iomart Group plc.
Report and
Financial Statements.
31 March 2006
.
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
CONTENTS
(cid:129) Officers and professional advisers
(cid:129) Chairman's statement
(cid:129) Chief executive officer's report
(cid:129) Corporate governance
(cid:129) Report of the board to the members on directors' remuneration
(cid:129) Directors' report
(cid:129) Statement of directors' responsibilities
(cid:129) Board of directors
(cid:129) Report of the independent auditors
(cid:129) Consolidated profit and loss account
(cid:129) Consolidated balance sheet
(cid:129) Company balance sheet
(cid:129) Consolidated cash flow statement
(cid:129) Notes to the accounts
(cid:129) Notice of annual general meeting
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P A G E 1
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
OFFICERS AND PROFESSIONAL ADVISERS
Directors
Nick Kuenssberg OBE, BA, FCIS, CCMI, FIoD
Angus MacSween
Sarah Haran
Stuart Forrest
Mark Hallam
Fred Shedden MA, LLB
Chris Batterham MA, FCA
Non executive chairman
Chief executive officer
Operations director
Technical sales director (web services)
Sales director (web services)
Non executive director
Non executive director
Secretary
Stewart Moir CA
Registered office
Lister Pavilion
Kelvin Campus
West of Scotland Science Park
Glasgow G20 0SP
Nominated adviser and broker
KBC Peel Hunt Ltd
111 Old Broad Street
London EC2N 1PH
Bankers
Bank of Scotland
235 Sauchiehall Street
Glasgow G2 3EY
Solicitors
McGrigors
Pacific House
70 Wellington Street
Glasgow G2 6SB
Independent auditors
Grant Thornton UK LLP
95 Bothwell Street
Glasgow G2 7JZ
Registrars
Capita IRG plc
Bourne House
34 Beckenham Road
Beckenham
Kent BR3 4TU
P A G E 2
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
CHAIRMAN’S STATEMENT
Highlights
(cid:129) Turnover £24.3m up by 46% (2005 - £16.6m)
(cid:129) Operating profit pre-amortisation £5.0m up by 120% (2005 - £2.3m)
(cid:129) Fully diluted underlying earnings per share 6.4p up by 88% (2005 - 3.4p)
(cid:129) Dividend proposed of 3p per share up by 140% (2005 - 1.25p)
(cid:129) 240,000 customers, numbers grown 20%
(cid:129) Financial director appointed
Statement
The year 2005/06 has seen further significant progress by your company with substantial growth in sales revenue and profits on the back of
an improving operational base.
Total revenue increased by 46% to £24.3m (2005 - £16.6m) with gross profit margins averaging 82%, operating profit pre-amortisation
increased by 120% to £5.0m (2005 - £2.3m) and fully diluted underlying earnings per share, excluding the charge for amortisation and the
deferred tax charge/credit relating to tax losses, increased by 88% to 6.4p (2005 - 3.4p).
This overall improvement was fuelled by excellent performances in the web services sector which serviced 478,000 domain names and
240,000 customers. Ufindus, with its web and directory service, opened a new sales office in Chorley and continued to generate organic
growth with over 46,000 businesses. Easyspace, the web-based domain name and hosting business, continued to justify the acquisition in
2004 with very good figures.
Netintelligence, the security enterprise business, fell short of expectations but has now been converted to a hosted model for marketing to the
SME sector as well. We remain convinced that this end-point security product will satisfy the requirements of the SME market in the short term
and the ISP sector in the medium term and will therefore continue to support it with additional resource.
Your board has proposed a 140% increase in dividend to 3p per share (2005 - 1.25p) payable on 29 September 2006 to shareholders on
the register at 11 August 2006 in line with our progressive dividend policy. Your board also confirms that it is the company's intention to
introduce a scrip dividend scheme to enable shareholders to elect to receive new ordinary shares of 1p each in the capital of the company
instead of cash dividends payable by the company. A circular containing full details of the proposed scheme is being sent to shareholders
along with this annual report. Shareholder approval for the introduction of the scrip dividend scheme will be sought at the forthcoming
annual general meeting (AGM) of the company, notice of which is included at the end of this report.
We are pleased to announce the appointment of Richard Logan, aged 49, BA, CA as finance director and look forward to his contribution.
On your behalf I recognise the commitment shown by Angus MacSween and his executive team and all the staff of the company and look
forward to another year of significant progress.
Nick Kuenssberg
Non-executive chairman
16 May 2006
P A G E 3
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
CHIEF EXECUTIVE OFFICER’S REPORT
The past year has been one of continuing progress on all fronts.
Revenues have risen by 46% and operating profit pre-amortisation has increased by 120%.
UfindUs, our directory service where we provide a web and directory presence to the small and micro business sector, has continued to be
our main driver of growth. The growing penetration of broadband into the UK market means more and more people are using the web to
source local products and services. UfindUs is gaining users with over 2 million searches per month being carried out on the directory and an
additional 2 million visits per month direct to our customers' websites. More and more of our customers are extolling the amount of business
that being on UfindUs brings them. We are also seeing a growing source of revenue from improving and deepening our existing 46,000
customers' web presence with over 4,000 of them now taking advantage of our web design services.
Easyspace Limited is our web based domain name and hosting business. This is a marketing led business which attracts existing and new
customers to its web site for a self-serve range of web products. Easyspace has had a good year following a period of integration and is now
recognised as one of the UK's leading hosting companies. We provide services to 194,000 customers and continue to lead with new products
and services, such as dedicated servers, hosted mail and security.
Netintelligence has continued to make progress although more slowly than anticipated. We have recently launched our new version which has
a full suite of functionality in a very simple to use, simple to deploy and simple to manage hosted format. There is a growing acceptance that
as the world goes mobile there is a requirement to defend security at the end point, be it a desktop in a home office or a laptop in a coffee
shop. The ISP community has been slow to adopt security products while they remain focussed on broadband land-grab at any price, and
we have refocused on the SME market via our proven direct sales model. The fact that we can demonstrate the product live with potential
customers is increasing the number of trials significantly.
We remain convinced that, with the right sales teams in place and appropriate marketing support, Netintelligence sales will grow significantly.
Our business models require further fine tuning and investment in systems, marketing and co-location facilities and we will develop additional
innovative strategies to increase average annual revenue and total customer numbers. We will focus on the sustainability of your company as
well as consider opportunities for organic growth, acquisition and partnership in the growing and consolidating web-services sector.
Results
Turnover for the year of £24.3m is 46% higher than last year and gross margin at 82% overall is consistent with our expectations.
Administrative expenses were £15.5m against £11.3m last year. The current year's figure includes a full year's charge for the Blackpool sales
office opened last year, costs of larger premises in both Glasgow and Lancaster and the new Chorley sales office opened during the year,
together with a full year's charge for amortisation of the goodwill arising on the acquisition of Easyspace Limited. In addition marketing
expenditure, including a new television advertising campaign, was increased significantly to promote the Ufindus directory.
A total of £0.6m of capital expenditure was incurred during the year, as the group continued the programme of replacement of older more
expensive equipment and purchased additional servers to support the increased levels of business during the year, together with the costs of
equipping the new Chorley sales office.
Group pre-tax trading profit excluding amortisation was £5.0m compared with £2.3m in the previous year, a rise of over 120%.
Operating profit was £4.4m (2005 - £1.8m) and the profit for the year before taxation was £4.2m (2005 - £1.7m). There is no liability to
corporation tax on the results for the year and research and development tax credits totalling £0.1m are due to be refunded. A charge of
£0.3m has been made for deferred tax reflecting the reduction in the amount of tax losses available within one of the subsidiary companies
for offset against future expected taxable profits.
This has resulted in a profit after taxation for the year of £4.0m (2005 - £3.1m after a tax credit of £1.4m).
Basic earnings per share for the year were 5.2p compared to 4.4p per share for the previous year and fully diluted earnings per share were
5.0p. Fully diluted underlying earnings per share, excluding the charge for amortisation and the deferred tax charge/credit relating to tax
losses, were 6.4p (2005 - 3.4p).
P A G E 4
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
CHIEF EXECUTIVE OFFICER’S REPORT (CONTINUED)
The directors have proposed a dividend for the year of 3p per share payable on 29 September 2006 to shareholders on the register at 11
August 2006 in line with our progressive dividend policy. The dividend will be payable in cash or as a scrip dividend. The price of each
new Ordinary Share will be calculated based on the average of the middle market quotation of an Ordinary Share on the market on which
the Ordinary Shares are listed or quoted on each of the first five consecutive dealing days on which the relevant shares are quoted "ex" the
relevant dividend.
Cash and borrowings
Cash balances at 31 March 2006 were £1.3m. Borrowings under finance leases amounted to £0.1m, bank loans totalled £2.2m and
overdrafts totalled £1.3m. The group had no other significant debt outstanding.
Trade debtors at £4.3m (2005 - £1.9m) increased disproportionately as a result of both increased sales and delayed receipts from credit
card processing following the introduction of chip and pin technology, which impacted on the group's collection of recurring payments. The
directors do not consider this to be an ongoing issue and measures have been put in place to address this situation.
Financial instruments
The group's financial instruments comprise cash and liquid resources, bank loans and finance leases together with various items such as trade
debtors and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to provide finance for
the group's operations. The main risk to the group is interest rate risk arising from floating rate interest rates. The group's borrowings at 31
March 2006 comprise a bank loan and overdrafts of £3.5m and finance leases totalling £0.1m. The interest rate payable on the bank loan
and overdrafts is 2.5% above the base rate of Bank of Scotland plc. The interest rate at 31 March 2006 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 at 8.0%. All transactions
of the holding company and the UK subsidiaries are in sterling and the group does not use derivative instruments.
Financial Position
The group's financial position remains strong with sufficient resources to fund the current business plans.
International Financial Reporting Standards
The AIM Rules require all AIM companies to adopt International Accounting Standards (IAS) for financial years commencing on or after 1
January 2007 and allow for early adoption. The board propose to adopt IAS from 1 April 2007.
The company has established a project team to plan for and achieve a smooth transition to IFRS. The project team is looking at all
implementation aspects, including changes to accounting policies, systems impacts and the wider business issues that may arise from such a
fundamental change and we expect that the group will be fully prepared for the transition.
Prospects
Our three lines of business are all in markets that are real, growing and changing. They also share a technical infrastructure which provides
efficiencies and synergies. We own our intellectual property in each line of business and all have high gross margins. All our pricing is now on
a recurring revenue model providing increasing visibility of future revenues.
We look forward to continuing the growth in each of these businesses and will consider opportunities to enhance shareholder value in each of
these lines of business through organic growth, acquisition and partnership.
Angus MacSween
Chief executive officer
16 May 2006
P A G E 5
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
CORPORATE GOVERNANCE
While the company is listed on the Alternative Investment Market it is not required to comply with the provisions of the Combined Code.
However, the board is committed to ensuring that proper standards of corporate governance operate and has established governance
procedures and policies that are considered appropriate to the nature and size of the group. Your board considers that at this stage in the
group's development, the expense of full compliance with the Combined Code and with the further provisions of the Revised Combined Code
is not appropriate.
Directors and the board
The board directs the group's activities in an effective manner through regular monthly board meetings and monitors performance through
timely and relevant reporting procedures. Where it deems it necessary the board requests reports on specific areas outwith the normal
reporting regime. All directors have access to advice from the company secretary and independent professionals at the company's expense.
Training is available for new and other directors as necessary.
The board at present comprises four executive and three non-executive directors. The size of the board is considered to be appropriate to the
current size and character of the group. The non-executive directors are independent of management and any business or other relationships
which could interfere with the exercise of their independent judgement. The roles of chairman and chief executive are separate appointments
and it is board policy that this will continue.
The board has established three committees, the audit committee, the remuneration committee and the nominations committee. Membership
of both the audit committee and the remuneration committee is exclusively non-executive while membership of the nominations committee
comprises the chairman, two non-executive directors and the chief executive officer. Nick Kuenssberg is currently chairman of the audit and
nominations committees and Fred Shedden of the remuneration committee. Chris Batterham will take over as chairman of the audit
committee with effect from the annual general meeting.
A separate report on directors' remuneration is set out on pages 8 to 11, this to be approved by the shareholders at the annual general
meeting.
Under the company's articles of association, the nearest number to one third of the board shall retire each year by rotation.
Accountability and audit
The board considers that the annual report presents a balanced and understandable assessment of the group's performance and prospects.
The audit committee has written terms of reference setting out its authority and duties and has meetings, at which the executive directors also
have the right to attend, at least three times a year with the external auditors.
The audit committee reviews the independence and objectivity of the external auditors. The committee reviews the nature and amount of the
non-audit work undertaken by the auditors to satisfy itself that there is no effect on their independence. The committee is satisfied that Grant
Thornton UK LLP are independent.
Risk management
The executive carried out a risk management workshop, the results of which were reported to and discussed at the audit committee and the
board, a process supported by Grant Thornton. The resulting risk register was reviewed and a number of mitigating policies were
implemented, a procedure that will be repeated on an annual basis.
Going Concern
On the basis of a review of facilities available to the group together with a review of forecasts, the directors have a reasonable expectation
that the group has adequate resources to continue in operational existence for the foreseeable future. For this reason they continue to adopt
the going concern basis in preparing the financial statements.
P A G E 6
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
CORPORATE GOVERNANCE (CONTINUED)
Internal financial control
The group has established policies covering the key areas of internal financial control and the appropriate procedures, controls, authority
levels and reporting requirements which must be applied throughout the group. The key procedures that have been established in respect of
internal financial control are as follows:
(cid:129) Financial reporting: there is in place a comprehensive system of financial reporting based on the annual budget which the board
approves. The results for the group as a whole and each business sector are reported monthly, along with an analysis of key
variances. Year-end forecasts are updated on a regular basis.
(cid:129) Investment appraisal: applications for capital expenditure are made in a prescribed format which places emphasis on the commercial
and strategic as well as the financial justification. All significant projects require specific board approval.
No system can provide absolute assurance against material misstatement or loss but the group's systems are designed to provide reasonable
assurance as to the reliability of financial information, ensuring proper control over income and expenditure, assets and liabilities.
Relations with shareholders
The company values the views of its shareholders and recognises their interest in the group's strategy and performance, board membership
and quality of management.
The AGM is used to communicate with all shareholder and investor groups, and they are encouraged to participate. The chairmen of the
audit, remuneration and nominations committees are available to answer questions. Separate resolutions are proposed on each issue so that
they can be given proper consideration and there are resolutions to receive the annual report and accounts and the report on directors'
remuneration. The company counts all proxy votes and will indicate the level of proxies lodged on each resolution, after it has been dealt with
by a show of hands.
The company uses its website, www.iomart.com, as a means of providing information to shareholders and other related parties. The
company's annual report and accounts, interim reports and other relevant announcements are maintained on the website.
P A G E 7
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
REPORT OF THE BOARD TO THE MEMBERS ON DIRECTORS’ REMUNERATION
The remuneration committee has given consideration to the Combined Code issued by the Financial Services Authority in framing its
remuneration policy. As the company is listed on the Alternative Investment Market, it is not required to comply with the provisions of Schedule
7a of the Companies Act 1985. The following disclosures are voluntary as is the resolution (8) to approve this report at the annual general
meeting.
Remuneration Committee
The remuneration committee determines, on behalf of the board, the group's policy for executive remuneration and the individual
remuneration packages for executive directors. In setting the group's remuneration policy, the remuneration committee considers a number of
factors, including the following:
(cid:129) salaries and benefits available to executive directors of comparable companies;
(cid:129) the need to attract and retain executives of an appropriate calibre; and
(cid:129) the continued commitment of executives to the group's success through appropriate incentive schemes.
The committee meets at least three times each year.
Remuneration of executive directors
The remuneration packages of the executive directors comprise the following elements:
(cid:129) Base salary
The remuneration committee sets base salaries to reflect responsibilities and the skill, knowledge and experience of the individual.
The executive directors do not receive directors' fees.
(cid:129) Bonus scheme
The executive directors are eligible to receive a bonus on top of basic salary dependent on individual and group performance at the
discretion of the remuneration committee. The performance conditions are set individually for each director to ensure they are relevant
and stretching.
(cid:129) Car allowance and other benefits
The executive directors are entitled to a car allowance. No other benefits are provided.
(cid:129) Pensions
Pension contributions to individuals' personal pension arrangements are payable by the group at the rate of twice the contribution
made by the director subject to a maximum employer contribution of 10% of basic salary.
All the executive directors are engaged under service contracts which require a notice period of 6 or 12 months.
Remuneration of non-executive directors
The fees paid to the non-executive directors include a basic fee and additional fees in respect of committee chairmanships as determined by
the board. They are not entitled to receive any bonus or other benefits.
Non-executive directors' letters of appointment are on a six month rolling basis.
P A G E 8
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
REPORT OF THE BOARD TO THE MEMBERS ON DIRECTORS’ REMUNERATION (CONTINUED)
Directors’ remuneration
Details of individual directors’ emoluments for the year are as follows:
Name of director
Angus MacSween
Sarah Haran
Stuart Forrest (appointed 20 June 2005)
Mark Hallam (appointed 20 June 2005)
Nick Kuenssberg
Fred Shedden
Chris Batterham (appointed 14 September 2005)
Bill Dobbie (resigned 20 June 2005)
Salary
or fees
£
130,000
82,500
48,750
48,750
35,000
25,000
12,375
5,625
Bonus
£
91,000
90,775
110,955
110,955
-
-
-
-
Year
ended
31 March
2006
Total
£
241,200
188,725
159,705
159,705
35,000
25,000
12,375
5,625
Pension
Benefits contributions
£
13,000
8,250
-
-
-
-
-
-
£
7,200
7,200
-
-
-
-
-
-
Year
ended
31 March
2005
Total
£
207,200
175,480
-
-
27,500
21,250
-
20,625
Directors' interests in shares
The interests of the directors in the shares of the company at 31 March 2006, together with their interests at 1 April 2005 or the date of
appointment were as follows:
Name of director
Angus MacSween
Sarah Haran
Stuart Forrest (appointed 20 June 2005)
Mark Hallam (appointed 20 June 2005)
Nick Kuenssberg
Fred Shedden
Chris Batterham (appointed 14 September 2005)
Number of ordinary shares
31 March 2006
At 1 April 2005
or date of
appointment
18,395,500
246,955
1,600,000
1,240,780
910,010
636,122
25,000
18,395,500
246,955
1,600,000
1,240,780
881,777
603,222
-
P A G E 9
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
REPORT OF THE BOARD TO THE MEMBERS ON DIRECTORS REMUNERATION (CONTINUED)
Directors' interests in share options
The interests of the directors at 31 March 2006 in options over the ordinary shares of the company were as follows:
Name of director
At 1 April
2005 or
date of
appointment
Granted
in year
At 31
Exercised March 2006
Exercise
Date from
which
price exerciseable Expiry date
Angus MacSween
1,750,000
12,302
1,750,000
12,302
78.5p
76p
17/11/07
1/3/09
17/11/14
1/9/09
Sarah Haran
Stuart Forrest
Mark Hallam
1,750,000
12,302
-
1,762,302
159,746
159,747
159,747
100,000
133,333
133,333
133,334
850,000
159,746
159,747
159,747
100,000
68,333
133,333
133,334
850,000
4,921
(65,000)
4,921
1,829,240
4,921
(65,000)
1,769,161
133,333
133,333
133,334
1,000,000
12,302
133,333
133,333
133,334
1,000,000
12,302
1,400,000
12,302
-
1,412,302
133,333
133,333
133,334
1,000,000
12,302
133,333
133,333
133,334
1,000,000
12,302
1,400,000
12,302
-
1,412,302
5p
5p
5p
9p
6.25p
6.25p
6.25p
78.5p
76p
6.25p
6.25p
6.25p
78.5p
76p
6.25p
6.25p
6.25p
78.5p
76p
11/5/00
11/2/01
11/2/02
27/2/05
2/7/04
2/7/05
2/7/06
17/11/07
1/3/09
14/12/08
14/12/08
14/12/08
27/2/12
2/7/13
2/7/13
2/7/13
17/11/14
1/9/09
2/7/04
2/7/05
2/7/06
17/11/07
1/3/09
2/7/13
2/7/13
2/7/13
17/11/14
1/9/09
2/7/04
2/7/05
2/7/06
17/11/07
1/3/09
2/7/13
2/7/13
2/7/13
17/11/14
1/9/09
P A G E 1 0
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
REPORT OF THE BOARD TO THE MEMBERS ON DIRECTORS REMUNERATION (CONTINUED)
The options granted during the year at 76p were granted under the company's savings related share option scheme. The options granted at
78.5p vest over a three year period subject to demanding performance criteria. All other options have already vested.
No other directors have been granted share options in the shares of the company or other group companies. The market price of the
company's shares at the end of the financial period was 87p and the range of prices during the period was between 81.5p and 140p.
By order of the board
Fred Shedden
Chairman, Remuneration committee
16 May 2006
P A G E 1 1
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
DIRECTORS’ REPORT
The directors present their annual report on the affairs of the group, together with the financial statements and auditors' report, for the year
ended 31 March 2006.
Principal activity
The principal activity of the group is the provision of internet services.
Business review
The chairman's statement and the chief executive officer's report contain a review of trading.
The company operates primarily in the internet arena, where the pace of change in technology, and the rapid rise of new ways of delivering
products and services place an element of uncertainty over the future prospects of any internet business. We endeavour to keep abreast of
trends in all our areas of business, to anticipate major shifts in business models, and to adapt as early and quickly as we can to the
considerable opportunities afforded by the growth and changing patterns of internet usage.
Most of our revenues are collected online via credit card and direct debit. There are growing concerns from banks and credit card companies
around the volume of transactions going on line, and the risk of fraud attached to them. Whilst the services we provide are all service based,
and do not lend themselves to serious fraud, we are subject to the ever tightening rules and regulations set by these financial institutions
around transacting via credit cards particularly.
The company has key performance indicators around sales growth, gross margin and customer numbers which are all closely monitored.
The principal indicators for the current and the previous year are:
Turnover growth
Gross margin
Number of customers
Year ended
31 March
2006
46%
82%
240,000
Year ended
31 March
2005
87%
79%
200,000
Financial instruments
The group's financial instruments comprise cash and liquid resources, bank loans and finance leases together with various items such as trade
debtors and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to provide finance for
the group's operations. The main risk to the group is interest rate risk arising from floating rate interest rates. The group's borrowings at 31
March 2006 comprise a bank loan and overdrafts of £3.5m and finance leases totalling £0.1m. The interest rate payable on the bank loan
and overdrafts is 2.5% above the base rate of Bank of Scotland plc. The interest rate at 31 March 2006 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 at 8.0%. All transactions
of the holding company and the UK subsidiaries are in sterling and the group does not use derivative instruments. Additional information on
financial instruments is included in Note 27.
Dividends
The directors have proposed a dividend of 3p per share for the year ended 31 March 2006 (2005 - 1.25p). Subject to shareholders
approving the introduction of the scrip dividend scheme referred to earlier in this report and to the terms and conditions of the scheme, it is
intended that shareholders be entitled to elect to receive new ordinary shares of 1p each in the capital of the company instead of cash
dividends.
Directors and their interests
The present membership of the board is set out on page 2. In accordance with the company's articles of association, Chris Batterham, Sarah
Haran and Nick Kuenssberg will offer themselves for re-election at the forthcoming annual general meeting.
Details of directors' interests in the company's shares are set out in the report of the board to the members on directors' remuneration on
pages 8 to 11.
P A G E 1 2
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
DIRECTORS’ REPORT (CONTINUED)
Substantial shareholdings
At 31 March 2006 the following interests in 3% or more of the issued ordinary share capital had been notified to the company:
Angus MacSween
Merrill Lynch Pensions Nominees
Goldman Sachs
Majedie Asset Management
Pension Services Limited
Noble Grossart Investments Limited
New Star Select Opportunities Fund
Universities Superannuation Scheme
Bill Dobbie
Number of ordinary shares
18,395,500
Percentage held
23.8%
7,559,796
4,654,535
4,586,100
3,925,000
2,925,000
2,500,000
2,490,000
2,320,000
9.8%
6.0%
5.9%
5.1%
3.8%
3.2%
3.2%
3.0%
Employee involvement
A newsletter is sent to all staff providing information on developments within the group including updates on the group's strategy and details
of new products and services provided by the group.
Staff are eligible to receive share options in the company under the group's share option schemes and it is the board's policy to make specific
option awards as appropriate to attract and retain the best available people.
Employment of disabled persons
Full and fair consideration is given to applications for employment made by disabled persons having regard to their particular aptitudes and
abilities. Appropriate training is arranged for disabled persons, including retraining for alternative work of employees who become disabled,
to promote their career development within the organisation.
Supplier payment policy and practice
The company and its subsidiaries agree the terms of payment when negotiating the terms and conditions for their transactions with their
suppliers. Payment is made in compliance with those terms, subject to the terms and conditions of the relevant transaction having been met
by the supplier. Trade creditor days of the group at 31 March 2006, calculated in accordance with the requirements of the Companies Act
1985, were 35 days (2005 - 54 days), and of the company were 90 days (2005 - 14 days). This represents the ratio, expressed in days,
between the amounts invoiced to the company in the year by its suppliers and the amounts due, at the year end, to trade creditors falling due
for payment within one year.
Political and charitable donations
The group did not make any charitable donations during the year (2005 - £7,000). The group made no political donations in either the
current or the previous year.
Awareness of relevant audit information
So far as each of the directors, at the time the report is approved, is aware:
(cid:129) there is no relevant audit information of which the auditors are unaware, and
(cid:129) the directors have taken all the steps they ought to have taken to make themselves aware of any relevant audit information and to
establish that the auditors are aware of that information.
P A G E 1 3
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
DIRECTORS’ REPORT (CONTINUED)
Auditors
Grant Thornton UK LLP have expressed their willingness to continue in office as auditors and a resolution to reappoint them will be proposed
at the forthcoming annual general meeting.
By order of the board
Stewart Moir
Company secretary
16 May 2006
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
Company law in the United Kingdom requires the directors to prepare financial statements for each financial year which give a true and fair
view of the state of affairs of the company and the group as at the end of the financial year and of the profit or loss of the group for that
period. In preparing those financial statements, the directors are required to:
(cid:129) select suitable accounting policies and then apply them consistently;
(cid:129) make judgements and estimates that are reasonable and prudent;
(cid:129) state whether applicable accounting standards have been followed subject to any material departures disclosed and explained in
the financial statements; and
(cid:129) prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group will continue in
business.
The directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial
position of the company and to enable them to ensure that the financial statements comply with the Companies Act 1985. They are also
responsible for the group's system of internal financial control, for safeguarding the assets of the group and hence for taking reasonable steps
for the prevention and detection of fraud and other irregularities.
P A G E 1 4
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
BOARD OF DIRECTORS
Angus MacSween
49, appointed 2000; after a short service commission in the Royal Navy, Angus started his first business selling telephone systems in 1984.
Since selling this first business he has established, grown and sold 5 profitable businesses in the telephony and internet sector. Following the
sale of Teledata Limited, the UK's leading telephone information services company to Scottish Telecom plc, Angus spent two years on the
executive of Scottish Telecom plc where he was responsible for the development of the company's Internet division. In December 1998 Angus
founded iomart. Angus is non-executive chairman of Moneyquest UK Limited.
Sarah Haran
40, appointed 2000; Sarah has spent her career implementing and managing operations centres for large corporations such as Microsoft
Inc, Compaq Inc, Scottish Power plc and Prestel Limited. She joined iomart in 1998, from Scottish Telecom plc and has been responsible for
developing the day-to-day business processes and technical operations to support the group's customer base.
Stuart Forrest
39, appointed 2005; Stuart began his career in financial services in the North West of England. He was involved in several new starts
alongside Mark Hallam before they jointly formed Business Serve Plc, a business only internet service provider, in 1995. Stuart was operations
director of Business Serve until its successful sale after rapid growth in May 2000. Stuart joined iomart in March 2002 as technical sales
director for webservices, now UFindUs.
Mark Hallam
40, appointed 2005; Mark's early career was in retail management in the North West of England. He then began a number of small
businesses all within the direct sales sector. In 1995 Mark and Stuart Forrest started Business Serve Plc, a business only internet service
provider. This company achieved rapid growth and was sold in May 2000. Mark stayed on as sales director until July 2001 when he left to
pursue further internet related opportunities and joined iomart in March 2002 as sales director for webservices, now UFindUs.
Nick Kuenssberg
63, appointed 2000; currently chairman of Canmore Partnership Ltd and director of Chamberlin & Hill plc, RingProp plc and Amino
Technologies plc, and previously chairman of Dynacast International Ltd, Stoddard International plc, Keronite PLC, GAP Group Ltd,
ScotlandIS, IoD Scotland and others, director of Coats Viyella plc, Dawson International plc, Scottish Power plc, Standard Life Assurance
Company and other companies and visiting professor at Strathclyde Business School. Nick is also chairman of The Glasgow School of Art
and of Scottish Networks International and deputy chairman of the Scottish Environment Protection Agency.
Fred Shedden
61, appointed 2000; chairman of Halladale Group plc; director of Murray International Trust plc, and Equitable Life Assurance Society;
member of the Board of Glasgow Housing Association Limited; deputy chairman of The Glasgow School of Art; formerly senior partner of
McGrigors.
Chris Batterham
51, appointed 2005; Chris was finance director of Unipalm plc, the first internet company to IPO and stayed with the company for 5 years
following its takeover by UUnet. He was CFO of Searchspace until 2005 and is currently a non executive director of SDL plc, DRS Group
plc, The Risk Advisory Group and The Sporting Exchange Limited (Betfair). Chris has also served on the boards of Staffware plc, DBS
Management plc and The Invesco Techmark Enterprise Trust plc.
P A G E 1 5
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
SENIOR MANAGEMENT
Angus MacSween
Chief executive officer
Stuart Forrest
Mark Hallam
Sarah Haran
Technical sales director, webservices
Sales director, webservices
Operations director
Stewart Moir CA
Financial controller and company secretary
Bill Strain
Phil Worms
Chief technology officer, Netintelligence
Director of marketing, Netintelligence
P A G E 1 6
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF IOMART GROUP PLC
We have audited the group and parent company financial statements (the ''financial statements'') of iomart Group plc for the year ended 31
March 2006 which comprise the principal accounting policies, the group profit and loss account, the group and company balance sheets, the
group cash flow statement, and notes 1 to 27. These financial statements have been prepared under the accounting policies set out therein.
This report is made solely to the company's members, as a body, in accordance with Section 235 of the Companies Act 1985. Our audit
work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditors'
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the
company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditors
The directors' responsibilities for preparing the Annual Report and the financial statements in accordance with United Kingdom law and
Accounting Standards (United Kingdom Generally Accepted Accounting Practice) are set out in the Statement of Directors' Responsibilities.
Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International
Standards on Auditing (UK and Ireland).
We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with
the Companies Act 1985. We also report to you if, in our opinion, the Directors' Report is not consistent with the financial statements, if the
company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if
information specified by law regarding directors' remuneration and other transactions is not disclosed.
We read other information contained in the Annual Report, and consider whether it is consistent with the audited financial statements. This
other information comprises only the directors' report, the chairman's statement, the chief executive officer's report, the corporate governance
statement and directors' remuneration report. We consider the implications for our report if we become aware of any apparent misstatements
or material inconsistencies with the financial statements. Our responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An
audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes
an assessment of the significant estimates and judgments made by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the group's and company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide
us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by
fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the
financial statements.
P A G E 1 7
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF IOMART GROUP PLC
Opinion
In our opinion:
(cid:129) the financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting Practice, of the
state of the group's and the parent company's affairs as at 31 March 2006 and of the group's profit for the year then ended;
(cid:129) the financial statements have been properly prepared in accordance with the Companies Act 1985; and
(cid:129) the information given in the directors' report is consistent with the financial statements for the year ended 31 March 2006.
GRANT THORNTON UK LLP
REGISTERED AUDITORS
CHARTERED ACCOUNTANTS
Glasgow
16 May 2006
The maintenance and integrity of the iomart Group plc website is the responsibility of the directors: the work carried out by the auditors does
not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to
the financial statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination of the financial statements may differ from legislation in other
jurisdictions.
P A G E 1 8
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 March 2006
TURNOVER
Cost of sales
Gross profit
Administrative expenses
Restructuring expenses
Total administrative expenses
OPERATING PROFIT
Net interest
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
Tax (charge)/credit on profit on ordinary activities
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION
FOR THE YEAR
Equity minority interests
PROFIT FOR THE FINANCIAL YEAR
Earnings per ordinary share (pence)
Basic
Diluted
Note
3
5
8
20
10
10
31 March
2006
£'000
Restated
31 March
2005
£'000
24,306
16,603
(4,361)
(3,513)
19,945
13,090
(15,547)
-
(11,176)
(113)
(15,547)
(11,289)
4,398
1,801
(214)
(77)
4,184
1,724
(170)
1,415
4,014
-
3,139
(11)
4,014
3,128
5.2p
5.0p
4.4p
4.3p
There have been no recognised gains and losses attributable to the shareholders other than the profit for the current financial year and
preceding financial year and, accordingly, no statement of total recognised gains and losses is shown.
P A G E 1 9
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
CONSOLIDATED BALANCE SHEET
31 March 2006
FIXED ASSETS
Intangible assets
Tangible assets
CURRENT ASSETS
Debtors
Deferred tax asset
Cash at bank and in hand
Note
11
12
14
18
2006
£'000
Restated
2005
£'000
13,470
918
14,289
885
14,388
15,174
10,614
945
1,279
5,256
1,200
2,033
12,838
8,489
CREDITORS: amounts falling due within one year
15
(7,167)
(5,933)
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
5,671
2,556
20,059
17,730
CREDITORS: amounts falling due after more than one year
16
(1,373)
(2,201)
NET ASSETS
CAPITAL AND RESERVES
Called up share capital
Capital redemption reserve
Share premium account
Profit and loss account
TOTAL EQUITY SHAREHOLDERS' FUNDS
19
20
20
20
21
These financial statements were approved by the board of directors on 16 May 2006.
Signed on behalf of the board of directors
18,686
15,529
773
1,200
6,203
10,510
767
1,200
6,108
7,454
18,686
15,529
Angus MacSween
Director and chief executive officer
P A G E 2 0
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
COMPANY BALANCE SHEET
31 March 2006
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors
Cash at bank and in hand
Note
13
14
2006
£'000
Restated
2005
£'000
16,156
16,156
14,305
150
8,515
154
14,455
8,669
CREDITORS: amounts falling due within one year
15
(9,184)
(4,925)
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
5,271
3,744
21,427
19,900
CREDITORS: amounts falling due after more than one year
16
(1,307)
(2,171)
NET ASSETS
CAPITAL AND RESERVES
Called up share capital
Capital redemption reserve
Share premium account
Profit and loss account
TOTAL EQUITY SHAREHOLDERS' FUNDS
19
20
20
20
21
These financial statements were approved by the board of directors on 16 May 2006.
Signed on behalf of the board of directors
20,120
17,729
773
1,200
6,203
11,944
767
1,200
6,108
9,654
20,120
17,729
Angus MacSween
Director and chief executive officer
P A G E 2 1
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 March 2006
Net cash inflow from operating activities
Returns on investments and servicing of finance
Taxation
Capital expenditure and financial investment
Acquisitions and disposals
Equity dividends paid
Cash outflow before financing
Financing
Decrease in cash in the year
Reconciliation of net cash flow to movement in net (debt)
Decrease in cash in the year
Cash inflows/(outflows) from debt and lease financing
Change in net (debt) from cash flows
Opening net (debt)/funds
Inception of finance leases
Closing net (debt)
Note
22
23
23
23
23
23
23
24
24
24
P A G E 2 2
w w w . i o m a r t . c o m
31 March
2006
£'000
Restated
31 March
2005
£'000
362
1,057
(214)
(94)
123
4
(478)
(765)
(34)
(4,103)
(958)
-
(1,199)
(3,901)
(875)
2,909
(2,074)
(992)
(2,074)
(992)
976
(2,846)
(1,098)
(3,838)
(1,104)
(76)
2,734
-
(2,278)
(1,104)
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
1. ACCOUNTING POLICIES
The financial statements are prepared in accordance with applicable United Kingdom accounting standards.
Changes in accounting policies
The particular accounting policies adopted are described below and have remained unchanged from the previous year apart from the
adoption of the following Financial Reporting Standards:
FRS 21 'Events After the Balance Sheet Date'
The adoption of FRS 21 has resulted in a change in accounting policy in respect of proposed equity dividends. If the company declares
dividends to the holders of equity instruments after the balance sheet date, the company does not recognise those dividends as a liability
at the balance sheet date. Previously where these equity dividends were proposed after the balance sheet date but before authorisation of
the financial statements they were recorded as liabilities at the balance sheet date. The aggregate amount of equity dividends proposed
before approval of the financial statements, which have not been shown as liabilities at the balance sheet date, are disclosed in the notes
to the financial statements. The financial effect of this change in accounting policy is set out in note 7.
FRS 22 'Earnings per Share'
FRS 22 has been adopted and there has been no impact on the calculation of earnings per share.
FRS 25 'Financial Instruments -Presentation'
The adoption of the presentation requirements of FRS 25 has had no impact on the financial statements.
Accounting convention
The financial statements are prepared under the historical cost convention.
Basis of consolidation
The consolidated financial statements incorporate the financial statements of the company and all its subsidiaries.
Revenue recognition
Revenue from the sale of software licences, domain registration and search engine submission is recognised once the licence or service
has been delivered and all significant obligations in relation to the sale have been fulfilled. Revenue from one-off services is recognised
on completion of the supply of the service.
Revenue from ongoing services, including mail filter, software maintenance, webhosting and colocation, is recognised on a straight line
basis over the life of the contract with the unearned portion of the revenue being included in creditors as deferred revenue.
Acquisitions and disposals
On the acquisition of a business fair values are attributed to the group's share of net separable assets. Where the cost of acquisition
exceeds the fair values attributable to such net assets, the difference is treated as purchased goodwill and is capitalised in the group
balance sheet in the year of acquisition.
The results and cash flows relating to a business are included in the consolidated profit and loss account and the consolidated cash flow
statement from the date of acquisition or up to the date of disposal.
Goodwill
Purchased goodwill arising on the acquisition of a business is capitalised in the year in which it arises and amortised over the directors'
estimate of its useful economic life, which is between 7 and 20 years.
P A G E 2 3
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
1. ACCOUNTING POLICIES (CONTINUED)
Tangible fixed assets
Fixed assets are stated at historic cost.
Depreciation is provided on cost in equal annual installments over the estimated useful economic lives of the assets. The rates of
depreciation are as follows:
Short-term leasehold improvements
Computer software and equipment
Office equipment
25% per annum
Between 20% and 50% per annum
25% per annum
Investments
Investments held as fixed assets are stated at cost less provision for any permanent diminution in value.
Deferred taxation
Deferred tax is provided in full on timing differences which result in an obligation at the balance sheet date to pay more tax, or a right to
pay less tax, at a future date, at rates expected to apply when they crystallise based on current tax rates and law. Timing differences arise
from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included
in financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be
recovered. Deferred tax assets and liabilities are not discounted.
Deferred grants
Government grants in respect of capital expenditure are credited to a deferred income account and are released to the profit and loss
account by equal annual instalments over the expected useful economic lives of the relevant assets.
Government grants of a revenue nature are credited to the profit and loss account in the same period as related expenditure.
Leases
Assets obtained under finance leases, which transfer substantially all the risks and rewards of ownership, are capitalised at their fair value
on acquisition and depreciated over their estimated useful economic lives. The finance charges are allocated over the period of the lease
in proportion to the capital element outstanding.
Operating lease rentals are charged to the profit and loss account in equal annual amounts over the lease term.
Foreign currency transactions
All foreign currency transactions are translated at the rate of exchange ruling on the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated at the rate of exchange ruling on the balance sheet date. The group does not have any
non-monetary assets or liabilities denominated in foreign currencies. All exchange differences are taken to profit and loss account when
they arise.
Financial instruments
Financial assets are recognised in the balance sheet at the lower of cost and net realisable value. Provision is made for dimunition in
value where appropriate.
Income and expenditure on financial instruments is recognised on the accruals basis and credited or charged to the profit and loss
account in the financial period to which it relates.
Pension scheme arrangements
The group operates a stakeholder pension scheme and contributes to a number of personal pension schemes on behalf of executive
directors and some senior employees. No other post retirement benefits are provided to employees. Pension costs are charged to the
profit and loss account in the period to which they relate.
Development expenditure
Development expenditure is charged to the profit and loss account as incurred.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
2. SEGMENTAL ANALYSIS
The analysis of turnover by destination is as follows:
Geographical analysis
United Kingdom
European Union
USA
Other
Year
ended 31
March
2006
£’000
23,529
214
337
226
Restated
Year
ended 31
March
2005
£’000
16,245
126
140
92
24,306
16,603
The analysis of profit before tax and net assets by geographical segment has not been disclosed as over 95% of the group's activities are
undertaken in the UK.
3. OPERATING PROFIT
Operating profit is after charging/(crediting)
Depreciation of tangible fixed assets:
Owned assets
Leased assets
Amortisation of intangible fixed assets
Rentals under operating leases
Land and buildings
Plant and machinery
Amortised deferred grant income
Auditors' remuneration
- company audit fees
- group audit fees
- taxation
- corporate finance transactions
- interim review
- preparation of financial statements of subsidiaries
- advice re share schemes
- advice re risk management assessment
Year
ended 31
March
2006
£’000
Restated
Year
ended 31
March
2005
£’000
513
8
819
491
258
(48)
16
20
13
2
3
-
4
5
405
7
547
256
437
(60)
12
19
11
-
11
19
-
-
P A G E 2 5
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
4. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
Directors' emoluments
Aggregate emoluments
Pension contributions to personal money purchase schemes
Emoluments payable to the highest paid director are as follows:
Aggregate emoluments
Pension contributions to personal money purchase schemes
Year
ended 31
March
2006
£’000
806
21
228
13
Restated
Year
ended 31
March
2005
£’000
431
21
195
12
During the year the company made personal pension contributions to the personal pension schemes of 2 directors (2005 - 2).
The aggregate amount of gains realised by directors on the exercise of share options during the year was £57,000 (2005 - £nil).
The detailed numerical analysis of directors' remuneration and share options is included in the report of the board to the members on
directors' remuneration on pages 8 to 11.
Average number of persons employed by the group (including directors):
Technical
Customer services
Sales and marketing
Administration
Number of persons employed by the group at the year end
Technical
Customer services
Sales and marketing
Administration
Staff costs of the group during the year in respect of employees and directors were:
Wages and salaries
Social security costs
Other pension costs
No.
30
101
283
43
457
32
105
280
40
457
£'000
8,122
928
24
9,074
No.
26
73
220
34
353
24
89
234
38
385
£'000
6,707
770
26
7,503
The group operates a stakeholder pension scheme for the benefit of employees who wish to participate.
There are no other company or group pension schemes. However the group makes contributions to executive directors' and some senior
employees' personal pension schemes.
Staff costs of the company during the year in respect of employees and directors were:
Non-executive directors' remuneration
Social security costs
£'000
£'000
78
8
86
69
7
76
P A G E 2 6
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
5. NET INTEREST
Investment income:
Bank interest receivable
Interest payable and similar charges:
Bank overdraft and other borrowings
Finance leases
Net interest
6. DIVIDENDS ON SHARES CLASSED AS EQUITY
Paid during the year
Equity dividends on ordinary shares
Proposed after the year end (not recognised as a liability)
Equity dividends on ordinary shares
7. PRIOR YEAR ADJUSTMENT
Year
ended 31
March
2006
£’000
Restated
Year
ended 31
March
2005
£’000
29
65
(241)
(2)
(243)
(214)
(142)
(3)
(142)
(77)
Year
ended 31
March
2006
£’000
Restated
Year
ended 31
March
2005
£’000
958
-
2,318
958
As disclosed in the accounting polices section, a new accounting standard, which impacted on the financial results was adopted in the
year. The financial effect of this has been detailed below.
FRS 21
In the prior year dividends of £958,000 were proposed and these were disclosed in the profit and loss account for the prior year. In the
comparative figures these are now no longer disclosed on the face of the profit and loss account but disclosed as an appropriation of
profit in note 20.
In respect of the year under review dividends of £2,318,000 were proposed after the balance sheet date. Under the previous accounting
policy these would have been shown as a liability and deducted from the profit for the year. Under the new accounting policy these are
not accrued and are disclosed only in note 6.
P A G E 2 7
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
8. TAX ON PROFIT ON ORDINARY ACTIVITIES
Research and development tax credit
Tax credit
Deferred tax (charge)/credit
Year
ended 31
March
2006
£’000
85
-
(255)
(170)
Restated
Year
ended 31
March
2005
£’000
141
74
1,200
1,415
The group has a deferred tax asset which has been recognised in respect of tax losses within one of the subsidiary companies, which has
generated taxable profits and is expected to continue to do so.
The differences between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation tax
to the profit before tax is as follows:
Profit on ordinary activities before tax
Tax charge @ 30%
Non qualifying depreciation
Disallowed expenditure
Deferred tax movement
Movement in short term timing differences
Consolidation adjustments
Utilisation of tax losses
Rate differences
Capital allowances in excess of depreciation
Statutory deductions on exercise of share options
Year
ended 31
March
2006
£’000
4,184
1,255
-
152
-
(11)
-
(1,098)
44
(15)
(157)
Restated
Year
ended 31
March
2005
£’000
1,724
517
7
87
658
14
2
(2,291)
124
(53)
(480)
170
(1,415)
There is no charge to corporation tax in the year due to the availability of losses. Unrelieved losses of £8.0 million (2005 - £12.1 million)
are carried forward and are available to reduce the tax liability in respect of suitable future trading profits.
Research and development tax credits have been claimed in respect of expenditure incurred on the development of the group's
Netintelligence software. These credits are at the rate of 16% of the amount of expenditure allowed as a deduction from taxable income,
which is 150% of the development expenditure incurred.
P A G E 2 8
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
8. TAX ON PROFIT ON ORDINARY ACTIVITIES (CONTINUED)
Deferred tax
The group had recognised deferred tax assets and potential unrecognised deferred tax assets as follows:
Restated
Year ended 31 March Year ended 31 March
2005
Recognised Unrecognised Recognised Unrecognised
£'000
£'000
£'000
£'000
2006
Tax losses carried forward
945
1,555
1,200
2,430
9. PROFIT OF PARENT COMPANY
As permitted by Section 230 of the Companies Act 1985, the profit and loss account of the parent company is not presented as part of
these financial statements. The parent company's profit for the financial period after taxation was £3,248,000 (2005 - £1,671,000).
P A G E 2 9
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
10. EARNINGS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the year. Fully diluted earnings per share is calculated by dividing the earnings attributable to ordinary
shareholders by the total of the weighted average number of ordinary shares in issue during the year and the dilutive potential ordinary
shares relating to share options.
Underlying earnings are calculated by adding back the charge for amortisation of goodwill to the earnings attributable to ordinary
shareholders and adjusting for the deferred tax charge/credit relating to the recognition of tax losses.
Profit for the financial period and basic earnings attributed to ordinary shareholders 4,014
819
Amortisation
255
Deferred tax charge/(credit)
Year
ended 31
March
2006
£’000
Restated
Year
ended 31
March
2005
£’000
3,128
547
(1,200)
Underlying earnings
Weighted average number of ordinary shares:
For basic earnings per share
Exercise of share options
For diluted earnings per share
Basic earnings per share
Fully diluted earnings per share
Basic underlying earnings per share
Fully diluted underlying earnings per share
5,088
2,475
No
000
No
000
76,933
3,155
70,318
3,067
80,088
73,385
5.2p
5.0p
6.6p
6.4p
4.4p
4.3p
3.5p
3.4p
P A G E 3 0
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
11. INTANGIBLE ASSETS
The group
Cost
At 1 April 2005 and 31 March 2006
Accumulated amortisation
At 1 April 2005
Charge for the year
At 31 March 2006
Net book value
At 31 March 2006
At 31 March 2005
12. TANGIBLE FIXED ASSETS
The group
Cost
At 1 April 2005
Additions in the year
Disposals
At 31 March 2006
Accumulated depreciation
At 1 April 2005
Charge for the year
On disposals
At 31 March 2006
Net book value
At 31 March 2006
At 31 March 2005
Goodwill
£'000
15,175
886
819
1,705
13,470
14,289
Total
£'000
4,037
554
(1,913)
2,678
3,152
521
(1,913)
1,760
918
885
Leasehold
improvements
£'000
Computer
software and
Office
equipment equipment
£'000
£'000
315
152
-
467
198
79
-
277
190
117
3,243
332
(1,913)
1,662
2,648
351
(1,913)
1,086
576
595
479
70
-
549
306
91
-
397
152
173
The net book value of the group's tangible fixed assets includes an amount of £68,000 in respect of assets held under finance leases
(2005 - £nil). The depreciation charged on these assets during the year totalled £8,000 (2005 - £nil).
P A G E 3 1
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
13. INVESTMENTS HELD AS FIXED ASSETS
The company
Cost
Shares in subsidiary undertakings
£'000
At 1 April 2005 and 31 March 2006
16,156
All of the above investments are unlisted.
The following subsidiaries have been consolidated in the group financial statements:
Country of registration
and operation
Ordinary share capital
Owned by
subsidiary
the company % undertakings %
Owned by
Activity
Netintelligence Limited
iomart Limited
Ufindus Limited
Web Genie Internet Limited
Internetters Limited
NicNames Limited
Easyspace Limited
14. DEBTORS
The group
Trade debtors
Amounts due on deferred payment terms
Other debtors
Prepayments and accrued income
Research and development tax credit
The company
Prepayments and accrued income
Amounts owed by subsidiary undertakings
Scotland
Scotland
England
England
England
England
England
Network security
Dormant
Webservices
Dormant
Webservices
Dormant
Webservices
100
100
100
2006
£'000
4,344
5,421
104
519
226
10,614
-
14,305
14,305
100
100
100
100
Restated
2005
£'000
1,907
2,603
149
333
264
5,256
64
8,451
8,515
The company's debtors include an amount of £750,000 (2005 - £750,000) owed by a subsidiary, which is repayable after more than
one year.
P A G E 3 2
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
The group
Obligations under finance leases (note 17)
Bank loan (note 17)
Bank overdrafts (note 17)
Trade creditors
Corporation tax
Other taxation and social security
Other creditors
Deferred consideration
Deferred grants
Accruals and deferred income
The company
Bank loan
Bank overdraft
Trade creditors
Other taxation and social security
Accruals and deferred income
Amounts owed by subsidiary undertakings
16. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
The group
Obligations under finance leases (note 17)
Bank loan (note 17)
Deferred grants
2006
£'000
24
866
1,320
972
169
1,748
25
-
48
1,995
7,167
866
1,277
61
110
53
6,817
9,184
2006
£'000
40
1,307
26
1,373
Restated
2005
£'000
101
865
-
983
169
1,350
69
34
60
2,302
5,933
865
-
19
504
49
3,488
4,925
Restated
2005
£'000
-
2,171
30
2,201
The company
Bank loan
1,307
2,171
P A G E 3 3
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
17. BORROWINGS
The group
Obligations under finance leases
Bank loan
Bank overdrafts
The obligations under finance leases are secured by the related assets and are repayable as follows:
Due within one year
Due between two and five years
2006
£'000
64
2,173
1,320
3,557
2006
£'000
24
40
64
Restated
2005
£'000
101
3,036
-
3,137
Restated
2005
£'000
101
-
101
The bank loan and overdrafts are secured by debentures and floating charges over all the assets of the company and each of its
subsidiaries and by cross guarantees by all group companies and are repayable as follows:
The group
Due within one year
Due between one and two years
Due between two and five years
The bank overdrafts are repayable on demand.
The bank loan and the bank overdrafts bear interest at 2.5% above the base rate of Bank of Scotland plc.
18. DEFERRED TAX
The deferred tax included in the balance sheet is as follows:
The group
Included in debtors
The movement in the deferred tax account during the year was:
Balance brought forward
Profit and loss account movement arising during the year
Balance carried forward
2006
£'000
2,186
871
436
3,493
Restated
2005
£'000
865
867
1,304
3,036
2006
£'000
Restated
2005
£'000
945
1,200
1,200
(255)
945
-
1,200
1,200
The deferred tax balance represents tax losses within one of the subsidiary companies, which has generated taxable profits and is expected
to continue to do so.
P A G E 3 4
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
19. SHARE CAPITAL
The company
Authorised
Ordinary shares of 1p each
Number of shares
£'000
At 31 March 2005 and 31 March 2006
100,000,000
1,000
Called up, allotted and fully paid
At 31 March 2005
Exercise of options
At 31 March 2006
76,663,225
601,829
77,265,054
767
6
773
During the year the company issued an additional 601,829 ordinary shares of 1p each in respect of the exercise of options, for which a
net total of £101,000 was received.
The difference between the nominal value of the shares issued and the net issue price has been credited to share premium account.
The company operates an approved share option scheme, a savings related share option scheme, an enterprise management incentive
scheme and an unapproved share option scheme.
P A G E 3 5
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
19. SHARE CAPITAL (CONTINUED)
At 31 March 2006, 94 employees, 4 directors and 2 former employees held share options as follows:
Approved scheme
Enterprise management incentive scheme
Number of
shares
Exercise
price
per share
Date
from which
exercisable
Expiry date
37,500
5,000
23,888
100,000
266,666
266,666
266,668
138,245
215,414
265,011
6,666
6,667
590,485
44.00p
13.50p
11.75p
9.00p
6.25p
6.25p
6.25p
6.25p
6.25p
6.25p
78.50p
78.50p
78.50p
24/1/2004
26/9/2004
31/10/2004
27/2/2005
24/1/2011
26/9/2011
31/10/2011
27/2/2012
26/7/2002
26/7/2003
26/7/2004
2/7/2004
2/7/2005
2/7/2006
17/11/2005
17/11/2006
17/11/2007
26/7/2012
26/7/2012
26/7/2012
2/7/2013
2/7/2013
2/7/2013
17/11/2014
17/11/2014
17/11/2014
Savings related scheme
545,761
76.00p
1/3/2009
1/9/2009
Unapproved scheme
Other unapproved options
50,000
33,333
33,333
33,334
4,256,182
276,886
276,887
276,887
11.75p
6.25p
6.25p
6.25p
78.50p
5.00p
5.00p
5.00p
31/10/2001
27/6/2002
27/6/2003
27/6/2004
17/11/2007
31/10/2011
27/6/2007
27/6/2007
27/6/2007
17/11/2014
11/5/2000
11/2/2001
11/2/2002
14/12/2008
14/12/2008
14/12/2008
The total number of options outstanding is 7,971,479 shares equalling 9.35% of the enlarged share capital assuming exercise of all
options.
P A G E 3 6
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
20. STATEMENT OF MOVEMENT ON RESERVES
The group
Profit for the financial period
Dividend paid
Shares issued (net of expenses)
Opening balance
Closing balance
The company
Profit for the financial period
Dividend paid
Shares issued (net of expenses)
Opening balance
Closing balance
21. MOVEMENT IN SHAREHOLDERS' FUNDS
The group
Profit for the financial period
Dividend paid
Share capital issued
Expenses in respect of reduction of capital
Opening shareholders' funds
Closing shareholders' funds
The company
Profit for the financial period
Dividend paid
Share capital issued
Expenses in respect of reduction of capital
Opening shareholders' funds
Closing shareholders' funds
P A G E 3 7
w w w . i o m a r t . c o m
Capital
redemption
reserve
£'000
Share
premium
account
£'000
Profit and
loss
account
£'000
-
-
-
1,200
1,200
-
-
-
1,200
1,200
-
-
95
6,108
4,014
(958)
-
7,454
6,203
10,510
-
-
95
6,108
3,248
(958)
-
9,654
6,203
11,944
Year
ended 31
March
2006
£'000
4,014
(958)
101
-
Restated
Year
ended 31
March
2005
£'000
3,128
-
8,413
(28)
3,157
15,529
11,513
4,016
18,686
15,529
3,248
(958)
101
-
2,391
17,729
1,671
-
8,413
(28)
10,056
7,673
20,120
17,729
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
22. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Operating profit
Depreciation
Amortisation of intangible assets
Increase in debtors
Increase in creditors
Year
ended 31
March
2006
£’000
4,398
521
819
(5,396)
20
Restated
Year
ended 31
March
2005
£’000
1,801
412
547
(2,752)
1,049
Net cash inflow from operating activities
362
1,057
23. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
Year
ended 31
March
2006
£’000
Restated
Year
ended 31
March
2005
£’000
29
(241)
(2)
(214)
123
-
123
65
(142)
(17)
(94)
-
4
4
(478)
(765)
-
-
(34)
-
(34)
(5,852)
(182)
(117)
2,048
(4,103)
(958)
-
Returns on investments and servicing of finance
Other interest receivable
Bank overdraft and other borrowings
Finance leases
Taxation
Research and development tax credits received
Corporation tax refund
Capital expenditure and financial investment
Payments to acquire tangible fixed assets
Acquisitions
Purchase of subsidiary undertakings
Professional fees in connection with acquisitions
Payment of deferred consideration
Net cash acquired with subsidiaries
Equity dividends paid
Dividend paid on ordinary shares
P A G E 3 8
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
23. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT (CONTINUED)
Financing
Issue of ordinary shares
Professional fees in connection with share exchanges
Expenses of capital reduction
Bank loan
Repayment of bank loan
Capital element of finance lease rentals
24. ANALYSIS OF CHANGE IN NET (DEBT)
Cash at bank and in hand
Bank overdrafts
Bank loan
Finance leases and hire purchase
Net (debt)
25. OPERATING LEASE COMMITMENTS
Year
ended 31
March
2006
£’000
Restated
Year
ended 31
March
2005
£’000
101
-
-
-
(863)
(113)
(875)
Inception
of finance
lease
£'000
-
-
-
(76)
Cash flow
£'000
(754)
(1,320)
863
113
327
(236)
(28)
3,465
(429)
(190)
2,909
At 31
March
2006
£'000
1,279
(1,320)
(2,173)
(64)
(76)
(1,098)
(2,278)
Restated
At 31
March
2005
£'000
2,033
-
(3,036)
(101)
(1,104)
At 31 March 2006 the group was committed to making the following payments during the next year in respect of operating leases:
Land and
buildings
31 March
2006
£'000
19
61
444
524
Other
31 March
2006
£'000
159
13
-
172
Land and
buildings
Restated
31 March
2005
£'000
33
86
265
384
Other
Restated
31 March
2005
£'000
365
26
-
391
Leases which expire:
Within one year
Within two to five years
After five years
26. RELATED PARTY TRANSACTIONS
There were no related party transactions during the year. Included in other debtors is £nil (2005 - £47,150) due from Stewart Moir,
company secretary, in respect of share options which were exercised at the year end for personal pension purposes, which was settled in
April 2005.
P A G E 3 9
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2006
27. FINANCIAL INSTRUMENTS
The group finances its operations by raising finance through equity and bank borrowings. No speculative treasury transactions are
undertaken and, during the last two years, no derivative contracts were entered into. Financial assets and liabilities include those assets
and liabilities of a financial nature, namely cash, investments and borrowings. Short term debtors/creditors have been excluded from the
following disclosures, with the exception of currency risk and credit risk.
Financial assets
The group's financial assets and their maturity profile are:
Cash at bank and in hand
Maturing
One year or less or on demand
Financial liabilities
The group's financial liabilities and their maturity profile are:
Leasing obligations - fixed rates
Bank overdrafts - floating rate
Bank loan - floating rate
All of the fixed interest obligations are repayable within one year.
Weighted average fixed interest rate
An analysis of the maturity of group debt is given in note 17
2006
£'000
Restated
2005
£'000
1,279
2,033
1,279
2,033
64
1,320
2,173
3,557
101
-
3,036
3,137
8.0%
9.2%
Liquidity risk
The group seeks to manage financial risk to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash safely and
profitably.
Interest rates
The interest rate on the group's floating rate loan and cash at bank is determined by reference to the base rate.
The group has a committed overdraft facility of £1,500,000 (2005 - £1,000,000), which falls due for renewal on 30 October 2006.
Currency risk
No forward foreign exchange contracts were entered into during the year. There were no outstanding foreign exchange contracts at the
end of the current or the preceding year. The company has no non-monetary assets or liabilities denominated in foreign currencies. The
monetary assets and liabilities and the level of transactions denominated in foreign currencies is minimal and there is no significant
currency risk.
Credit risk
The majority of the group's customers are small businesses and a significant number of these customers take advantage of the deferred
payment terms offered by the group. The board consider that the trade debtors and amounts due on deferred payment terms (note 14),
both of which are stated net of applicable provisions, represent the total amount exposed to credit risk.
Further information on financial instruments policy and procedures is given in both the chief executive officer's report and the directors'
report.
P A G E 4 0
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTICE OF 2006 ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the 2006 annual general meeting of iomart Group plc will be held at Lister Pavilion, Kelvin Campus, West
of Scotland Science Park, Glasgow G20 0SP on 21 June 2006 at 12 noon, for the purpose of considering and, if thought fit, transacting the
following business:-
As Special Business, a resolution will be proposed as follows:-
1 To consider and, if thought fit, pass the following resolution as an ordinary resolution of the company:-
"That the directors of the company be and are hereby authorised to exercise the powers contained in article 143 of the articles of
association of the company so that, to the extent and in the manner determined by the directors, the holders of ordinary shares of 1p
each in the capital of the company ("Ordinary Shares") shall be permitted to elect to receive Ordinary Shares, credited as fully paid,
instead of all or part of the dividends payable on Ordinary Shares and that this authority shall expire, unless sooner revoked or varied
by the company, on 21 June 2011."
As Ordinary Business, ordinary resolutions will be proposed as follows:-
2 To receive and adopt the financial statements of the company and the directors' and auditors' reports thereon for the year ended 31
March 2006.
3 To approve the payment of the proposed dividend of 3p per share on 29 September 2006 to shareholders on the register at 11 August
2006.
4 To reappoint Chris Batterham (who was appointed by the board since the last annual general meeting) as a director of the company.
5 To reappoint Sarah Haran (who retires by rotation and, being eligible, offers herself for re-election) as a director of the company.
6 To reappoint Nick Kuenssberg (who retires by rotation and, being eligible, offers himself for re-election) as a director of the company.
7 To reappoint Grant Thornton UK LLP, Chartered Accountants, as auditors of the company and to authorise the directors to fix their
remuneration.
8 To approve the report of the board to the members on directors' remuneration for the year ended 31 March 2006.
As further Special Business, resolutions will be proposed as follows:-
9 To consider and, if thought fit, pass the following resolution as an ordinary resolution:-
“That the directors be and they are hereby generally and unconditionally authorised to exercise all of the powers of the company to
allot relevant securities (within the meaning of Section 80(2) of the Companies Act 1985 (the "Act")) subject always to the provisions of
the articles of association of the company provided that:-
(a) the maximum nominal amount of relevant securities to be allotted in pursuance of such authority shall be £227,349; and
(b) this power shall expire, unless sooner revoked or varied by the company, on the conclusion of the next annual general meeting of
the company or the expiry of the period of fifteen months from the date of the passing of this resolution whichever is the earlier,
save that the company may before such expiry make an offer or agreement which would or might require relevant securities to be
allotted after such expiry and the directors may allot relevant securities in pursuance of such offer or agreement as if the power
conferred hereby had not expired.”
And
P A G E 4 1
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTICE OF 2006 ANNUAL GENERAL MEETING
10 To consider and, if thought fit, pass the following resolution as a special resolution of the company:-
“That the directors be and are hereby empowered pursuant to section 95(1) of the Act to allot equity securities (within the meaning
of Section 94 of the Act) for cash pursuant to the authority conferred by resolution 9 above as if Section 89(1) of the Act did not
apply to such allotment provided that this power shall be limited to:-
(a) the allotment of equity securities in connection with one or more issues by way of rights in favour of holders of ordinary shares
where the equity securities respectively attributable to the interest of all such holders are proportionate (as nearly as may be
practicable) to the respective number of ordinary shares held, or deemed to be held, by them but subject to such exclusions or
other arrangements as the directors may deem necessary or expedient in relation to fractional entitlements or any legal, regulatory
or practical problems under the laws of, or the requirements of any recognised regulatory body or any stock exchange in, any
territory;
(b) the allotment of equity securities pursuant to any authority conferred upon the directors in accordance with and pursuant to article
143 of the articles of association of the company; and
(c)
the allotment (otherwise than pursuant to (a) and/or (b) above) of equity securities up to an aggregate nominal amount of
£38,632;
provided that this authority shall expire, unless sooner revoked or varied by the company, on the conclusion of the next annual general
meeting of the company or the expiry of the period of fifteen months from the date of the passing of this resolution whichever is the
earlier, save that the company may before such expiry make an offer or agreement which would or might require equity securities to be
allotted after such expiry and the directors may allot equity securities in pursuance of such offer or agreement as if the authority conferred
hereby had not expired.”
11 To consider and, if thought fit, pass the following resolution as a special resolution of the company:-
"That the company be generally and unconditionally authorised for the purposes of section 166 of the Act to make one or more market
purchases (within the meaning of section 163(3) of the Act) on a recognised investment exchange (as defined in section 163(4) of the Act)
of ordinary shares of 1p each in the capital of the company ("Ordinary Shares") provided that:
(a) the maximum number of Ordinary Shares hereby authorised to be purchased is 7,726,505 (representing 10% of the company's
issued ordinary share capital at the date of the notice of this annual general meeting);
(b) the minimum price, exclusive of any expenses, which may be paid for any such Ordinary Share is 1p;
(c)
the maximum price, exclusive of any expenses, which may be paid for any such Ordinary Share shall be not more than 5% above
the average of the middle market quotations for an Ordinary Share on the relevant investment exchange on which the Ordinary
Shares are traded for the five business days immediately preceding the date on which such Ordinary Share is contracted to be
purchased;
(d) unless previously revoked or varied, the authority hereby conferred shall expire on the earlier of the date which is fifteen months
from the date of the passing of this resolution and the conclusion of the next annual general meeting of the company; and
P A G E 4 2
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTICE OF 2006 ANNUAL GENERAL MEETING
(e) the company may make a contract or contracts for the purchase of Ordinary Shares under this authority before the expiry of
this authority which would or might be executed wholly or partly after the expiry of such authority, and may make purchases of
Ordinary Shares in pursuance of such a contract or contracts as if such authority had not expired."
By order of the board
Stewart Moir
Company Secretary
16 May 2006
Notes
Lister Pavilion, Kelvin Campus
West of Scotland Science Park
Glasgow G20 0SP
1. The register of directors' interests in the share capital of the company and copies of directors' service contracts or letters of appointment
with the company will be available for inspection at the registered office of the company during usual business hours on any weekday
(public holidays excluded) from the date of this notice until the date of the meeting.
2. A member of the company entitled to attend and vote at the above meeting may appoint one or more proxies (whether a member or not)
to attend and, on a poll, vote instead of him. A form of proxy is enclosed. To be effective this form of proxy must be deposited, together
with the power of attorney or other authority under which it is executed or a notarially certified copy of such power or authority, at the
office of the company's registrars, Capita IRG plc, Bourne House, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, not later than 48
hours before the time of the meeting or any adjournment thereof. Completion of a form of proxy will not preclude a member from
attending and voting in person.
3. For the purposes of determining who is entitled to attend and vote (whether on a show of hands or on a poll) at the meeting a person
must be entered on the register of members not later than 48 hours before the time of the meeting, or any adjournment thereof.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTICE OF 2006 ANNUAL GENERAL MEETING
Explanatory Notes to the Notice of Annual General Meeting
Resolutions to be considered as Special Business
Resolution 1 - Scrip Dividend Scheme
Resolution 1 seeks authority to implement the power given to the company under article 143 of the articles of association of the company to
offer participation in a scrip dividend scheme. Shareholders will then have the opportunity to elect to receive Ordinary Shares instead of cash
dividends payable on Ordinary Shares. The authority given by Resolution 1 will expire on 21 June 2011 (i.e. 5 years after the date of the
passing of the Resolution). The 5 year period is the maximum recommended by the Association of British Insurers ("ABI").
Resolution 9 - Allotment authority
Resolution 9 renews an authority given to the directors at the last annual general meeting of the company, held on 20 June 2005, which
expires at this meeting, and authorises the directors generally and unconditionally, in accordance with Section 80 of the Companies Act 1985
(the "Act"), to allot unissued shares in the capital of the company during the period expiring (unless sooner revoked or varied by the company)
on the conclusion of the next annual general meeting of the company or 21 September 2007, whichever occurs first, up to a maximum
aggregate nominal value of £227,349, being equal to the difference between the company's issued share capital at the date of the notice
of AGM and its authorised share capital. This Resolution complies with the guidelines issued by the Investment Committees of the ABI and
the National Association of Pension Funds (the "IPCs") in respect of companies whose shares are admitted to the Official List of the UK Listing
Authority. The IPCs regard it as good practice for the guidelines to be followed by companies whose shares are traded on the Alternative
Investment Market of the London Stock Exchange.
Resolution 10 - Disapplication of pre-emption rights
Paragraphs (a) and (c) of Resolution 10 renew an authority given to the directors at the last annual general meeting of the company, held on
20 June 2005, which expires at this meeting. Paragraph (b) comprises an additional authority in respect of shares issued pursuant to the scrip
dividend scheme.
Under Section 89(1) of the Act, if the directors wish to allot any of the unissued shares for cash, they must in the first instance offer them to
existing shareholders in proportion to the number of shares they each hold at that time. An offer of this type is called a "rights issue" and the
entitlement to be offered a new share is known as a "pre-emption right".
There may be circumstances, however, where it is in the interests of the company for the directors to allot some of the new shares for cash
other than by way of a rights issue. This cannot be done under the Act unless the shareholders first waive their pre-emption rights. Resolution
10 asks shareholders to do this, but only (1) in respect of new shares issued under the scrip dividend scheme and (2) additionally, in respect
of new shares equal to 5 per cent of the company's issued ordinary share capital at the date of the notice of AGM.
The directors will be able to use this power without obtaining further authority from shareholders before they allot new shares covered by it. If
the directors wish, other than by rights issue or pursuant to the scrip dividend scheme, to allot for cash new shares which would exceed the
5 per cent limit referred to above, they would first have to ask the company's shareholders to waive their pre-emption rights in respect of that
proportion of new shares which exceeds the 5 per cent ceiling.
There are legal, regulatory and practical reasons why it may not always be possible to issue new shares under a rights issue to some
shareholders, particularly those resident overseas. To cater for this, Resolution 10, in authorising the directors to allot new shares by way of a
rights issue, also permits the directors to make appropriate exclusions or arrangements to deal with such difficulties.
The power given by Resolution 10 will, unless sooner revoked or varied by the company, last until next year's annual general meeting or 21
September 2007, whichever occurs first. This resolution complies with the IPCs' guidelines.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2006
NOTICE OF 2006 ANNUAL GENERAL MEETING
Resolution 11 - Authority to purchase company's own shares
This resolution grants authority to the company to make purchases of up to a maximum of 10% of the issued ordinary share capital of the
company.
In certain circumstances it may be advantageous for the company to purchase its Ordinary Shares. The directors would use the share
purchase authority with discretion and purchases would only be made from funds not required for other purposes and in light of market
conditions prevailing at the time. In reaching a decision to purchase Ordinary Shares, your directors would take account of the company's
cash resources and capital, the effect of such purchases on the company's business and on earnings per Ordinary Share.
The directors have no present intention of using the authority. However, the directors consider that it is in the best interests of the company
and its shareholders as a whole that the company should have the flexibility to buy back its own shares should the directors in the future
consider that it is appropriate to do so.
In relation to any buy back, the maximum price per Ordinary Share at which the company is authorised in terms of Resolution 11 to effect
that buy back is 5% above the average middle market price of an Ordinary Share for the five business days immediately preceding the date
on which the buy back is effected.
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iomart Group plc
Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow, G20 OSP
Tel: +44 (0)141 931 6400 / Fax: +44 (0)141 931 6401
www.iomart.com
iomart Group 2006.