16th Nov 2006 07:01
Iomart Group PLC16 November 2006 iomart Group plc Interim Results Announcement @ 30.9.06 iomart Group plc ("iomart"), the Glasgow based software and web-servicesbusiness, presents its consolidated interim results for the six month periodended 30 September 2006. Highlights: • Total turnover at £13.9m up by 26.7% • NetIntelligence sales orders growing rapidly and now running at c.£200k per month • Gross Margin maintained at 82% • Operating profit at £1.6m up 13.7% • Pre-tax profit at £1.5m up 11.7% • Basic earnings per share unchanged at 1.75p (fully diluted up 1.2% at 1.71p) Nick Kuenssberg, chairman, commented "These results show continuing substantialrevenue growth. Sales in the first half at both Ufindus and Easyspace havecontributed as planned. The new business model for NetIntelligence, sold throughan outbound sales process via telephone and web as a 'Software as a Service'(SaaS) product, has now gained real momentum and gives us confidence for thefuture. In the coming months, we plan to invest further in promoting the growth ofNetIntelligence, underpinning Ufindus processes and generating additionalEasyspace revenue. Profit growth in the period has been restricted by an increased bad debtprovision arising from weaknesses in business processes in Ufindus which are nowbeing rectified. The EPS effect of an increased bad debt provision is expectedto be offset by a reduced tax charge arising from the improving NetIntelligenceperformance. Since the end of the period, the Group has been cash positive and ourexpectations are for a good second half of the year with a growing contributionfrom NetIntelligence and improving cash generation. Chief Executive Officer's review Netintelligence, which is a pure "Software as a Service" (SaaS) product,delivering end point security and control is now performing well. Following areorganisation of our sales operation in the Spring and the foundation of ourdirect telesales team in June sales orders have grown quickly giving usconfidence that Netintelligence, which has a relatively fixed cost base, willproduce significant future profits. Where we previously had a very lumpy revenuestream in Netintelligence, we are now seeing consistent month on month growth,with a significant deferred revenue line giving good visibility of futureearnings. Monthly orders which continue to grow rapidly are now running at around £200kper month. We have recently concluded deals with BT to provide services to thecustomers of its wholesale managed broadband service, The Carphone Warehouse andlaunched a home security version of the product in the US under the brand nameSafekeeper. Alongside Easyspace and UfindUs this will give us three operations contributingto the profitability of the group, all with good prospects and all sharing anoverall infrastructure built round our strategy of delivering web basedservices, also known as 'in the cloud' services or 'SaaS' from secure andresilient data centres. It is our ambition to become leading players in the'SaaS' market as we believe the next few years will see a continuing massiveshift towards hosted services generally. Easyspace, which provides website hosting and domains remains a key contributorto our profitability, and we intend to invest further in growing this area byenhancing and adding to the services we provide. We now have a betterunderstanding of our customers and their needs and our customer retention iscontinually improving. We are seeing demand for more complex hosting servicesand have established additional datacentre capacity to meet these needs. Ufindus, which has grown quickly over the last two years, continues to gainmarket share in the web directory sector. We are now generating over 6 millionsearches and visits to customer websites per month, providing a substantialnumber of business opportunities to our customers. We believe UfindUs has becomeone of the UK's most used internet business directories, this being achievedwith very modest marketing spend. However, that fast customer growth, alongsidechanges such as chip and pin and new regulation around credit card collections,has outstripped the business infrastructure leading to issues around debt andcollections which in turn has required us to increase our bad debt provision inthe period thereby adversely affecting our operating profit margin. We havetaken steps to establish more robust systems and processes and are well down theroad to establishing the infrastructure we need. In addition we have engineereda substantial shift to direct debit as the main method of payment for newcustomers. Financials Turnover on continuing operations for the period was £13.88m, up from £10.95m,which represents an increase of 27% over the corresponding period last year.Gross profit margins have been maintained at 82%. Administrative expenses of £9.74m (restated previous year £7.58m) include aprovision for bad debts of £0.93m (£0.37m) and a charge of £0.07m (£0.08m) forshare based payments following the adoption of FRS 20. Since this charge inrespect of share based payments is matched by an equal and opposite adjustmentto profit and loss reserves our balance sheet reserves are unaltered as a resultof complying with the standard. The operating profit for the period was £1.64m (restated previous year £1.44m).Due to the improved performance of Netintelligence we are now required to createa deferred tax asset arising out of previously accumulated tax losses, theeffect of which has been to reduce the tax charge for the period by £0.2m.Consequently the net profit was £1.36m (£1.34m) and fully diluted earnings pershare were 1.71p compared to 1.69p. Cash balances at 30 September were £0.75m and net debt was £4.54m. Prospects We believe that our overall strategic positioning of providing web basedservices "in the cloud" has left all three of our lines of business ideallypositioned to take full advantage of the continuing growth opportunities thatundoubtedly exist. In particular we believe our perseverance with NetIntelligence is proving to befully justified. The opportunities that exist for our current product are manyincluding the enormous potential in the US market into which we have alreadytaken our first exploratory steps. The EPS effect of an increased bad debt provision is expected to be offset by areduced tax charge arising from the improving NetIntelligence performance. Since the end of the period, the Group has been cash positive and ourexpectations are for a good second half of the year with a growing contributionfrom NetIntelligence and improving cash generation. Angus MacSweenChief Executive Officer 15 November 2006 Consolidated Profit and Loss AccountSix months ended 30 September 2006 6 months ended Year ended 30.9.06 30.9.05 31.3.06 Restated Restated Unaudited Unaudited Audited Notes £ 000 £ 000 £ 000TURNOVERContinuing operations 13,876 10,952 24,306 Cost of sales (2,499) (1,928) (4,361) --------- -------- -------- GROSS PROFIT 11,377 9,024 19,945 Administrative expenses (restatedamounts) 2 (9,737) (7,581) (15,707) --------- -------- -------- OPERATING PROFIT 1,640 1,443 4,238 Net interest (138) (104) (214) --------- -------- -------- PROFIT ON ORDINARY ACTIVITIES BEFORETAXATION 1,502 1,339 4,024Taxation (142) - (170) --------- -------- -------- PROFIT FOR THE FINANCIAL PERIOD 1,360 1,339 3,854 ========= ======== ======== Earnings per ordinary share (pence) 3Basic 1.75p 1.75p 5.02pFully diluted 1.71p 1.69p 4.82p There have been no recognised gains or losses attributable to the shareholdersother than the profit for the current financial period and the precedingfinancial periods and accordingly, no statement of total recognised gains andlosses is shown. Consolidated Balance SheetAs at 30 September 2006 30.9.06 30.9.05 31.3.06 Restated Restated Unaudited Unaudited Audited Notes £ 000 £ 000 £ 000 FIXED ASSETSIntangible assets 13,061 13,879 13,470Tangible assets 1,226 905 918 -------- -------- -------- 14,287 14,784 14,388 -------- -------- --------CURRENT ASSETSDebtors 4 12,689 7,564 10,614Deferred tax asset 718 1,200 945Cash at bank and in hand 753 1,390 1,279 -------- -------- -------- 14,160 10,154 12,838 CREDITORS: amounts falling due within oneyear (8,448) (6,998) (7,167) -------- -------- -------- NET CURRENT ASSETS 5,712 3,156 5,671 -------- -------- -------- TOTAL ASSETS LESS CURRENT LIABILITIES 19,999 17,940 20,059 CREDITORS: amounts falling due after morethan one year (1,131) (1,885) (1,373) -------- -------- -------- 18,868 16,055 18,686 ======== ======== ======== CAPITAL AND RESERVESCalled up share capital 793 770 773Capital redemption reserve 1,200 1,200 1,200Share premium account 7,270 6,172 6,203Profit and loss account 9,605 7,913 10,510 -------- -------- -------- TOTAL EQUITY SHAREHOLDERS' FUNDS 18,868 16,055 18,686 ======== ======== ======== The comparative figures for the financial year ended 31 March 2006 are anextract of the company's statutory accounts for that financial year restated toreflect the adoption of FRS 20. Those accounts have been reported on by thecompany's auditors and delivered to the Registrar of Companies. The report ofthe 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 15 November 2006. Consolidated Cash Flow StatementSix months ended 30 September 2006 6 months ended Year ended 30.9.06 30.9.05 31.3.06 Restated Restated Unaudited Unaudited Audited Notes £ 000 £ 000 £ 000 Net cash (outflow)/inflow fromoperating activities 5 (154) 274 362 --------- -------- -------- Returns on investments and servicing of financeBank interest received 3 14 29Bank and other loan interest paid (134) (118) (241)Finance lease and hire purchase interest paid (7) (2) (2) --------- -------- -------- Net cash outflow from returns oninvestments and servicing of finance (138) (106) (214) --------- -------- -------- Taxation (150) 123 123 --------- -------- -------- Capital expenditurePayments to acquire tangible fixed assets (301) (275) (478)Proceeds of disposal of fixed assets 23 - - --------- -------- -------- (278) (275) (478) --------- -------- -------- Acquisitions and disposalsPayment of deferred consideration - (28) (34) --------- -------- -------- Equity dividends paid (1,282) (958) (958) --------- -------- -------- Cash outflow before financing (2,002) (970) (1,199) --------- -------- -------- FinancingIssue of ordinary shares 36 67 101Repayment of bank loan (438) (438) (863)Capital element of finance lease rentals (44) (99) (113) --------- -------- -------- Net cash outflow from financing (446) (470) (875) --------- -------- -------- Decrease in cash in the period (2,448) (1,440) (2,074) ========= ======== ======== Reconciliation of net cash flow to movement in net debt Decrease in cash in period (2,448) (1,440) (2,074)Cash outflows from debt and lease financing 482 537 976 -------- -------- -------- Change in net funds from cash flows (1,966) (903) (1,098)Opening net debt (2,278) (1,104) (1,104)Inception of finance leases (296) - (76) -------- -------- -------- Closing net debt (4,540) (2,007) (2,278) ======== ======== ======== Notes to the AccountsSix months ended 30 September 2006 1. Accounting policies The interim financial information does not constitute statutory accounts for thepurpose of section 240 of the Companies Act 1985. The figures for the year ended31 March 2006 have, except as stated below, been extracted from the Groupaccounts for that year. Those financial statements have been delivered to theRegistrar of Companies and included an auditors' report, which was unqualified. The interim financial information has been prepared using the same accountingpolicies and estimation techniques as set out in the Group accounts for the yearended 31 March 2006, except as stated below. During the period the company adopted FRS 20 'Share Based Payments' whichapplies to AIM listed companies for accounting periods commencing on or after 1January 2006. Under FRS 20, the fair value of options granted is recognised as an employeeexpense with a corresponding increase in equity. The fair value is measured atgrant date and spread over the period during which the employees becomeunconditionally entitled to the options. The fair value of the options grantedhas been measured using an option pricing model taking into account the termsand conditions upon which the options were granted. The amount recognised as anexpense is adjusted to reflect the actual number of share options expected tovest. This has resulted in prior year adjustments to the previously reportedfigures for the six months ended 30 September 2005 and for the year ended 31March 2006, details of which are given in Note 2. The charge in respect of theshare based payments is matched by an equal and opposite adjustment to profitand loss reserves, thereby having no net impact on the Group's closing reserves. 2. Share based payments The effect of the adoption of FRS 20 has been to increase administrativeexpenses and thereby reduce profits for each financial period, including prioryear adjustments, as follows: 6 months ended Year ended 30.9.06 30.9.05 31.3.06 Restated Restated Unaudited Unaudited Audited £ 000 £ 000 £ 000 Charge for share based payments 68 78 160 ========= ======== ========= 3. Earnings per share The calculations of earnings per share are based on the following profits andnumbers of shares: 6 months ended Year ended 30.9.06 30.9.05 31.3.06 Restated Restated Unaudited Unaudited Audited £ 000 £ 000 £ 000Profit for the financialperiod 1,360 1,339 3,854 ========= ======== ========= Number of Number of Number of shares shares shares 000 000 000Weighted average number of shares:For basic earnings per share 77,513 76,727 76,933Exercise of share options 1,768 2,654 3,155 --------- -------- --------- For diluted earnings per share 79,281 79,381 80,088 ========= ======== ========= Notes to the AccountsSix months ended 30 September 2006 4. Debtors 6 months ended Year ended 30.9.06 30.9.05 31.3.06 Restated Restated Unaudited Unaudited Audited £ 000 £ 000 £ 000 Trade debtors 4,609 2,648 4,344 Amounts due on deferred payment terms 6,707 4,068 5,421 Other debtors 1,373 848 849 --------- -------- --------- 12,689 7,564 10,614 ========= ======== ========= 5. Reconciliation of operating profit to net cash inflow from operating activities 6 months ended Year ended 30.9.06 30.9.05 31.3.06 Restated Restated Unaudited Unaudited Audited £ 000 £ 000 £ 000 Operating profit 1,640 1,443 4,238 Share based payments 68 78 160 Depreciation 289 255 521 Amortisation of intangible assets 409 410 819 Gain on disposal of fixed assets (23) - - Increase in debtors (1,990) (2,432) (5,396) (Decrease)/increase in creditors (547) 520 20 --------- -------- --------- Net cash (outflow)/inflow from operating activities (154) 274 362 ========= ======== ========= 6. Analysis of change in net debt At 31.3.06 Inception of finance leases Cash flow At 30.9.06 £ 000 £ 000 £ 000 £ 000 Cash at bank and in hand 1,279 - (526) 753 Bank overdrafts (1,320) - (1,922) (3,242) Bank loan (2,173) - 438 (1,735) Finance leases (64) (296) 44 (316) -------- --------- -------- --------- Net debt (2,278) (296) (1,966) (4,540) ======== ========= ======== ========= 7. Availability of interim reports Interim reports will be sent to all shareholders on 1 December 2006. Copies ofthe interim report will be available for collection from the offices of KBC PeelHunt Ltd, 62 Threadneedle Street, London, EC2R 8HP, for a period of 1 month fromthe date of despatch. INDEPENDENT REVIEW REPORT TO IOMART GROUP PLC Introduction We have been instructed by the company to review the financial information forthe six months ended 30 September 2006 which comprises the consolidated profitand loss account, the consolidated balance sheet, the consolidated cash flowstatement, the reconciliation of net cash flow to movement in net funds andrelated notes 1 to 7. We have read the other information contained in theinterim report and considered whether it contains any apparent misstatements ormaterial inconsistencies with the financial information. Our responsibilities donot extend to any other information. This report is made solely to the company in accordance with guidance containedin APB Bulletin 1999/4 "Review of Interim Financial Information". Our reviewwork has been undertaken so that we might state to the company those matters weare required to state to them in a review report and for no other purpose. Tothe fullest extent permitted by law, we do not accept or assume responsibilityto anyone other than the company for our review work, for this report, or forthe conclusion we have formed. Directors' responsibilities The interim report including the financial information contained therein is theresponsibility of, and has been approved by, the directors. The directors arealso responsible for ensuring that the accounting policies and presentationapplied to the interim figures should be consistent with those applied inpreparing the preceding annual accounts except where any changes, and thereasons for them, are disclosed. Review work performed We conducted our review in accordance with guidance contained in Bulletin 1999/4"Review of Interim Financial Information" issued by the Auditing Practices Boardfor use in the United Kingdom. A review consists principally of making enquiriesof management and applying analytical procedures to the financial informationand underlying financial data and, based thereon, assessing whether theaccounting policies and presentation have been consistently applied unlessotherwise disclosed. A review excludes audit procedures such as tests ofcontrols and verification of assets, liabilities and transactions. It issubstantially less in scope than an audit performed in accordance withInternational Standards of Auditing (UK & Ireland) and therefore provides alower level of assurance than an audit. Accordingly, we do not express an auditopinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications thatshould be made to the financial information as presented for the six monthsended 30 September 2006. Grant Thornton UK LLPChartered AccountantsGlasgow 15 November 2006 Notes: A review does not provide assurance on the maintenance and integrity ofthe Group's website, including controls used to achieve this, and in particularon whether any changes may have occurred to the financial information sincefirst published. These matters are the responsibility of the directors but nocontrol procedures can provide absolute assurance in this area. Legislation in the United Kingdom governing the preparation and dissemination offinancial information differs from legislation in other jurisdictions. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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