Annual Report
and Accounts 2008
The natural choice for business hosting
iomart group plc Annual Report 2008
“Our ability to offer a
‘soup to nuts’ solution,
from domain to data
centre, including complex
hosting requirements,
gives us a unique
place in the hosting
marketplace.”
iomart group plc Annual Report 2008
Financial Statements for year ended 31March 2008
Highlights
º £20m cash sale of Ufindus to BT post year end
º Revenue
• Hosting revenue increased by 63% to £1.4m
• Easyspace revenue increased by 9% to £6.3m
• Combined managed hosting revenues increased
by 17% to £7.7m
º Profitability
• Over £3 million spent on operating costs on start up
data centre operation with limited impact on profitability
• Group EBITDA only reduced by £0.3m to £1.0m
• EBITDA from operations, excluding startup hosting division,
increased from £2.7m to £5.0m
º iomart’s largest ever contract to date for a total
of £6.75m over 5 years with BT
g r o u p p l c
iomart group plc Annual Report 2008
63% GrowthHosting revenue9% GrowthEasyspace revenue£5M EBITDA PROFITUP FROM £2.7M(excluding hosting division)£20MCash from sale of Ufindus strengthens balance sheet.
“Our virtualisation skills
enable us to build, deploy and
manage customer platforms
with a much higher level of
complexity, increasing the
range of managed services
that we provide.”
iomart group plc Annual Report 2008
Contents
Business Review
3
4
7
Chairman’s statement
Chief Executive Officer’s report
Finance Director's report
Corporate Governance
8
10
13
15
17
18
Corporate governance
Report on directors’ remuneration
Directors' report
Statement of directors' responsibilities
Board of directors
Independent auditors’ report
Financial Statements
20
21
22
23
25
51
Consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the financial statements
Holding company financial statements
Other Information
58
Notice of annual general meeting
62 Officers and professional advisers
1
www.iomartgroup.com
“iomart has funds to
accelerate growth”
“Microsoft certifies
iomart”
“Easyspace puts PCL in
the Picture”
“Netintelligence and
XMA unite to defend
kids”
“iomart buoyed by
£6.75m contract”
“iomart wins Web
Services contract with
UK Online”
“ioSmart thinking”
“iomart nets major
award”
iomart group plc Annual Report 2008
The Group has been
making headlines
throughout the year.
A great deal of effort
has been spent on
communicating our
strategy, services and
successes to as wide an
audience as possible.
“the Group now finds itself in a much stronger position
than at this time last year.”
Ian Ritchie, Chairman
I am delighted to present my first report as Chairman of iomart Group. It is not too much of
an exaggeration to say that this has been a pivotal year in the development of the Group,
which has seen us establish ourselves as providers of complex managed hosting and
colocation services to the SME and corporate market in the UK through our owned network
of carrier neutral data centres.
Over the year we set ourselves some objectives in order to ensure that the Group was best
positioned to take advantage of opportunities within a changing market. I am pleased to
report that our management has achieved these objectives and the Group now finds itself in
a much stronger position than at this time last year. As a result of the acquisition of our data
centres last year and the recent disposal of Ufindus our management has successfully built an
asset backed business with substantial cash resources whilst having taken steps to eliminate
the losses from non-performing assets.
We now have a very clear strategy and a solid basis from which to grow the Group and
thereby increase shareholder returns in the medium and long term. With their wealth of
experience in web hosting and managed services, our management is well positioned to
deliver on our strategic goals.
During the year I took over the role of Chairman of the Group from Nick Kuenssberg. For
eight years Nick had provided the Group with first class commitment and service and both
personally and on behalf of everyone connected with the Group I want to thank him for
everything he has contributed to the development of iomart over that period. Mark Hallam
and Stuart Forrest also left the Board and subsequently, with the disposal of Ufindus, ceased
to be employees of the Group. Both contributed greatly to the successful development of
Ufindus and thoroughly deserve the gratitude of everyone connected with iomart for their
sterling efforts.
Finally, I would like to thank our employees for their hard work and commitment over the last
year and our Board for their strong strategic leadership of the business. I believe we can look
to the future with confidence.
Ian Ritchie, Chairman. 28 July 2008
3
Chairman's Statement
“Our
management
is well
positioned
to deliver on
our strategic
goals.”
www.iomartgroup.com
4
Chief Executive Officer's Report
"Complex managed hosting solutions is the target
market for the Group.”
Angus MacSween, Chief Executive Officer
Introduction
We have continued to pursue the strategy laid out last year of focusing on building a managed
hosting business owning its own carrier neutral data centre capacity to allow the delivery of
the full set of vertical components from domain names through space power and bandwidth
to complex application hosting.
Since the year end we have completed the sale of Ufindus to BT for a total cash consideration
of £20m which not only enables us to concentrate solely on the development of the managed
services business but also provides us with the capital to acquire additional assets in this area
when appropriate.
Managed Hosting
Our overall managed hosting revenues grew from £6.6m to £7.7m, a 17% increase in the
year. This is composed of two elements: Easyspace, which services the SME market, had
revenues of £6.3m, and our fledgling data centre-owning Hosting arm which trades as iomart
Hosting serving the needs of the corporate market, had revenues of £1.4m in our start up
year of data centre operation.
Over the years we have developed a portfolio of managed services for SMEs as part of the
Easyspace brand. We now have over 210,000 customers to whom we sell domain name
services, web hosting, dedicated and virtual servers and other web based services. During
the year we have seen good growth in our virtual server and dedicated server offerings and
our growing recognition as experts in virtualisation is attracting opportunities. We now have
accreditation with the major providers of virtualisation software and this will allow us to build,
deploy and maintain customer platforms with a much higher level of complexity and increase
the range of managed services that we provide.
With the addition of our own data centres, all of which are fully operational, we are now able
to leverage this expertise at the enterprise level through the provision of a range of services
from the straightforward provision of space and power to the more complex managed hosting
solutions.
iomart group plc Annual Report 2008
In February 2008 after successfully passing a thorough diligence process, thereby fully
verifying our quality and capability, we won a major contract with BT worth £6.75m over 5
years giving us an anchor tenant for our London data centre.
Complex managed hosting solutions is the target market for the Group going forward and
fundamental to achieving the maximum return on the investment we have made in our data
centres. The demand for managed services remains strong. Typically rack rates for managed
services are around 10x that of providing just space and power and it is for this reason that
we are focused on securing long term managed services contracts rather than filling the data
centres with low value space and power contracts.
Netintelligence
As ‘sofware as a service’ (“SaaS”) begins to hit the mainstream of service and software
delivery, we are delighted to report that Netintelligence, our SaaS based internet security
product, contributed £0.3m of operating profit to the Group largely through controlling
costs. This year we intend to bring the established and robust delivery platforms developed by
Netintelligence closer to the mainstream hosting business and begin to add hosting and other
new services through the same seamless delivery system. We are attracting resellers who see
the requirement to deliver services in this way to their customers.
Ufindus
Following the year end we successfully sold our online directory business, Ufindus to BT for a
total cash consideration of £20m. We improved the profitability of Ufindus through the year
and firmly established its presence in that market. However it was, and remains, our view that
unlocking the shareholder value in Ufindus and reinvesting it in our core business was in the
best interests of the Group and shareholders in the medium and long term. We are delighted
that the UK’s largest telecommunications organisation has recognised the value we have
created in Ufindus and look forward to seeing it prosper under BT’s ownership. I would like
to add my personal thanks to Mark Hallam and Stuart Forrest for their commitment and effort
over the years, and wish them well in their futures with BT.
Current trading and outlook
We are now well positioned to address our chosen market and a combination of the defensive
qualities of managed hosting provision alongside revenue visibility related to multi-year
contracts give us confidence in our long term prospects.
We intend to use the proceeds of the sale of Ufindus to acquire hosting businesses which can
add revenues, customers and skills while benefitting from cost efficiencies within the Group.
We look forward with clarity and confidence.
Angus MacSween, Chief Executive Officer. 28 July 2008
5
Chief Executive Officer's Report
“We look
forward
with
clarity and
confidence.”
www.iomartgroup.com
"Our investment to date gives
the group 4 fully powered,
resilient and highly secure
data centres."
iomart group plc Annual Report 2008
“We find ourselves in the enviable position of having
sufficient funding to fully underwrite our plans.”
Richard Logan, Finance Director
Trading
After the acquisition of our data centres at the very end of the last financial year our plan
this year was to absorb the considerable costs of establishing a data centre operation
without affecting our overall Group profitability. Despite having incurred planned operating
expenditure in the first year of ownership of our data centres in excess of £3m there has been
a limited impact on our overall profitability.
What has been particularly pleasing has been the revenue growth in both Easyspace (9%)
which has been achieved through a combination of additional dedicated resources and
greater focus and our Hosting operation (63%) which includes the impact of the first year of
operation of our data centres. Through a combination of a reduction in direct sales headcount
and other operational efficiencies, the underlying level of profitability of the Ufindus operation
was substantially improved at the expense of revenue growth in the short term.
EBITDA for the year was £1.0m (2007: £1.3m) which includes the planned operating
expenditure incurred in the first year of operation of our data centres, within our Hosting
division. All of our other operating divisions, namely Easyspace, Netintelligence and Ufindus,
showed strong EBITDA growth collectively delivering EBITDA profits of £5.0m compared to
£2.7m in 2007. In particular, as we committed at the end of the last financial year, we have
taken steps to ensure Netintelligence made an EBITDA profit compared to the substantial
EBITDA loss in 2007.
Cash
Despite the cost of establishing our data centre operation our operating cashflow improved
over last year with £0.5m generated from operating activities this year compared to £0.2m
in 2007. A great deal of effort has gone into improved working capital management and it
is very pleasing to see the positive effect this has had.
At the end of the financial year our net overall borrowings were £0.1m compared to £4.8m
at the end of the last financial year. This of course, also includes the cash effect of our share
issue at the very start of this financial year to finance the acquisition of our data centres.
Financial Position
Since the year end we have disposed of our internet directory subsidiary Ufindus for an initial
cash sum of £18m with a further £2m in escrow and consequently we find ourselves in the
enviable position of having sufficient funding to fully underwrite our current business plans and
not having to place reliance on borrowing facilities at this testing time in the credit market.
Richard Logan, Finance Director. 28 July 2008
7
Finance Directors' Report
“What has been
particularly
pleasing has
been the revenue
growth in
Easyspace and
our Hosting
operation.”
www.iomartgroup.com
8
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
timely and relevant
through
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 three 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. Ian Ritchie is chairman of the nominations
committee, Fred Shedden of the remuneration committee
and Chris Batterham of the audit committee.
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 concern
On the basis of a review of facilities available to the
Group together with a review of forecasts, the directors
have a reasonable expectation that the Group has
adequate resources to continue in operational existence
for the foreseeable future. For this reason they continue to
adopt the going concern basis in preparing the financial
statements.
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:
A separate report on directors’ remuneration is set out on
pages 10 to 12, this to be approved by the shareholders
at the annual general meeting.
• Financial reporting: there is in place a
comprehensive system of financial reporting based
iomart group plc Annual Report 2008
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.
• 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.iomartgroup.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.
9
Corporate Governance
www.iomartgroup.com
10
Report of the board to the members on directors'
remuneration
each director to ensure they are relevant and stretching.
• Car allowance and other benefits
The executive directors are entitled to a car allowance and
life insurance cover.
• Private Medical Insurance
The executive directors are entitled to participate in the
group’s Private Medical Insurance scheme.
• 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.
• 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.
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 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:
• salaries and benefits available to executive
directors of comparable companies;
• the need to attract and retain executives of an
appropriate calibre; and
• 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:
• 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.
• 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
iomart group plc Annual Report 2008
Report of the board to the members on directors' remuneration
11
Directors’ remuneration
Details of individual directors’ emoluments for the year are as follows:
Name of director
Salary or fees
£
Bonus
£
Benefits
£
Pension
contributions
£
Year
ended
Year
ended
31 March 31 March
2007
Total
£
2008
Total
£
Nick Kuenssberg (resigned 31 January 2008)
Angus MacSween
Chris Batterham
Stuart Forrest (resigned 31 March 2008)
Mark Hallam (resigned 31 March 2008)
Sarah Haran
Richard Logan (appointed 10 July 2006)
Ian Ritchie (appointed 21 December 2007)
Fred Shedden
40,000
154,167
30,000
110,000
110,000
110,000
110,000
13,333
30,000
-
91,000
-
73,595
73,595
85,000
45,000
-
-
-
991
-
1,304
16,216
-
991
-
-
-
13,500
-
-
-
7,574
8,000
-
-
40,000
259,658
30,000
184,899
199,811
202,574
163,991
13,333
30,000
35,000
202,950
24,375
194,249
194,249
187,425
95,052
-
25,000
707,500
368,190
19,502
29,074 1,124,266
958,300
Directors’ interests in shares
The interests of the directors in the shares of the company at 31 March 2008, together with their interests at 1 April 2007 or the date of
appointment were as follows:
Name of director
Angus MacSween
Chris Batterham
Sarah Haran
Richard Logan
Ian Ritchie
Fred Shedden
Number of ordinary shares
31 March 2008
At 1 April 2007
or date of
appointment
19,286,304
45,621
720,704
45,500
Nil
744,588
19,286,304
45,621
720,704
45,500
Nil
744,588
www.iomartgroup.com
12
Report of the board to the members on directors' remuneration
Directors’ interests in share options
The interests of the directors at 31 March 2008 in options over the ordinary shares of the company were as follows:
Name of director
At 1 April 2007
Granted
in year
At 31
Exercised March 2008
Exercise
price
Date from
which
exerciseable
Expiry date
Angus MacSween
Sarah Haran
Richard Logan
1,750,000
12,302
1,762,302
159,746
159,747
159,747
850,000
4,921
-
-
-
-
-
-
-
-
-
500,000
1,334,161
500,000
200,000
-
-
500,000
200,000
500,000
-
-
-
-
-
-
-
-
-
-
-
-
-
1,750,000
12,302
78.5p
76.0p
17/11/2007
01/03/2009
17/11/2014
01/09/2009
1,762,302
159,746
159,747
159,747
850,000
4,921
500,000
1,834,161
5.0p
5.0p
5.0p
78.5p
76.0p
50.5p
11/05/2000
11/02/2001
11/02/2002
17/11/2007
01/03/2009
27/09/2010
14/12/2008
14/12/2008
14/12/2008
17/11/2014
01/09/2009
27/09/2017
200,000
500,000
74.0p
50.5p
24/08/2009
27/09/2010
24/08/2016
27/09/2017
700,000
The options granted in the current year vest over a two year period subject to appropriate performance criteria.
On 28 April 2008 1,300,000 of the 78.5p options granted to Angus MacSween, 600,000 of the 78.5p options granted to Sarah
Haran and 150,000 of the 74p options granted to Richard Logan lapsed as the performance criteria on which these options would
have vested had not been satisfied. It is the intention of the remuneration committee to review option incentive packages for the
executive directors during the forthcoming financial year.
The market price of the company’s shares at the end of the financial period was 45p and the range of prices during the period was
between 32p and 70.5p.
By order of the board
Fred Shedden
Chairman, Remuneration committee
28 July 2008
iomart group plc Annual Report 2008
13
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 2008.
usage of racks to the total rack capacity of the data centres.
The increase in the year is due to new sales.
Principal activity
The principal activity of the Group is the provision of
webhosting and managed hosting services through a
network of owned data centres.
Business review
The chairman’s statement, chief executive officer’s and
finance director’s reports contain a review of trading.
The Group is focused on building a managed hosting
business using its own carrier neutral data centre capacity
to allow the full set of vertical components from domain
names through space, power and bandwidth to complex
application hosting.
Key performance indicator review
With the disposal of the Group’s on-line directory operation,
Ufindus, after the year end the Group has taken the
opportunity to revise its key performance indicators to be
more in line with those indicators which are important to
the future strategic direction of the Group.
Revenue
2008
2007
5% reduction 17% increase
There are two major components to the 5% reduction in
2008 revenue. Ufindus, our online directory operation
which was sold on 9 July 2008, had a revenue reduction of
10% (2007: revenue increase of 17%) and our managed
hosting operations had a revenue increase of 5% (2007:
revenue increase of 1%).
EBITDA margin
2008
5%
2007
6%
The Group’s EBITDA margin has shown a small decrease
despite incurring costs of over £3m in establishing its data
centre operation during the year.
Data centre usage
2008
19%
2007
5%
Data centre usage is calculated by comparing the actual
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 2008 comprise a bank
loan and overdrafts of £0.8m and finance leases totalling
£0.4m. 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
2008 was between 7.75% and 8.00% and the average
interest rate since the loan was drawn was 8.29%. 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 25.
Dividend
The directors do not propose a dividend for the year ended
31 March 2008 (2007 – nil).
Directors and their interests
The present membership of the board is set out on page
17. In addition Dominic Marrocco served as a director
until 20 June 2007, Nick Kuenssberg served as a director
until 31 January 2008, and Mark Hallam and Stuart
Forrest both served as directors until 31 March 2008. In
accordance with the company’s Articles of Association,
Chris Batterham, Sarah Haran and Ian Ritchie 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 10 to 12.
www.iomartgroup.com
7.00%
5.18%
4.68%
14
Directors' Report
Substantial shareholdings
At 30 June 2008 the following interests in 3% or more of
the issued ordinary share capital had been notified to the
company:
Shareholder
Shares
Percentage held
Angus MacSween
19,286,304
19.40%
16,169,944
16.26%
Gartmore
Investment Limited
Majedie
Asset Management
British Steel
Pension Scheme
6,690,911
5,146,000
Goldman Sachs
4,654,535
Universities
Superannuation
Scheme
4,177,000
4.20%
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
2008, calculated in accordance with the requirements
of the Companies Act 1985, were 26 days (2007 – 30
iomart group plc Annual Report 2008
days), and of the company were 27 days (2007 – 26
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:
• there is no relevant audit information of which the
auditors are unaware, and
• 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.
Website disclaimer
The maintenance and integrity of the iomart Group plc
website is the responsibility of the directors. The work
carried out by the auditor does not involve consideration
of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the
financial statements since they were initially presented on the
website. Legislation in the United Kingdom governing the
preparation and dissemination of the financial statements
may differ from legislation in the other jurisdictions.
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
Bruce Hall, Company secretary
28 July 2008
Statement of Directors' Responsibilities
15
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:
• select suitable accounting policies and then apply
them consistently;
• make judgements and estimates that are
reasonable and prudent;
• state whether applicable accounting standards
have been followed subject to any material
departures disclosed and explained in the
financial statements; and
• 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.
Netintelligence
achieved the Central
Sponsor of Information
Assurance, CSIA Claims
Tested Mark, awarded by
the Cabinet Office.
iomart has been
accredited by Microsoft
as a certified partner with
Advanced Infrastructure
Solutions status.
www.iomartgroup.com
“Our Nottingham data centre
incorporates the latest in cooling
technology reducing our estimated
electricity consumption by
7% per annum.”
iomart group plc Annual Report 2008
Board of Directors
Ian Ritchie
58, appointed 2008; Currently Chairman of Computer Application Services Ltd, Caspian
Learning Ltd, Connect Scotland, and Scapa Technologies Ltd he is also a past President of
the British Computer Society. Ian was founding chairman of several technology companies,
including Voxar Ltd (now part of Barco Ltd), a world leader in visualisation solutions for
medical markets, Orbital Software Group plc (now part of Sopheon plc), Digital Bridges Ltd.
(now part of Oberon Inc) and Sonaptic Ltd (now part of Wolfson Microelectronics plc), the
leading audio technology development company.
Angus MacSween
52, 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.
Chris Batterham
53, 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.
Sarah Haran
42, 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
50, 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
64 , 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.
17
Board of Directors
www.iomartgroup.com
18
Report of the independent auditor to the members
of iomart group plc.
We have audited the Group financial statements of iomart
Group plc for the year ended 31 March 2008 which
comprise the principal accounting policies, the consolidated
income statement, the consolidated balance sheet, the
consolidated cash flow statement, the consolidated
statement of changes in shareholders' equity and notes 1
to 26. These consolidated financial statements have been
prepared under the accounting policies set out therein.
Statement, Chief Executive Officer's Report and the Finance
Director's 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 have reported separately on the parent company
financial statements of iomart Group plc for the year ended
31 March 2008.
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. 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
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.
iomart group plc Annual Report 2008
Report of the independent auditor to the members of iomart group plc.
19
Opinion
In our opinion 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 2008 and of its profit for the year then ended;
the Group financial statements have been properly prepared
in accordance with the Companies Act 1985; and
the information given in the Directors' Report is consistent
with the financial statements.
Separate opinion in relation to IFRSs
As explained in Note 2 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 2008 and of its profit for
the year then ended.
GRANT THORNTON UK LLP
REGISTERED AUDITOR
CHARTERED ACCOUNTANTS
GLASGOW
28 July 2008
www.iomartgroup.com
20
Consolidated Income Statement
Year ended 31March 2008
Continuing
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating (loss)/profit
Analysed as:
Earnings before interest, tax, depreciation and amortisation
Depreciation
Amortisation
Finance income
Finance costs
(Loss)/profit before taxation
Taxation
Profit for the year from continuing operations
Basic and diluted earnings per share
Basic
Diluted
Note
2008
£’000
2007
£’000
20,049
21,086
(5,501)
(4,686)
14,548
16,400
(14,672)
(15,835)
(124)
565
964
(817)
(271)
73
(124)
1,331
(653)
(113)
11
(358)
(175)
218
528
1,962
353
2,180
4
4
6
6
8
10
10
0.35p
0.35p
2.78p
2.72p
iomart group plc Annual Report 2008
21
Consolidated Balance Sheet
31March 2008
Note
2008
£’000
Restated
2007
£’000
ASSETS
Non-current assets
Intangible assets – goodwill
Intangible assets – development costs
Intangible assets - software
Deferred tax asset
Lease deposit
Property, plant and equipment
Current assets
Cash and cash equivalents
Trade and other receivables
Amount due from share placing
Total assets
LIABILITIES
Non-current liabilities
Deferred consideration
Borrowings
Current liabilities
Cash and cash equivalents
Trade and other payables
Borrowings
Amount due in relation to acquisition
Total liabilities
Net assets
EQUITY
Share capital
Capital redemption reserve
Share premium
Retained earnings
Total equity
11
11
11
9
13
15
14
17
18
15
16
18
20
These financial statements were approved by the board of directors on 28 July 2008
Signed on behalf of the board of directors
Angus MacSween
Director and Chief Executive Officer
18,525
669
51
826
884
8,310
29,265
743
3,121
-
3,864
18,525
310
39
170
-
8,380
27,424
-
2,989
10,466
13,455
33,129
40,879
(4,800)
(187)
(4,987)
-
(4,789)
(672)
-
(5,461)
(4,800)
(649)
(5,449)
(3,152)
(4,336)
(1,032)
(4,800)
(13,320)
(10,448)
(18,769)
22,681
22,110
994
1,200
17,541
2,946
22,681
994
1,200
17,541
2,375
22,110
www.iomartgroup.com
22
Consolidated Cash Flow Statement
Year ended 31March 2008
Operating (loss)/profit
Depreciation
Amortisation
Share based payments
Recognition of deferred grants
Movement in deposits
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
Payment for acquisition of business
Net cash used in investing activities
Cash flow from financing activities
Issue of shares
Repayment of finance leases
Repayment of borrowings
Receipt of cash from share placing
Dividends
Interest received
Interest paid
Net cash from/(used) in financing activities
Note
4
4
21
11
11
20
22
22
7
6
6
2008
£’000
(124)
817
271
143
(24)
(884)
(152)
477
524
-
-
524
(520)
(606)
(36)
(4,800)
(5,962)
-
(206)
(876)
10,466
-
73
(124)
9,333
2007
£’000
565
653
113
153
(48)
-
(631)
(562)
243
142
(160)
225
(463)
(282)
(29)
-
(774)
43
(109)
(865)
-
(1,284)
11
(358)
(2,562)
Net increase / (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
3,895
(3,111)
(3,152)
(41)
Cash and cash equivalents at the end of the year
15
743
(3,152)
iomart group plc Annual Report 2008
Consolidated Statement of Changes in Equity
Year ended 31March 2008
23
Share
capital
Note
£’000
Capital
redemption
reserve
£’000
Share
premium
account
£’000
Retained
earnings
Total
£’000
£’000
Balance at 1 April 2006
Profit in the period
Scrip dividend
Dividends paid
Share based payments
Shares issued for share option redemption
(net of expenses)
Issue of new shares for acquisition
7
7
21
773
-
15
-
-
6
200
1,200
-
-
-
-
6,203
-
1,035
-
-
-
-
37
10,266
2,376
2,180
(1,050)
(1,284)
153
-
-
10,552
2,180
-
(1,284)
153
43
10,466
Balance at 31 March 2007
994
1,200
17,541
2,375
22,110
Balance at 1 April 2007
Profit in the period
Share based payments
Deferred tax on share based remuneration
21
9
Balance at 31 March 2008
994
-
-
-
-
994
1,200
-
-
-
-
1,200
17,541
-
-
-
-
17,541
2,375
353
143
75
571
2,946
22,110
353
143
75
571
22,681
During the year 6,667 shares were issued in relation to the exercise of share options. However the consideration received for these was
only £416, so did not move the rounded equity figures shown above.
www.iomartgroup.com
"Comparing our 100% uptime
guarantee with our competitors is like
comparing apples with oranges. 100%
Uptime can only be delivered, and
promised, if every component of the
supply chain is directly managed and
operated by a single source."
iomart group plc Annual Report 2008
25
Notes to the Financial Statements
Year ended 31March 2008
1. GENERAL INFORMATION
iomart Group plc is a company incorporated in the United
Kingdom under the Companies Act 1985. The address
of the registered office is given on the outer back cover
of this report. The nature of the Group’s operations and
its principal activities are set out in the Chief Executive
Officer’s report, Finance Director’s report and Directors’
report.
The financial statements are presented in pounds sterling
because that is the currency of the primary economic
environment in which the Group operates. Foreign
operations are included in accordance with the policies set
out in note 2.
2. ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements have been prepared
in accordance with applicable International Financial
Reporting Standards as adopted by the EU and 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. These policies have been consistently applied to all
years presented unless otherwise stated.
Basis of consolidation
The Group financial statements consolidate those of the
company and all of its subsidiary undertakings drawn up
to 31 March 2008. 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.
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.
At the date of transition, the Group 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.
Standards, amendments, and interpretations
effective in year
IFRS 7, ‘Financial instruments: Disclosures’, and the
complementary amendment to IAS 1, ‘Presentation of
financial statements – Capital disclosures’, introduces
new disclosures relating to financial instruments and does
not have any impact on the classification and valuation
of the Group’s financial instruments, but does bring in
further disclosures around trade and other receivables and
payables.
IFRIC 8, ‘Scope of IFRS 2’, 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 in order to
establish whether or not they fall within the scope of IFRS
2. This interpretation does not have any impact on the
Group’s financial statements.
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
IFRIC 10, ‘Interim financial reporting and impairment’,
prohibits the impairment losses recognised in an interim
www.iomartgroup.com
26
Notes to the Financial Statements. Year ended 31March 2008.
period on goodwill and investments in equity instruments
and in financial assets carried at cost to be reversed at a
subsequent balance sheet date. This interpretation does
not have any impact on the Group’s financial statements.
New standards and interpretations of existing
standards that are not yet effective and have not been
early adopted by the Group
The following standards and interpretations to existing
standards have been published that are mandatory for the
Group’s accounting periods beginning on or after 1 April
2009 or later periods but which the Group has not early
adopted:
• IAS 1 Presentation of
Financial Statements
(revised 2007)
• IAS 23 Borrowing Costs
(revised March 2007)
• IAS 27 Consolidated and
Separate Financial
Statements (Revised 2008)
• IFRS 3 Business Combinations
(Revised 2008)
Effective date
1 January 2009
1 January 2009
1 July 2009
1 July 2009
• IFRS 8 Operating Segments
1 January 2009
• IFRIC 13 Customer Loyalty
Programmes
1 July 2008
The full effect of the adoption of any of the above standards
or interpretations on the Group financial statements is not
known at this time.
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
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
27
been fulfilled. Any unearned portion of revenue is included
in payables as deferred revenue.
Amortisation charges are recognised in administration
expenses in the income statement.
Hosting
This operating segment provides managed hosting facilities
and services. Revenue from the sale of facilities and
services is spread evenly over the period of the agreement
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.
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:
• completion of the intangible asset is technically
feasible so that it will be available for use or sale
• the Group intends to complete the intangible asset
and use or sell it
• the Group has the ability to use or sell the
intangible asset
• the intangible asset will generate probable future
economic benefits
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 complementary
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 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.
• there are adequate technical, financial and other
resources to complete the development and to use
or sell the intangible asset, and
• the expenditure attributable to the intangible asset
during its development can be measured reliably.
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.
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 directory and internet security.
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.
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 plant and equipment
are deemed to have immaterial residual values. The rates
generally applicable are:
www.iomartgroup.com
28
Notes to the Financial Statements. Year ended 31March 2008.
Freehold property
Not depreciated
Short-term leasehold improvements
25% per annum
Computer equipment
Office equipment
Data centre equipment
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, 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 11.
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 a split between land
and buildings in the consideration as to whether there is a
finance lease within the lease.
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.
Deferred tax on temporary differences associated with
shares in subsidiaries 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.
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
29
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 share based
remuneration) in which case the related deferred tax is also
charged or credited directly to equity.
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 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 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.
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
Financial liabilities categorised as at fair value through
profit or loss are re-measured 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.
www.iomartgroup.com
30
Notes to the Financial Statements. Year ended 31March 2008.
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:
• "Share capital" represents the nominal value of
equity shares.
• "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.
• "Capital redemption reserve" represents set aside
reserves in relation to previous redemption of own
shares.
• "Retained earnings" 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
iomart group plc Annual Report 2008
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.
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.
Critical accounting judgements and key sources of
estimation uncertainty
Critical judgements in applying the Group’s accounting
policies
The Group made an acquisition in the prior year. The
allocation of fair values to the tangible and intangible
assets , and liabilities affects goodwill, and the assignment
of that to the cash generating unit, recognised in respect
of this acquisition. Estimates and judgments are continually
evaluated and are based on historical experience and
other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
It should be noted that the fair values placed on the
assets acquired were provisional and the omission of
this term on the prior year financial statements was an
oversight. Adjustments to fair values are on the basis of the
initial recognition being provisional and the comparative
figures for 2007 have been restated as a result of these
adjustments to the fair values (see note 11).
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key
sources of estimation uncertainty at the balance sheet date,
that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the
next financial year are discussed below.
Impairment of goodwill
Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units
to which goodwill has been allocated. The value in use
calculation requires the entity to estimate the future cash
flows expected to arise from the cash-generating unit and
a suitable discount rate in order to calculate the present
value.
Valuation of trade receivables
In assessing the recoverability of trade receivables the
company uses historic performances to estimate likely
future cash flows from contractual debt. Assumptions
require to be made about the indicators of recoverability
and any required provisions.
Notes to the Financial Statements. Year ended 31March 2008.
31
3. SEGMENTAL ANALYSIS
As at 31 March 2008 the Group is primarily organised into
four main business segments, which are detailed below.
During the year the Hosting division when added to the
data centre operations acquired in the prior year grew
substantially, and as such is now split out as a separate
segment, where previously it was included in Easyspace.
• Netintelligence – provides ‘software as a service’
products for a range of internet control and security
services
• Easyspace – a range of managed web hosting
services and domain name registration services.
• Hosting – provision of data centre and managed
hosting services.
• Ufindus – an internet business directory, providing a
web marketing presence to the business community.
There are no other services provided by the Group which
would constitute a separately disclosable segment.
“Easyspace is easy to use and
we found its connectivity and
customer service levels
to be strong.”
PC Pro January 08
Netintelligence’s partnership
with Carphone Warehouse led
to a British Computing Society
Medal for Business to Business
Project Excellence.
www.iomartgroup.com
32
Notes to the Financial Statements. Year ended 31March 2008.
Primary Reporting Segment – Business
Assets and Liabilities by Primary
Segment
Netintelligence
Easyspace
Hosting
Ufindus
Group assets
Total Assets
£000's
931
21,018
12,636
7,712
42,297
2008
Liabilities
£000's
(5,408)
(1,908)
(10,201)
(2,914)
(20,431)
Net Assets
(Liabilities)
£000's
(4,477)
19,110
2,435
4,798
21,866
815
22,681
2007 (restated)
Total Assets
£000's
468
19,278
9,906
7,650
37,302
Liabilities
£000's
(5,427)
(1,927)
(4,818)
(4,992)
(17,164)
Net Assets
(Liabilities)
£000's
(4,959)
17,351
5,088
2,658
20,138
1,972
22,110
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
27
53
567
133
780
2008
Intangible
non-current
assets
acquired in
period
£000's
259
-
2
381
642
External
£000's
448
2008
Internal
£000's
380
6,320 -
1,349
11,932
20,049
144
-
524
2008
Total
£000's
286
53
569
514
1,422
Total
£000's
828
6,320
1,493
11,932
20,573
EBITDA
£000's
403
1,996
(2,134)
2,552
(1,853)
964
amortisation
£000's
(140)
(18)
(519)
(411)
-
(1,088)
Depreciation & Operating
profit
£000's
263
1,978
(2,653)
2,141
(1,853)
(124)
477
353
Tangible
non-current
assets
acquired in
period
£000's
82
-
7,319
799
8,200
2007 (restated)
Intangible
non-current
assets
acquired in
period
£000's
29
-
2,421
282
2,732
2007
External
£000's
382
5,779
830
14,095
21,086
Internal
£000's
520
-
-
-
520
Total
£000's
111
-
9,740
1,081
10,932
Total
£000's
902
5,779
830
14,095
21,606
2007
EBITDA amortisation
£000's
£000's
(101)
(918)
(42)
1,601
(24)
410
(599)
2,056
-
(1,818)
(766)
1,331
Depreciation & Operating
profit
£000's
(1,019)
1,559
386
1,457
(1,818)
565
1,615
2,180
Netintelligence
Easyspace
Hosting
Ufindus
Revenue by Primary Segment
Netintelligence
Easyspace
Hosting
Ufindus
Profit by Primary Segment
Netintelligence
Easyspace
Hosting
Ufindus
Group overheads
Group interest and tax
Profit for the year
Group overheads, interest and tax are not allocated to segments.
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
33
4. OPERATING COSTS
Included within operating costs from continuing operations are the following items:
Staff cost excluding development costs capitalised and research and development costs
written to the income statement
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
Auditors’ remuneration
- Fees payable for the audit of the consolidation and the parent company accounts
- Fees payable for audit of subsidiaries, pursuant to legislation
- Tax compliance fees
- Corporate finance and advisory transactions
2008
£’000
2007
£’000
10,249
11,815
611
206
1,406
53
271
92
768
448
553
2,171
568
85
586
192
113
367
1,197
348
475
1,447
2008
£’000
2007
£’000
21
28
11
14
74
18
26
8
25
77
www.iomartgroup.com
34
Notes to the Financial Statements. Year ended 31March 2008.
5. 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
2008
£’000
1,095
29
84
246
14
2007
£’000
931
27
58
189
14
During the year the company made personal pension contributions to the personal pension schemes of 3 directors (2007: 3).
The aggregate amount of gains realised by directors on the exercise of share options during the year was nil (2007: £275,000).
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 10 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.
36
78
231
55
400
38
72
277
60
447
No.
27
85
345
50
507
39
91
231
48
409
2008
£’000
9,705
978
29
143
10,855
2007
£’000
11,141
1,073
27
153
12,394
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.
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
35
6. 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
7. DIVIDENDS ON SHARES CLASSED AS EQUITY
Paid during the year
Equity dividends on ordinary shares of nil per share (2007: 3p)
2008
£’000
73
-
73
(96)
(28)
(124)
(51)
2007
£’000
9
2
11
(341)
(17)
(358)
(347)
2008
£’000
2007
£’000
-
2,334
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.
www.iomartgroup.com
36
Notes to the Financial Statements. Year ended 31March 2008.
8. TAXATION
Research and development tax credit write-off
Tax charge for the current year
Deferred tax credit
Under provision in prior year
2008
£’000
(53)
(53)
581
-
528
2007
£’000
-
-
1,985
(23)
1,962
The Group has a deferred tax asset which has been recognised in respect of tax losses within one of the subsidiary companies, which
has generated taxable profits and is expected to continue to do so.
The differences between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation
tax to the (loss)/profit before tax is as follows:
(Loss)/profit before tax
Tax (credit)/charge @ 30%
Expenses not deductible for tax purposes
Research and development tax credit write-off
Tax effect of share based remuneration
Movement in other deferred tax not recognised
Movement in short term temporary differences
Consolidation adjustments
Utilisation of tax losses
Depreciation in excess of capital allowances
Prior year adjustment
2008
£’000
(175)
(53)
16
53
(88)
26
-
(8)
(473)
(1)
-
2007
£’000
218
66
1
-
(127)
(1,640)
(23)
(15)
(255)
8
23
Tax credit for the current year
(528)
(1,962)
The weighted average applicable tax rate for the year ended 31 March 2008 was 30% (2007: 30%)
9. DEFERRED TAX
The Group had recognised deferred tax assets, liabilities and potential unrecognised deferred tax assets as follows:
2008
Recognised Unrecognised
£’000
£’000
2007 (restated)
Recognised Unrecognised
£’000
£’000
Tax losses carried forward
Share based remuneration
Deferred tax on acquired assets with no capital allowances
Deferred tax
2,384
205
(1,763)
826
2,192
-
-
2,192
1,985
-
(1,815)
170
1,755
-
-
1,755
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
37
The movement in the deferred tax account during the year was:
Balance brought forward
Income statement movement arising during the year
Retained earnings movement during the year
Balance carried forward
2008
£’000
170
581
75
826
Restated
2007
£’000
-
170
-
170
The deferred tax asset in relation to tax losses carried forward arises from the unutilised tax losses of the hosting company. This trade
was transferred from the Ufindus Limited subsidiary to iomart Hosting Limited on 1 February 2008. The deferred tax asset has been
recognised in line with future projections of the hosting trade over a three year period. The basis of these projections are:
• The consistent success of the sales teams in generating new business
• Expectations about the retention of customers
• Continued success in achieving a particular product mix and maintaining price yield
Based on the current profitability of the hosting company, an assessment of projections and the expectations 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’.
The deferred tax asset in relation to share based remuneration arises from the anticipated future tax relief on the exercise of share
options. In accordance with IAS 12, ‘Income Taxes’, £75,000 of the total deferred tax asset of £205,000 has been recognised directly
in equity since this represents the excess of the estimated future tax deduction over the cumulative share based payment expense to
date.
The deferred tax on acquired assets arises from the data centre equipment acquired through the acquisition of Ezee DSL Limited on
which depreciation is charged but on which there are no capital allowances available.
10. EARNINGS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number
of ordinary shares in issue during the year. Fully diluted earnings per share is calculated by dividing the earnings attributable to
ordinary shareholders by the total of the weighted average number of ordinary shares in issue during the year and the dilutive potential
ordinary shares relating to share options.
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
2008
£’000
353
No
000
99,458
1,759
101,217
0.35p
0.35p
2007
£’000
2,180
No
000
78,558
1,683
80,241
2.78p
2.72p
www.iomartgroup.com
38
Notes to the Financial Statements. Year ended 31March 2008.
11. INTANGIBLE ASSETS
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
At 31 March 2006
Cost
At 1 April 2007
Additions
Development cost capitalised
At 31 March 2008
Accumulated amortisation
At 1 April 2007
Charge for the year
At 31 March 2008
Carrying amount At 31 March 2008
At 31 March 2007
2007 (restated)
Goodwill
£’000
Development
costs
£’000
Software
£’000
14,289
4,236
-
18,525
-
-
-
18,525
14,289
140
-
282
422
(24)
(88)
(112)
310
116
211
29
-
240
(176)
(25)
(201)
39
35
2008
Development
costs
£’000
Goodwill
£’000
Software
£’000
18,525
-
-
18,525
-
-
-
18,525
18,525
422
-
606
1,028
(112)
(247)
(359)
669
310
240
36
-
276
(201)
(24)
(225)
51
39
Total
£’000
14,640
4,265
282
19,187
(200)
(113)
(313)
18,874
14,440
Total
£’000
19,187
36
606
19,829
(313)
(271)
(584)
19,245
18,874
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.
Under the provisions of IFRS 3 'Business Combinations', the Group has finalised the fair value of the assets acquired in the Ezee DSL
Limited acquisition. This has resulted in a movement between the classification of the assets acquired between Property, Plant and
Equipment, Deferred Tax and Goodwill of £4m, with the prior year balance sheet restated as required. This is because some of the
tangible assets acquired had considerably lower value than initially assessed on acquisition and all of the tangible assets had no
capital allowances available. The increase in goodwill is justified in the impairment calculations below. Ezee DSL Limited is included
within the Hosting division.
During the year, goodwill was reviewed for impairment in accordance with IAS 36, 'Impairment of Assets'. No impairment charges
(2007: nil) arose as a result of this review.
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
39
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
Hosting
2008
£’000
264
364
11,686
1,975
4,236
18,525
Restated
2007
£’000
264
364
11,686
1,975
4,236
18,525
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:
Discount rate
Future perpetuity rate
Years for growth
12. PRINCIPAL SUBSIDIARIES
Hosting
Internetters
Nicnames
Easyspace
Ufindus
16%
3.0%
5
13%
1.0%
5
13%
1.0%
5
13%
2.5%
5
13%
2.2%
5
The following subsidiaries have been consolidated in the Group financial statements:
Country of
registration
and operation
Activity
Ordinary share capital
Owned by the
company
%
Owned by
subsidiary
undertakings
%
Netintelligence Limited
iomart Limited
iomart Hosting Limited
Ufindus Limited
Web Genie Internet Limited
Internetters Limited
NicNames Limited
Easyspace Limited
Ezee DSL Limited
Network security
Dormant
Scotland
Scotland
Scotland Managed hosting services
England Webservices
England Webservices
England Webservices
England
England Webservices
England
Data centre services
Dormant
100
100
100
100
100
99.8
100
100
100
www.iomartgroup.com
40
Notes to the Financial Statements. Year ended 31March 2008.
13. PROPERTY, PLANT AND EQUIPMENT
2007 (restated)
Freehold
property
£’000
Leasehold
improvements
£’000
Data centre
equipment
£’000
Computer
equipment
£’000
Office
equipment
£’000
Cost
At 1 April 2006
Additions in the year
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
At 31 March 2006
-
-
837
837
-
-
-
-
837
-
467
54
-
521
(277)
(90)
-
(367)
154
190
1,450
750
-
2,200
(909)
(466)
-
(1,375)
825
541
-
-
6,297
6,297
-
-
(48)
(48)
6,249
-
2008
Freehold
property
£’000
Leasehold
improvements
£’000
Data centre
equipment
£’000
Computer
equipment
£’000
Office
equipment
£’000
Cost
At 1 April 2007
Additions in the year
Disposals
At 31 March 2008
Accumulated depreciation
At 1 April 2007
Charge for the year
At 31 March 2008
Carrying amount
At 31 March 2008
At 31 March 2007
837
-
-
837
-
-
-
837
837
521
23
-
544
(367)
(92)
(459)
6,297
283
-
6,580
(48)
(176)
(224)
85
6,356
154
6,249
2,200
435
(33)
2,602
(1,375)
(471)
(1,846)
756
825
iomart group plc Annual Report 2008
315
8,380
152
883
Total
£’000
2,466
881
7,319
10,666
(1,583)
(653)
(50)
(2,286)
Total
£’000
10,666
780
(33)
11,413
(2,286)
(817)
(3,103)
549
77
185
811
(397)
(97)
(2)
(496)
811
39
-
850
(496)
(78)
(574)
276
8,310
315
8,380
Notes to the Financial Statements. Year ended 31March 2008.
41
14. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Provision for impairment
Trade receivables (net)
Other receivables
Prepayments and accrued income
Research and development tax credit
Trade and other receivables
2008
£’000
3,255
(1,608)
1,647
92
1,382
-
3,121
2007
£’000
3,670
(1,584)
2,086
38
812
53
2,989
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 impairment provision calculations. Almost all trade receivables in the Group
are individually small in terms of value, so are considered for impairment by business unit specific provision calculations and are not
individually impaired.
To consider the total exposure to credit risks, the Group uses figures net of VAT. At 31 March 2008, £614,000 (2007: £827,000) of
net trade receivables were fully performing. Net trade receivables of £293,000 (2007: £449,000) were past due, but not impaired.
The aging below shows that almost all are less than three months old. Historic performance indicates a high probability of payment for
debts in this aging. Those over three months relate to a small number of larger customers without history of default.
Up to 3 months
Over 3 months but less than 6 months
Over 6 months but less than 1 year
Over 1 year
Total unimpaired trade receivables which are past due
2008
£’000
273
20
-
-
293
2007
£’000
417
6
20
6
449
No loans are issued by the group, therefore the trade and other receivables figure is also the Loans and Receivables figure required by
IFRS 7.
15. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Bank overdrafts (note 18)
Cash and cash equivalents
The credit risk on cash and cash equivalents is negligible because the counter parties are banks.
16. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Deferred grants
Accruals and deferred income
Trade and other payables
2008
£’000
1,105
(362)
743
2008
£’000
(792)
(907)
(2)
(3,088)
(4,789)
2007
£’000
999
(4,151)
(3,152)
2007
£’000
(928)
(1,170)
(26)
(2,212)
(4,336)
The carrying amount of trade and other payables approximates to their fair value. Trade payables are non-interest bearing and are
generally on 30-day terms. The grants deferred are in relation to Regional Selective Assistance grants received in 2004 for capital
expenditure which are recognised over the life of the assets.
www.iomartgroup.com
42
Notes to the Financial Statements. Year ended 31March 2008.
17. DEFERRED CONSIDERATION
The Group continues to hold a deferred consideration in relation to the acquisition of Ezee DSL Limited. Under the Investment
Agreement, the Group acquired 51% of the ordinary share capital for £4.8m. After the initial acquisition as a result of the vendor
choosing not to provide working capital to Ezee DSL Limited, in accordance with the Investment Agreement, the Group became the
beneficial and subsequently the registered owner of 99.8% of the ordinary share capital of Ezee DSL Limited. Additionally, within the
Investment Agreement, the vendor was issued with a put option under which it can require iomart Group plc to purchase the remaining
0.2% of Ezee DSL Limited’s share capital in the future. The vendor also issued a corresponding call option to the Group, under which
the Group can require the vendor to sell the remaining 0.2% 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 Group believes that the maximum amount which will be paid to acquire the remaining 0.2% 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. The Group believes the value of the call
option to be nil.
18. BORROWINGS
Current:
Obligations under finance leases
Bank loan
Current borrowings
Bank overdraft (included in cash and cash equivalents note 15)
Non-current:
Obligations under finance leases
Bank loan
Total non-current borrowings
Total borrowings
2008
£’000
2007
£’000
(240)
(432)
(672)
(161)
(871)
(1,032)
(362)
(4,151)
(187)
-
(187)
(212)
(437)
(649)
(1,221)
(5,832)
The carrying amount of trade and other payables approximates to their fair value.
Finance leases
Leases which expire:
Within one year
Within two to five years
2008
2007
Carrying amount
£’000
240
187
427
Fair value
£’000
240
187
427
Carrying amount Fair value
£’000
£’000
161
161
212
212
373
373
The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. The fair values are
based on cash flows discounted using a rate based on the borrowing rate of 8.2% (2007: 7.2%).
The carrying amounts of short-term borrowings approximate their fair value and all of the Group’s borrowings are denominated in
pound sterling.
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
43
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
240
187
427
2008
Interest
£’000
20
10
30
Total
£’000
260
197
457
Capital
£’000
161
212
373
2007
Interest
£’000
20
10
30
Total
£’000
181
222
403
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.
The finance lease liability has an effective interest rate of 7.0% (2007: 7.3%). Lease payments are made on a monthly basis. The future
lease obligation of £457,000 (2007: £403,000) has present value of £443,000 (2007: £363, 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 Ezee DSL Limited) and are repayable as follows:
Due within one year
Due between one and two years
2008
£’000
(794)
-
(794)
2007
£’000
(5,022)
(437)
(5,459)
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.
19. OPERATING LEASES
The Group has outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due
as follows:
Within one year
Within two to five years
After five years
2008
Land and
buildings
£’000
1,324
4,985
7,988
14,297
Other
£’000
46
18
-
64
2007
Land and
buildings Other
£’000
53
42
-
95
£’000
578
1,780
1,916
4,274
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.
www.iomartgroup.com
44
Notes to the Financial Statements. Year ended 31March 2008.
20. SHARE CAPITAL
Authorised
At 31 March 2006, 2007, and 2008
Called up, allotted and fully paid
At 31 March 2006
Scrip dividend
Issue of Shares
Exercise of options
At 31 March 2007
Exercise of options
At 31 March 2008
Ordinary shares of 1p each
Number of shares
£’000
200,000,000
2,000
77,265,054
1,522,995
20,000,000
664,586
99,452,635
6,667
99,459,302
773
15
200
6
994
-
994
During the year the company issued an additional 6,667 (2007: 664,586) ordinary shares of 1p each in respect of the exercise of
options, for which a net total of £416 (2007: £43,000) was received.
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 2008 are fully
paid.
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
employment
Required to remain in
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
Unapproved schemes
3 years from grant
10 years after
date of grant
As set by
Remuneration
Committee
As set by
Remuneration
Committee
Yes
No
Yes
Yes
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
45
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
As at 31 March 2008
Options for shares outstanding
Options
for shares
exercisable
Expiry
date
31 March
2007
Issued Forfeited
Exercised
Expired
31 March 31 March
2008
2008
Enterprise management incentive scheme
26/07/2002
26/07/2003
26/07/2004
02/07/2004
02/07/2005
02/07/2006
17/11/2007
24/08/2009
27/09/2010
20/12/2007
20/06/2008
20/12/2008
20/06/2009
20/12/2009
20/06/2010
26/07/2012
26/07/2012
26/07/2012
02/07/2013
02/07/2013
02/07/2013
17/11/2014
24/08/2016
27/09/2017
20/12/2017
20/12/2017
20/12/2017
20/12/2017
20/12/2017
20/12/2017
6.25
6.25
6.25
6.25
6.25
6.25
78.50
74.00
50.50
43.50
43.50
43.50
43.50
43.50
43.50
266,666
266,666
266,668
44,583
51,916
57,585
583,818
64,865
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
85,982
200,000
210,000
210,000
210,000
129,540
10,000
Savings related scheme
76.00
01/03/2009
Unapproved schemes
11.75
78.50
5.00
5.00
5.00
74.00
50.50
43.50
43.50
31/10/2001
17/11/2007
11/05/2000
11/02/2001
11/02/2002
24/08/2009
27/09/2010
20/12/2009
20/06/2010
01/09/2009
337,565
-
31/10/2011
17/11/2014
29/03/2010
29/03/2010
29/03/2010
24/08/2016
27/09/2017
20/12/2017
20/12/2017
50,000
4,256,182
276,886
276,887
276,887
135,135
-
-
-
-
-
-
-
-
-
914,018
80,460
200,000
Approved Schemes
44.00
13.50
11.75
Total
Weighted Average Exercise price
24/01/2004
26/09/2004
31/10/2004
24/01/2011
26/09/2011
31/10/2011
37,500
5,000
23,888
-
-
-
7,278,697 2,250,000
46.61p
59.50p
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,333)
(3,334)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
n/a
-
-
-
(6,667)
6.25p
-
-
-
-
n/a
266,666
266,666
266,668
44,583
48,583
54,251
583,818
64,865
85,982
200,000
210,000
210,000
210,000
129,540
10,000
266,666
266,666
266,668
44,583
48,583
54,251
583,818
-
-
200,000
-
-
-
-
-
337,565
-
50,000
50,000
4,256,182 4,256,182
276,886
276,887
276,887
-
-
-
-
276,886
276,887
276,887
135,135
914,018
80,460
200,000
37,500
5,000
23,888
37,500
5,000
23,888
9,522,030 6,934,465
57.87p
56.49p
www.iomartgroup.com
46
Notes to the Financial Statements. Year ended 31March 2008.
Exercise
price
Details
Exercise
date
As at 31 March 2007
Options for shares outstanding
Options
for shares
exercisable
Expiry
date
31 March
2006
Issued Forfeited Exercised
Expired
31 March 31 March
2007
2007
Enterprise management incentive scheme
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
6.25
17/11/2005
78.50
17/11/2006
78.50
17/11/2007
78.50
24/08/2009
74.00
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
Savings related scheme
266,666
266,666
266,668
138,245
215,414
265,011
6,666
6,667
590,485
-
-
-
-
-
-
-
-
-
64,865
-
-
-
(6,666)
(6,666)
(6,668)
(6,666)
(6,667)
(6,667)
-
-
-
-
(86,996)
(156,832)
(200,758)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
266,666
266,666
266,668
44,583
51,916
57,585
-
-
583,818
64,865
266,666
266,666
266,668
44,583
51,916
57,585
-
-
-
-
76
01/03/2009
01/09/2009
545,761
- (208,196)
-
-
337,565
-
31/10/2001
27/06/2002
27/06/2003
27/06/2004
17/11/2007
11/05/2000
11/02/2001
11/02/2002
24/08/2009
Unapproved schemes
11.75
6.25
6.25
6.25
78.50
5.00
5.00
5.00
74.00
Approved Schemes
44.00
13.50
11.75
9.00
24/01/2004
26/09/2004
31/10/2004
27/02/2005
31/10/2011
27/06/2007
27/06/2007
27/06/2007
17/11/2014
29/03/2010
29/03/2010
29/03/2010
24/08/2016
24/01/2011
26/09/2011
31/10/2011
27/02/2012
50,000
33,333
33,333
33,334
4,256,182
276,886
276,887
276,887
-
-
-
-
-
-
-
-
-
135,135
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 (248,196)
70.58p
55.14 p
74.00p
(644,586)
6.68p
- 7,278,697 1,901,132
6.68p
59.50p
n/a
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.
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
47
As disclosed in note 5, a share based payment charge of £143,000 (2007: £153,000) 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.
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-03 17-Nov-04 01-Mar-06
02-Jul-06 17-Nov-07 01-Mar-09
24-Aug-06 27-Sep-07
01-Mar-09 27-Sep-10
13.75p
50%
0.00%
9
10
2.5
4%
100%
8.53p
6.25p
13.75p
50%
0.00%
9
10
3.5
4%
100%
8.95p
6.25p
78.50p
35%
1.27%
6
10
3.0
4%
42%
20.41p
78.50p
95.00p
49%
3.16%
46
10
3.0
4.17%
100%
35.77p
78.50p
95.00p
49%
3.16%
46
10
3.0
4.17%
100%
35.77p
78.50p
51.50p
41%
0.00%
2
10
3.0
5.02%
100%
17.42p
50.50p
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
20-Dec-07
20-Dec-07
20-Dec-07
20-Jun-08
20-Dec-07 20-Dec-07
20-Dec-08 20-Jun-09
20-Dec-07 20-Dec-07
20-Dec-09 20-Jun-10
38.50p
46%
0.00%
5
10
0.5
4.57%
100%
3.47p
43.50p
38.50p
46%
0.00%
5
10
0.5
4.57%
100%
3.47p
43.50p
38.50p
46%
0.00%
5
10
1.0
4.57%
100%
5.86p
43.50p
38.50p
46%
0.00%
5
10
1.5
4.57%
100%
7.76p
43.50p
38.50p
46%
0.00%
5
10
2.0
4.57%
100%
9.39p
43.50p
38.50p
46%
0.00%
5
10
2.5
4.57%
100%
10.83p
43.50p
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 and cash equivalents
Bank overdrafts
Bank loan
Finance leases and hire purchase
Inception
of finance
lease
£’000
-
-
-
(260)
2007
£’000
999
(4,151)
(1,308)
(373)
Cash flow
£’000
106
3,789
876
206
2008
£’000
1,105
(362)
(432)
(427)
Net debt
(4,833)
(260)
4,977
(116)
www.iomartgroup.com
48
Notes to the Financial Statements. Year ended 31March 2008.
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 5.
24. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
There were no contingent assets or contingent liabilities as at 31 March 2008 (2007: 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
2008
£’000
2007
£’000
76
78
1,216
1,370
149
94
388
631
Capital expenditure on property, plant and equipment committed by the Group at 31 March 2008 was £370,000 (2007: £nil).
25. 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.
2008
£’000
2007
£’000
1,648
1,105
2,753
2,086
999
3,085
2,753
3,085
(792)
(427)
(362)
(432)
(2,013)
(928)
(373)
(4,151)
(1,308)
(6,760)
Financial assets
The Group’s financial assets are:
Trade receivables
Cash and cash equivalents
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
iomart group plc Annual Report 2008
Notes to the Financial Statements. Year ended 31March 2008.
49
All of the fixed interest obligations are repayable within one year. An analysis of the maturity of Group debt is given in note 18. For
the purposes of IFRS 7, all Financial assets are classified as ‘Loans and receivables’ and all Financial liabilities are classified as ‘Other
financial liabilities’.
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.
At the year end, the Group had a committed overdraft facility of £4,500,000 (2007 - £4,500,000). This facility was cancelled by the
Group on 15 July 2008 following the receipt of the disposal proceeds from the sale of Ufindus Limited to British Telecommunications
PLC (note 26).
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 the Directors’ Report.
26. POST BALANCE SHEET EVENT
On 9 July 2008, the Group completed the sale of its subsidiary Ufindus Limited, to British Telecommunications plc for a total cash
consideration of £20 million. This disposal is expected to generate a profit of £15 million before goodwill adjustments. The Group has
given certain warranties in connection with the disposal. Of the total cash consideration, £2 million has been placed into escrow against
warranty claims and subject to any warranty claims, £1 million will be released after 6 months and the remainder will be released after
24 months.
www.iomartgroup.com
“During 2007/08, the Group
received over 10 major industry
awards and nominations, ranging
from Best Security Service
Europe to Best Managed Service
Provider of the Year.”
iomart group plc Annual Report 2008
51
Holding Company Financial Statements
Year ended 31March 2008
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 2008
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.
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 parent Company financial
statements. Our responsibilities do not extend to any other
information.
We have reported separately on the Group financial statements
of iomart Group plc for the year ended 31 March 2008.
Basis of audit opinion
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. The information given in the Directors'
Report includes that specific information presented in the
Chairman's Statement, Chief Executive Officer's Report and
the Finance Director's Report.
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
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.
Opinion
In our opinion:
• 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 2008 and of the
Company’s profit for the year then ended;
• the parent company financial statements have been
properly prepared in accordance with the Companies Act
1985; and
• the information given in the Directors' Report is consistent
with the financial statements.
GRANT THORNTON UK LLP
REGISTERED AUDITOR, CHARTERED ACCOUNTANTS
GLASGOW
28 July 2008
www.iomartgroup.com
52
Holding Company Financial Statements. Year ended 31March 2008.
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors
CREDITORS: amounts falling due within one year
NET CURRENT ASSETS
TOTAL ASSETS LESS CURRENT LIABILITIES
Note
4
5
7
2008
£’000
20,033
20,033
11,585
11,585
2007
£’000
19,930
19,930
23,304
23,304
(6,406)
(18,072)
5,179
5,232
25,212
25,162
CREDITORS: amounts falling due after more than one year
8
-
(437)
NET ASSETS
25,212
24,725
CAPITAL AND RESERVES
Called up share capital
Capital redemption reserve
Share premium account
Profit and loss account
10
11
11
11
994
1,200
17,541
5,477
994
1,200
17,541
4,990
TOTAL EQUITY SHAREHOLDERS’ FUNDS
25,212
24,725
These financial statements were approved by the board of directors on 28 July 2008.
Signed on behalf of the board of directors
Angus MacSween
Director and Chief Executive Officer
iomart group plc Annual Report 2008
1. ACCOUNTING POLICIES
The financial statements are prepared in accordance with
applicable United Kingdom accounting standards.
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
Holding Company Financial Statements. Year ended 31March 2008.
53
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.
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 profit for the financial period after taxation was
£242,000 (2007: loss £4,863,000).
www.iomartgroup.com
54
Holding Company Financial Statements. Year ended 31March 2008.
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
2008
£’000
2007
£’000
151
95
22
268
95
84
16
195
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
Cost
At 1 April 2007
Share based payment
Cost at 31 March 2008
Impairment
Impairment at 31 March 2007 and 31 March 2008
Net book value of Investments at 31 March 2008
Net book value of Investments at 31 March 2007
All of the above investments are unlisted.
The following subsidiaries are included in the company financial statements:
Shares in subsidiary undertakings
£’000
21,430
103
21,533
(1,500)
20,033
19,930
Country
of registration
and operation
Activity
Ordinary share capital
Owned by
company
%
Owned by
subsidiary
undertakings
%
Scotland
Scotland
Scotland
England
England
England
England
England
England
Network security
Dormant
Managed hosting services
Webservices
Webservices
Webservices
Dormant
Webservices
Data centre provision
100
100
100
100
100
99.8
100
100
100
Netintelligence Limited
iomart Limited
iomart Hosting Limited
Ufindus Limited
Web Genie Internet Limited
Internetters Limited
NicNames Limited
Easyspace Limited
Ezee DSL Limited
iomart group plc Annual Report 2008
Holding Company Financial Statements. Year ended 31March 2008.
55
2008
£’000
96
-
323
205
10,961
11,585
2007
£’000
7
10,466
-
-
12,831
23,304
5. DEBTORS
Prepayments and accrued income
Amounts due from share placing
Other taxation and social security
Deferred taxation (note 6)
Amounts owed by subsidiary undertakings
6. DEFERRED TAXATION
The company had recognised deferred tax assets and potential unrecognised deferred tax assets as follows:
2008
Recognised Unrecognised
£’000
£’000
2007
Recognised Unrecognised
£’000
£’000
Share based remuneration
205
-
-
-
The movement in the deferred tax account during the year was:
Balance brought forward
Profit and loss account reserve movement during the year
Balance carried forward
2008
£’000
-
205
205
2007
£’000
-
-
-
The deferred tax asset in relation to share based remuneration arises from the anticipated future tax relief on the exercise of share
options.
7. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Bank loan
Bank overdraft
Trade creditors
Other taxation and social security
Accruals and deferred income
Amounts due on acquisition
Amounts owed by subsidiary undertakings
2008
£’000
432
277
342
179
257
-
4,919
6,406
2007
£’000
871
4,001
115
561
134
4,800
7,590
18,072
www.iomartgroup.com
56
Holding Company Financial Statements. Year ended 31March 2008.
8. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Bank loan
9. BORROWINGS
Current:
Bank loan
Bank overdrafts
Total current borrowings
Non-current:
Bank loan
Total non-current borrowings
Total borrowings
10. SHARE CAPITAL
Authorised
At 31 March 2006, 2007 and 2008
Called up, allotted and fully paid
At 31 March 2007
Exercise of options
At 31 March 2008
2008
£’000
-
2008
£’000
432
277
709
-
-
709
2007
£’000
437
2007
£’000
871
4,001
4,872
437
437
5,309
Ordinary shares of 1p each
Number of shares
200,000,000
99,452,635
6,667
99,459,302
£’000
2,000
994
-
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 2008 are fully
paid.
During the year the company issued an additional 6,667 (2007: 664,586) ordinary shares of 1p each in respect of the exercise of
options, for which a net total of £416 (2007: £43,000) was received.
11. STATEMENT OF MOVEMENT IN RESERVES
Profit for the financial period
Share based payments in company only
Deferred tax on share based remuneration
Opening balance
Closing balance
iomart group plc Annual Report 2008
Capital
redemption
reserve
£’000
-
-
-
1,200
1,200
Share
premium
account
£’000
-
-
-
17,541
17,541
Profit and
loss
account
£’000
242
40
205
4,990
5,477
Holding Company Financial Statements. Year ended 31March 2008.
57
2008
£’000
242
-
-
40
205
487
2007
£’000
(4,863)
(2,334)
11,559
6
-
4,368
24,725
20,357
25,212
24,725
12. MOVEMENT IN SHAREHOLDERS’ FUNDS
Profit/(loss) for the financial period
Dividend paid
Share capital issued
Share based payments in company only
Deferred tax on share based remuneration
Opening shareholders’ funds
Closing shareholders’ funds
13. SHARE BASED PAYMENTS
For details of share based payment awards and fair values see note 21 to the Group financial statements. The Company accounts
recognise the charge for share based payments for the year of £143,000 (2007: £153,000) 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 are no contingent assets or contingent liabilities present as at 31 March 2008 (2007 Nil).
(b) Commitments
There are no commitments present as at 31 March 2008 (2007 Nil).
15. POST BALANCE SHEET EVENT
On 9 July 2008, the Company completed the sale of its investment in Ufindus Limited, to British Telecommunications plc for a total
cash consideration of £20 million. This disposal is expected to generate a profit, excluding Group balances, of £11 million for the
Company. The Company has given certain warranties in connection with the disposal. Of the total cash consideration, £2 million has
been placed into escrow against warranty claims and subject to any warranty claims, £1 million will be released after 6 months and
the remainder will be released after 24 months.
www.iomartgroup.com
58
Notice of the 2008 Annual General Meeting
NOTICE IS HEREBY GIVEN that the 2008 annual general
meeting of iomart Group plc will be held at Lister Pavilion,
Kelvin Campus, West of Scotland Science Park, Glasgow
G20 0SP on 29 September 2008 at 4.00 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 2008.
2 To reappoint Ian Ritchie (who was appointed by the
board since the last annual general meeting) as a
director of the company.
3 To reappoint Sarah Haran (who retires by rotation
and, being eligible, offers herself for re-election) as a
director of the company.
4 To reappoint Christopher Batterham (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 2008.
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 £393,538; 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.”
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;
iomart group plc Annual Report 2008
Notice of the 2008 Annual General Meeting
59
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
Bruce Hall
Company Secretary
(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 £49,720;
provided that this authority shall expire, unless sooner
revoked or varied by the company, on the conclusion
of the next annual general meeting of the company
or the expiry of the period of fifteen months from the
date of the passing of this resolution whichever is the
earlier, save that the company may before such expiry
make an offer or agreement which would or might
require equity securities to be allotted after such
expiry and the directors may allot equity securities
in pursuance of such offer or agreement as if the
authority conferred hereby had not expired.”
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
9,943,930 (representing 10% of the company's
issued ordinary share capital at the date of the
notice of this annual general meeting);
Lister Pavilion, Kelvin Campus
West of Scotland Science Park
Glasgow G20 0SP
28 July 2008
(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
www.iomartgroup.com
60
Notice of the 2008 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
Registrars, The Registry, 34 Beckenham Road,
Beckenham, Kent, BR3 4BR, 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
27 July 2007, 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 29 December 2009, whichever
occurs first, up to a maximum aggregate nominal value
of £393,538, 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
27 July 2007, 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.
iomart group plc Annual Report 2008
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 29 December 2009, 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.
Notice of the 2008 Annual General Meeting
61
www.iomartgroup.com
62
Officers and Professional Advisers
Ian Ritchie
CBE, FREng, FRSE, FBCS, CEng, BSc
Non Executive Chairman
Angus MacSween
Chief Executive Officer
Chris Batterham MA, FCA
Non Executive Director
Sarah Haran
Director
Richard Logan BA, CA
Director
Fred Shedden MA, LLB
Non Executive Director
Bruce Hall BAcc (Hons), CA
Secretary
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 LLP, 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
Company Registration Number
SC204560
iomart group plc Annual Report 2008
63
Group Contact Information
iomart Group
) : + 44 (0) 141 931 6400
* : info@iomartgroup.com
www.iomartgroup.com
iomart managed hosting & data centres
* : info@iomart.com
www.iomart.com
Easyspace
* : sales@easyspace.com
www.easyspace.com
Netintelligence
* : info@netintelligence.com
www.netintelligence.com
iomart group plc Annual Report 2008
www.iomartgroup.com
iomart Group plc
Lister Pavilion, Kelvin Campus,
West of Scotland Science Park, Glasgow, G20 OSP
www.iomartgroup.com
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iomart group plc Annual Report 2008