points for our customers.

One particular trend we are seeing is an increasing adoption of the Public Cloud. There is a developing level of acceptance and sufficient confidence in Public Cloud that we have been able to add into the product mix when proposing a new solution to a customer, particularly concerning business continuity. Previously we would replicate a Private Cloud across two Datacentres, but are increasingly replicating data to a Netplan designed continuity solution with Amazon Web Services (AWS). The "pay as you use" elements of Public Cloud are bringing into reach solutions that were previously cost prohibitive for some customers. This is helping us bring a greater breadth and depth of service, increasing revenues but all the time protecting or growing our overall gross margin.

The vast and growing array of methods of delivering a solution are making decisions more complex for IT departments, who do not have the market knowledge, skills and infrastructure and so seek the expert advice of a partner such as Netplan. It is certainly the case that our larger customers are placing an increasing amount of business with us due to the increasing complexities in the overall solution. We believe this will help maintain our low levels of client churn in this segment moving forward.

One key attraction of some customers to Netplan is our PCI DSS (Payment Card Industry Data Security Standards) capabilities and offerings. PCI DSS applies to all entities involved in payment card processing-including merchants, processors, financial institutions and service providers, as well as all other entities that store, process or transmit cardholder data and/or sensitive authentication data.

Netplan are certified as a PCI DSS Level 1 Service provider and have a dedicated PCI team. This has assisted in attracting business from payment processing business to insurance companies who wish to outsource their PCI environment and elements of their compliancy process.

Acquisitions

During the year we acquired Evohosting Ltd and Q4Ex Ltd. Both acquisitions have performed better than expected and have now been fully integrated into the Group. We continue to evaluate acquisition opportunities that must fit our stringent acquisition criteria.

Evohosting added CPanel specific hosting capacity to our SME Hosting segment. CPanel are the market leaders in SME shared hosting control panels. Evohosting continues to grow under our ownership.

Q4Ex, a Cloud hosting provider, brought key specialist personnel to the Group in the form of a strong management team and access to a vertical market which complimented Netplan. It now trades under the Netplan umbrella and is making substantial progress as the 'Merchant and Distribution' division of Netplan. This division was identified as being a vertical market, "ripe for change", especially given the bulk of potential clients still utilise Windows Server 2003. Microsoft are withdrawing support and updates as the product reaches the end of life span on 14 July 2015.

Current trading and outlook

Trading post the financial year end has been in line with management and market expectations.

Our pipeline of opportunities continues to grow and we are well placed to take advantage of the continued move to the cloud. We will continue to invest over the next 12 months in our network infrastructure, automated systems and internal processes and drive further operational efficiencies with the integration of staff and systems across our business units and offices.

I look forward to the year ahead with confidence.

Chris Evans

Chief Executive Officer

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 MARCH 2015

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 MARCH 2015

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 MARCH 2015

NOTES

Going concern

The Directors have prepared the Financial Statements on a going concern basis which assumes that the Group and the company will continue to meet liabilities as they fall due.

The directors have reviewed forecasts prepared for the period ending 30 September 2016 and considered the projected trading forecasts and resultant cash flows together with confirmed loan facilities and other sources of finance.

The Group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the Group can continue to operate within the current facilities available to it.

The Directors therefore have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

1 Acquisitions

Evohosting Limited

The Group acquired 100% of the share capital of Evohosting Limited on 20 August 2014.

Evohosting provides Domain registration and shared hosting services to individuals and SME's.

During the current period the Group incurred £50,000 of costs in relation to this acquisition. These costs are included in administrative expenses in the Groups consolidated statement of comprehensive income for the year ended 31 March 2015.

The amount of identifiable net assets assumed at the acquisition date in shown below:

The fair value of acquired customer relationships intangible asset has been estimated using a discounted cashflow method, based on the estimated level of profit to be generated from them. A post tax discount rate of 19% was used in the valuation. Customer relationships are being amortised over an estimated useful life of 5 years.

Since the acquisition date, Evohosting Limited has contributed £250,000 to Group revenues and £80,000 to Group profit.

Q4Ex Limited

The Group acquired 100% of the share capital of Q4Ex Limited ("Q4Ex") on 10 December 2014. Q4Ex provides managed hosting and application support services.

During the current period the Group incurred £25,000 of costs in relation to this acquisition. These costs are included in administrative expenses in the Groups consolidated statement of comprehensive income for the year ended 31 March 2015.

The amount of identifiable net assets assumed at the acquisition date in shown below:

Since the date of acquisition, Q4Ex Ltd has contributed £112,000 to Group revenues and £31,000 to Group profits.

The acquisition of Q4Ex Ltd included a contingent consideration consisting three potential hurdle payments (of up to £520,000, £520,000 and £416,000) payable in new Ordinary shares at 1.7p. The contingent consideration is based on the level of earnings before interest, tax, depreciation and amoritisation EBITDA) achieved in a 12 month rolling period less an amount for central re-charges. The earnout period is to 08 December 2017.

The fair value of deferred consideration has been estimated using the discounted cashflow method based on the timing of the payment of the consideration. A post tax discount rate of 19% was used.

Pro-forma full year information

Had both acquisitions taken place on 1 April 2014, the Group's revenue would have been £4.3m and the Group's profit would have been £0.15m

2 Loss per share

Since the conversion of potential ordinary shares to ordinary shares would decrease the net loss per share, they are not dilutive. Accordingly diluted loss per share is the same as basic loss per share.

3 Taxation

The Group recognised deferred tax assets and liabilities as follows:

The Directors have not provided for the potential deferred tax asset arising from carried forward tax losses due to the uncertainty of future taxable profits. The tax losses available were approximately £4,692,000 at 31 March 2015 (2014: £4,638,000). The deferred tax asset on these tax losses at 20% (2014: 20%) of £971,000 (2014: £928,000) has not been recognised due to the uncertainty of the timing of the recovery.

The movement in the deferred tax account during the year was:

4 Trade and other receivables

The Group is not exposed to any significant credit risk from trade receivables. The ageing below shows that all debts are less than three months old and no impairment is required.

5 Trade and other payables

The fair value of contingent consideration was based on the present value of cash flows and the market value of the shares to be issued as per note 1.

To the extent trade payables and other payables are not carried at fair value in the consolidated balance sheet, book value approximates to fair value at 31 March 2015 and 31 March 2014.

6 Loans and borrowings

The book value and fair value of loans and borrowings are as follows:

7 Share capital

During the year the Company issued 72,119,021 ordinary shares of 0.5p each. Of this total 21,750,000 ordinary shares were issued at 2.0p per share for cash, the proceeds of which were used to fund the acquisition of Evohosting.

A further 19,326,241 ordinary shares were issued at 1.88p per share in settlement to the Netplan shareholders, 454,545 at 1.88p were issued to a consultant and 30,588,235 ordinary shares were issued at 1.7p for the acquisition of Q4Ex.

Under the terms of the EMI and unapproved share options a further 43,040,000 ordinary shares could be issued with a nominal value of £215,200.

8 The financial information set out above does not comprise the Company's statutory accounts. The Annual Report and Financial Statements for the year ended 31 March 2014 have been filed with the Registrar of Companies. The Independent Auditors' Report on the Annual Report and Financial Statement for the year ended 31 March 2014 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

The Independent Auditors' Report on the Annual Report and Financial Statement for the year ended 31 March 2015 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. These will be delivered to the Registrar of Companies following the annual general meeting.

9 The Group's full statutory financial statements for 31 March 2015 have been prepared in accordance with International Financial Reporting Standards (IFRSs and IFRIC interpretations) as endorsed by the European Union ("endorsed IFRS") and with those parts of the Companies Act 2006 applicable to companies preparing their accounts under endorsed IFRS.

10 This preliminary announcement was approved by the Board of directors on 19 June 2015.

11 Annual General Meeting ("AGM") and Availability of Annual Report

The AGM of the Company will be held on 14 August 2015 at 10 am at Walker House, Exchange Flags, Liverpool L2 3YL.

Copies of the Notice of AGM and the Report and Accounts of the Company will be posted to shareholders shortly and will be available to view online on the Company's website www.investors.daily.co.uk.