IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
CONTENTS
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61
Officers and professional advisers
Chairman’s statement
Chief executive officer’s report
Finance director’s report
Corporate governance
Report of the board to the members on directors’ remuneration
Directors' report
Statement of directors' responsibilities
Board of directors
Independent auditors’ report
Consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the accounts
Holding company accounts
Notice of annual general meeting
P A G E 1
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
OFFICERS AND PROFESSIONAL ADVISERS
Directors
Nick Kuenssberg OBE, BA, FCIS, CCMI, FIoD
Angus MacSween
Chris Batterham MA, FCA
Stuart Forrest
Mark Hallam
Sarah Haran
Richard Logan BA, CA
Fred Shedden MA, LLB
Non executive chairman
Chief executive officer
Non executive director
Director
Director
Director
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 2007
CHAIRMAN’S STATEMENT
Financial and operating highlights
(cid:129) Significant acquisition of Datacentre business funded by £11m placing
(cid:129) Reduced cost of option to buy minority stake in Datacentre business
(cid:129) Ufindus and Easyspace performing well
(cid:129) Accounts for 2006/07 presented under IFRS convention
(cid:129) Profit after tax including deferred tax credit £2,180k (2006 £11k)
This has been a pivotal year in our development, particularly with the raising of £11m through a share placement to acquire a controlling stake
in significant datacentre assets. The Group is now well positioned to take advantage of the exciting market opportunities in colocation and
complex hosting more easily facilitated by the datacentre business. Boosted by the reduced cost of the option to acquire the minority stake, this
will deliver significant shareholder returns in the medium term.
You will note that our figures are presented under the new IFRS convention, introduced one year earlier than required; while the figures may
look different, your Group has performed generally in line with expectations. Sales revenue was up 16.9% at £21,086k and profit before tax
increased to £218k (2006 loss of £74k). The effect of the deferred tax credit through the recovery of losses increased profit after tax to £2,180k
(2006 - £11k). We have not recommended a dividend.
The management team under Angus MacSween has successfully improved internal systems and processes. Ufindus is increasingly self-
sufficient, collection methods are better, Easyspace is more robust and the welcome appointment of Richard Logan as finance director has been
effective.
Dominic Marrocco, the previous owner and managing director of the datacentre business, has left, but we have a new highly experienced team
under the leadership of Sarah Haran driving the integrated Easyspace and Easyspace Datacentres business.
On a personal note, having been chairman of your Group since the AIM flotation in April 2000, I believe that it is appropriate that I plan to
step down. We have therefore commissioned a search firm to identify suitably experienced candidates with a view to appointing a non-executive
director who will take over as chairman in due course.
The Group is now poised to deliver significant shareholder returns and I look forward to the increasing value which Angus and his team will
deliver.
Nick Kuenssberg
Chairman
20 June 2007
P A G E 3
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
CHIEF EXECUTIVE OFFICER’S REPORT
Easyspace Datacentres (UK) Ltd
The highlight of 2006/7 has been our entry into the datacentre marketplace with the successful placing and acquisition of a controlling interest
in Easyspace Datacentres (UK) Ltd (formerly Ezee DSL Ltd). Since the acquisition we have made good progress in making the datacentres
operational and recruiting key senior personnel. The reaction to our initial marketing of the London datacentre has been very encouraging and
we remain convinced that our strategic move into the datacentre market at this stage of the cycle will provide additional growth and profit for
the Group.
I am also pleased to report that, as a result of 186k Ltd, the vendor, not funding their share of the working capital requirement, iomart Group will
acquire 100% of the equity for a maximum payment of £4.8m in 2 years time. Since we had expected to pay up to £20m to acquire the 49%,
based on the business plan and formula in the purchase agreement, we believe this represents significant additional value for shareholders.
Having our own datacentre capacity allows us to reshape our strategy in the hosting environment, building on our existing experience, to be
able to deliver the complete set of vertical components in the hosting arena from domain names, virtual webspace, websites, dedicated servers
through to complex managed hosting solutions, colocation space, power, cooling and bandwidth.
As more and more mission critical business applications move on to the web, so organisations need more resilience, security and 24 hour
management; the market for managed hosting services and datacentre capacity is expected to grow significantly over the next few years. We
will leverage the skills and experience within Easyspace to provide a comprehensive set of services.
Easyspace
The existing Easyspace business continued to provide a solid platform of revenue, cash generation and profit providing £1.9m of operating
profit from revenues of £6.6m. Whilst we have seen some downward pressure on pricing at the very low end of the market, gross margins
remain good at 60% and we are winning higher margin business in the corporate hosting market where business continuity is becoming ever
more important.
Ufindus
The continuing shift from traditional media advertising and paper directory services to internet driven services is, if anything, accelerating and our
online directory business UfindUs is benefiting from that with a growing number of users generating 9 million searches and visits to customer
websites per month.
Despite the impact on revenues of the adoption of IFRS, explained in the Finance Director’s report and in the notes to the financial statements,
we have seen UfindUs revenues grow 30% from £10.9m to £14.1m providing an operating profit of £1.5m. Gross margins have also improved.
The business is in much better shape operationally than was the case six months ago with well established and more robust systems around
billing and collections and over 75% of new customers signing up to pay by direct debit.
UfindUs is gaining credibility in the search and directory market and, with a number of initiatives ready to launch to improve the product, is set
to provide more and more business opportunities for our customers.
Netintelligence
Netintelligence is a highly developed leading edge product set in the ‘Software as a Service’ arena. We have had a disappointing year with
Netintelligence but continue to develop the IPR to ensure that we remain competitive and can exploit potential opportunities. The strategy is to
use indirect channels to market and we have taken steps to ensure our costs going forward are in line with our revenues.
Current trading and outlook
Across the Group we have taken steps to strengthen and deepen the senior management team.
Our timely entry into the datacentre market and the very encouraging response to our initial marketing reinforces our view that there is significant
growth potential which can be delivered in the medium term. We have generated substantial interest, mainly from large enterprises interested in
long term commitments, which should form the backbone of future sales revenues. Additionally our core business continues to perform in line
with expectations and we look forward to a rewarding year.
Angus MacSween
Chief Executive Officer
20 June 2007
P A G E 4
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
FINANCE DIRECTOR'S REPORT
Trading
It is with much pleasure that I present my first report as Finance Director of iomart.
Revenue increased in the year by 16.9% to £21,086,000 (2006 - £18,032,000) principally due to the continued growth achieved by our internet
directory business Ufindus.
Encouragingly, our gross profits increased by 20% to £16,400,000 (2006 - £13,671,000) meaning our gross margin percentage in the year
of 78% was higher than the 76% achieved in 2006. Again the main reason for this was the increase in gross margin delivered by Ufindus due
to the favourable impact of recurring revenue from customers for which there is very little cost of sale to be recognised.
Administrative expenses were 17% higher at £15,835,000 (2006 - £13,531,000). The major reason for the increase is staff costs reflecting
the additional personnel we have employed to service our growing Ufindus business and also increased sales resources for part of the year in
both Ufindus and Netintelligence. In addition, primarily due to debt collection issues at Ufindus there has been an increased level of bad debt
expense in the current year.
Operating profit for the year of £565,000 was four times greater than that achieved in 2006.
After financing costs, which have increased this year due to the additional debt that we have serviced, pre-tax profits for the year were £218,000
compared to a loss for last year of £74,000.
The deferred taxation credit of £1,962,000 is primarily due to the recognition of a deferred tax asset in respect of tax losses relating to Ufindus
which we now expect to utilise against the future profits of that operation.
As a result our profit for the year from continuing operations is £2,180,000 compared to a profit in 2006 of £11,000. Basic earnings per share
for the year of 2.78p compared to 0.01p in 2006.
Cash
There was a cash inflow for the year of £243,000 from operating activities.
During the year the Group invested £463,000 in acquiring property plant and equipment and £311,000 on developing and acquiring software.
We also made dividend payments of £1,284,000, bank loan repayments of £865,000, net interest payments of £347,000, finance lease
repayments of £109,000 and net corporation tax of £18,000.
To fund this, after receiving proceeds of £43,000 from the issue of shares, the Group increased its net bank overdraft by £3,111,000 over the
year.
At the year end cash balances were £999,000 borrowings under finance leases amounted to £373,000, bank loans totalled £1,308,000 and
overdrafts totalled £4,151,000 resulting in an overall net borrowings position of £4,833,000 which has increased by £2,555,000 over the year.
The cash position of the Group changed significantly immediately after the year end with the receipt, net of expenses, of £10,466,000 from the
issue of shares to fund the acquisition of a majority stake in Ezee DSL Limited.
Acquisitions
On 30 March 2007 we acquired a controlling interest of 51% in Ezee DSL Limited for £4,890,000 including certain costs of acquisition. This
was funded by the issue of 20 million shares which raised a total of £10,466,000 net of expenses and we received these funds, which had been
underwritten by KBC Peel Hunt, on 2 April. The book value of the Ezee DSL datacentre assets at the time of acquisition was £8,870,000 and
based on a report on the London datacentre, commissioned immediately prior to acquisition, we would estimate the replacement cost of such
assets to be in the region of £28,000,000.
Financial Position
With funding raised through the share placement, the availability of our committed overdraft facility and the anticipated cash generation from the
existing operations the Group’s financial position is sufficient to fund our current business plans. We believe we are now entering an important
growth phase in our continued development which will place demands on our cash resources including the obligation to fully fund the Easyspace
Datacentres (UK) operation and we have not recommended a dividend be paid at this time. We will continue to review this position and intend
to be in a position to re-establish dividend payments in future years.
P A G E 5
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
FINANCE DIRECTOR’S REPORT
International Financial Reporting Standards
Once the impact of the introduction of IFRS had been assessed we made the decision to adopt IFRS as we felt in the circumstances it was the
most appropriate basis for the preparation of these accounts. Consequently IFRS has been implemented one year ahead of our original plan
and indeed one year ahead of its mandatory adoption.
In note 27 there is an explanation of the impact of adopting IFRS on the Group’s results including the impact on prior years the results of which
have been restated and I would encourage you to review the details of that note to gain a full understanding of the position.
The major impact has been in relation to the revenues of our internet directory business Ufindus. Under UK GAAP we recognised Ufindus
revenue at the time of sale, on the basis that the service had been delivered and all significant obligations of the sale fulfilled. Since the vast
majority of our customers take advantage of the deferred payment terms which we offer our revenue was recognised in advance of actual
invoicing to customers. Under IFRS we are required to recognise revenue from the customers’ perspective and therefore spread the revenue
over the period of use by the customer. For a Group experiencing substantial growth in revenues, such as iomart, the impact of this has been
to reduce revenues and profitability previously reported. Under IFRS the Group will continue to invoice and recognise as revenue the remaining
sums due from customers in respect of contractual commitments.
Richard Logan
Finance Director
20 June 2007
P A G E 6
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
CORPORATE GOVERNANCE
As 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 five 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 chairman of the nominations committee,
Fred Shedden of the remuneration committee and Chris Batterham of the audit committee.
A separate report on directors’ remuneration is set out on pages 9 to 12 , 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 board established a risk register in 2006 which is formally reviewed during each calendar year.
Going
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 7
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
CORPORATE GOVERNANCE
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 annual general meeting 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 8
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
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 6 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. 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.
(cid:129) Share options
Executive directors are entitled to participate in share option schemes.
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 6 month rolling basis.
P A G E 9
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
REPORT OF THE BOARD TO THE MEMBERS ON DIRECTORS’ REMUNERATION
Directors’ remuneration
Details of individual directors’ emoluments for the year are as follows:
Name of director
Nick Kuenssberg
Angus MacSween
Chris Batterham (appointed 14 September 2005)
Bill Dobbie (resigned 20 June 2005)
Stuart Forrest (appointed 20 June 2005)
Mark Hallam (appointed 20 June 2005)
Sarah Haran
Richard Logan (appointed 10 July 2006)
Fred Shedden
Salary
or fees
£
35,000
135,000
24,375
-
83,754
83,754
86,670
58,259
25,000
531,812
Bonus
£
-
47,250
-
-
104,495
104,495
84,939
26,217
-
367,396
Year
ended
31 March
2007
Total
£
35,000
202,950
24,375
-
194,249
194,249
187,425
95,052
25,000
958,300
Pension
Benefits contributions
£
-
13,500
-
-
-
-
8,616
5,333
-
27,449
£
-
7,200
-
-
6,000
6,000
7,200
5,243
-
31,643
Year
ended
31 March
2006
Total
£
35,000
241,200
12,375
5,625
159,705
159,705
188,725
-
25,000
827,335
There was also a gain in relation to the exercise of share options by Sarah Haran which totalled £275,000.
Directors’ interests in shares
The interests of the directors in the shares of the company at 31 March 2007, together with their interests at 1 April 2006 or the date of
appointment were as follows:
Name of director
Nick Kuenssberg
Angus MacSween
Chris Batterham
Stuart Forrest
Mark Hallam
Sarah Haran
Richard Logan (appointed 10 July 2006)
Dominic Marrocco (appointed 30 March 2007 and resigned 20 June 2007)
Fred Shedden
Number of ordinary shares
31 March 2007
At 1 April 2006
or date of
appointment
1,060,400
19,286,304
45,621
1,689,284
1,324,767
720,704
45,500
91,000
744,588
910,010
18,395,500
25,000
1,600,000
1,240,780
246,955
-
-
636,122
P A G E 1 0
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
REPORT OF THE BOARD TO THE MEMBERS ON DIRECTORS’ REMUNERATION
Directors’ interests in share options
The interests of the directors at 31 March 2007 in options over the ordinary shares of the company were as follows:
Name of director
At 1 April
2006
Granted
in year
At 31
Exercised March 2007
Exercise
Date from
which
price exerciseable Expiry date
1,750,000
12,302
78.5p
76p
17/11/07
1/3/09
17/11/14
1/9/09
Angus MacSween
Sarah Haran
Stuart Forrest
Mark Hallam
1,750,000
12,302
1,762,302
159,746
159,747
159,747
100,000
68,333
133,333
133,334
850,000
4,921
1,769,161
133,333
133,333
133,334
1,000,000
12,302
1,412,302
133,333
133,333
133,334
1,000,000
12,302
1,412,302
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(100,000)
(68,333)
(133,333)
(133,334)
-
-
1,762,302
159,746
159,747
159,747
-
-
-
-
850,000
4,921
(435,000)
1,334,161
-
-
-
-
-
-
-
-
-
-
-
-
133,333
133,333
133,334
1,000,000
12,302
1,412,302
133,333
133,333
133,334
1,000,000
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
Richard Logan
200,000
200,000
74p
24/08/09
24/08/16
P A G E 1 1
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
REPORT OF THE BOARD TO THE MEMBERS ON DIRECTORS’ REMUNERATION
Directors’ interests in share options (continued)
Other than 50,000 of the options granted to Richard Logan which vested on his appointment the options granted at 74p and 78.5p vest over
a three year period subject to demanding performance criteria. The remaining options listed have already vested. No options lapsed during
the year.
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 46.0p and the range of prices during the period was between 43.5p and 90.0p.
By order of the board
Fred Shedden
Chairman, Remuneration committee
20 June 2007
P A G E 1 2
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
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 2007.
Principal activity
The principal activity of the Group is the provision of internet services.
Business review
The chairman’s statement, chief executive officer’s and finance director’s reports contain a review of trading.
The Group 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.
We are particularly pleased about the investment made in datacentres through the acquisition of 51% of Ezee DSL Limited at the end of the
financial year. We believe this is a good time to enter this market segment where demand substantially exceeds supply and foresee this as a
substantial business activity in the future.
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
2007
16.9%
77.8%
232,000
2006
29.5%
75.8%
213,000
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
2007 comprise a bank loan and overdrafts of £5.5m and finance leases totalling £0.37m. The interest rate payable on the bank loan and
overdrafts is between 2.5% and 2.75% above the base rate of Bank of Scotland plc. The interest rate at 31 March 2007 was between 7.75%
and 8% and the average interest rate since the loan was drawn was 7.21%. The interest rates on the finance leases are fixed for the term of
the lease at between 7.7% and 9.75%. All transactions of the holding company and the UK subsidiaries are in UK sterling and the Group does
not use derivative instruments. Additional information on financial instruments is included in Note 26.
Dividend
The directors do not propose a dividend for the year ended 31 March 2007 (2006 – 3.00p).
Directors and their interests
The present membership of the board is set out on page 2. In addition Dominic Marrocco served as a director between 30 March 2007 and 20
June 2007. In accordance with the company’s Articles of Association, Angus MacSween, Richard Logan and Fred Shedden 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
9 to 12.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
DIRECTORS REPORT
Substantial shareholdings
At 14 June 2007 the following interests in 3% or more of the issued ordinary share capital had been notified to the company:
Angus MacSween
Gartmore Investment Limited
Goldman Sachs
British Steel Pension Fund
Majedie Asset Management
Bill Dobbie
Universities Superannuation Scheme
Number of ordinary shares
Percentage held
19,286,304
14,382,370
5,587,826
4,921,000
4,586,100
3,361,369
3,117,000
19.40%
14.60%
5.60%
4.95%
4.60%
3.40%
3.13%
Employee involvement
The Group regularly communicates with 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 2007, calculated in accordance with the requirements of the Companies Act 1985, were 30
days (2006 – 35 days), and of the company were 26 days (2006 – 90 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 or 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.
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
20 June 2007
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
DIRECTORS REPORT
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and International
Financial Reporting Standards (IFRS).
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.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
BOARD OF DIRECTORS
Nick Kuenssberg
64, appointed 2000; currently chairman of Canmore Partnership Ltd, Keronite PLC and eTourism Ltd and previously chairman of Dynacast
International Ltd, Stoddard International plc, GAP Group Ltd, ScotlandIS, IoD Scotland and others, director of Coats Viyella 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.
Angus MacSween
50, 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.
Chris Batterham
52, 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.
Stuart Forrest
40, appointed 2005; Stuart began his career in financial services in the North West of England. He was involved in several new starts alongside
Mark 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
41, 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.
Sarah Haran
41, 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.
Richard Logan
49, appointed 2006; Richard is a chartered accountant having qualified with Arthur Young in 1984. Richard then spent 7 years with Ben Line
Group initially as Group treasurer and latterly as financial director of Ben Line’s main container shipping division. From 1992 to 2002 Richard
served as finance director of Kingston SCL a company which provided administration and billing software to the mobile communications market
during which time he was involved in a management buy-out and subsequent trade sale of the company. Immediately prior to joining iomart
Richard served as finance director of ePOINT Group a technology company based in Scotland.
Fred Shedden
62, appointed 2000; 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 and chairman of Halladale Group
plc.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF IOMART GROUP PLC
We have audited the Group financial statements of iomart Group plc for the year ended 31 March 2007 which comprise the principal
accounting policies, the Group income statement, the Group balance sheet, the Group cash flow statement, the Group statement of changes in
shareholders' equity and notes 1 to 27. These Group financial statements have been prepared under the accounting policies set out therein.
We have reported separately on the parent company financial statements of iomart Group plc for the year ended 31 March 2007 and the
information in the Report of the board on Directors Remuneration that is described as having been audited.
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 auditor's 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 Group financial statements in accordance with United Kingdom
law and International Financial Reporting Standards (IFRSs) as adopted by the European Union are set out in the Statement of Directors'
Responsibilities.
Our responsibility is to audit the Group 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 Group financial statements give a true and fair view and whether the Group financial statements
have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS Regulation. We also report to you whether
in our opinion the information given in the Directors' Report is consistent with the financial statements. The information given in the Directors'
Report includes that specific information presented in the Chairman's Statement and the Business Review that is cross referred from the Business
Review section of the Directors' Report.
In addition we report to you if, in our opinion, 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 Group financial statements.
The other information comprises only the Chairman's Statement, the Chief Executive Officer’s Report, the Finance Director’s Report, the
Directors' Report, the Statement of Director’s Responsibilities, Report of the Board to the Members on Directors’ Remuneration and the
Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material
inconsistencies with the Group 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 Group financial statements. It also includes an
assessment of the significant estimates and judgments made by the directors in the preparation of the Group financial statements, and of whether
the accounting policies are appropriate to the Group'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 Group 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
Group financial statements.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
REPORT OF THE INDEPENDENT AUDITORS TO THE MEMBERS OF IOMART GROUP PLC
Opinion
In our opinion:
(cid:129) the Group financial statements give a true and fair view, in accordance with IFRSs as adopted by the European Union, of the state of
the Group's affairs as at 31 March 2007 and of its profit for the year then ended;
(cid:129) the Group financial statements have been properly prepared in accordance with the Companies Act 1985 and Article 4 of the IAS
Regulation; and
(cid:129) the information given in the Directors' Report is consistent with the financial statements.
Separate opinion in relation to IFRSs
As explained in Note 1 to the Group financial statements, the Group in addition to complying with its legal obligation to comply with IFRSs as
adopted by the European Union, has also complied with the IFRSs as issued by the International Accounting Standards Board.
In our opinion the Group financial statements give a true and fair view, in accordance with IFRSs, of the state of the Group's affairs as at 31
March 2007 and of its profit for the year then ended.
GRANT THORNTON UK LLP
REGISTERED AUDITOR
CHARTERED ACCOUNTANTS
GLASGOW
20 June 2007
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
CONSOLIDATED INCOME STATEMENT
Year ended 31 March 2007
Continuing
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
Profit for the year from continuing operations
Basic and diluted earnings per share
Basic
Diluted
Note
2
3
3
5
5
7
9
9
2007
£'000
2006
£'000
21,086
18,032
(4,686)
(4,361)
16,400
13,671
(15,835)
(13,531)
565
140
11
(358)
29
(243)
218
(74)
1,962
2,180
85
11
2.78p
2.72p
0.01p
0.01p
P A G E 1 9
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
CONSOLIDATED BALANCE SHEET
31 March 2007
ASSETS
Non-current assets
Intangible assets – goodwill
Intangible assets – development costs
Intangible assets - software
Deferred tax asset (non-current element)
Property, plant and equipment
Current assets
Trade and other receivables
Deferred tax asset (current element)
Amount due from share placing
Total assets
LIABILITIES
Non-current liabilities
Deferred grants
Minority interest payable
Non-current borrowings
Current liabilities
Cash and cash equivalents
Trade and other payables
Current income tax liabilities
Current borrowings
Amount due in relation to acquisition
Total Liabilities
Net assets
EQUITY
Share capital
Capital redemption reserve
Share premium
Profit and loss reserve
Total equity
These financial statements were approved by the board of directors on 20 June 2007
Signed on behalf of the board of directors
Angus MacSween
Director and chief executive officer
P A G E 2 0
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Note
2007
£’000
2006
£’000
10
10
10
8
12
13
8
16
17
14
15
17
20
19
14,475
310
39
1,137
10,615
26,576
2,989
848
10,466
14,303
14,289
116
35
-
883
15,323
2,531
-
-
2,531
40,879
17,854
-
(4,800)
(649)
(5,449)
(26)
-
(1,347)
(1,373)
(3,152)
(4,336)
-
(1,032)
(4,800)
(13,320)
(41)
(4,829)
(169)
(890)
-
(5,929)
(18,769)
(7,302)
22,110
10,552
994
1,200
17,541
2,375
773
1,200
6,203
2,376
22,110
10,552
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
CONSOLIDATED CASH FLOW STATEMENT
31 March 2007
Operating profit
Depreciation
Amortisation
Share based payments
Recognition of deferred grants
Movement in trade receivables
Movement in trade payables
Cash flow from operations
Research and development tax credit received
Corporation tax paid
Net cash flow from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Capitalisation of development costs
Purchase of intangible assets - software
Net cash used in investing activities
Cash flow from financing activities
Issue of shares
Repayment of finance lease
Repayment of borrowings
Dividends
Interest received
Interest paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Note
3
3
21
12
10
10
19
22
22
6
5
5
2007
£’000
2006
£’000
565
653
113
153
(48)
(631)
(562)
243
142
(160)
225
(463)
(282)
(29)
(774)
140
501
44
168
(16)
(355)
(13)
469
123
-
592
(470)
(140)
(8)
(618)
43
(109)
(865)
(1,284)
11
(358)
(2,562)
101
(113)
(864)
(958)
29
(243)
(2,048)
(3,111)
(2,074)
(41)
2,033
Cash and cash equivalents at the end of the year
14
(3,152)
(41)
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2007
Share capital
Note
£’000
Share capital
redemption
reserve
£’000
Share
premium
account
£’000
Profit and
Total
loss account
£’000
£’000
Changes in equity
Balance at 1 April 2005
Dividends paid
Share based payments
Shares issued for share option
redemption (net of expenses)
Profit in the period
Balance at 31 March 2006
Balance at 1 April 2006
Scrip dividend
Dividends paid
Share based payments
Shares issued for share option
redemption (net of expenses)
Issue of new shares for acquisition
Profit in the period
6
21
19
6
6
21
19
19
767
1,200
6,108
6
95
3,155
(958)
168
11,230
(958)
168
11
101
11
773
1,200
6,203
2,376
10,552
773
15
6
200
1,200
6,203
1,035
37
10,266
2,376
(1,050)
(1,284)
153
2,180
10,552
0
(1,284)
153
43
10,466
2,180
Balance at 31 March 2007
994
1,200
17,541
2,375
22,110
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
1. ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards as
issued by the International Accounting Standards Board (IFRS), under the historical cost convention. The measurement bases and principal
accounting policies of the Group are set out below.
The policies have changed from the previous year when the financial statements were prepared under applicable United Kingdom
Generally Accepted Accounting Principles (UK GAAP). The comparative information has been restated in accordance with IFRS. The
changes to accounting policies are explained in note 27, together with the reconciliation of opening balances. The date of transition to
IFRS was 1 April 2005. The accounting policies that have been applied in the opening balance sheet have also been applied throughout
all periods presented in these financial statements.
Basis of consolidation
The Group financial statements consolidate those of the company and all of its subsidiary undertakings drawn up to 31 March 2007.
Subsidiaries are entities over which the Group has the power to control the financial and operating policies so as to obtain benefits from
its activities. The Group obtains and exercises control through voting rights.
Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. Amounts reported in the financial statements of subsidiaries have
been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the purchase method. The purchase method involves the recognition at fair value of all
identifiable assets and liabilities, including contingent liabilities of the subsidiary, at the acquisition date, regardless of whether or not
they were recorded in the financial statements of the subsidiary prior to acquisition. On initial recognition, the assets and liabilities of the
subsidiary are included in the consolidated balance sheet at their fair values, which are also used as the bases for subsequent
measurement in accordance with the Group accounting policies. Goodwill is stated after separating out identifiable intangible assets.
Goodwill represents the excess of acquisition cost over the fair value of the Group's share of the identifiable net assets of the acquired
subsidiary at the date of acquisition.
The Group has elected not to apply IFRS 3 Business Combinations retrospectively to business combinations prior to date of transition.
Accordingly the classification of the combination remains unchanged from that used under UK GAAP. Assets and liabilities are recognised
at date of transition if they would be recognised under IFRS, and are measured using their UK GAAP carrying amount immediately post-
acquisition as deemed cost under IFRS, unless IFRS requires fair value measurement.
New standards and interpretations of existing standards that are not yet effective and have not been early adopted
by the Group
The following interpretations to existing standards have been published that are mandatory for the Group’s accounting periods beginning
on or after 1 April 2007 or later periods but which the Group has not early adopted:
(cid:129) IFRS 7 Financial instruments: Disclosures, (effective for annual periods beginning on or after 1 January 2007) and the complementary
amendment to IAS 1,’Presentation of financial statements – Capital disclosures’, were not early adopted. IFRS 7 introduces new
disclosures relating to financial instruments. This standard does not have any impact on the classification and valuation of the Group’s
financial instruments. It is not expected to have any significant impact on the consolidated financial statements;
(cid:129) IFRIC 8 Scope of IFRS 2, (effective for annual periods beginning on or after 1 May 2006). IFRIC 8 requires consideration of transactions
involving the issuance of equity instruments – where the identifiable consideration received is less than the fair value of the equity
instruments issued – to establish whether or not they fall within the scope of IFRS 2. The Group has applied IFRIC 8 from 4 February
2007, but it has not had any impact on the Group’s financial statements;
(cid:129) IFRIC 10 Interim Financial Reporting and Impairment, (effective for annual periods beginning on or after 1 November 2006). IFRIC 10
prohibits the impairment losses recognised in an interim period on goodwill and investments in equity instruments and in financial assets
carried at cost to be reversed at a subsequent balance sheet date. The Group has applied IFRIC 10 from 4 February 2007 but it has
not had any significant impact on the consolidated financial statements;
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
(cid:129) IFRS 8 Operating Segments, (effective for annual periods beginning on or after 1 January 2010) replaces IAS 14 and aligns segment
reporting with the requirements of the US standard SFAS 131, ‘Disclosures about segments of an enterprise and related information’.
The new standard uses a ‘management approach’, under which segment information is presented on the same basis as that used for
internal reporting purposes. It is not expected to have any significant impact on the consolidated financial statements; and
(cid:129) IFRIC 11, ‘IFRS 2 – Group and Treasury Share Transactions’, (effective for annual periods beginning on or after 1 January 2009)
provides guidance on whether share-based transactions involving treasury shares or involving Group entities (for instance, options over
a parent’s shares) should be accounted for as equity-settled or cash-settled. This is not expected to have any impact on the consolidated
financial statements.
Goodwill
Goodwill representing the excess of the cost of acquisition over the fair value of the Group's share of the identifiable net assets acquired
is capitalised and reviewed annually for impairment. Goodwill is carried at cost less accumulated impairment losses. Any excess of the
Group’s interest in the net fair value of the identifiable net assets acquired over cost is recognised immediately after acquisition in the
income statement.
Revenue
Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of
the Group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the
Group.
The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will
flow from the transaction and specific criteria have been met for each of the Group’s activities as described below. The amount of revenue
is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates
on prior experience, taking into consideration the type of customer and the type of transaction.
Ufindus
This operating segment sells web based marketing services comprising the creation, maintenance and ongoing promotion of websites
on an internet directory. Revenue for the initial creation and design of websites is recognised when the website has been created and all
significant obligations in relation to the sale have been fulfilled. Revenue for the ongoing maintenance and promotion of websites is then
recognised evenly over the period of the service.
Easyspace
This operating segment provides domain name registration and web hosting services. Revenue from the provision of domain names is
recognised at the time the title to the domain name passes. Revenue from the provision of web hosting is recognised evenly over the
period of the service and only after all significant obligations in relation to the sale have been fulfilled. Any unearned portion of revenue
is included in payables as deferred revenue.
Netintelligence
This operating segment provides internet security software under licence. Revenue from the sale of licences is recognised evenly over the
period of the licence and only after all significant obligations in relation to the sale have been fulfilled. Any unearned portion of revenue
is included in payables as deferred revenue.
Interest
Interest is recognised on a time-proportion basis using the effective interest method.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Intangible assets
Research and development
Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is incurred.
Development costs incurred are capitalised when all the following conditions are satisfied:
(cid:129) completion of the intangible asset is technically feasible so that it will be available for use or sale
(cid:129) the Group intends to complete the intangible asset and use or sell it
(cid:129) the Group has the ability to use or sell the intangible asset
(cid:129) the intangible asset will generate probable future economic benefits
(cid:129) there are adequate technical, financial and other resources to complete the development and to use or sell the intangible asset, and
(cid:129) the expenditure attributable to the intangible asset during its development can be measured reliably
Development costs not meeting the criteria for capitalisation are expensed as incurred. The only development costs which are deemed to meet
these criteria in the Group are in relation to developments by specific teams to develop products in the internet business. Development costs
capitalised are amortised on a straight-line basis over the estimated useful life of the asset. The estimated useful life is deemed to be three years
from the month of expenditure for all developments capitalised. Amortisation charges are recognised in administration expenses in the income
statement.
Software
Software is recognised at fair value on purchase and amortised on a straight-line basis over its useful economic life, which does not generally
exceed four years.
Assets acquired as part of a business combination
In accordance with IFRS 3 Business Combinations, an intangible asset acquired in a business combination is deemed to have a cost to the
Group of its fair value at the acquisition date. The fair value of the intangible asset reflects market expectations about the probability that the
future economic benefits embodied in the asset will flow to the Group. Where an intangible asset might be separable, but only together with a
related tangible or intangible asset, the group of assets is recognised as a single asset separately from goodwill where the individual fair values
of the assets in the group are not reliably measurable. Where the individual fair values of the complimentary assets are reliably measurable,
the Group recognises them as a single asset provided the individual assets have similar useful lives.
Property, plant and equipment
Property, plant and equipment is stated at cost or valuation, net of depreciation and any provision for impairment. Leasehold property is included
in property, plant and equipment only where it is held under a finance lease.
Disposal of assets
The gain or loss arising on the disposal of an asset is determined as the difference between the disposal proceeds and the carrying amount of
the asset and is recognised in the income statement.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Depreciation
Depreciation is calculated to write down the cost of all property, plant and equipment to the expected residual value by equal annual instalments
over their estimated useful economic lives. All items of property, plant and equipment are deemed to have residual values of nil. The rates
generally applicable are:
Freehold property
Short-term leasehold improvements
Computer equipment
Office equipment
Datacentre equipment
Not depreciated
25% per annum
Between 20% and 50% per annum
Between 10% and 25% per annum
Between 6% and 10% per annum
Impairment testing of goodwill, other intangible assets and property, plant and equipment
For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-
generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill
is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the
lowest level within the Group at which management monitors the related cash flows.
Goodwill, other individual assets or cash-generating units that include goodwill, other intangible assets with an indefinite useful life, and those
intangible assets not yet available for use are tested for impairment at least annually. All other individual assets or cash-generating units are
tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the asset's or cash-generating unit's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use based on an internal
discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited
initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash generating unit.
With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no
longer exist.
Details of the key assumptions and judgements are shown in note 10.
Leased assets
In accordance with IAS 17 Leases, the economic ownership of a leased asset is deemed to have been transferred to the Group (the lessee) if the
Group bears substantially all the risks and rewards related to the ownership of the leased asset. The related asset is recognised at the time of
inception of the lease at the fair value of the leased asset or, if lower, the present value of the minimum lease payments plus incidental payments,
if any, to be borne by the lessee. A corresponding amount is recognised as a finance lease liability.
The interest element of leasing payments represents a constant proportion of the capital balance outstanding and is charged to the income
statement over the period of the lease.
All other leases are regarded as operating leases and the payments made under them are charged to the income statement on a straight line
basis over the lease term. Lease incentives are spread over the term of the lease. Where a lease is for land and buildings there is no distinction
between land and buildings, with both being classified as operating leases.
Taxation
Current tax is the tax currently payable based on taxable profit for the year.
Deferred income taxes are calculated using the liability method on temporary differences. Deferred tax is generally provided on the difference
between the carrying amounts of assets and liabilities and their tax bases. However, deferred tax is not provided on the initial recognition of
goodwill, nor on the initial recognition of an asset or liability unless the related transaction is a business combination or affects tax or accounting
profit.
P A G E 2 6
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Deferred tax on temporary differences associated with shares in subsidiaries and joint ventures is not provided if reversal of these temporary
differences can be controlled by the Group and it is probable that reversal will not occur in the foreseeable future. In addition, tax losses
available to be carried forward as well as other income tax credits to the Group are assessed for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax assets are recognised to the extent that it is probable that the
underlying deductible temporary differences will be able to be offset against future taxable income. Current and deferred tax assets and liabilities
are calculated at tax rates that are expected to apply to their respective period of realisation, provided they are enacted or substantively enacted
at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of tax expense in the income statement, except where they relate to
items that are charged or credited directly to equity (such as the revaluation of land) in which case the related deferred tax is also charged or
credited directly to equity.
Financial assets
All financial assets are recognised when the Group becomes a party to the contractual provisions of the instrument. Financial assets other than
those categorised as at fair value through profit or loss are recognised at fair value plus transaction costs. Financial assets categorised as at fair
value through profit or loss are recognised initially at fair value with transaction costs expensed through the income statement.
Financial assets at fair value through profit or loss include financial assets that are either classified as held for trading or are designated by the
entity as at fair value through profit or loss upon initial recognition. Subsequent to initial recognition, the financial assets included in this category
are measured at fair value with changes in fair value recognised in the income statement. Financial assets originally designated as financial
assets at fair value through profit or loss may not be reclassified subsequently.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Trade
and other receivables are classified as loans and receivables. Loans and receivables are measured subsequent to initial recognition at amortised
cost using the effective interest method, less provision for impairment. Any change in their value through impairment or reversal of impairment
is recognised in the income statement.
Provision against trade and other receivables is made when there is objective evidence that the Group will not be able to collect all amounts
due to it in accordance with the original terms of those receivables. The amount of the write-down is determined as the difference between the
asset's carrying amount and the present value of estimated future cash flows.
An assessment for impairment is undertaken at least at each balance sheet date.
A financial asset is derecognised only where the contractual rights to the cash flows from the asset expire or the financial asset is transferred
and that transfer qualifies for derecognition. A financial asset is transferred if the contractual rights to receive the cash flows of the asset have
been transferred or the Group retains the contractual rights to receive the cash flows of the asset but assumes a contractual obligation to pay
the cash flows to one or more recipients. A financial asset that is transferred qualifies for derecognition if the Group transfers substantially all
the risks and rewards of ownership of the asset, or if the Group neither retains nor transfers substantially all the risks and rewards of ownership
but does transfer control of that asset.
Financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Group becomes a party to the contractual
provisions of the instrument. Financial liabilities categorised as at fair value through profit or loss are recorded initially at fair value, all
transaction costs are recognised immediately in the income statement. All other financial liabilities are recorded initially at fair value, net of
direct issue costs.
P A G E 2 7
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Financial liabilities categorised as at fair value through profit or loss are remeasured at each reporting date at fair value, with changes in fair
value being recognised in the income statement. All other financial liabilities are recorded at amortised cost using the effective interest method,
with interest-related charges recognised as an expense in finance cost in the income statement. Finance charges, including premiums payable
on settlement or redemption and direct issue costs, are charged to the income statement on an accruals basis using the effective interest method
and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.
Financial liabilities are categorised as at fair value through profit and loss on initial recognition. A financial liability is derecognised only when
the obligation is extinguished, that is, when the obligation is discharged or cancelled or expires.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand deposits, together with other short-term, highly liquid investments that are readily
convertible into known amounts of cash and which are subject to an insignificant risk of changes in value.
Dividends
Dividend distributions payable to equity shareholders are included in "other short term financial liabilities" when the dividends are approved in
general meeting prior to the balance sheet date. Scrip dividends are recognised at the fair value of the cash alternative.
Equity
Equity comprises the following:
(cid:129) "Share capital" represents the nominal value of equity shares.
(cid:129) "Share premium" represents the excess over nominal value of the fair value of consideration received for equity shares, net of expenses
of the share issue.
(cid:129) "Capital redemption reserve" represents set aside reserves in relation to previous redemption of own shares.
(cid:129) "Profit and loss reserve" represents retained profits.
Employee benefits
The Group operates a stakeholder pension scheme for the benefit of employees who wish to participate. The Group also makes contributions to
executive directors’ and some senior employees’ personal defined contribution pension schemes. The pension costs charged against operating
profit are the contributions payable to the schemes in respect of the accounting period.
Share-based payment
All share-based payment arrangements granted after 7 November 2002 that had not vested prior to 1 April 2005 are recognised in the financial
statements. All share-based payment arrangements in the Group are equity settled.
All goods and services received in exchange for the grant of any share-based payment are measured at their fair values. Where employees
are rewarded using share-based payments, the fair values of employees' services are determined indirectly by reference to the fair value of the
instrument granted to the employee. This fair value is appraised at the grant date and excludes the impact of non-market vesting conditions (for
example, profitability and sales growth targets).
All equity-settled share-based payments are ultimately recognised as an expense in the income statement with a corresponding credit to "Profit
and loss reserve".
If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available
estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share
options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognised in the current period. No
adjustment is made to any expense recognised in prior periods if share options ultimately exercised are different to that estimated on vesting.
Upon exercise of share options the proceeds received net of attributable transaction costs are credited to share capital, and where appropriate
share premium.
P A G E 2 8
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Government grants
Government grants relating to non-current assets are treated as deferred income and credited to the income statement in equal instalments
over the anticipated useful lives of the assets to which the grants relate. Other grants are credited to the income statement over the period of
the project to which they relate.
Segmental reporting
The Group's primary reporting format is business segments and its secondary format is geographical segments. The Group is primarily UK based
and focused with sales to and costs in relation to other countries accounting for less than 10% of the Group’s total. All assets are located in the
UK. Therefore in line with IAS 14 para 69, no geographical breakdown is provided.
2. SEGMENTAL ANALYSIS
As at 31 March 2007 the Group is primarily organised into three main business segments:
(cid:129) Ufindus – an internet Business Directory, providing a web marketing presence to the business community.
(cid:129) Easyspace – a range of managed web hosting services, domain name registration services and the provision of datacentres.
(cid:129) Netintelligence – provides ‘software as a service’ products for a range of internet control and security services
There are no other services provided by the Group which would constitute a separately disclosable segment.
Primary Reporting Segment – Business
Assets and Liabilities by Primary Segment
2007
2006
Total Assets
£000's
Liabilities
£000's
Net Assets
(Liabilities)
£000's
Total Assets
£000's
Liabilities
£000's
Net Assets
(Liabilities)
£000's
Netintelligence
Easyspace
Ufindus
468
29,184
7,650
37,302
(5,427)
(6,745)
(4,992)
(17,164)
Group assets/(liabilities)
(4,959)
22,439
2,658
20,138
1,972
22,110
735
17,039
4,634
22,408
(4,674)
(2,216)
(3,435)
(10,325)
(3,939)
14,823
1,199
12,083
(1,531)
10,552
The assets and liabilities of each business segment are derived using the same classifications as management reporting, including gross
inter-segment balances, but net of inter-segment dividends paid.
Non-current assets acquired in the period by Primary Segment
Tangible
non-current
assets
acquired in
period
£000's
82
9,554
799
10,435
2007
Intangible
non-current
assets
acquired in
period
£000's
29
186
282
497
Tangible
non-current
assets
acquired in
period
£000's
39
13
494
546
2006
Intangible
non-current
assets
acquired in
period
£000's
4
-
144
148
Total
£000's
43
13
638
694
Total
£000's
111
9,740
1,081
10,932
Netintelligence
Easyspace
Ufindus
P A G E 2 9
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Revenue by Primary Segment
External
£000's
382
6,609
14,095
21,086
2007
Internal
£000's
520
-
-
520
Total
£000's
902
6,609
14,095
21,606
External
£000's
669
6,417
10,946
18,032
2006
Internal
£000's
514
-
-
514
Total
£000's
1,183
6,417
10,946
18,546
Netintelligence
Easyspace
Ufindus
Profit by Primary Segment
2007
Depreciation &
amortisation
£000's
(101)
(66)
(599)
-
(766)
EBITDA
£000's
(918)
2,011
2,056
(1,818)
1,331
Operating
profit
£000's
(1,019)
1,945
1,457
(1,818)
565
1,615
2,180
2006
Depreciation &
amortisation
£000's
(85)
(88)
(372)
-
(545)
EBITDA
£000's
(382)
2,175
335
(1,443)
685
Operating
profit
£000's
(467)
2,087
(37)
(1,443)
140
(129)
11
Netintelligence
Easyspace
Ufindus
Group overheads
Group interest and tax
Profit for the year
Group overheads, interest and tax are not allocated to segments.
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 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
3. OPERATING COSTS
Included within operating costs from continuing operations are the following items:
Staff cost (note 4)
Depreciation of property plant and equipment
- Owned assets
- Leased assets
Property, plant and equipment hire
- Land and buildings
- Plant and machinery
Amortisation of intangible assets
R&D written to income statement
Marketing and sales
Infrastructure
Provision for doubtful debts
Premises and office
Other expenses
Cost of sales
Administrative expenses
Included within other expenses are fees paid to the Group’s auditors, an analysis of which is provided below:
Auditors’ remuneration
- audit fees
- tax compliance fees
- corporate finance and advisory transactions
2007
£’000
2006
£’000
12,394
10,496
568
85
493
8
586
192
113
796
1,197
348
475
2,033
1,734
491
258
44
670
1,592
228
144
1,420
2,048
20,521
17,892
4,686
15,835
4,361
13,531
20,521
17,892
2007
£’000
44
8
25
77
2006
£’000
39
13
11
63
P A G E 3 1
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
4. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
Directors’ emoluments
Aggregate emoluments
Pension contributions to personal money purchase schemes
Share based payments
Emoluments payable to the highest paid director are as follows:
Aggregate emoluments
Pension contributions to personal money purchase schemes
2007
£’000
2006
£’000
931
27
58
203
14
806
21
72
228
13
During the year the company made personal pension contributions to the personal pension schemes of 3 directors (2006: 2).
The aggregate amount of gains realised by directors on the exercise of share options during the year was £275,000 (2006: £57,000).
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 9 to 12.
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
Share based payments
No.
27
85
345
50
507
39
91
231
48
409
No.
30
101
283
43
457
32
105
280
40
457
2007
£’000
11,141
1,073
27
153
12,394
2006
£’000
9,376
928
24
168
10,496
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 defined contribution
pension schemes.
P A G E 3 2
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
5. NET FINANCE COST
Finance income:
Bank interest receivable
Interest on R & D tax credit
Finance expenses:
Bank overdraft and other borrowings
Finance leases
Net finance cost
6. DIVIDENDS ON SHARES CLASSED AS EQUITY
Paid during the year
Equity dividends on ordinary shares of 3p per share (2006: 1.25p)
Proposed after the year end (not recognised as a liability)
Equity dividends on ordinary shares of nil (2006: 3p)
2007
£’000
2006
£’000
9
2
11
29
-
29
(341)
(17)
(358)
(241)
(2)
(243)
(349)
(214)
2007
£’000
2006
£’000
2,334
958
-
2,318
The dividend paid in 2007 was offered both as cash and as scrip dividend with £1,284,000 paid in cash and £1,050,000 paid in ordinary
shares in the Group. The amount paid differs to the amount proposed in the prior year accounts due to the exercise of share options during the
year which were within the scope of this dividend.
7. TAX ON PROFIT ON ORDINARY ACTIVITIES
Research and development tax credit
Tax (charge)/credit for the current year
Deferred tax credit
Under provision in prior year
2007
£’000
-
-
1,985
(23)
1,962
2006
£’000
85
85
-
-
85
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.
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 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
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/(loss) on ordinary activities before tax
Tax charge @ 30%
Disallowed expenditure
Deferred tax credit not recognised
Movement in short term timing differences
Consolidation adjustments
Utilisation of tax losses
Rate differences
Depreciation in excess of capital allowances
Statutory deductions on exercise of share options
Tax charge/(credit) for the current year
The weighted average applicable tax rate for the year ended 31 March 2007 was 30% (2006: 30%)
8. DEFERRED TAX
The Group had recognised deferred tax assets and potential unrecognised deferred tax assets as follows:
2007
£’000
2006
£’000
218
66
1
345
(23)
(15)
(255)
-
8
(127)
-
(74)
(22)
(94)
245
(11)
(15)
(60)
44
(15)
(157)
(85)
2007
2006
Recognised Unrecognised Recognised Unrecognised
£’000
£’000
£’000
£’000
Tax losses carried forward
1,985
1,755
-
4,767
The deferred tax included in the balance sheet is as follows:
Included in non-current assets
Included in current assets
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
2007
£’000
1,137
848
1,985
-
1,985
1,985
2006
£’000
-
-
-
-
-
-
The deferred tax asset is in relation to unutilised losses in the Ufindus subsidiary company. This has been recognised in line with budgets and
future projections of the company over a three year period. The basis of these projections and budgets are:
(cid:129) The consistent success of sales teams in generating new business
(cid:129) The volume of traffic generated through Ufindus websites
(cid:129) Expectations about the retention of customers
(cid:129) Continuing development of the Ufindus product
(cid:129) Expectations of continued growth in market prospects in relation to the internet generally and online directories in particular.
At 31 March 2006 it was deemed that the historic performance did not provide significant certainty to justify this recognition, but the performance
of the company during the year to 31 March 2007, along with the business developments detailed above has led to the expectation that
sustainable profits are probable in the medium term. Ufindus became profitable in the current year, and based on the foregoing assessment of
budgets and projections and the expectation of sustainable profits in future years, a deferred tax asset in relation
to the utilisation of these losses is recognised in line with IAS 12 Income Taxes.
P A G E 3 4
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
9. 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.
Profit for the financial period and basic earnings attributed to ordinary shareholders
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
2007
£’000
2,180
No
000
78,558
1,683
80,241
2006
£’000
11
No
000
76,933
3,155
80,088
2.78p
2.72p
0.01p
0.01p
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 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
10. INTANGIBLE ASSETS
Cost
At 1 April 2005
Additions
Disposals
Development cost capitalised
At 31 March 2006
Accumulated amortisation
At 1 April 2005
Charge for the year
Disposals
At 31 March 2006
Carrying amount
At 31 March 2006
2006
Development
costs
£’000
Goodwill
£’000
Software
£’000
Total
£’000
14,289
-
-
-
14,289
-
-
-
-
-
-
140
140
-
(24)
(24)
357
8
(154)
-
211
(310)
(20)
154
(176)
14,646
8
(154)
140
14,640
(310)
(44)
154
(200)
14,289
116
35
14,440
At 31 March 2005
14,289
-
47
14,336
2007
Development
costs
£’000
Goodwill
£’000
Software
£’000
Total
£’000
Cost
At 1 April 2006
Additions
Development cost capitalised
At 31 March 2007
Accumulated amortisation
At 1 April 2006
Charge for the year
At 31 March 2007
Carrying amount
At 31 March 2007
14,289
186
-
14,475
-
-
-
140
-
282
422
(24)
(88)
(112)
211
29
14,640
215
- 282
15,137
240
(176)
(25)
(201)
(200)
(113)
(313)
14,475
310
39
14,824
At 31 March 2006
14,289
116
35
14,440
All depreciation and impairment charges are included in the depreciation, amortisation and impairment of non-financial assets classification,
which is disclosed as administration expenses in the income statement.
During the year, goodwill was reviewed for impairment in accordance with IAS 36 “Impairment of Assets”. No impairment charges (2006:
£Nil) arose as a result of this review.
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 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
For this review goodwill was allocated to individual Cash Generating Units (CGU) on the basis of the Group’s operations. The carrying value
of goodwill by each CGU is as follows:
Cash Generating Units (CGU)
Internetters
Nicnames
Easyspace
Ufindus
Easyspace Datacentres
2007
£’000
264
364
11,686
1,975
186
14,475
2006
£’000
264
364
11,686
1,975
-
14,289
No goodwill in the Group is attributable to Netintelligence.
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based
on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the
estimated growth rates stated below.
The growth rates and margins used to estimate future performance are based on past performance and the experience of growth rates. The
growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. The growth rates used to estimate
future performance beyond the periods covered by the annual and strategic planning processes do not exceed the long-term average growth
rates for similar products.
The assumptions used for the CGU included within the impairment reviews are as follows:
Easyspace Datacentres
Internetters
Nicnames
Easyspace
Ufindus
Discount rate
Future perpetuity rate
Years for growth
17%
1.8%
5
15%
2.5%
5
15%
2.5%
5
15%
2.5%
5
16%
2.2%
5
11. PRINCIPAL SUBSIDIARIES
The following subsidiaries have been consolidated in the Group financial statements:
Ordinary share capital
Owned by the
Owned by
subsidiary
company undertakings
%
%
100
100
100
51
100
100
100
100
Country of
registration and
operation
Netintelligence Limited
iomart Limited
Ufindus Limited
Web Genie Internet Limited
Internetters Limited
NicNames Limited
Easyspace Limited
Easyspace Datacentres (UK) Limited (formerly Ezee DSL Limited)
Scotland
Scotland
England
England
England
England
England
England
Activity
Network security
Dormant
Webservices
Webservices
Webservices
Dormant
Webservices
Datacentre provision
P A G E 3 7
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
12. PROPERTY, PLANT AND EQUIPMENT
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
Carrying amount
At 31 March 2006
At 31 March 2005
2006
Leasehold
improvements
£’000
Computer
equipment
£’000
Office
equipment
£’000
315
152
-
467
198
79
-
277
190
117
2,885
324
(1,759)
1,450
2,337
331
(1,759)
909
541
548
479
70
-
549
306
91
-
397
152
173
Freehold
Leasehold
Property improvements
£’000
£’000
Datacentre
Equipment
£’000
2007
Computer
software and
equipment
£’000
Office
equipment
£’000
Cost
At 1 April 2006
Additions in the year
Disposals
Acquisition
At 31 March 2007
Accumulated depreciation
At 1 April 2006
Charge for the year
Acquisition
At 31 March 2007
Carrying amount
At 31 March 2007
-
-
-
837
837
-
-
-
-
467
54
-
521
277
90
-
367
-
-
-
8,467
8,467
-
-
48
48
837
154
8,419
At 31 March 2006
-
190
-
1,450
750
-
-
2,200
909
466
-
1,375
825
541
P A G E 3 8
w w w . i o m a r t . c o m
Total
£’000
3,679
546
(1,759)
2,466
2,841
501
(1,759)
1,583
883
838
Total
£’000
2,466
881
-
9,554
12,901
1,583
653
50
2,286
549
77
-
250
876
397
97
2
496
380
10,615
152
883
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
13. TRADE AND OTHER RECEIVABLES
Trade receivables (net)
Other receivables
Prepayments and accrued income
Research and development tax credit
Trade and other receivables
2007
£’000
2,086
38
813
52
2,989
2006
£’000
1,573
104
628
226
2,531
The carrying amount of trade and other receivables approximates to their fair value, which has been calculated based on expectations of debt
recovery from historic performances feeding into bad debt provision calculations. Trade receivables are stated net of the allowance for estimated
irrecoverable amounts of £1,584,000 (2006: £1,194,000). The Group's main credit risk relates to its trade receivables.
14. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Bank overdrafts (note 17)
Cash and cash equivalents
The credit risk on cash and cash equivalents is negligible because the counter parties are banks.
15. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Other payables
Deferred grants
Accruals and deferred income
Trade and other payables
2007
£’000
999
(4,151)
(3,152)
2007
£’000
(928)
(1,170)
-
(26)
(2,212)
(4,336)
2006
£’000
1,279
(1,320)
(41)
2006
£’000
(972)
(1,748)
(25)
(48)
(2,036)
(4,829)
The carrying amount of trade and other payables approximates to their fair value. The grants deferred are in relation to Regional Selective
Assistance grants received in 2004 for capital expenditure which are now recognised over the life of the assets.
16. MINORITY INTERESTS
On 30 March 2007 the Group completed the acquisition of 51% of the ordinary share capital of Ezee DSL Limited for a cash consideration
of £4.9m including certain costs of acquisition. Under the Investment Agreement the vendors were issued with a put option under which they
can require iomart Group plc to purchase the remaining 49% of Ezee DSL Limited’s share capital in the future. The vendors also issued a
corresponding call option to the Group, under which the Group can require the vendors to sell the remaining 49% of Ezee DSL Limited’s share
capital in the future. These options have the same exercise dates and use the same pre-determined calculations to value the business and, subject
to certain obligations which the vendor is required to fulfil, have a minimum value of £4.8m.
The Investment Agreement also requires the Group and the vendor to fund the working capital needs of Ezee DSL relative to their respective
shareholdings at the time the funding is required. If one party does not provide its share of the required funding then the other party may
provide funding in excess of its share and acquire shares from the other party to compensate for the excess funding so provided. Ezee DSL, in
line with its agreed business plan, has required funding and the Group has provided all of that funding to date. Consequently, the Group has
now begun the process of acquiring the additional shares from the vendor which will result in Group holding 99.8% of the share capital of Ezee
DSL. Therefore, the Group believes that the maximum amount which will be paid to acquire the remaining 49% of the shares of Ezee DSL is the
£4.8m minimum value which has been agreed within the Investment Agreement and has taken this to be the fair value of the put option held
by the vendor. It is deemed highly probable that the option will be exercised and the Group will be required to pay £4.8m. The Group also
believes the value of the call option to be nil.
P A G E 3 9
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
The value of the vendor’s 49% interest in the share capital of Ezee DSL, based on the fair value of the assets and the increase in that value in
respect of the fair value of the put option, is as shown below. The increase in the value of the put option has, in accordance with IFRS 3 Business
Combinations, been adjusted against goodwill.
Minority Interest in the assets of Ezee DSL
Increase to reflect fair value of put option (note 20)
Minority Interest at fair value
17. BORROWINGS
Current:
Obligations under finance leases
Bank loan
Current borrowings
Bank overdraft (included in cash and cash equivalents note 14)
Non-current:
Obligations under finance leases
Bank loan
Total non-current borrowings
Total borrowings
2007
£000
2006
£000
(4,657)
(143)
(4,800)
-
-
-
2007
£’000
2006
£’000
(161)
(871)
(1,032)
(24)
(866)
(890)
(4,151)
(1,320)
(212)
(437)
(649)
(40)
(1,307)
(1,347)
(5,832)
(3,557)
The obligations under finance leases are secured by the related assets and are repayable as follows:
Due within one year
Due between one and five years
Capital
£’000
161
212
373
2007
Interest
£’000
20
10
30
Total
£’000
181
222
403
Capital
£’000
24
40
64
2006
Interest
£’000
4
2
6
Total
£’000
28
42
70
The Group in its ordinary course of business enters into hire purchase and finance lease agreements to fund or re-finance the purchase of
computer equipment and software. The lease agreements are typically for periods of 2 to 3 years and do not have contingent rent or escalation
clauses. The agreements have industry standard terms and do not contain any restrictions on dividends, additional debt or further leasing.
P A G E 4 0
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
The finance lease liability has an effective interest rate of 7.3% (2006: 8.0%). Lease payments are made on a monthly basis. The future lease
obligation of £403,000 (2006: £70,000) has present value of £363,000 (2006: £65, 000).
The bank loan and overdrafts are secured by debentures and floating charges over all the assets of the company and each of its subsidiaries
and by cross guarantees by all Group companies (except Easyspace Datacentres (UK) Ltd) and are repayable as follows:
Due within one year
Due between one and two years
Due between two and three years
2007
£’000
(5,022)
(437)
-
(5,459)
2006
£’000
(2,186)
(871)
(436)
(3,493)
The bank overdrafts are repayable on demand. The bank loan and the bank overdrafts bear interest between 2.5% and 2.75% above the
Bank of Scotland base rate.
18. OPERATING LEASES
The Group has outstanding commitments under non-cancellable operating leases, which fall due as follows:
Leases which expire:
Within one year
Within two to five years
After five years
2007
2006
Land and
buildings
£’000
73
61
444
578
Other
£’000
31
34
-
65
Land and
buildings
£’000
19
61
444
524
Other
£’000
159
13
-
172
Lease terms for land and buildings
Operating leases do not contain any contingent rent clauses. None of the operating leases contain renewal of purchase options or escalation
clauses or any restrictions regarding further leasing or additional debt.
19. SHARE CAPITAL
Authorised
At 31 March 2006
Increase in year
At 31 March 2007
Called up, allotted and fully paid
At 31 March 2006
Scrip dividend
Issue of Shares
Exercise of options
At 31 March 2007
Ordinary shares of 1p each
Number of shares
£’000
100,000,000
100,000,000
200,000,000
1,000
1,000
2,000
77,265,054
1,522,995
20,000,000
664,586
99,452,635
773
15
200
6
994
During the year the company issued an additional 664,586, (2006: 601,829) ordinary shares of 1p each in respect of the exercise of options,
for which a net total of £43,000 (2006: £101,000) was received. No consideration was received for the issue of 1,522,995 shares which were
issued for the scrip dividend. There was also a separate issue of 20 million ordinary shares of 1p each on 30 March 2007 to raise funds for the
acquisition of Ezee DSL Limited, which raised a net total of £10,466,000 net of expenses.
The share capital of iomart Group plc consists of ordinary shares with a par value of 1p. All shares are equally eligible to receive dividends and
represent one vote at the shareholders' meetings of iomart Group plc. All shares issued at 31 March 2007 are fully paid; however the proceeds
P A G E 4 1
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
from the placing of 20 million ordinary shares were not received until 2 April 2007.
The difference between the nominal value of the shares issued and the net issue price has been credited to share premium account.
20. ACQUISITIONS
On 30 March 2007 through a share placing to the Group by Ezee DSL Limited, the Group completed the acquisition of 51% of the ordinary
share capital of Ezee DSL Limited for a cash consideration of £4.8m plus certain costs of acquisition which resulted in a total cost of £4.89m.
The £4.8m acquisition cost was actually paid on 2 April 2007, although the transaction was fully completed on 30 March 2007.
At the time of acquisition, Ezee DSL was effectively a non-trading company that owned datacentre assets which, with the exception of a small
number used by the Group, were not in use. The intention of the acquisition is to bring these datacentre assets into use.
The fair value of the assets of Ezee DSL Limited shown in the table below has been assessed as their book value at the time of acquisition under
the Group’s depreciation policies. This required the reversal of some depreciation charged on equipment which was yet to be brought into use.
Goodwill generated by the acquisition is tested for impairment in note 10.
Property, plant and equipment
Cash and cash equivalents
Receivable from share placing
Current liabilities
Goodwill
Total fair value of acquisition
Consideration to deemed fair value
Total consideration (settled in cash)
Excess value of put option issued in acquisition
Total consideration
Book value on
acquisition
30/03/2007
£000's
8,872
-
4,800
(4,800)
Fair value to
the Group
£000's
9,504
-
4,800
(4,800)
51% acquired
£000's
4,847
-
2,448
(2,448)
186
5,033
4,890
143
5,033
The amount shown as receivable from share placing is the amount due to Ezee DSL from the Group on the acquisition of 51% of Ezee DSL
Limited share capital.
21. SHARE BASED PAYMENTS
The Group operates the following share based payment employee share option schemes; Enterprise Management Incentive scheme,
Sharesave scheme, a number of other approved schemes and a number of unapproved schemes. All schemes are settled in equity only and
are summarised below.
Vesting period
Maximum term
Performance criteria
Required to remain
in employment
Enterprise Management
Incentive scheme
Between 1 and 3
years from grant
10 years after date
of grant
As set by Remuneration
Committee
Sharesave scheme
3 years from grant
6 months after
vesting period
No
Other approved schemes
Between 1 and 3
years from grant
10 years after
date of grant
As set by Remuneration
Committee
Unapproved schemes
3 years from grant
10 years after
date of grant
As set by Remuneration
Committee
Yes
No
Yes
Yes
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 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Details of options and awards outstanding, and a reconciliation of movements in the year in respect of the Company’s ordinary shares of 1p
each, under the various schemes are as follows:
Exercise
price
Details
Exercise
date
Expiry
date
Enterprise management incentive scheme
6.25
6.25
6.25
6.25
6.25
6.25
78.50
78.50
78.50
26/07/2002
26/07/2003
26/07/2004
02/07/2004
02/07/2005
02/07/2006
17/11/2005
17/11/2006
17/11/2007
26/07/2012
26/07/2012
26/07/2012
02/07/2013
02/07/2013
02/07/2013
17/11/2014
17/11/2014
17/11/2014
As at 31 March 2006
Options for shares outstanding
Issued
Forfeited Exercised
Expired
(123,422)
(52,919)
(1,667)
(4,989)
31
March
2005
266,666
266,666
266,668
261,667
270,000
270,000
6,666
6,667
590,485
Savings related scheme
01/03/2009
76.00
01/09/2009
545,761
Unapproved schemes
31/10/2001
11.75
27/06/2002
6.25
27/06/2003
6.25
27/06/2004
6.25
17/11/2007
78.50
11/05/2000
5.00
11/02/2001
5.00
11/02/2002
5.00
Approved Schemes
44.00
13.50
13.50
13.50
11.75
9.00
24/01/2004
26/09/2001
31/01/2003
26/09/2004
31/10/2004
27/02/2005
31/10/2011
27/06/2007
27/06/2007
27/06/2007
17/11/2014
14/12/2008
14/12/2008
14/12/2008
50,000
33,333
33,333
33,334
4,256,182
276,886
276,887
276,887
24/01/2011
26/09/2011
26/09/2011
26/09/2011
31/10/2011
27/02/2012
43,000
62,500
1,500
197,500
23,888
100,000
(5,500)
(62,500)
(1,500)
(192,500)
Options
for shares
exercisable
31
March
2006
266,666
266,666
266,668
138,245
215,414
-
6,666
-
-
31
March
2006
266,666
266,666
266,668
138,245
215,414
265,011
6,666
6,667
590,485
545,761
-
50,000
33,333
33,333
33,334
4,256,182
276,886
276,887
276,887
37,500
-
-
5,000
23,888
100,000
50,000
33,333
33,333
33,334
-
276,886
276,887
276,887
37,500
-
-
5,000
23,888
100,000
Total
Weighted Average Exercise price
8,416,476
53.87
-
n/a
(6,656)
6.25
(438,341)
10.97
-
n/a
7,971,479
55.21
2307,373
6.93
P A G E 4 3
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Exercise
price
Details
Exercise
date
Expiry
date
Enterprise management incentive scheme
6.25 26/07/2002
6.25 26/07/2003
6.25 26/07/2004
6.25 02/07/2004
6.25 02/07/2005
6.25 02/07/2006
78.50 17/11/2005
78.50 17/11/2006
78.50 17/11/2007
74.00 24/08/2009
26/07/2012
26/07/2012
26/07/2012
02/07/2013
02/07/2013
02/07/2013
17/11/2014
17/11/2014
17/11/2014
24/08/2016
As at 31 March 2007
Options for shares oustanding
Issued
Forfeited Exercised
Expired
(6,666)
(6,666)
(6,668)
(86,996)
(156,832)
(200,758)
(20,000)
31
March
2006
266,666
266,666
266,668
138,245
215,414
265,011
6,666
6,667
590,485
64,865
Options
for shares
exercisable
31
March
2007
31
March
2007
266,666
266,666
266,668
44,583
51,916
57,585
6,666
6,667
570,485
64,865
266,666
266,666
266,668
44,583
51,916
57,585
6,666
6,667
-
-
Savings related scheme
76 01/03/2009
Unapproved schemes
11.75 31/10/2001
6.25 27/06/2002
6.25 27/06/2003
6.25 27/06/2004
78.50 17/11/2007
5.00 11/05/2000
5.00 11/02/2001
5.00 11/02/2002
74.00 24/08/2009
Approved Schemes
44.00 24/01/2004
13.50 26/09/2004
11.75 31/10/2004
9.00 27/02/2005
01/09/2009
545,761
(208,196)
337,565
-
50,000
31/10/2011
33,333
27/06/2007
33,333
27/06/2007
27/06/2007
33,334
17/11/2014 4,256,182
276,886
14/12/2008
276,887
14/12/2008
14/12/2008
276,887
24/08/2016
135,135
24/01/2011
26/09/2011
31/10/2011
27/02/2012
37,500
5,000
23,888
100,000
(33,333)
(33,333)
(33,334)
(100,000)
50,000
-
-
-
4,256,182
276,886
276,887
276,887
135,135
50,000
-
-
-
276,886
276,887
276,887
-
37,500
5,000
23,888
-
37,500
5,000
23,888
-
Total
Weighted Average Exercise price
7,971,479 200,000
55.14 74.00
(248,196)
70.58
(644,586)
6.68
-
n/a
7,278,697 1,914,465
6.87
59.42
In accordance with the transitional provisions of IFRS, the requirements of IFRS 2 Share Based Payment have not been applied to equity
instruments that were granted before 7 November 2002 or equity instruments that were granted after 7 November 2002 that had vested
before the date of transition, being 1 April 2005. Therefore the following disclosures relate only to awards made after 7 November 2002 that
had not vested by 1 April 2005.
As disclosed in note 4, a share based payment charge of £153,000 (2006: £168,000) has been recognised in the income statement during
the year in relation to the above schemes. The fair value of the employee services received is valued indirectly by valuing the options granted
using the Black-Scholes option pricing model, which worked on the following assumptions.
P A G E 4 4
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Grant date
Vesting date
Variables used
Share price at grant date
Volatility
Dividend yield
Number of employees holding options/units
Option/award life (years)
Expected life (years)
Risk free rate
Expectations of meeting performance criteria
Fair value
Exercise price per share
02-Jul-03
02-Jul-05
02-Jul-06
17-Nov-04
17-Nov-07
01-Mar-06
01-Mar-09
24-Aug-06
24-Aug-09
13.75p
50%
0.00%
9
10
2.50
4%
100%
8.53p
6.25p
13.75p
50%
0.00%
9
10
3.50
4%
100%
8.95p
6.25p
78.50p
35%
1.27%
6
10
3.00
4%
42%
20.41p
78.50p
95.00p
49%
3.16%
46
10
3.00
4.17%
100%
35.77p
78.50p
69.00p
40%
4.35%
1
10
3.00
4.75%
100%
14.91p
74.00p
i) Expected volatility was determined at the date of grant from historic volatility, adjusted for events that were not considered to be reflective
of the volatility of the share price going forward
ii) Risk free rate was calculated based on the average Bank of England zero coupon yields.
22. ANALYSIS OF CHANGE IN NET DEBT
Cash at bank and in hand
Bank overdrafts
Bank loan
Finance leases and hire purchase
2006
£’000
1,279
(1,320)
(2,173)
(64)
Inception of
finance lease
£’000
Cash flow
£’000
(280)
(2,831)
865
109
(418)
2007
£’000
999
(4,151)
(1,308)
(373)
Net debt
(2,278)
(418)
(2,137)
(4,833)
23. RELATED PARTY TRANSACTIONS
The only related party transactions in the year were the payments to key management (only directors are deemed to fall into this category)
disclosed in note 4.
24. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
There were no contingent assets or contingent liabilities as at 31 March 2007 (2006: nil).
(b) Commitments
The future annual minimum lease payments under non-cancelable operating leases are as follows:
No later than 1 year
Later than 1 year and no later than 5 years
Later than 5 years
2007
£’000
104
95
444
643
2006
£’000
178
74
444
696
Capital expenditure on property, plant and equipment committed by the Group at 31 March 2007 was £nil (2006: £nil).
P A G E 4 5
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
25. EVENTS AFTER THE BALANCE SHEET DATE
a) Operating lease contracted
On the 4 April 2007 the Group entered into an operating lease contract to lease a datacentre property in London. The lease has a term of
13 years 3 months and has an annual charge for rental and service fees totalling around £1m, as well as dilapidations provisions which are
estimated to be around £2m at the end of the lease term.
b) Ownership of Ezee DSL
The Investment Agreement under which the Group acquired a 51% controlling interest in Ezee DSL Limited also requires the Group and the
vendor to fund the working capital needs of Ezee DSL relative to their respective shareholdings at the time the funding is required. If one party
does not provide its share of the required funding then the other party may provide funding in excess of its share and acquire shares from the
other party to compensate for the excess funding so provided. Ezee DSL, in line with its agreed business plan, has required funding and the
Group has provided all of that funding to date. Consequently, the Group has now begun the process of acquiring the additional shares from
the vendor which will result in Group holding 99.8% of the share capital of Ezee DSL.
26. RISK MANAGEMENT
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, short term receivables/payables and borrowings.
Financial assets
The Group’s financial assets and their maturity profile are:
Trade receivables
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:
Trade payables
Finance leasing capital obligations
Bank overdrafts – floating rate
Bank loan – floating rate
All of the fixed interest obligations are repayable within one year.
An analysis of the maturity of Group debt is given in note 17
2007
£’000
2006
£’000
2,086
999
1,573
1,279
3,085
2,852
3,085
2,852
(928)
(373)
(4,151)
(1,308)
(972)
(64)
(1,320)
(2,173)
(6,760)
(4,529)
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, overdraft and cash at bank is determined by reference to the base rate.
The Group has a committed overdraft facility of £4,500,000 (2006 - £1,500,000), which falls due for renewal on 30 October 2007.
P A G E 4 6
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
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 Group 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, however the revenue recognition policy takes account of this, so that there is no exposure from the deferred payment
terms. Therefore the Group consider that the trade receivables 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.
27. CHANGES IN ACCOUNTING POLICIES – ADOPTION OF IFRS
As of 1 April 2005, the Group’s accounting policies have been changed to comply with International Financial Reporting Standards (IFRS). The
date of transition is 1 April 2005 and all comparative figures at 1 April 2005 and for the year ended 31 March 2006 have been restated.
The Group has taken the optional exemption available under IFRS 1 First Time Adoption of IFRS, and has not reclassified business combinations
that took place before 1 April 2005, the date of transition. Therefore the purchase price in excess of assets and liabilities acquired previously
recorded as goodwill has not been reclassified into goodwill and other intangible assets.
The adoption of IFRS results in changes to the accounting policies in the following areas:
(a) Revenue recognition
Previously under UK GAAP revenue relating to Ufindus was recognised once the service had been delivered and all significant obligations in
relation to the sale had been fulfilled. Under this policy revenue was recognised in advance of invoicing and recorded as an amount due on
deferred payment terms and was included within debtors in the balance sheet. Under IAS 18 Revenue, revenue is recognised over the period
which the customer uses the service and only where it is probable that future economic benefit will flow from the transaction. This has the effect
of removing the debtor balance representing the amount due on deferred payment terms from the balance sheet and reducing the amount of
trade debtors recorded in the balance sheet in both cases net of any applicable provisions for doubtful debts which had been established.
(b) Share-based payments
In accordance with IFRS 2 Share Based Payments, the fair value of employee services received in exchange for the grant of share based
compensation plans is recognised as an expense, and allocated over the vesting period.
(c) Share based payments prior to November 2002
The Group operates a variety of share-based employee incentive arrangements which typically include the grant of share options. Under UK
GAAP, the intrinsic value of an award under the Group’s share plans was charged as an operating cost over the period of performance of the
employee receiving the award. Inland Revenue approved SAYE schemes (and their overseas equivalents) were outside the scope of UITF Abstract
17, and a charge was therefore not recorded in respect of these schemes even where the options were granted at a discount to the market price
at the date of invitation.
IFRS 2 Share Based Payments requires that an expense is recognised in the income statement based on the fair value of an award at the date
of grant for all share-based incentive schemes. The expense is spread over the period for which services are received from employees, which
is assumed to be the vesting period of the award. The impact of adopting IFRS is to increase the share-based payment charge in the income
statement, primarily because IFRS 2 Share Based Payments covers market value schemes and schemes which were outside the scope of UITF
17.
In line with the provisions of IFRS 2 Share Based Payments a separate share based payment reserve has not been set up, and the credit is instead
taken to profit and loss reserves.
P A G E 4 7
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
(d) Development costs
Under UK GAAP the Group elected to expense development costs of Ufindus directory products to profit and loss, but in accordance with IAS
38 Intangible Assets, these are now capitalised on the Balance Sheet as intangible assets.
(e) Income taxes
In accordance with both UK GAAP and IFRS the Group recognises a deferred tax asset in respect of tax losses to the extent that it is probable
that these losses will be utilised. The deferred tax asset at March 2005 and March 2006 previously reported on the basis of the expected tax
loss utilisation arising from profitability measured under UK GAAP, have been restated to reflect the expected utilisation arising from profitability
measured under IFRS.
(f) Business combinations
IFRS 3 Business Combinations prohibits merger accounting and the amortisation of goodwill. The standard requires goodwill to be carried at cost
with impairment reviews both annually and when there are indications that the carrying value may not be recoverable. IFRS 3 requires certain
intangible assets to be recognised at the date of acquisition and to be amortised on a systematic basis over their economic lives.
As required by IFRS 1, goodwill recognised under previous UK GAAP has been tested for impairment at the date of transition to IFRS. No
impairment loss was required to be recognised. In accordance with IFRS 1, this amount has been considered the carrying amount of goodwill
in the opening IFRS balance sheet.
(g) Fair value of property, plant and equipment
Under UK GAAP computer software was classified as property, plant and equipment, however under IAS 38 this is to be classified as an Intangible
Asset. This reclassification is the only change in the figures as a result of the adoption of IAS 16 Property, Plant and Equipment.
(h) Software
Costs of software and software licences purchased for internal use have been reclassified from property, plant and equipment to intangible
assets.
(I) IFRS cash flow statement adjustments
The overall cash flows of the Group do not change as a result of adopting IFRS. The IFRS cash flow format includes various cash flows in different
categories and in a different order to UK GAAP. Development costs which were written-off as operating costs under UK GAAP are capitalised
and amortised under IFRS and are classified as investing activities in the cash flow statement. Dividends and interest are reported as financing
costs. Tax is reported as an operating cash flow. Certain leasehold properties accounted for as operating leases under UK GAAP are accounted
for as finance leases under IFRS. The cash flow categorisation changes accordingly.
P A G E 4 8
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Reconciliation of profit reported under UK GAAP for the year ended 31 March 2006 to profit reported under IRFS
Year ended 31st March 2006
UK
GAAP
£’000
Revenue
Recognition
£’000
Amortisation
£’000
Tax
£’000
Development
costs
£’000
Share
based
payments
£’000
IFRS
£’000
Turnover
24,306
(6,274)
Cost of sales
(4,361)
-
Gross profit
19,945
(6,274)
Admin expenses
(15,547)
1,249
Operating profit
4,398
(5,025)
Net interest
(214)
-
(Loss)/profit before tax
4,184
(5,025)
-
-
-
819
819
-
819
-
-
-
-
-
-
-
-
-
-
-
18,032
-
(4,361)
-
13,671
116
(168)
(13,531)
116
(168)
140
-
-
(214)
116
(168)
(74)
Tax
(170)
-
-
255
-
-
Profit after tax
4,014
(5,025)
819
255
116
(168)
85
11
To ensure complete focus on the appropriate revenue, whilst the Group could have continued to recognise revenue in the Ufindus statutory
accounts under UK GAAP on the basis previously used, it has decided to alter UK GAAP revenue recognition to a basis consistent with IFRS.
The accounts of Ufindus Limited have been prepared on the basis of the revised revenue recognition policy.
P A G E 4 9
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
As at 1st April 2005
Reported
under UK
GAAP
£’000
Revenue
recognition
£’000
Software
intangible
asset
£’000
Share
based
payments
£’000
Restated
under
IFRS
£’000
Tax
£’000
-
-
-
47
(47)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
14,336
838
15,174
-
(1,200)
(1,200)
2,214
-
2,033
4,247
-
(5,990)
-
(5,990)
(1,200)
-
13,431
(2,201)
(1,200)
11,230
-
-
-
69
(69)
-
-
-
-
(1,200)
767
1,200
6,108
69
3,086
-
(1,200)
11,230
-
-
-
-
-
-
-
-
-
-
-
-
-
Non-current assets
Intangible assets
Tangible assets
Current assets
Debtors
Deferred tax
Cash at bank and in hand
Current liabilities
Bank overdraft
Total assets less current liabilities
Non-current liabilities
14,289
885
15,174
5,256
1,200
2,033
8,489
(5,933)
(5,933)
17,730
(2,201)
(3,042)
-
(3,042)
(57)
(57)
(3,099)
-
Net assets
15,529
(3,099)
Capital and reserves
Share capital
Redemption reserve
Share premium
Share based payments
Profit and loss account
767
1,200
6,108
-
-
-
7,454
(3,099)
Total equity
15,529
(3,099)
P A G E 5 0
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2007
Revenue
Share
based
recognition payments
£’000
£’000
As at 31st March 2006
Software
intangible Amortisation Development
costs
of goodwill
Tax
£’000 £’000
£’000
asset
£’000
Restated
under
IFRS
£’000
Reported
under UK
GAAP
£’000
13,470
918
14,388
10,614
945
1,279
12,838
(5,847)
(1,320)
(7,167)
Non-current assets
Intangible assets
Tangible assets
Current assets
Debtors
Deferred tax
Cash at bank and in hand
Current liabilities
Bank overdraft
-
-
-
(8,083)
-
-
(8,083)
(41)
-
(41)
Total assets less
current liabilites
Non-current liabilities
20,059
(1,373)
(8,124)
-
Net assets
18,686
(8,124)
Capital and reserves
Share capital
Redemption reserve
Share premium
Share based payments
Profit and loss account
773
1,200
6,203
-
-
-
10,510
(8,124)
-
-
-
237
(237)
Total equity
18,686
(8,124)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
35
(35)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
819
-
819
-
-
-
-
-
-
-
819
-
819
-
-
-
-
819
819
116
-
116
-
-
-
14,440
883
15,323
-
-
-
-
-
-
-
-
(945)
-
(945)
2,531
-
1,279
3,810
-
-
-
(5,888)
(1,320)
(7,208)
116
-
(945)
-
11,925
(1,373)
116
(945)
10,552
-
-
-
-
116
-
-
-
-
(945)
773
1,200
6,203
237
2,139
116
(945)
10,552
P A G E 5 1
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
HOLDING COMPANY FINANCIAL STATEMENTS
Year ended 31 March 2007
REPORT OF THE INDEPENDENT AUDITOR TO THE MEMBERS OF IOMART GROUP PLC
We have audited the parent company financial statements of iomart Group plc for the year ended 31 March 2007 which comprise the principal
accounting policies, the balance sheet and notes 1 to 15. These parent company financial statements have been prepared under the accounting
policies set out therein.
We have reported separately on the Group financial statements of iomart Group plc for the year ended 31 March 2007.
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 auditor's 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 parent company 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 parent company 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 parent company financial statements give a true and fair view and whether the parent
company financial statements have been properly prepared in accordance with the Companies Act 1985. We also report to you whether
in our opinion the information given in the Directors' Report is consistent with the financial statements.
In addition we report to you if, in our opinion, 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 Group financial statements.
The other information comprises only the Chairman's Statement, the Chief Executive Officer’s Report, the Finance Director’s Report, the
Directors' Report, the Statement of Director’s Responsibilities, Report of the Board to the Members on Directors’ Remuneration and the
Corporate Governance Statement. We consider the implications for our report if we become aware of any apparent misstatements or material
inconsistencies with the Group 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 parent company financial statements. It
also includes an assessment of the significant estimates and judgments made by the directors in the preparation of the parent company financial
statements, and of whether the accounting policies are appropriate to the 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 parent company 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 parent company financial statements.
P A G E 5 2
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
HOLDING COMPANY FINANCIAL STATEMENTS
Year ended 31 March 2007
Opinion
In our opinion:
(cid:129)
the parent company financial statements give a true and fair view, in accordance with United Kingdom Generally Accepted Accounting
Practice, of the state of the company's affairs as at 31 March 2007
(cid:129)
the parent company 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.
GRANT THORNTON UK LLP
REGISTERED AUDITOR
CHARTERED ACCOUNTANTS
GLASGOW
20 June 2007
P A G E 5 3
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
HOLDING COMPANY BALANCE SHEET
31 March 2007
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors
Cash at bank and in hand
CREDITORS: amounts falling due within one year
NET CURRENT ASSETS
Note
2007
£’000
2006
£’000
4
5
6
19,930
19,930
16,393
16,393
23,304
(4,001)
19,303
14,305
(1,127)
13,178
(14,071)
(7,907)
5,232
5,271
TOTAL ASSETS LESS CURRENT LIABILITIES
25,162
21,664
CREDITORS: amounts falling due after more than one year
7
(437)
(1,307)
NET ASSETS
24,725
20,357
CAPITAL AND RESERVES
Called up share capital
Capital redemption reserve
Share premium account
Profit and loss account
9
11
11
11
994
1,200
17,541
4,990
773
1,200
6,203
12,181
TOTAL EQUITY SHAREHOLDERS’ FUNDS
24,725
20,357
These financial statements were approved by the board of directors on 20 June 2007.
Signed on behalf of the board of directors
Angus MacSween
Director and chief executive officer
P A G E 5 4
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE HOLDING COMPANY FINANCIAL STATEMENTS
Year ended 31 March 2007
1. ACCOUNTING POLICIES
The financial statements are prepared in accordance with applicable United Kingdom accounting standards.
FRS 20 'Share-based Payments’
FRS 20 has been adopted during the year. FRS 20 requires that an expense is recognised in the income statement based on the fair value of an
award at the date of grant for all share-based incentive schemes. The expense is spread over the period for which services are received from
employees, which is assumed to be the vesting period of the award. The impact of this adoption is to increase the share-based payment charge
in the income statement, primarily because FRS 20 covers market value schemes and schemes which were outside the scope of UITF 17. The
effect on the financial statements is shown in notes 10 and 13.
In line with the provisions of FRS 20 Share Based Payments a separate share based payment reserve has not been set up, and the credit is
instead taken to profit and loss reserves.
Accounting convention
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.
Financial instruments
Financial assets are recognised in the balance sheet at the lower of cost and net realisable value. Provision is made for diminution 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.
P A G E 5 5
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE HOLDING COMPANY FINANCIAL STATEMENTS
Year ended 31 March 2007
2. 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 loss for the financial period after taxation was £4,863,000 (2006: profit - £3,416,000).
3. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
Staff costs of the company during the year in respect of employees and directors were:
Executive directors’ remuneration
Non-executive directors’ remuneration
Social security costs
2007
£’000
2006
£’000
95
84
16
195
-
78
8
86
The company makes contributions to executive directors’ and some senior employees’ personal defined contribution pension schemes. These
are the only pension arrangements of the holding company
4. INVESTMENTS HELD AS FIXED ASSETS
The company
Shares in subsidiary undertakings
Restated for FRS 20
£’000
Cost
At 1 April 2006
FRS 20 Adjustment
At 1 April 2006, restated
Acquisition
FRS 20 charge
Cost at 31 March 2007
Impairment
At 1 April 2006
Impairment during the year
Impairment at 31 March 2007
Net book value of Investments at 31 March 2007
Net book value of Investments at 31 March 2006, restated
Net book value of Investments at 31 March 2006
All of the above investments are unlisted.
P A G E 5 6
w w w . i o m a r t . c o m
16,156
237
16,393
4,890
147
21,430
-
(1,500)
(1,500)
19,930
16,393
16,156
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE HOLDING COMPANY FINANCIAL STATEMENTS
Year ended 31 March 2007
The following subsidiaries are included in the company financial statements:
Country of
registration
and operation
Scotland
Scotland
England
England
England
England
England
Activity
Network security
Dormant
Webservices
Webservices
Webservices
Dormant
Webservices
England
Datacentres Provision
Netintelligence Limited
iomart Limited
Ufindus Limited
Web Genie Internet Limited
Internetters Limited
NicNames Limited
Easyspace Limited
Easyspace Datacentres (UK) Limited
(formerly Ezee DSL Limited)
5. DEBTORS
Prepayments and accrued income
Amounts due from share placing
Amounts owed by subsidiary undertakings
6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Bank loan
Trade creditors
Other taxation and social security
Accruals and deferred income
Amounts due on acquisition
Amounts owed to subsidiary undertakings
7. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Bank loan
Ordinary share capital
Owned by
the company
%
Owned by
subsidiary
undertakings
%
100
100
100
51
100
100
100
100
2007
£’000
7
10,466
12,831
2006
£’000
-
-
14,305
23,304
14,305
2007
£’000
871
115
561
134
4,800
7,590
14,071
2006
£’000
866
62
110
53
-
6,816
7,907
2007
£’000
2006
£’000
437
1,307
P A G E 5 7
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE HOLDING COMPANY FINANCIAL STATEMENTS
Year ended 31 March 2007
8. BORROWINGS
Current:
Bank loan
Bank overdrafts
Total current borrowings
Non-current:
Bank loan
Total non-current borrowings
Total borrowings
9. SHARE CAPITAL
Authorised
At 31 March 2006
Increase in year
At 31 March 2007
Called up, allotted and fully paid
At 31 March 2006
Scrip dividend
Issue of Shares
Exercise of options
At 31 March 2007
2007
£’000
2006
£’000
871
4,001
866
1,277
4,872
2,143
437
437
1,307
1,307
5,309
3,450
Ordinary shares of 1p each
Number of shares
£’000
100,000,000
100,000,000
200,000,000
1,000
1,000
2,000
77,265,054
1,522,995
20,000,000
664,586
99,432,635
773
15
200
6
994
The share capital of iomart Group plc consists of ordinary shares with a par value of £0.01. All shares are equally eligible to receive
dividends and represent one vote at the shareholders' meetings of iomart Group plc. All shares issued at 31 March 2007 are fully paid.
During the year the company issued an additional 664,586 (2006: 601,829) ordinary shares of 1p each in respect of the exercise of options,
for which a net total of £43,000 (2006: £101,000) was received.
There was also a separate issue of ordinary shares of 1p each to raise funds for the acquisition of Ezee DSL Limited, which raised a net total
of £10,466,000 net of expenses. The difference between the nominal value of the shares issued and the net issue price has been credited to
share premium account.
P A G E 5 8
w w w . i o m a r t . c o m
IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE HOLDING COMPANY FINANCIAL STATEMENTS
Year ended 31 March 2007
10. PRIOR YEAR ADJUSTMENT
As disclosed in the accounting policies section, a new accounting standard, which has impacted on the financial results was adopted in the year.
The financial effect has been detailed below.
FRS 20, Share based payments
FRS 20 requires the fair value of outstanding share options granted to employees to be recognised as a charge in the profit and loss account.
Previous UK GAAP treatment required the intrinsic value to be recognised as a charge in the profit and loss account. Where employees of
subsidiary companies have been granted options in the holding company, the profit and loss charge is transferred to the subsidiary through
recognising an increase in the investment in that subsidiary (see note 4). Any options granted to employees of the holding company are
recognised through the holding company profit and loss account.
Increase in investments in subsidiaries
Increase in net assets
Increase in profit and loss account reserve
Recognised in profit for the period
11. STATEMENT OF MOVEMENT IN RESERVES
Profit (loss)for the financial period
Dividend paid
Share based payments in company only
Shares issued (net of expenses)
Opening balance
Closing balance
12. MOVEMENT IN SHAREHOLDERS’ FUNDS
(Loss)/profit for the financial period
Dividend paid
Share capital issued
Share based payments in company only
Opening shareholders’ funds
Closing shareholders’ funds
2007
£000
147
147
147
6
2006
£000
237
237
237
-
Capital
redemption
reserve
£’000
Share
premium
account
£’000
Profit and
loss
account
£’000
-
-
-
-
1,200
-
1,035
-
10,303
6,203
(4863)
(2,334)
6
-
12,181
1,200
17,541
4,990
2007
£’000
(4,863)
(2,334)
11,559
6
4,368
2006
£’000
3,416
(958)
101
-
2,559
20,357
17,798
24,725
20,357
2006 opening shareholder funds have been restated to reflect the adoption of FRS 20. Futher information on this is shown in note 10.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTES TO THE HOLDING COMPANY FINANCIAL STATEMENTS
Year ended 31 March 2007
13. SHARE BASED PAYMENTS
For details of share based payment awards and fair values see note 1 to the Group financial statements. The Company accounts recognise
the charge for share based payments for the year of £153,000 (2006: £168,000) by;
1) taking the charge in relation to employees of the holding company through the holding company income statement,
2) recording an increase to its investment in subsidiaries for the amounts attributable to directors of subsidiaries and recording a
corresponding entry to the profit and loss account reserve
14. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
There were no contingent assets or contingent liabilities present as at 31 March 2007 (2006 Nil).
(b) Commitments
There were no commitments present as at 31 March 2007 (2006 Nil).
15. EVENTS AFTER THE BALANCE SHEET DATE
a) Operating lease contracted
On the 4 April 2007 the Company entered into an operating lease contract to lease a datacentre property in London.
The lease has a term of 13 years 3 months and has an annual charge for rental and service fees totalling around £1m, as well as
dilapidations provisions which are estimated to be around £2m at the end of the lease term.
b) Ownership of Ezee DSL
The Investment Agreement under which the Company acquired a 51% controlling interest in Ezee DSL Limited also requires the
Company and the vendor to fund the working capital needs of Ezee DSL relative to their respective shareholdings at the time the funding
is required. If one party does not provide its share of the required funding then the other party may provide funding in excess of its share
and acquire shares from the other party to compensate for the excess funding so provided. Ezee DSL, in line with its agreed business
plan, has required funding and the Company has provided all of that funding to date. Consequently, the Company has now begun the
process of acquiring the additional shares from the vendor which will result in Company holding 99.8% of the share capital of Ezee DSL.
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTICE OF 2007 ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the 2007 annual general meeting of iomart Group plc will be held at Lister Pavilion, Kelvin Campus, West
of Scotland Science Park, Glasgow G20 0SP on 27 July 2007 at 2.30 pm, for the purpose of considering and, if thought fit, transacting the
following business:-
As Ordinary Business, ordinary resolutions will be proposed as follows:-
1 To receive and adopt the financial statements of the company and the directors' and auditors' reports thereon for the year ended 31
March 2007.
2 To reappoint Richard Logan (who was appointed by the board since the last annual general meeting) as a director of the company.
3 To reappoint Angus MacSween (who retires by rotation and, being eligible, offers himself for re-election) as a director of the company.
4 To reappoint Fred Shedden (who retires by rotation and, being eligible, offers himself for re-election) as a director of the company.
5 To reappoint Grant Thornton UK LLP, Chartered Accountants, as auditors of the company and to authorise the directors to fix their
remuneration.
6 To approve the report of the board to the members on directors’ remuneration for the year ended 31 March 2007.
As further Special Business, resolutions will be proposed as follows:-
7 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 £371,107; 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
8 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 7 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 £49,716;
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
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTICE OF 2007 ANNUAL GENERAL MEETING
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.”
9 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 9,943,263 (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
(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
20 June 2007
Lister Pavilion, Kelvin Campus
West of Scotland Science Park
Glasgow G20 0SP
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTICE OF 2006 ANNUAL GENERAL MEETING
Notes
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.
Explanatory Notes to the Notice of Annual General Meeting
Resolutions to be considered as Special Business
Resolution 7 - Allotment authority
Resolution 7 renews an authority given to the directors at the last annual general meeting of the company, held on 21 June 2006, 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 27 October 2007, whichever occurs first, up to a maximum aggregate
nominal value of £371,107, being equal to the total of 30% of the company's issued share capital and the number of shares needed to satisfy
the requirement to issue shares in respect of outstanding share options. 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 8 - Disapplication of pre-emption rights
Resolution 8 renews an authority given to the directors at the last annual general meeting of the company, held on 21 June 2006, which expires
at this meeting.
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 8 asks
shareholders to do this, but only 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 annual general meeting.
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, 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 8, 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 8 will, unless sooner revoked or varied by the company, last until next year's annual general meeting or 27
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IOMART GROUP PLC REPORT AND FINANCIAL STATEMENTS 2007
NOTICE OF 2006 ANNUAL GENERAL MEETING
October 2007, whichever occurs first. This resolution complies with the IPCs' guidelines.
Resolution 9 – 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 9 to affect 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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