iomart group plc Annual Report 2010
Annual Report and Accounts 2010
We are deploying cloud services to our customers
and using a range of virtualization technologies to
deliver high availability services to organisations who
expect 100% uptime.
iomart group plc Annual Report 2010
Financial Statements for year ended 31March 2010
Highlights
Financial
• Adjusted EBITDA of £3.1m (2009: loss of £0.3m)
• Revenue growth of 55% to £18.3m (2009: £11.8m)
• Cashflow from operations of £3.9m (2009: £0.3m)
• Earnings per share from continuing operations of 2.12p
(2009: negative earnings per share of 1.95p)
• Dividend up 33% to 0.4p per share (2009: 0.3p per share)
• Initial acquisition facility of £10m provided by Lloyds
Banking Group
Operational
• Robust demand in internet usage and cloud computing
ensuring high visibility of recurring revenues
• Inflexion point reached such that future sales will contribute
high levels of profitability - iomart Hosting customer base
more than doubled in size since March 2009
• RapidSwitch integrated into Group and operations
completely migrated into own datacentre in Maidenhead
£3.1M
EBITDA
55%
Increase
in Revenue
33%
Increase
in Dividend
£3.9M
Cashflow
from Operations
iomart group plc Annual Report 2010
“We needed a disaster recovery facility that
could meet our requirements for continuity of
service, accessibility, security, environmental
considerations and best practice. iomart
Hosting came out on top. Our aim is to ensure
that our learners can access their learning
around the clock when they need to. ”
Fiona Benoist, Technology Services Manager
for learndirect
iomart group plc Annual Report 2010
Contents
Chairman’s statement
Chief executive officer’s report
Finance director's report
Corporate governance
Report of the board to the members on directors’ remuneration
Directors' report
Statement of directors' responsibilities
Board of directors
Independent auditor's report to the members of iomart Group plc
Consolidated income statement
Consolidated statement of comprehensive income
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in equity
Notes to the financial statements
Holding company financial statements
Notice of annual general meeting
Officers and professional advisers
1
3
4
6
9
11
15
17
19
20
21
22
23
24
25
27
56
64
69
www.iomart.com
“When we met with iomart hosting they understood our world
which is a great head start. We’re moving such a lot of digital
media content around the world and we wanted our hosting
partner to have a grasp of our business. We immediately felt
that we could trust iomart Hosting.”
Ben Smith, Chief Technical Officer, ChilliBean
iomart group plc Annual Report 2010
“the highlight of the year is our move into profitability after
two years of investment whilst establishing our managed
hosting operation.”
Ian Ritchie, Chairman
Once again I am delighted to report that iomart has enjoyed another very successful year.
Focussing on our core strategic goal of becoming one of the UK’s leading managed hosting
operators with owned datacentres has undoubtedly driven that success.
The highlight of the year is our move into profitability especially in the face of particularly
demanding economic conditions. This has been achieved following two years of investment
in establishing our managed hosting operation. The move into profitability has been achieved
by both continued organic growth and through the successful acquisition and integration of
Rapidswitch during the year.
We remain keen to grow the company through further acquisitions and were delighted to
secure a facility from our bank to finance future growth.
The success which has been achieved over the year is completely due to the dedication and
commitment of the senior management team and all employees of the Group. On behalf
of the Board and all shareholders I am pleased to have this opportunity to acknowledge the
contribution they have all made to our achievements this year.
I indicated in my statement last year, when I advised of the re-introduction of a dividend
payment, that your Board intended, depending on the underlying profitability and cash
generation of the Group, to continue to pay dividends going forward. Due to our success
during the year we have already declared an interim dividend of 0.4p per share which was
paid to shareholders on 1 April 2010. The Board intends to continue to reward shareholders
with an increasing dividend stream as profitability and liquidity grows.
Each year since I became Chairman of the Group, I have been in the fortunate position of
advising you, in my statement, of the excellent progress which we have made over the year
under review. Likewise, each year, as I have considered our future prospects, I have advised
you of the confidence we have felt regarding our continued success. This year I can once
again assure you that we are convinced that we will deliver another strong performance in
the year to come.
Ian Ritchie
Chairman
1 June 2010
3
Chairman's Statement
“We are
convinced that
we will deliver
another strong
performance
in the year to
come.”
www.iomart.com
4
Chief Executive Officer's Report
“We continue to deliver on the strategic goal of being
the UK leader in the managed hosting market and I am
delighted to report an excellent year of trading for the
Group.”
Angus MacSween, Chief Executive Officer
Introduction
We continue to deliver on the strategic goal of becoming one of the UK’s leading managed
hosting Groups and I am delighted to report an excellent year of trading for the Group.
Revenues have grown 55% to £18.3m and we have moved through the inflexion point from
losses into profitability. Accordingly, the Group’s adjusted EBITDA* went from a loss of £0.3m
in 2009 to a profit of £3.1m in 2010. In addition we were significantly cash generative
producing cashflow from operations of £3.9m in the year.
The acquisition of our own datacentre capacity at the end of March 2007 exposed the Group
to a planned period of losses as we absorbed the high level of fixed costs of the datacentres
whilst taking up the challenge of growing revenues from a zero base. As a consequence we
have recorded adjusted EBITDA losses in the past two years whilst making excellent progress
in establishing our managed hosting operation. We have always retained a very strong belief
that the ownership of our own datacentre capacity is an essential element in delivering on our
strategic goal. This short period of loss making was necessary as we laid the foundations for
a highly profitable managed hosting business.
A feature of this model is the contracted nature of the services provided giving excellent
forward visibility of revenues and profits.
Easyspace, which services the micro and SME market through its website has continued to
provide the Group with strong levels of profits and cash generation and has helped underpin
our ability to grow our managed hosting operation in the way we had planned.
The acquisition of Rapidswitch in May has helped accelerate our move into profitability. We
are very happy with the performance of the business since acquisition and it has now been
fully integrated into our Hosting segment enhancing our ability to provide a spectrum of
managed hosting services to any size of company.
We continue to look for opportunities to acquire companies that will enhance our position in
the managed hosting market and we are pleased to announce an initial acquisition facility of
£10m with our bank, Lloyds Banking Group. At a time when the lack of availability of debt
finance is a constant topic of debate in the corporate world it shows the belief that the bank
has in both our business model and our ability to continue to grow successfully.
Operational Review
Whilst all our activities involve the provision of managed hosting services we are organised
into two segments.
iomart group plc Annual Report 2010
“We are now
more established,
with more
credibility and
with a growing
reputation for
good service. We
look forward to
delivering another
year of growth
and enhanced
profitability.”
5
Chief Executive Officer's Report
Hosting
Our Hosting segment provides managed hosting services to a wide range of SME and corporate customers. This includes the
provision of complex hosting solutions to the corporate market through iomart Hosting; dedicated server hosting services to the SME
market through Rapidswitch and cloud security services to the large corporate and education sector through Netintelligence.
iomart Hosting has been the driver of most of the organic growth. We have won over 300 new orders in the period almost half
of which were from new customers and the balance were additional orders from existing customers. We are very pleased that our
customers continue to show confidence in our provision of services in this way and we believe that additional orders from existing
customers will form an important part of our future growth provided we maintain the level of service that we currently offer.
The introduction of our cloud product offerings during the year have been well received and has helped maintain our leading
technological position in the marketplace. We have a highly experienced and innovative technology team, and we are currently
testing or using all the flavours of virtualisation technologies to develop ‘private clouds’ for mission critical applications which we
provide under our 100% uptime guarantee. Using our multiple datacentres we can provide an enviable level of resilience and
backup/disaster recovery.
Rapidswitch has continued to grow revenues at a similar rate in absolute terms under the ownership of the Group as it did before
being acquired. One of the major tasks in the period since acquisition was to move all servers from a rented datacentre facility
to our own datacentre in Maidenhead. This major project was successfully achieved whilst continuing to deliver revenue growth
and has resulted in the Group being free from any external datacentre rental costs going forward. We also continued with the fit
out of the Maidenhead datacentre adding a further 3,500 square feet of new space during the year.
Netintelligence has focussed on the education market over the period. After a successful trial period at the start of the year, our
“Software as a Service” internet security product was chosen by all of the suppliers to be part of the UK government’s Universal
Home Access (UHA) laptop provision programme towards the end of the year.
Our revenues in the Hosting segment have grown from £4.6m at the last year end to £11.0m for this year, an overall increase
of £6.4m (139%) which has led to a substantial increase in profitability.
Easyspace
Our Easyspace segment, which serves the micro and SME market with a range of products including domain names, shared
hosting and dedicated and virtual servers has performed well. We have continued to drive operational efficiencies over the year
as we seek to increase the profitability of Easyspace. Despite a competitive marketplace and an exposure to a strengthening US
Dollar as a result of these efficiencies we have managed to improve the overall profitability of this segment.
Easyspace revenues for the year were £7.4m an increase of 2% over the previous year whilst the adjusted EBITDA profit margin
has increased from 30% to 35%.
Current trading and outlook
We are now more established, with more recognition of our presence in the market and with a growing reputation for excellent
service. We are also in a fragmented and fast growing market where more and more companies are looking to outsource their
web facing infrastructure to a trusted supplier. We intend to be leaders in that market.
We are deploying leading edge cloud services to our customers and using a range of virtualisation technologies to deliver high
availability services to organisations who expect 100% uptime.
We look forward to another exciting year of delivering significant growth and profitability.
Angus MacSween, Chief Executive Officer. 1 June 2010
* Throughout the Chief Executive Officer, Finance Director and Directors' reports adjusted EBITDA for March 2010 is earnings before interest, tax, depreciation and amortisation
(EBITDA) before share based payment charges and gain on reduction of deferred consideration and for March 2009 is EBITDA before share based payment charges.
www.iomart.com
6
Finance Director's Report
“With the net cash balance at the end of the year and the availability
of the new bank facility we are very well funded to continue our
growth through both organic and acquisitive means.”
Richard Logan, Finance Director
Trading results
Revenues for the year of £18.3m (2009: £11.8m) have grown by 55% with both of our operating
segments having contributed to this growth.
The Hosting segment grew revenues to £11.0m (2009: £4.6m) which is an increase of 139%. This,
of course, includes the contribution from Rapidswitch which was acquired in May 2009. The growth
in the Hosting segment revenues over the previous year excluding the impact of Rapidswitch was
37%.
Easyspace grew revenues by 2% to £7.4m (2009: £7.2m) in challenging market conditions.
Our gross margin, which is calculated by deducting variable cost of sales such as domain costs
and sales commission and the relatively fixed costs of operating our datacentres from revenue, was
£10.5m (2009: £6.1m). This substantial increase in gross margin was as a direct result of higher
revenues in the Hosting segment. In percentage terms the gross margin improved to 57% (2009:
52%). Despite a continued exposure to a stronger US Dollar, Easyspace has maintained its gross
margin percentage over the year through the introduction of selective price increases. Hosting
continues to show an improved gross margin percentage as it generates additional sales revenues
whilst its fixed costs of operation remain unchanged. The inclusion of Rapidswitch within the Hosting
segment has also helped to improve the gross margin over the year in both absolute and percentage
terms.
The Group’s adjusted EBITDA for the year of £3.1m (2009: adjusted EBITDA loss of £0.3m) showed
a very significant improvement over last year. Both of our segments have helped to deliver this
expected improvement.
Our Hosting segment’s adjusted EBITDA was £2.8m (2009: adjusted EBITDA loss of £0.2m). This
significant improvement is a direct result of the generation of sufficient sales revenues to cover the
fixed cost base which was in place when our datacentre operations were established. New sales in
the year have therefore contributed at a high margin level to the adjusted EBITDA for the period.
We have also continued to invest in our Hosting operation through increases in both sales and
technical staff headcount and marketing expenditure thereby increasing overhead expenditure. The
Rapidswitch operation which was acquired in the year and which was integrated into the Hosting
segment during the year also contributed significantly to the improvement in adjusted EBITDA
performance.
Easyspace improved its adjusted EBITDA to £2.6m (2009: £2.2m) and most encouragingly in
a very competitive market environment also achieved a substantial improvement in its adjusted
EBITDA margin to 35% from 30%. This margin improvement has been achieved through operational
efficiencies predominantly in the areas of staffing and marketing.
Group overheads, which are not allocated to segments, includes the cost of the Board, all the
running costs of the premises in Glasgow, Group marketing, human resource, finance and design
functions and legal and professional fees for the year of £2.2m has reduced from £2.3m in 2009.
Depreciation charges of £1.8m (2009: £1.0m) have increased as we acquire equipment to provide
hosting services to our customers and also as a result of the acquisition of Rapidswitch. The charge
for amortisation of intangibles of £0.5m (2009: £0.1m) has increased as a consequence of the
acquisition of Rapidswitch which has resulted in the recognition of additional intangible assets. The
iomart group plc Annual Report 2010
charge for share based payments in the year of £0.4m (2009: £0.2m) has increased as a result of
the issue of additional share options.
As a consequence of the reduction in the amount due for the deferred consideration, details of
which are given in Note 20, on the acquisition of Ezee DSL Limited through which we acquired our
datacentres an exceptional gain of £1.0m, offset by associated costs of £0.1m, has been credited
to the Income Statement in the year.
Net finance income was nil (2009: £0.4m receipt) and has reduced from the level last year due to
the reduction in cash balances, the reduction in interest rates and the use of finance leases to fund
the acquisition of equipment for customers.
As a result the profit for the year before tax was £1.3m (2009: loss of £1.2m).
The taxation credit for the year of £0.8m (2009: taxation charge of £0.7m) relates to the recognition
of a deferred tax asset in respect of accumulated tax losses which the Group now expects to use up
quicker than previously expected.
The profit for the year from continuing operations after taxation was £2.1m (2009: loss of £1.9m).
Earnings per share
Basic earnings per share from continuing operations was 2.12p (2009: negative earnings per share
of 1.95p).
Acquisition
In May 2009 the company acquired Rapidswitch Limited for a total consideration of £5.5m, including
£0.2m of costs related to the acquisition. Full details of this acquisition are given in note 10.
Cash flow and net cash
The Group enjoyed strong operating cash generation over the year resulting in a cash flow from
continuing operations of £3.9m (2009: £0.3m). The improvement over the prior year was a direct
consequence of the improved adjusted EBITDA recorded in the year. After deducting a tax payment
of £0.2m relating to the operations of Rapidswitch the net cashflow from operating activities was
£3.7m (2009: £0.8m).
Over the year, in total, the Group spent £11.0m (2009: £13.0m receipt) in investing activities. The
biggest single element of this was the acquisition of Rapidswitch which cost £5.5m, including related
costs. In addition, £2.9m was spent in the part settlement of the deferred consideration, together
with related costs, due on the acquisition of Ezee DSL Limited. We also invested £2.3m (2009:
£1.5m), net of related finance lease drawdown, in the purchase of property plant and equipment
primarily in acquiring the equipment to provide services to our Hosting customers and also in the fit
out of additional datacentre space. Expenditure was incurred on development costs £0.3m (2009:
£0.2m), purchase of intangible software assets £0.1m (2009: nil). There were two items related to
the acquisition of Rapidswitch including the repayment of borrowings of £0.2m and the cash balance
acquired of £0.2m. Finally, we received £0.2m of interest on our deposits over the year.
Our financing activities absorbed £0.9m of cash (2009: £1.3m). This included sums spent on
repayment of borrowings and finance leases and dividends.
As a consequence, our overall cash expenditure over the year was £8.2m (2009: £13.2m receipt)
which resulted in cash and cash equivalent balances at the end of the year of £5.7m (2009:
£13.9m). After recognising finance lease obligations of £1.3m (2009: £0.2m) net cash at the end
of the period was £4.4m (2009: £13.7m).
Subsequent to the year-end we have secured a £10m facility with our bankers for the purposes of
funding acquisitions and capital expenditure.
7
Finance Director's Report
www.iomart.com
8
Finance Director's Report
Financial position
Having generated a cash flow from operations of £3.9m we are now generating significant amounts
of operating cash which will be available to fund the continuing need to invest in capital expenditure
for the equipment required to provide services for new managed hosting customers. With the net cash
balance at the end of the year and the availability of the new bank facility we are very well funded
to continue our growth through both organic and acquisitive means.
Principal risks and uncertainties
Section 417(3) of the Companies Act 2006 provides that the business review must contain a
description of the principal risks and uncertainties.
The board has established a formal process to identify risks and uncertainties through the production
and maintenance of a risk register. There are a number of potential risks and uncertainties which
have been identified as a result of this process which could have a material impact on the Group’s
future performance. These are not all the risks which the board has identified but those that the
Directors currently consider to be the most material. In addition to these risks Note 27 contains
details of financial risks.
Staff
As with any service organisation iomart is dependent on the skill, experience and commitment of
its employees and especially a relatively small number of senior staff. The Group seeks to recruit
and retain suitably skilled and experienced staff by offering a challenging and rewarding work
environment. This includes competitive and innovative reward packages and a strong commitment
to training and development.
Datacentre operation
Any downtime experienced at our datacentres would immediately have an impact on our ability to
provide customers with the level of service they demand. Our ongoing investment in preventative
maintenance and lifecycle replacement programme ensures our datacentres continue to deliver
operational efficiency and effectiveness.
Customers
The Group provides an essential service to an extensive client base many of whom rely on the
provision of that service for their major internet presence. Any diminution in the level of service
could have serious consequences for customer acquisition and retention. Our high level of recurring
revenue and our low level of customer attrition are evidence of our ability to provide the level of
service required.
Key suppliers
The Group is dependent on certain key suppliers for the continued operation of its business. The
most significant of which are those for electricity, bandwidth and servers. In all cases these supplies
are obtained from reputable organisations chosen after a thorough selection process. After selection,
the Group actively seeks to maintain good relationships with the chosen suppliers. The Group also
seeks to maintain either several sources of supply or in the case of electricity alternative sources of
power.
Search engine optimisation
A significant amount of the Group’s sales revenues are generated through consumers using internet
search engines to acquire goods and services. The Group continually monitors the position of its
websites with respect to these search engines. Through the engagement of expert consultants and the
allocation of experienced staff the Group seeks to maintain or enhance the position of its websites
for detection by internet search engines.
Richard Logan
Finance Director
1 June 2010
iomart group plc Annual Report 2010
9
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
timely and relevant
through
monitors performance
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 11 to 14, 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 on the annual
budget which the board approves. The results for the
www.iomart.com
10
Corporate Governance
Group as a whole and each business segment 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.iomart.com, as a
means of providing information to shareholders and other
related parties. The company’s annual report and accounts,
interim reports and other relevant announcements are
maintained on the website.
iomart group plc Annual Report 2010
Report of the board to the members on directors'
remuneration
11
•
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.
•
Joint Share Ownership Plan
During the year the Company established a Joint Share
Ownership Plan (JSOP) to provide additional incentives to
executive directors.
• Other benefits
The executive directors are entitled to life insurance cover
and to participate in the Group’s Private Medical Insurance
scheme.
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 are 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 Section 412 of the Companies Act
2006. The following disclosures are voluntary as is resolution
2 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 twice a 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 their basic salary dependent on individual and Group
performance at the discretion of the remuneration committee.
Performance conditions are set individually for each director
to ensure they are relevant and stretching.
www.iomart.com
12
Report of the board to the members on directors' remuneration
Directors’ remuneration
Details of individual directors’ emoluments for the year are as follows:
Name of director
Angus MacSween
Chris Batterham
Sarah Haran
Richard Logan
Ian Ritchie
Fred Shedden
Salary or fees
£
159,490
30,000
116,850
116,850
50,000
30,000
Bonus
£
150,000
-
105,000
93,500
-
-
Benefits
£
1,557
-
412
1,409
-
-
Pension
contributions
£
15,949
-
11,685
11,685
-
-
Year
ended
Year
ended
31 March 31 March
2009
Total
£
321,717
30,000
219,812
232,809
50,000
30,000
2010
Total
£
326,996
30,000
233,947
223,444
50,000
30,000
503,190
348,500
3,378
39,319
894,387
884,338
Directors’ interests in shares
The interests of the directors in the shares of the company at 31 March 2010, together with their interests at 1 April 2009 were as
follows:
Name of director
Angus MacSween
Chris Batterham
Sarah Haran
Richard Logan
Ian Ritchie
Fred Shedden
Number of ordinary shares
31 March 2010
At 1 April 2009
19,686,304
90,621
1,224,944
135,500
151,400
764,588
19,686,304
45,621
745,704
135,500
107,000
744,588
The shareholdings for Angus MacSween, Sarah Haran and Richard Logan exclude shares held under the Company’s Joint Share
Ownership Plan (JSOP) which was established during the year, to replace certain share option arrangements, in which the directors are
beneficial co-owners of shares. Details of such shareholdings are given overleaf.
iomart group plc Annual Report 2010
Report of the board to the members on directors' remuneration
13
Directors’ interests in shareholdings of Joint Share Ownership Plan
The interests of the directors in the JSOP shares are as follows:-
Name of director
Angus MacSween
Sarah Haran
Richard Logan
Market
Award price at date Participation
price
of award
date
Vesting date
Number of
shares
Date
from which
exerciseable
Expiry date
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
49.5p
49.5p
49.5p
49.5p
49.5p
49.5p
49.5p
49.5p
49.5p
49.5p
49.5p
49.5p
49.5p
49.5p
78.5p
49.5p
49.5p
Already vested
Already vested
31/03/2011
31/03/2012
356,990
322,612
350,000
450,000
31/03/2010 06/10/2018
31/03/2010 17/11/2014
31/03/2011 06/10/2018
31/03/2012 06/10/2018
1,479,602
50.5p
78.5p
49.5p
49.5p
49.5p
Already vested
Already vested
Already vested
31/03/2011
31/03/2012
414,018
177,867
357,087
350,000
450,000
31/03/2010 27/09/2017
31/03/2010 17/11/2014
31/03/2010 06/10/2018
31/03/2011 06/10/2018
31/03/2012 06/10/2018
1,748,972
49.5p
50.5p
49.5p
49.5p
Already vested
Already vested
31/03/2011
31/03/2012
221,505
500,000
350,000
450,000
31/03/2010 06/10/2018
31/03/2010 27/09/2017
31/03/2011 06/10/2018
31/03/2012 06/10/2018
1,521,505
The JSOP shares are held jointly between the director and the iomart Group plc Employee Benefit Trust. Under the terms of the JSOP
rules the directors are eligible to receive the excess of any disposal proceeds received for the JSOP shares over the participation price.
The participation price is subject to a 3% per annum escalation until the JSOP shares are sold. The JSOP shares do not carry dividend
or voting rights whilst they are jointly held by the director and the iomart Group plc Employee Benefit Trust. The JSOP shares which vest
for Angus MacSween, Sarah Haran and Richard Logan at 31 March 2011 and 2012 are subject to continuous employment criteria.
Under the rules of the scheme should the market price of a vested JSOP share exceed the participation price the director has the
option to convert the value of any such excess into a number of wholly owned shares within the JSOP. If a director exercises this right
then the wholly owned shares subsequently held within the JSOP by the director shall be eligible for both dividend and voting rights.
www.iomart.com
14
Report of the board to the members on directors' remuneration
Directors’ interests in share options
The interests of the directors at 31 March 2010 in options over the ordinary shares of the company were as follows:
Name of
director
At
1 April
2009 Exercised Surrendered Lapsed
At
31 March Exercise
price
2010
Date of
Date from
which
Grant exerciseable
Expiry
date
Angus MacSween 450,000
12,302
150,000
250,000
350,000
450,000
1,662,302
-
-
-
-
-
-
-
(322,612)
- (12,302)
-
-
-
-
- 127,388
-
43,010
-
-
-
(106,990)
(250,000)
(350,000)
(450,000)
78.5p 17/11/2004
76.0p 01/03/2006
46.5p 06/10/2008
46.5p 06/10/2008
46.5p 06/10/2008
46.5p 06/10/2008
17/11/2007 17/11/2014
01/03/2009 01/09/2009
31/03/2009 06/10/2018
31/03/2010 06/10/2018
31/03/2011 06/10/2018
31/03/2012 06/10/2018
(1,479,602) (12,302) 170,398
Sarah Haran
159,746
159,747
159,747
250,000
4,921
500,000
150,000
250,000
350,000
450,000
(159,746)
(159,747)
(159,747)
-
-
-
-
-
-
-
-
-
-
(177,867)
-
(414,018)
(107,087)
(250,000)
(350,000)
(450,000)
-
-
-
-
(4,921)
-
-
-
-
-
-
-
-
72,133
-
85,982
42,913
-
-
-
5.0p 11/05/2000
5.0p 11/02/2001
5.0p 11/02/2002
78.5p 17/11/2004
76.0p 01/03/2006
50.5p 27/09/2007
46.5p 06/10/2008
46.5p 06/10/2008
46.5p 06/10/2008
46.5p 06/10/2008
11/05/2000 29/03/2010
11/02/2001 29/03/2010
11/02/2002 29/03/2010
17/11/2007 17/11/2014
01/03/2009 01/09/2009
27/09/2010 27/09/2017
31/03/2009 06/10/2018
31/03/2010 06/10/2018
31/03/2011 06/10/2018
31/03/2012 06/10/2018
2,434,161
(479,240)
(1,748,972)
(4,921) 201,028
Richard Logan
50,000
500,000
150,000
250,000
350,000
450,000
1,750,000
-
-
-
-
-
-
-
-
(500,000)
-
(221,505)
(350,000)
(450,000)
50,000
-
-
-
- 150,000
28,495
-
-
-
-
-
74.0p 24/08/2006
50.5p 27/09/2007
46.5p 06/10/2008
46.5p 06/10/2008
46.5p 06/10/2008
46.5p 06/10/2008
24/08/2009 24/08/2016
27/09/2010 27/09/2017
31/03/2009 06/10/2018
31/03/2010 06/10/2018
31/03/2011 06/10/2018
31/03/2012 06/10/2018
(1,521,505)
- 228,495
On 19 June 2009, Sarah Haran exercised 479,240 share options under the Company’s Unapproved Share Option Scheme at an
exercise price of 5.0p. The market price on the date of exercise was 32.0p resulting in a gain on exercise of £129,395. No share
options were exercised by directors in the previous year and no new share options were granted to directors during the year. There
have been no variations to the terms and conditions or performance criteria for share options during the year.
The market price of the company’s shares at the end of the financial period was 49.5p and the range of prices during the period was
between 31.0p and 52.5p.
By order of the board
Fred Shedden, Chairman, Remuneration committee
1 June 2010
iomart group plc Annual Report 2010
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 2010.
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 datacentre capacity to allow the
full set of vertical components from domain names through
space, power and bandwidth to complex application hosting.
The principal risks and uncertainties faced by the business are
described in the Finance Director’s Report.
Key performance indicator review
Revenue
2010
55% increase
2009
45% increase
Revenue from continuing operations grew by 55% over the
year compared to a growth of 45% in the previous year. The
Hosting segment grew revenues by 139% (2009: 155%) and
the Easyspace segment by 2% (2009: 14%).
Adjusted EBITDA margin
2010
17%
2009
-3%
The adjusted EBITDA margin has shown a substantial
improvement as a result of the Hosting segment both
continuing to win new business and the inclusion of Rapidswitch
which was acquired during the year. Easyspace has also
contributed to the adjusted EBITDA margin improvement
through operational efficiencies.
15
Financial instruments
The Group’s financial instruments comprise cash and liquid
resources 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 2010
comprise finance leases totalling £1.3m (2009: £0.2m). The
interest rates on the finance leases are fixed for the term of the
lease at between 5.0% and 12.2%. The Group has exposure
to movements in the exchange rate of the US dollar as certain
domain name purchases are transacted in this currency. To
protect cash flows against the level of exchange rate risk,
the Group entered into forward exchange contracts to hedge
foreign exchange exposures arising on the forecast payments.
The majority of transactions of the holding company and the
UK subsidiaries are in UK sterling and, with the exception of
forward foreign exchange contracts, the Group does not use
derivative instruments. Additional information on financial
instruments is included in Note 27.
Dividend
The directors declared an interim dividend on 22 February
2010, for the year ended 31 March 2010, of 0.4p per share
(2009: nil) which was paid on 1 April 2010. The directors do
not recommend a final dividend for the year ended 31 March
2010 (2009: 0.3p).
Directors and their interests
The present membership of the board is set out on page 19.
In accordance with the company’s Articles of Association, Ian
Ritchie and Fred Shedden will offer themselves for re-election
at the forthcoming annual general meeting.
Details of directors’ interests in the company’s shares are set
out in the report of the board to the members on directors’
remuneration on pages 11 to 14.
www.iomart.com
16
Directors' Report
Substantial shareholdings
At 18 May 2010 the following interests in 3% or more of the
issued ordinary share capital, excluding shares held by the
iomart Group plc Employee Benefit Trust, had been notified
to the company:
Shareholder
Shares
Percentage held
Gartmore
Investment Limited
27,401,453
Angus MacSween
19,686,304
28.02%
20.13%
Majedie Asset
Management
Legal & General
Investment
Management
Universities
Superannuation
Scheme
British Steel
Pension Scheme
8,278,001
8.47%
4,785,000
4.89%
4,737,000
4.84%
Bill Dobbie
3,361,369
4,653,000
4.76%
3.44%
Transactions in own shares
At 31 March 2009 the company held 3,294,547 shares in
treasury and during the year the company issued 830,660
shares from treasury in respect of the exercise of share options
by employees and 2,463,887 shares from treasury to the
iomart Group plc Employee Benefit Trust. At 31 March 2010
no shares were held in treasury.
The company also issued 2,513,297 ordinary shares to the
iomart Group plc Employee Benefit Trust. Therefore, at 31
March 2010 the iomart Group plc Employee Benefit Trust
held 4,977,184 shares (2009: nil) which are accounted for
as Own shares.
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 or Joint Share
Ownership Plan shares in the company under the Group’s
share incentive schemes and it is the board’s policy to make
specific awards as appropriate to attract and retain the best
available people.
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 2010 were 23 days (2009: 25
days), and of the company were 4 days (2009: 6 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
Employment of disabled persons
Full and fair consideration is given to applications for
employment made by disabled persons having regard to
Bruce Hall, Company secretary
1 June 2010
iomart group plc Annual Report 2010
Statement of Directors' Responsibilities
17
The directors are responsible for preparing the Annual Report
and the Group and the Parent Company Financial Statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the Group Financial Statements in accordance
with International Financial Reporting Standards (IFRSs) as
adopted by the European Union, and the Parent Company
Financial Statements in accordance with applicable law and
United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice). The Group and
Parent Company Financial Statements are required by law to
give a true and fair view of the state of affairs of the Company
and the Group 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; 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 adequate 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 2006. 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.
www.iomart.com
“Corporate responsibility has long been a part of the Group's
values and how we operate. We recognise that our long-term
success depends on our ability to develop and offer innovative
services that encourage both our clients and our shareholders to
invest in us with confidence.”
iomart group plc Annual Report 2010
The Easyspace sponsored elephant, ‘Cosmos’, outside the Royal Exchange.
One of 258 individually designed elephants that formed the London Elephant Parade 2010.
Board of Directors
Ian Ritchie
59, appointed 2008; currently Chairman of Computer Application Services Ltd, Caspian
Learning Ltd and Interactive Design Institute 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 Toshiba), 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).
Angus MacSween
53, 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
55, 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,
office2office plc, DRS plc, The Risk Advisory Group and Betfair Limited. He is also chairman
of Eckoh plc. Chris has also served on the boards of Staffware plc, DBS Management plc
and The Invesco Techmark Enterprise Trust plc
Sarah Haran
44, 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
52, 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
65, appointed 2000; independent director of Murray International Trust plc; vice-chair of
Glasgow Housing Association and Glasgow School of Art; formerly chairman of Halladale
Group plc and senior partner of McGrigors.
19
www.iomart.com
20
Independent auditor's report to the members of
iomart Group plc
We have audited the Group financial statements of iomart
Group Plc for the year ended 31 March 2010 which
comprise the consolidated income statement, consolidated
statement of comprehensive income, consolidated balance
sheet, consolidated cash flow statement, the consolidated
statement of changes in equity and the related notes. The
financial reporting framework that has been applied in their
preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European
Union.
This report is made solely to the company’s members, as
a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. 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
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation
of the Group financial statements and for being satisfied that
they give a true and fair view. Our responsibility is to audit
the Group financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland).
Those standards require us to comply with the Auditing
Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is
provided on the APB’s website at www.frc.org.uk/apb/scope/
UKNP.
Opinion
In our opinion the Group financial statements:
• give a true and fair view of the state of the Group's affairs
as at 31 March 2010 and of its profit for the year then
ended;
• have been properly prepared in accordance with IFRS as
adopted by the European Union; and
• have been prepared in accordance with the requirements
of the Companies Act 2006.
Opinion on other matter prescribed by the Companies
Act 2006
In our opinion the information given in the Directors’ Report for
the financial year for which the Group financial statements are
prepared is consistent with the Group financial statements.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you
if, in our opinion:
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Other matter
We have reported separately on the parent company financial
statements of iomart Group plc for the year ended 31 March
2010.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
1 June 2010
iomart group plc Annual Report 2010
Consolidated Income Statement
Year ended 31March 2010
CONTINUING OPERATIONS
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit/(loss)
Analysed as:
Earnings before interest, tax, depreciation, amortisation, share based
payments and gain on reduction of deferred consideration
Share based payments
Depreciation
Amortisation
Gain on reduction of deferred consideration on business combination
Associated costs on gain on reduction of deferred consideration
Finance income
Finance costs
Profit/(loss) before taxation
Taxation
Profit/(loss) for the year from continuing operations
DISCONTINUED OPERATIONS
Profit for the year from discontinued operations
Profit on disposal of discontinued operations
Net result from discontinued operations
TOTAL OPERATIONS
Profit for the year from total operations attributable to
equity holders of the parent
Basic and diluted earnings per share
Continuing operations
Basic
Diluted
Total operations
Basic
Diluted
Note
4
4
24
4
4
20
20
6
6
8
11
11
11
11
21
2010
£’000
18,327
2009
£’000
11,797
(7,830)
(5,718)
10,497
6,079
(10,119)
(7,728)
378
(1,649)
3,112
(318)
(379)
(1,846)
(509)
1,000
(135)
77
(66)
(231)
(959)
(141)
-
-
497
(49)
1,254
(1,201)
816
(731)
2,070
(1,932)
-
-
-
516
12,598
13,114
2,070
11,182
2.12 p
2.12 p
(1.95)p
(1.95)p
2.12 p
2.12 p
11.27p
11.17p
www.iomart.com
22
Consolidated Statement of Comprehensive Income
Year ended 31March 2010
Profit for the year from total operations
Total comprehensive income for the year
Attributable to equity holders of the parent
2010
£’000
2,070
2,070
2,070
2009
£’000
11,182
11,182
11,182
iomart group plc Annual Report 2010
23
Consolidated Balance Sheet
31March 2010
Note
2010
£’000
2009
£’000
ASSETS
Non-current assets
Intangible assets – goodwill
Intangible assets – other
Deferred tax asset
Lease deposit
Deferred consideration receivable on disposal
Property, plant and equipment
Current assets
Cash and cash equivalents
Deferred consideration receivable on disposal
Trade and other receivables
Total assets
LIABILITIES
Non-current liabilities
Non-current borrowings
Current liabilities
Deferred consideration due on acquisition
Trade and other payables
Current borrowings
Total liabilities
Net assets
EQUITY
Share capital
Own shares
Capital redemption reserve
Share premium
Retained earnings
Total equity
These financial statements were approved by the board of directors on 1 June 2010.
Signed on behalf of the board of directors
Angus MacSween
Director and chief executive officer
12
12
9
13
18
15
17
18
16
21
20
19
21
23
20,723
1,008
604
1,216
-
12,276
35,827
5,715
914
2,937
9,566
16,550
363
20
884
1,000
8,672
27,489
13,910
-
2,184
16,094
45,393
43,583
(834)
(834)
(54)
(54)
(1,000)
(7,489)
(480)
(8,969)
(4,800)
(5,190)
(148)
(10,138)
(9,803)
(10,192)
35,590
33,391
1,028
(2,464)
1,200
19,514
16,312
35,590
1,002
(678)
1,200
17,583
14,284
33,391
www.iomart.com
24
Consolidated Cash Flow Statement
Year ended 31March 2010
Profit/(loss) before taxation
Gain on reduction of deferred consideration - net
Finance income - net
Depreciation
Amortisation
Share based payments
Movement in deposits
Movement in trade receivables
Movement in trade payables
Cash flow from operations
Taxation paid
Cash generated from discontinued operations
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
Purchase of intangible assets – domain names
Payment for acquisition of business
Repayment of borrowings on acquisition of business
Deferred consideration paid on prior period acquisition
Receipt from disposal of discontinued operation
Net cash acquired with subsidiary undertaking
Interest received
Investing activities of discontinued operation
Net cash (used in)/from investing activities
Cash flow from financing activities
Issue of shares
Repayment of finance leases
Repayment of borrowings
Purchase of own shares
Interest paid
Dividends paid
Financing activities of discontinued operation
Net cash used in financing activities
Note
20
6
4
4
24
15
12
12
12
10
10
20
23
21
10
6
7
2010
£’000
1,254
(865)
(11)
1,846
509
379
(332)
(63)
1,169
3,886
(164)
-
3,722
(2,341)
(281)
(69)
-
(5,458)
(226)
(2,935)
-
155
172
-
(10,983)
41
(396)
(222)
-
(66)
(291)
-
(934)
2009
£’000
(1,201)
-
(448)
959
141
231
-
(453)
1,087
316
-
463
779
(1,519)
(238)
(10)
(31)
-
-
-
15,235
-
389
(99)
13,727
50
(210)
(432)
(678)
(49)
-
(20)
(1,339)
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
(8,195)
13,167
13,910
743
Cash and cash equivalents at the end of the year
17
5,715
13,910
iomart group plc Annual Report 2010
Consolidated Statement of Changes in Equity
Year ended 31March 2010
25
Own
shares
JSOP
£’000
-
-
-
-
-
-
-
-
-
-
-
Changes in equity
Balance at 1 April 2008
Note
Share
capital
£’000
994
Share based payments
24
Deferred tax on share based
payments
Acquisition of own shares
Issue of shares for option
redemption
Profit in the period
-
-
-
8
-
Balance at 31 March 2009
1,002
Dividends – final (paid)
Share based payments
Issue of own shares for
option redemption
Issue of own shares to
Joint Share Ownership Plan
Issue of new shares to Joint
Share Ownership Plan
Profit in the period
7
24
-
-
-
-
26
(2,464)
-
-
Balance at 31 March 2010
1,028
(2,464)
Own
Share
Capital
shares redemption premium
account
reserve
£’000
£’000
treasury
£’000
Retained
earnings
£’000
Total
£’000
-
-
-
(678)
-
-
1,200
17,541
2,946
22,681
-
-
-
-
-
-
-
-
42
231
231
(75)
(75)
-
-
(678)
50
-
11,182
11,182
(678)
1,200
17,583
14,284
33,391
-
-
171
507
-
-
-
-
-
-
-
-
-
-
-
-
(291)
(291)
379
379
(130)
41
712
1,219
-
-
1,219
(1,219)
-
2,070
2,070
1,200
19,514
16,312
35,590
www.iomart.com
“iomart Hosting’s central London location data centre gives us a much
better power supply, huge amounts of bandwidth, the tightest security and
a 100 per cent uptime guarantee that’s actually written in to the contract.
We now feel a lot more comfortable than we did.”
Alex Fagioli, Technical Director of Tectrade
iomart group plc Annual Report 2010
27
Notes to the Financial Statements
Year ended 31March 2010
1. GENERAL INFORMATION
iomart Group plc is a company incorporated in the United
Kingdom under the Companies Act 2006. The address of the
registered office is given on page 69 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 each of the Group’s subsidiaries
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 (IFRS) as adopted by the EU and issued by
the International Accounting Standards Board (IASB). 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.
Standards, amendments, and interpretations
effective in year
IAS 1 (revised) Presentation of Financial Statements. This does
not affect the financial position or profits of the Group but
gives rise to additional disclosures. The measurement and
recognition of the Group’s assets, liabilities, income and
expenses is unchanged. The adoption of this standard affects
the presentation of owner changes in equity and introduces a
‘Statement of Comprehensive Income’.
IFRS 8 Operating Segments. This extends the scope of
segmental reporting so that segments are identified by
reference to the information reviewed by the Chief Operating
Decision Maker. This standard does effect the Group’s
financial statements and the required disclosure has been
included in Note 3 to the financial statements.
In addition the following standards, amendments and
interpretations are effective in the year but have no material
impact on the Group’s financial statements:
• IAS 23 Borrowing Costs.
• IAS 32 (amended February 2008) Financial Instruments:
Presentation.
• IAS 39 and IFRIC 9 Financial Instruments: Recognition
and Measurement: Eligible Hedged Items.
• IFRS 2 (amendment), Share-based Payment, vesting
conditions and cancellations.
• IFRS 7 (amended March 2009) Improving Disclosures
about Financial Instruments.
• IFRIC 13 Customer Loyalty Programme.
• IFRIC 15 Agreements for the Construction of Real
Estate.
• IFRIC 16 Hedges of a Net Investment in a Foreign
Operation.
New standards and interpretations of existing standards
that are not yet effective and have not been adopted
early by the Group
IFRS 3 Business Combinations (revised 2008). This continues
to apply the acquisition method to business combinations.
This standard does not have any impact on the Group’s
financial statements. The standard is applicable to business
combinations occurring in reporting periods beginning on
or after 1 July 2009 and will be applied prospectively. This
standard will be applied to any future acquisitions.
In addition the following new standards and interpretations of
existing standards that are not yet effective and have not been
adopted early by the Group are not expected to have any
impact on the Group’s consolidated financial statements:
• IAS 27 Consolidated and Separate Financial Statements
(revised 2008).
• IFRIC 17 Distributions of Non-cash Assets to Owners.
• IFRIC 18 Transfers of Assets from Customers.
www.iomart.com
28
Notes to the Financial Statements. Year ended 31March 2010.
Summary of Accounting Policies
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.
Basis of consolidation
The Group financial statements consolidate those of the
company and all of its subsidiary undertakings drawn up to
31 March 2010. Subsidiaries are entities over which the
Group has the power to control the financial and operating
policies so as to obtain benefits from its activities. The
Group obtains and exercises control through voting rights.
Unrealised gains on transactions between the Group and
its subsidiaries are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Amounts reported in
the financial statements of subsidiaries have been adjusted
where necessary to ensure consistency with the accounting
policies adopted by the Group.
Acquisitions of subsidiaries are dealt with by the purchase
method. The purchase method involves the recognition at
fair value of all identifiable assets and liabilities, including
contingent liabilities of the subsidiary, at the acquisition
date, regardless of whether or not they were recorded in the
financial statements of the subsidiary prior to acquisition.
On initial recognition, the assets and liabilities of the
subsidiary are included in the consolidated balance sheet
at their fair values, which are also used as the bases for
subsequent measurement in accordance with the Group
accounting policies. Goodwill is stated after separating out
identifiable intangible assets. Goodwill represents the excess
of acquisition cost over the fair value of the Group’s share
of the identifiable net assets of the acquired subsidiary at the
date of acquisition.
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.
Continuing Operations
Easyspace
This operating segment provides domain name registration
and shared 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 shared
hosting is recognised evenly over the period of the service
and once the service has been established. Any unearned
portion of revenue is included in payables as deferred
revenue.
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 once
the service has been established. 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
• 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
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
29
during its development can be measured reliably.
Development costs not meeting the criteria for capitalisation
are expensed as incurred. The only development costs which
are deemed to meet these criteria in the Group are in relation
to developments by specific teams to develop products in
the hosting asset management control system 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.
Amortisation charges are recognised in administration
expenses in the income statement.
Software
Software is recognised at fair value on purchase and
amortised on a straight-line basis over its useful economic
life, which does not generally exceed four years.
Assets acquired as part of a business combination
In accordance with IFRS 3 Business Combinations, an
intangible asset acquired in a business combination is
deemed to have a cost to the Group of its fair value at
the acquisition date. The fair value of the intangible asset
reflects market expectations about the probability that the
future economic benefits embodied in the asset will flow to
the Group. Where an intangible asset might be separable,
but only together with a related tangible or intangible
asset, the group of assets is recognised as a single asset
separately from goodwill where the individual fair values of
the assets in the Group are not reliably measurable. Where
the individual fair values of the 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.
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.
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 (per annum):
Freehold property
Leasehold improvements
Computer equipment
Office equipment
Datacentre equipment
Motor vehicle
3.33%
25%
Between 20% and 50%
Between 10% and 25%
Between 6% and 10%
25%
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 goodwill.
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. Management estimate expected future cash flows
from each cash generating unit and determines a suitable
interest rate to determine the present value of the future
cash flows. Discount factors are determined for each cash
generating unit to reflect the underlying risks involved. The
future cash flows used in the calculation are based on the
Group’s latest approved budget.
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
www.iomart.com
30
Notes to the Financial Statements. Year ended 31March 2010.
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 12.
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.
Income Taxes
The tax expense recognised in the Income Statement
comprises the sum of deferred tax and current tax not
recognised in other comprehensive income or directly in
equity.
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.
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 recognised in other
comprehensive income or directly in equity (such as share
based remuneration) in which case the related deferred tax
is also recognised in other comprehensive income or equity
respectively.
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 on initial recognition. 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.
All income and expenses relating to financial assets that
are recognised in income statement are presented within
‘finance costs’, ‘finance income’ or ‘other financial items’
except for impairment of trade receivables which is presented
within ‘other expenses’.
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.
Discounting is omitted where the effect of discounting is
immaterial. The Group’s cash and cash equivalents, trade
and most other receivables fall into this category of financial
instruments.
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
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
31
is determined as the difference between the asset’s carrying
amount and the present value of estimated future cash flows.
An assessment for impairment is undertaken at least at each
balance sheet date.
Financial derivatives such as forward foreign exchange
contracts are carried at fair value through the income
statement.
A financial asset is derecognised only where the contractual
rights to the cash flows from the asset expire or the
financial asset is transferred and that transfer qualifies
for derecognition. A financial asset is transferred if the
contractual rights to receive the cash flows of the asset have
been transferred or the Group retains the contractual rights to
receive the cash flows of the asset but assumes a contractual
obligation to pay the cash flows to one or more recipients.
A financial asset that is transferred qualifies for derecognition
if the Group transfers substantially all the risks and rewards
of ownership of the asset, or if the Group neither retains nor
transfers substantially all the risks and rewards of ownership
but does transfer control of that asset.
Financial liabilities
Financial liabilities are obligations to pay cash or other
financial assets and are recognised when the Group
becomes a party to the contractual provisions of the
instrument. Financial liabilities categorised as at fair value
through profit or loss are recorded initially at fair value, all
transaction costs are recognised immediately in the income
statement. All other financial liabilities are recorded initially
at fair value, net of direct issue costs.
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
costs 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, cancelled or when it
expires.
Foreign currency transactions
Transactions denominated in foreign currencies are recorded
at the rate ruling at the date of the transaction. Any gains
or losses arising on assets and liabilities between the date
of recording and the date of settlement are treated as
gains or losses in the income statement. Forward foreign
exchange contracts used to hedge the Group’s exposure to
foreign currency transactions are fair valued at the balance
sheet date and the gain or loss is recognised in the income
statement for the period.
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 the financial statements within ‘other short term
financial liabilities’ when a final dividend is approved in a
general meeting. Interim dividend distributions to equity
shareholders approved by the Board are not included in
the financial statements until paid. 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.
• “Own shares JSOP” represents the amount of the
company’s own equity shares, plus attributable
transaction costs, that is held by the company within
the iomart Group plc Employee Benefit Trust in respect
of the Joint Share Ownership Plan.
• “Own shares treasury” represents the amount of
the company’s own equity shares, plus attributable
transaction costs, that is held by the company as
treasury 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.
www.iomart.com
32
Notes to the Financial Statements. Year ended 31March 2010.
Employee benefits
The Group operates a stakeholder pension scheme and also
contributes to a number of personal pension schemes on
behalf of executive directors and some senior employees.
The pension costs charged against operating profit are
the contributions payable to the schemes in respect of the
accounting period.
Share-based payment
The Group operates equity-settled and cash-settled share-
based remuneration plans for its employees. All goods and
services received in exchange for the grant of any share-
based payment are measured at their fair values. Where
employees are rewarded using share-based payments, the
fair values of employees’ services are determined indirectly
by reference to the fair value of the instrument granted to the
employee. This fair value is appraised at the grant date and
excludes the impact of non-market vesting conditions (for
example, profitability and sales growth targets).
Where existing share based incentives are replaced the fair
value of the replacement share based incentives is calculated
and compared to the current fair value of the replaced share
based incentives. Where the fair value of the replaced share
based incentives exceeds that of the replacement share
based incentives then the share based payment charge to the
income statement for the year continues to be based on the
original share based incentives.
All share-based remuneration plans are ultimately recognised
as an expense in the income statement with a corresponding
credit to ‘retained earnings’.
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
based incentives 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 based
incentives ultimately exercised are different to that estimated
on vesting.
the value of any such excess into a number of wholly owned
shares within the JSOP. The JSOP scheme can therefore
be either equity-settled or cash-settled at the option of the
employee.
Discontinued operations
Profit or loss from discontinued operations, including prior
year components of profit or loss, are presented as a single
amount in the Income Statement. A discontinued operation
is a component of the entity that either has been disposed of,
or is classified as held for sale, and:
• represents a major line of business or geographical
area of operations;
• is part of a single coordinated plan to dispose of a
separate major line of business or geographical area
of operations; or
• is a subsidiary acquired exclusively with a view to
resale.
The Group disposed of its Ufindus operation in the prior
year and consequently, Ufindus has been treated as a
discontinued operation within these financial statements.
The Ufindus operation has been shown as discontinued
within the segmental analysis at note 3. The disclosures for
discontinued operations in the prior year relate to operations
that have been discontinued by the reporting date.
Segmental reporting
The Group provides segmental reporting on a basis consistent
with the provision of internal financial information used for
decision making purposed by the Chief Operating Decision
Maker. Internal reports are produced on a basis consistent
with the accounting policies adopted in Group’s financial
statements.
The Group calculates geographical information on the basis
of the location of the customer.
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.
Upon exercise of share based incentives the proceeds
received net of attributable transaction costs are credited
to share capital, and where appropriate share premium.
Under the rules of the Joint Share Ownership Plan (JSOP),
should the market price of a vested JSOP share exceed the
participation price the employee has the option to convert
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
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
33
to select a suitable discount rate in order to calculate the
present value. Full details of the assumptions used in the
calculation are disclosed in note 12.
Valuation of intangible assets and fair value adjustments
on acquisition
Note 10 summarises the fair value adjustments that were
made in relation to the acquisition of Rapidswitch Limited.
Within these adjustments consideration has been given
to the valuation of intangible assets including customer
relationships and brand.
Recoverability of deferred consideration on disposal of
subsidiary
Part of the consideration due to be received in relation to
the disposal of Ufindus Limited was deferred and placed
into escrow against warranty claims. Under the terms of the
agreement relating to the disposal the Group gave standard
warranties to the purchaser. An assumption has been made
that no further warranty claim will reduce the remaining
amount outstanding.
Estimated accruals
Estimates have been made of a number of accruals relating
to premises used in the Group’s operations. These estimates
are based on previous experience of costs incurred in similar
situations.
Deferred tax
The Group has substantial tax losses available to offset future
taxable profits. In assessing the amount of deferred tax to
be recognised as an asset the Group has estimated future
profitability of the relevant operating unit.
3. SEGMENTAL ANALYSIS
The chief operating decision-maker has been identified as
the Chief Executive Officer (“CEO”) of the Company. The
CEO reviews the Group’s internal reporting in order to assess
performance and to allocate resources. The Company has
determined its operating segments based on these reports.
The Group currently has two reportable segments.
• Easyspace – this segment provides a range of share
hosting and domain registration services to micro and
SME companies.
• Hosting – this segment provides managed hosting
facilities and services, through a network of owned
datacentres, to the larger SME and corporate markets.
The segment uses several routes to market and
provides managed hosting services through iomart
Hosting, Rapidswitch and Netintelligence. Rapidswitch
Limited was acquired in the early part of the year and
was fully integrated into the Hosting segment during
the year.
Information regarding the operation of the reportable
segments is included below. The CEO assesses the
performance of the operating segments based on revenue
and a measure of Earnings before Interest, Depreciation
and Amortisation (EBITDA) before any allocation of Group
overheads or charges for share based payments. Segment
EBITDA is used to measure performance as the CEO believes
that such information is the most relevant in evaluating the
results of the segment.
The Group’s EBITDA for the year has been calculated after
deducting Group overheads from the EBITDA of the two
segments as reported internally. In previous years certain
Group overheads were allocated at the year end to segments
for segmental reporting purposes. Consequently prior year
comparative figures have been presented on a basis consistent
with the current year with no allocation of Group overheads.
Whilst this means that the level of Group overheads reported
in the segmental analysis comparative figures has increased
from that reported last year likewise the level of EBITDA
profitability of the two segments has also increased by the
same amount and the overall Group EBITDA profitability has
been unaffected. The Group overheads include the cost of
the Board, all the costs of running the premises in Glasgow,
the Group marketing, human resource, finance and design
functions and legal and professional fees.
www.iomart.com
34
Notes to the Financial Statements. Year ended 31March 2010.
3. SEGMENTAL ANALYSIS (CONTINUED)
The segment information is prepared using accounting policies consistent with those of the Group as a whole.
The assets and liabilities of the Group are not reviewed by the chief operating decision-maker on a segment basis. Therefore none of the
Group’s assets and liabilities are segmental assets and liabilities and are all unallocated for segmental disclosure purposes. The Group
has adopted early the amendment to IFRS 8 Operating Segments as detailed in the ‘Improvements to IFRS’ issued in April 2009. This
amendment states that if segmental assets and liabilities are not presented to the Chief Operating Decision Maker then the Group need
not disclose these in the financial statements. On this basis the Group has not disclosed details of segmental assets and liabilities.
All segments are continuing operations. No customer accounts for more than 10% of external revenues. Inter-segment transactions are
accounted for using an arms-length commercial basis.
Operating Segments
Revenue by Operating Segment
Easyspace
Hosting
Continuing operations
Discontinued operations
External
£’000
7,363
10,964
18,327
-
18,327
2010
Internal
£’000
-
717
717
-
717
Total
£’000
7,363
11,681
19,044
-
19,044
External
£’000
7,224
4,573
11,797
3,321
15,118
2009
Internal
£’000
-
572
572
-
572
Total
£’000
7,224
5,145
12,369
3,321
15,690
Geographical Information
In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. The
United Kingdom is the place of domicile of the parent company, iomart Group plc. All of the Group’s revenue originates from the United
Kingdom. No individual country other than the United Kingdom contributes a material amount of revenue therefore revenue from outside
the United Kingdom has been shown as from Rest of the World.
Analysis of Revenue by Destination
United Kingdom
Rest of the World
Revenue from continuing operations
Profit by Operating Segment
Easyspace
Hosting
Group overheads
Share based payments
Net gain on business combination
Group interest and tax
Total continuing
Gain on disposal
Discontinued operations
Profit for the year
2010
£’000
17,142
1,185
18,327
2009
£’000
11,173
624
11,797
2010
EBITDA
before
Share based
payments
EBITDA
before
2009
Share based
payments
£’000
(35)
(2,320)
-
(379)
(2,734)
payments
£’000
2,579
2,763
(2,230)
-
3,112
Share based depreciation & Operating
amortisation profit/(loss)
£’000
2,544
443
(2,230)
(379)
378
865
827
2,070
-
-
2,070
(2,734)
-
-
(2,734)
3,112
-
-
3,112
£’000
(38)
(1,062)
-
(231)
(1,331)
payments
£’000
2,203
(242)
(2,279)
-
(318)
Share based depreciation & Operating
amortisation profit/(loss)
£’000
2,165
(1,304)
(2,279)
(231)
(1,649)
-
(283)
(1,932)
12,598
516
11,182
(1,331)
-
(99)
(1,430)
(318)
12,598
615
12,895
Group overheads, share based payments, interest and tax are not allocated to segments.
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
35
4. OPERATING PROFIT/(LOSS)
The profit for the year from total operations is stated after charging the following
operating costs:
Staff costs excluding development costs capitalised and research and
development costs written off the income statement
2010
£’000
2009
£’000
6,216
9,808
Depreciation of property plant and equipment
- Owned assets (2009: continuing operations: £787,000; discontinued operations: £34,000)
- Leased assets
Property, plant and equipment hire
- Land and buildings
- Plant and machinery
Amortisation of intangible assets (2009: continuing operations: £141,000; discontinued operations: £66,000)
R&D expensed to income statement
Marketing and sales
Infrastructure
Provision for doubtful debts
Premises and office
1,498
348
1,299
242
509
162
604
337
57
3,778
821
172
1,078
57
207
56
955
188
56
2,640
Included within other expenses are fees paid to the Group’s auditors, an analysis of which is provided below:
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
2010
£’000
2009
£’000
22
23
14
27
86
21
19
12
22
74
www.iomart.com
36
Notes to the Financial Statements. Year ended 31March 2010.
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
2010
£’000
2009
£’000
855
39
243
311
16
849
35
192
307
15
During the year the company made personal pension contributions to the personal pension schemes of 3 directors (2009: 3).
The aggregate amount of gains realised by directors on the exercise of share options during the year was £129,395 (2009: £nil).
The detailed numerical analysis of directors’ remuneration and share options is included in the report of the board to the members on
directors’ remuneration on pages 11 to 14.
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.
No.
66
22
33
24
145
65
19
32
22
138
51
32
86
35
204
48
23
28
26
125
2010
£’000
2009
£’000
5,688
536
56
379
8,887
1,008
56
231
6,659 10,182
The Group operates a stakeholder pension scheme and also contributes to a number of personal pension schemes on behalf of
executive directors and some senior employees. In the case of executive directors, details of the pension arrangements are given within
the Directors’ Remuneration Report on pages 11 to 14. In the case of senior employees, pension contributions to individuals’ personal
pension arrangements are payable by the Group at a rate equal to the contribution made by the senior employee subject to a maximum
employer contribution of 5% of basic salary. The comparative figure for 2009 for staff costs during the year includes £5,145,000 relating
to discontinued operations.
iomart group plc Annual Report 2010
6. NET FINANCE COST
Finance income:
Bank interest receivable
Finance expenses:
Bank overdraft and other borrowings
Finance leases
Net finance cost
7. DIVIDENDS ON SHARES CLASSED AS EQUITY
Paid during the year:
Final dividend – for prior year
Equity dividends on ordinary shares
Notes to the Financial Statements. Year ended 31March 2010.
37
2010
£’000
2009
£’000
77
77
497
497
-
(66)
(66)
(26)
(23)
(49)
11
448
2010
Pence per
share
2010
£’000
2009
Pence per
share
2009
£’000
0.3p
291
291
-
-
-
The directors declared an interim dividend on 22 February 2010, for the year ended 31 March 2010, of 0.4p per share (2009: nil) which
was paid after the balance sheet date.
www.iomart.com
38
Notes to the Financial Statements. Year ended 31March 2010.
8. TAXATION
Tax charge for the year
Adjustment relating to prior year
Deferred tax credit/(charge)
Taxation
2010
£’000
(12)
20
808
816
2009
£’000
-
-
(731)
(731)
The Group has a deferred tax asset which has been recognised in respect of tax losses within one of the subsidiary companies, which has
generated taxable profits and is expected to continue to do so.
The differences between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation
tax to the profit before tax is as follows:
Profit before tax
Tax charge @ 28% (2009 – 28%)
Expenses disallowed for tax purposes
Adjustments in respect of prior periods
Effect of research and development tax reliefs
Tax effect of share based remuneration
Non-taxable gain on reduction of deferred consideration on business combination
Effect of intangible asset tax reliefs
Movement in unprovided deferred tax related to fixed assets
Movement in unprovided deferred tax related to other timing differences
Gain on disposal of subsidiary undertaking not subject to corporation tax
Non-taxable income on discontinued operations
Movement in unprovided deferred tax related to loses
(Increase)/reduction in tax losses recognised
2010
£’000
2009
£’000
1,254
11,913
351
3,336
23
(20)
(44)
50
(242)
(24)
(99)
(8)
-
-
-
(803)
25
-
(36)
24
-
-
(12)
5
(3,527)
(77)
199
794
Taxation (credit)/charge for the year
(816)
731
The weighted average applicable tax rate for the year ended 31 March 2010 was 28% (2009: 28%).
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
39
9. DEFERRED TAX
The Group had recognised deferred tax assets and liabilities as follows:
2010
Deferred tax Deferred tax
Recognised Unrecognised
£’000
£’000
2009
Deferred tax Deferred tax
Recognised Unrecognised
£’000
£’000
Tax losses carried forward
Share based remuneration
Deferred tax on acquired assets with no capital allowances
Deferred tax on customer relationships
Deferred tax
2,187
72
(1,504)
(151)
604
2,427
-
-
-
2,427
1,590
79
(1,649)
-
20
3,270
-
-
-
3,270
At the balance sheet date, the Group has unused tax losses of £16.5m (2009: £17.4m) available for offset against future profits. A
deferred tax asset has been recognised in respect of £7.8m (2009: £5.7m) of such losses. No deferred tax asset has been recognised in
respect of the remaining £8.7m (2009: £11.7m) since it is unlikely that these losses will be used in the foreseeable future.
The movement in the deferred tax account during the year was:
Tax losses carried
forward
£’000
Deferred tax on
acquired assets
Share based with no capital
allowances
£’000
remuneration
£’000
Opening balance
Acquired on acquisition of subsidiary
Credited/(charged) to income statement
Closing balance
1,590
-
597
2,187
79
-
(7)
72
(1,649)
-
145
(1,504)
Customer
relationships
£’000
-
(224)
73
(151)
Total
£’000
20
(224)
808
604
The deferred tax asset in relation to tax losses carried forward arises from the unutilised tax losses of the hosting trade. The deferred tax
asset has been recognised in line with future projections of the hosting company 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.
The deferred tax on acquired assets arises from the datacentre equipment acquired through the acquisition of Ezee DSL Limited on which
depreciation is charged but on which there are no capital allowances available.
The deferred tax on customer relationships arises from the intangible asset recognised on the acquisition of Rapidswitch Limited on 11
May 2010 which is being amortised over an estimated useful life of 5 years and on which there are no capital allowances or other tax
deductions available.
www.iomart.com
40
Notes to the Financial Statements. Year ended 31March 2010.
10. ACQUISITION
The Group acquired 100% of the issued share capital of Rapidswitch Limited on 11 May 2009. This transaction has been accounted for
by the purchase method of accounting. The book and final fair values of the company were as follows:
Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Deferred taxation
Other loans
Finance leases
Bank loan
Net assets
Goodwill
Total consideration
Satisfied by:
Cash
Net cash outflow arising on acquisition
Cash consideration
Cash and cash equivalents acquired
Book value
£’000
51
2,226
785
155
(1,526)
-
(226)
(425)
(222)
818
Fair value
adjustments
£’000
753
-
-
-
(62)
(224)
-
-
-
467
Final
Fair value
£’000
804
2,226
785
155
(1,588)
(224)
(226)
(425)
(222)
1,285
4,173
5,458
5,458
5,458
(155)
5,303
The goodwill arising on the acquisition of Rapidswitch Limited is attributable to the specialised, industry specific knowledge of the
management and staff, the benefits to the Group in merging the business with our existing infrastructure and the anticipated future
operating synergies from the combination.
Fair value adjustments resulting in a net increase in net assets of £467,000 were made on acquisition. The goodwill of £47,000 within
the company was written off, a provision of £58,000 was made for contracted lease payments for datacentre space in excess of the
company’s ongoing requirements and £4,000 was provided for a pre-acquisition trade creditor. An intangible asset in respect of existing
customer relationships has been recognised at its fair value of £800,000 with a related deferred tax liability of £224,000. The £4,000
adjustment for the pre-acquisition trade creditor is the only difference between the provisional fair value and the final fair value.
To estimate the fair value of the customer relationships, a discounted cash flow method, specifically the income approach, was used with
reference to the directors’ estimates of the level of revenue which will be generated from them. A post-tax discount rate of 12% was used
for the valuation. Customer relationships are being amortised over an estimated useful life of 5 years.
Rapidswitch acquires new customers by maintaining its position on internet search engines and as a consequence no value has been
attributed to the brand name.
As part of the investment agreement, other loans owed by Rapidswitch Limited of £226,000 were repaid on the date of acquisition.
The Rapidswitch business contributed £4,694,000 of revenue and £994,000 of profit before tax to the Group for the period between
the acquisition date and the balance sheet date.
If the acquisition of the Rapidswitch business had been completed on the first day of the financial period, it would have contributed
£5,235,000 of revenue and £1,059,000 of profit before tax to the Group.
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
41
11. 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, after deducting any own shares (treasury and JSOP). 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.
Continuing operations
Profit/(loss) from continuing operations for the financial year
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
Discontinued operations
Profit from discontinued operations for the financial year
and basic earnings attributed to ordinary shareholders
Profit on disposal of discontinued operations
Total profit from discontinued operations
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
Total operations
Profit for the financial year 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
2010
£’000
2,070
No
000
97,577
230
97,807
2.12 p
2.12 p
2010
£’000
-
-
-
No
000
-
-
-
- p
- p
2010
£’000
2,070
No
000
97,577
230
97,807
2.12 p
2.12 p
For periods where the Group made a loss, there was no dilutive effect from the potential exercise of options.
2009
£’000
(1,932)
No
000
99,183
-
99,183
(1.95)p
(1.95)p
2009
£’000
516
12,598
13,114
No
000
99,183
902
100,085
13.22p
13.10p
2009
£’000
11,182
No
000
99,183
902
100,085
11.27p
11.17p
www.iomart.com
42
Notes to the Financial Statements. Year ended 31March 2010.
12. INTANGIBLE ASSETS
Cost
At 1 April 2008
Additions
Development cost capitalised
Derecognised on disposal of subsidiary
At 1 April 2009
Additions
Acquired on acquisition of subsidiary
Development cost capitalised
At 31 March 2010
Accumulated amortisation:
At 1 April 2008
Derecognised on disposal of subsidiary
Charge for the year
At 1 April 2009
Charge for the year
At 31 March 2010
Carrying amount:
At 31 March 2010
At 31 March 2009
Goodwill
£’000
Development
costs
£’000
Customer
relationships
£’000
Software
£’000
Domain
names
£’000
18,525
-
-
(1,975)
16,550
4,173
-
-
20,723
-
-
-
-
-
-
20,723
16,550
1,028
-
318
(867)
479
-
-
281
760
(359)
378
(188)
(169)
(209)
(378)
382
310
-
-
-
-
-
-
800
-
800
-
-
-
-
(261)
(261)
539
-
Total
£’000
19,829
53
318
(2,919)
17,281
4,242
804
281
22,608
(584)
423
(207)
(368)
(509)
(877)
276
22
-
(77)
221
69
4
-
294
(225)
45
(19)
(199)
(30)
(229)
-
31
-
-
31
-
-
-
31
-
-
-
-
(9)
(9)
65
22
22
21,731
31
16,913
All amortisation 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. On 9 July 2008 the online directory business Ufindus
was disposed of and the associated goodwill of £1,975,000 has been deducted from the carrying value.
During the year, goodwill was reviewed for impairment in accordance with IAS 36 “Impairment of Assets”. No impairment charges (2009:
nil) arose as a result of this review. 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)
Easyspace
Rapidswitch
Hosting
2010
£’000
12,314
4,173
4,236
20,723
2009
£’000
12,314
-
4,236
16,550
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.
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
43
12. INTANGIBLE ASSETS (CONTINUED)
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
Forecast period for which cash flows are estimated (years)
Easyspace
9%
2.5%
5
Rapidswitch
12%
2.5%
5
Hosting
12%
2.5%
5
Based on an analysis of the impairment calculation’s sensitivities to changes in key parameters (growth rate, discount rate and pre-tax
cash flow projections) there was no probable scenario where the CGU’s recoverable amount would fall below its carrying amount.
13. LEASE DEPOSIT
The lease deposit of £1,216,000 (2009: £884,000) is due to be repaid at the end of the lease which at the earliest is July 2020. The
Group is due to receive interest on the lease deposit at the prevailing market rate and therefore it has not been discounted.
14. PRINCIPAL SUBSIDIARIES
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
%
iomart Limited
iomart Hosting Limited
Netintelligence Limited
iomart Virtual Servers Hosting Limited
Easyspace Datacentres (UK) Limited
Easyspace Limited
Rapidswitch Limited
Ezee DSL Limited
Internetters Limited
NicNames Limited
Web Genie Internet Limited
Scotland
Scotland
Scotland
Scotland
Scotland
England
England
England
England
England
England
Dormant
Managed hosting services
Managed hosting services
Dormant
Dormant
Webservices
Managed hosting services
Datacentre services
Webservices
Dormant
Webservices
100
100
100
100
100
100
100
100 *
-
-
-
-
-
-
-
-
-
-
-
100
100
100
* as described in Note 20, the single share in Ezee DSL Limited, representing 0.2% of its issued share capital, has been transferred to
iomart Group plc through the completion of a signed stock transfer form that has been placed in escrow until the final payment of deferred
consideration is made on 27 August 2010. Until the final payment is made, under the terms of the agreement, the vendor has undertaken
to vote and otherwise exercise any and all rights in respect of the single share as directed by iomart Group plc. Furthermore, the vendor
has undertaken to waive any and all dividends or other distributions made or declared in respect of the single share.
www.iomart.com
44
Notes to the Financial Statements. Year ended 31March 2010.
15. PROPERTY, PLANT AND EQUIPMENT
Freehold
Property
£’000
Leasehold
improve-
ments
£’000
Datacentre
Equipment
£’000
Computer
equipment
£’000
Office
equipment
£’000
Motor
vehicles
£’000
Total
£’000
Cost:
At 1 April 2008
Additions in the year
Disposals
At 1 April 2009
Additions in the year
Acquisition of subsidiary
Disposals in the year
At 31 March 2010
Accumulated depreciation:
At 1 April 2008
Charge for the year
Eliminated on disposal
At 31 March 2009
Charge for the year
Disposals in the year
At 31 March 2010
Carrying amount:
At 31 March 2010
837
-
-
837
-
-
-
837
-
(12)
-
(12)
(8)
-
(20)
544
-
(184)
360
480
1,299
-
2,139
(459)
(46)
159
(346)
(112)
-
(458)
6,580
1,004
-
7,584
645
166
-
8,395
(224)
(453)
-
(677)
(652)
-
(1,329)
2,602
416
(1,149)
1,869
2,088
727
-
4,684
(1,846)
(436)
1,036
(1,246)
(1,029)
-
(2,275)
817
1,681
7,066
2,409
At 31 March 2009
825
14
6,907
623
850
110
(283)
677
12
21
-
710
(574)
(46)
246
(374)
(40)
-
(414)
296
303
-
-
-
-
-
14
(7)
7
-
-
-
-
(5)
5
-
7
-
The net book value of computer equipment held under finance lease at 31 March 2010 was £1,204,000 (2009: £91,000).
16. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Provision for impairment
Trade receivables (net)
Other receivables
Prepayments and accrued income
Trade and other receivables
2010
£’000
1,382
(124)
1,258
191
1,488
2,937
11,413
1,530
(1,616)
11,327
3,225
2,227
(7)
16,772
(3,103)
(993)
1,441
(2,655)
(1,846)
5
(4,496)
12,276
8,672
2009
£’000
764
(67)
697
233
1,254
2,184
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. Some of the higher value trade receivables
in the Hosting division are reviewed individually for impairment and judgment made as to any likely impairment based on historic trends
and the latest communication with specific customers. The balance of 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.
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
45
16. TRADE AND OTHER RECEIVABLES (CONTINUED)
To consider the total exposure to credit risks, the Group uses figures net of VAT. At 31 March 2010, £862,000 (2009: £317,000) of
net trade receivables were fully performing. Net trade receivables of £396,000 (2009: £380,000) 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
Total unimpaired trade receivables which are past due
2010
£’000
337
55
4
396
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at start of the year
Provision for receivables impairment
Eliminated on disposal of business
Balance at end of year
17. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Cash and cash equivalents
2010
£’000
67
57
-
124
2010
£’000
5,715
5,715
2009
£’000
278
59
43
380
2009
£’000
1,608
56
(1,597)
67
2009
£’000
13,910
13,910
The credit risk on cash and cash equivalents is considered to be negligible because the counter parties are UK banking institutions.
18. DEFERRED CONSIDERATION RECEVIABLE ON DISPOSAL
Deferred consideration receivable on disposal: non-current
Deferred consideration receivable on disposal: current
Total deferred consideration receivable on disposal
2010
£’000
2009
£’000
-
(1,000)
(914)
-
(914)
(1,000)
The deferred consideration is due to be received in July 2010 in respect of the disposal of Ufindus Limited in July 2008. The amount to
be received has reduced over the year due to sums paid out in respect of a claim under the sale and purchase agreement.
www.iomart.com
46
Notes to the Financial Statements. Year ended 31March 2010.
19. TRADE AND OTHER PAYABLES
Trade payables
Corporation tax
Other taxation and social security
Accruals
Deferred income
Trade and other payables
2010
£’000
(1,044)
(12)
(915)
(2,399)
(3,119)
(7,489)
2009
£’000
(746)
-
(476)
(1,923)
(2,045)
(5,190)
The carrying amount of trade and other payables approximates to their fair value. Trade payables and accruals are non-interest bearing
and generally mature within three months.
20. DEFERRED CONSIDERATION
Deferred consideration due on acquisition
Total deferred consideration due on acquisition
2010
£’000
2009
£’000
(1,000)
(4,800)
(1,000)
(4,800)
During the year the original deferred consideration due of £4,800,000 on the acquisition of Ezee DSL Limited was subject to a
renegotiation with the vendor. As a result of that the total amount due was reduced to £3,800,000 and the Group returned certain assets
to the vendor which had been fair valued to nil in the balance sheet at the time of the acquisition. The reduction in deferred consideration
of £1,000,000 has been treated as a gain on reduction of deferred consideration on business combination in the income statement.
Costs of £135,000 were incurred in respect of the renegotiation with the vendor. These costs have also been shown separately in the
income statement.
Of the total revised deferred consideration of £3,800,000, £2,800,000 was paid together with £135,000 of associated costs during
the year and the remaining balance of £1,000,000 is due to be paid on 27 August 2010. As part of the settlement with the vendor,
the single share in Ezee DSL Limited, representing 0.2% of its issued share capital, which had been held by the vendor, was transferred
to iomart Group plc, through the completion of a signed stock transfer form which has been placed in escrow and will be released on
payment of the remaining balance. The vendor has undertaken to vote and otherwise exercise any and all rights in respect of the single
share as directed by iomart Group plc and to waive any and all dividends or other distributions made or declared in respect of the single
share whilst it is held in escrow.
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
47
21. BORROWINGS
Current:
Obligations under finance leases
Current borrowings
Non-current:
Obligations under finance leases
Total non-current borrowings
Total borrowings
The carrying amount of borrowings approximates to their fair value.
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
54
1,260
1,314
2010
Interest
Total
£’000 £’000
55
1
149
1,409
150 1,464
2010
£’000
(480)
(480)
(834)
(834)
(1,314)
Capital
£’000
54
148
202
2009
£’000
(148)
(148)
(54)
(54)
(202)
2009
Interest
Total
£’000 £’000
55
157
212
1
9
10
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 6.1% (2009: 7.1%). Lease payments are made on a monthly basis. The future
lease obligation of £1,464,000 (2009: £212,000) has present value of £1,367,000 (2009: £198,000).
22. 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
2010
Land and
buildings
£’000
1,280
4,972
5,228
11,480
Other
£’000
240
347
387
974
2009
Land and
buildings
£’000
1,078
4,311
5,944
11,333
Other
£’000
57
91
-
148
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.iomart.com
48
Notes to the Financial Statements. Year ended 31March 2010.
23. SHARE CAPITAL
Authorised
At 31 March 2008, 2009, and 2010
Called up, allotted and fully paid
At 31 March 2008
Exercise of options
At 31 March 2009
Issued to Employee Benefit Trust
At 31 March 2010
Ordinary shares of 1p each
Number of shares
200,000,000
99,439,302
800,000
100,239,302
2,513,297
102,752,599
£’000
2,000
994
8
1,002
26
1,028
During the year the company issued 2,513,297 ordinary shares of 1p each to the iomart Group plc Employee Benefit Trust in relation
to the Joint Share Ownership Plan (“JSOP”) (2009: nil), for which a net total of £1,244,000 was received. In the previous year, the
company issued 800,000 ordinary shares of 1p each in respect of the exercise of share options by employees for which a net total of
£50,000 was received
At 31 March 2009 the company held 3,294,547 shares in treasury, which were accounted for in the Own Shares reserve and had a
nominal value of £32,945 and a market value of £1,070,728. This represented 3.4% of the issued share capital as at 31 March 2009
excluding treasury shares. During the year the company issued 830,660 shares from treasury, with a nominal value of £8,307, in respect
of the exercise of share options, for which a net total of £41,533 was received, by employees and 2,463,887 shares from treasury to the
iomart Group plc Employee Benefit Trust in relation to the JSOP. At 31 March 2010 no shares were held in treasury.
Due to the issue of new ordinary shares and the issue of shares held in treasury at 31 March 2010 the company held 4,977,184 shares
(2009: nil) in the iomart Group plc Employee Benefit Trust in relation to the JSOP which are accounted for in the Own Shares JSOP
reserve and have a nominal value of £49,772 (2009: £nil).
During the year the company set up a Joint Share Ownership Plan (“JSOP”) to provide incentives to directors and employees. At 31
March 2010, 4,977,184 shares were held in the JSOP all with an initial participation price of 49.5p, which was the mid-market value
of the shares at the start of trading on the day they were issued, resulting in a total market value in the Own Shares JSOP reserve of
£2,463,706.
The JSOP shares are held jointly between employees and the iomart Group plc Employee Benefit Trust. Under the terms of the JSOP
rules employees are eligible to receive the excess of any disposal proceeds received for the JSOP shares over the participation price. The
participation price is subject to a 3% per annum escalation until the JSOP shares are sold. The JSOP shares do not carry dividend or
voting rights whilst they are jointly held by the employee and the iomart Group plc Employee Benefit Trust.
Under the rules of the scheme should the market price of a vested JSOP share exceed the participation price the employee has the option
to convert the value of any such excess value into a number of wholly owned shares within the JSOP. If an employee exercises this right
then the wholly owned shares subsequently held within the JSOP by the employee shall be eligible for both dividend and voting rights.
The share capital of iomart Group plc consists of ordinary shares with a par value of 1p. All shares, excluding the shares held by the
iomart Group plc Employee Benefit Trust and in the prior year the treasury 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 2010 are fully paid.
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
49
24. SHARE BASED PAYMENTS
The Group operated the following share based payment employee share option schemes during the year; Enterprise Management
Incentive scheme, a number of other approved schemes and a number of unapproved schemes. All schemes are settled in equity only,
except for the Joint Share Ownership Plan, which may be settled in either equity or cash, and are summarised below.
Vesting period
Maximum term
Performance criteria
Required to remain in
employment
Enterprise Management
Incentive scheme
Up to 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 None
Other approved schemes
Between 1 and
years from grant
Unapproved schemes
3 years from grant
Joint Share Ownership
Plan
Up to 3 years
from grant
10 years after
date of grant
10 years after
date of grant
10 years after
date of grant
As set by Remuneration
Committee
As set by Remuneration
Committee
As set by Remuneration
Committee
Yes
No
Yes
Yes
Yes
The exercise period on the Sharesave Scheme ended on 1 September 2009 with no share options being exercised and this scheme has
not been replaced. The performance criteria as set by the Remuneration Committee are based on the achievement of annual objectives
and continuous employment.
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.
During the year, options over 830,660 ordinary shares (2009: 800,000) were exercised and the market price at the exercise date was
32.0p (2009: 46.5p). As described in Note 23, on 31 March 2010, a total of 4,977,184 share options were surrendered and an
equivalent number of shares issued to a Joint Share Ownership Plan to provide incentives to directors and employees. These have been
accounted for as replacement share based incentives. As the fair value of the original share based incentives exceeds the fair value of
the replacement share based incentives the share based payment charge recognised in the income statement in relation to these share
based incentives continues to be based on the original share options.
As disclosed in note 5, a share based payment charge of £379,000 (2009: £231,000) 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 for the options granted in the
year.
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
37.0p
55%
1.0%
2
10
3.9
2.69%
100%
15.37p
37.0p
37.0p
55%
1.0%
2
10
2.9
2.69%
100%
13.51p
37.0p
37.0p
55%
1.0%
2
10
1.9
2.69%
100%
11.11p
37.0p
44.5p
61%
1.0%
1
10
3.3
2.64%
100%
18.73p
44.5p
37.0p
55%
1.0%
2
10
0.9
2.69%
100%
7.73p
37.0p
09-Dec-09
31-Mar-13
31-Mar-10 31-Mar-11
31-Mar-12 31-Mar-13
11-May-09
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.
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:
www.iomart.com
50
Notes to the Financial Statements. Year ended 31March 2010.
24. SHARE BASED PAYMENTS (CONTINUED)
As at 31 March 2010
Details
Options for shares outstanding
Vested
options for
shares not yet
exercisable
Exercise
price
Grant
date
Exercise
date
Expiry
date
31 March
2009
Issued Surrendered Exercised Expired 31 March 31 March
2010
2010
Enterprise management incentive scheme
6.25 02/07/2003
6.25 02/07/2003
6.25 02/07/2003
78.50 17/11/2004
74.00 24/08/2006
50.50 27/09/2007
43.50 20/12/2007
43.50 20/12/2007
43.50 20/12/2007
43.50 20/12/2007
43.50 20/12/2007
43.50 20/12/2007
46.50 29/09/2008
46.50 29/09/2008
46.50 29/09/2008
46.50 06/10/2008
46.50 06/10/2008
26.50 05/02/2009
37.00 11/05/2009
37.00 11/05/2009
37.00 11/05/2009
37.00 11/05/2009
44.50 09/12/2009
Savings related scheme
76.00 01/03/2006
Unapproved schemes
5.00 29/03/2000
5.00 29/03/2000
5.00 29/03/2000
11.75 31/10/2001
78.50 17/11/2004
50.50 27/09/2007
43.50 20/12/2007
43.50 20/12/2007
46.50 29/09/2008
46.50 29/09/2008
46.50 29/09/2008
46.50 06/10/2008
46.50 06/10/2008
46.50 06/10/2008
46.50 06/10/2008
26.50 05/02/2009
37.00 11/05/2009
37.00 11/05/2009
37.00 11/05/2009
Approved Schemes
44.00 24/01/2001
13.50 26/09/2001
11.75 31/10/2001
Total
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
31/03/2009
31/03/2010
31/03/2011
31/03/2009
31/03/2010
05/02/2012
31/03/2010
31/03/2011
31/03/2012
31/03/2013
31/03/2013
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
29/09/2018
29/09/2018
29/09/2018
06/10/2018
06/10/2018
05/02/2019
11/05/2019
11/05/2019
11/05/2019
11/05/2019
09/12/2019
44,581
47,916
47,920
224,521
50,000
85,982
150,000
160,000
160,000
160,000
99,655
10,000
345,700
216,668
211,287
235,923
28,495
100,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
250,000
124,324
25,000
25,000
200,000
01/03/2009
01/09/2009
41,579
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,581
47,916
47,920
224,521
50,000
85,982
150,000
160,000
160,000
160,000
99,655
10,000
345,700
216,668
211,287
235,923
28,495
100,000
250,000
124,324
25,000
25,000
200,000
44,581
47,916
47,920
224,521
50,000
-
150,000
160,000
160,000
160,000
99,655
-
345,700
216,668
-
235,923
28,495
-
250,000
-
-
-
-
- (41,579)
-
-
11/05/2000
11/02/2001
11/02/2002
31/10/2001
17/11/2007
27/09/2010
20/12/2009
20/06/2010
31/03/2009
31/03/2010
31/03/2011
31/03/2009
31/03/2010
31/03/2011
31/03/2012
30/09/2009
31/03/2011
31/03/2012
31/03/2013
276,886
29/03/2010
276,887
29/03/2010
276,887
29/03/2010
50,000
31/10/2011
500,479
17/11/2014
914,018
27/09/2017
60,345
20/12/2017
150,000
20/12/2017
104,304
29/09/2018
233,334
29/09/2018
238,708
29/09/2018
214,077
06/10/2018
06/10/2018
721,505
06/10/2018 1,050,000
06/10/2018 1,350,000
12,000
05/02/2019
-
11/05/2019
-
11/05/2019
-
11/05/2019
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
125,676
225,000
225,000
- (276,886)
- (276,887)
- (276,887)
-
-
-
(500,479)
-
(914,018)
-
(20,115)
-
(50,000)
-
(23,657)
-
(66,667)
-
(66,666)
-
(214,077)
-
(721,505)
-
(1,050,000)
-
(1,350,000)
-
-
-
-
-
-
-
-
24/01/2004
26/09/2004
31/10/2004
24/01/2011
26/09/2011
31/10/2011
37,500
5,000
23,888
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
50,000
-
-
40,230
100,000
80,647
166,667
172,042
-
-
-
-
12,000
125,676
225,000
225,000
-
-
-
50,000
-
-
40,230
-
80,647
166,667
-
-
-
-
-
12,000
-
-
-
37,500
5,000
23,888
37,500
5,000
23,888
8,916,045 1,200,000
(4,977,184) (830,660) (41,579) 4,266,622 2,637,311
Weighted Average Exercise price
44.45p
38.25p
50.41p
5.00p 76.00p
43.14p
44.66p
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
51
24. SHARE BASED PAYMENTS (CONTINUED)
As at 31 March 2009
Details
Grant
date
26/07/2002
26/07/2002
26/07/2002
02/07/2003
02/07/2003
02/07/2003
17/11/2004
24/08/2006
27/09/2007
20/12/2007
20/12/2007
20/12/2007
20/12/2007
20/12/2007
20/12/2007
29/09/2008
29/09/2008
29/09/2008
06/10/2008
06/10/2008
05/02/2009
Exercise
price
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
46.50
46.50
46.50
46.50
46.50
26.50
Savings related scheme
01/03/2006
76.00
Unapproved schemes
5.00
5.00
5.00
11.75
78.50
74.00
50.50
43.50
43.50
46.50
46.50
46.50
46.50
46.50
46.50
46.50
26.50
29/03/2000
29/03/2000
29/03/2000
31/10/2001
17/11/2004
24/08/2006
27/09/2007
20/12/2007
20/12/2007
29/09/2008
29/09/2008
29/09/2008
06/10/2008
06/10/2008
06/10/2008
06/10/2008
05/02/2009
Approved Schemes
44.00
13.50
11.75
24/01/2001
26/09/2001
31/10/2001
Options for shares outstanding
Exercise
date
Expiry
date
31 March
2008
Issued Surrenderd Exercised Expired
31 March
2009
Vested
options for
shares not yet
exercisable
31 March
2009
26/07/2002 26/07/2012
26/07/2003 26/07/2012
26/07/2004 26/07/2012
02/07/2004 02/07/2013
02/07/2005 02/07/2013
02/07/2006 02/07/2013
17/11/2007 17/11/2014
24/08/2009 24/08/2016
27/09/2010 27/09/2017
20/12/2007 20/12/2017
20/06/2008 20/12/2017
20/12/2008 20/12/2017
20/06/2009 20/12/2017
20/12/2009 20/12/2017
20/06/2010 20/12/2017
31/03/2009 29/09/2018
31/03/2010 29/09/2018
31/03/2011 29/09/2018
31/03/2009 06/10/2018
31/03/2010 06/10/2018
05/02/2012 05/02/2019
266,666
266,666
266,668
44,583
48,583
54,251
583,818
135,135
85,982
200,000
210,000
210,000
210,000
129,540
10,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
345,700
216,668
211,287
235,923
28,495
100,000
- (266,666)
- (266,666)
- (266,668)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2)
(667)
(6,331)
(359,297)
(85,135)
-
(50,000)
(50,000)
(50,000)
(50,000)
(29,885)
-
-
-
-
-
-
-
01/03/2009 01/09/2009
337,565
-
(295,986)
-
-
276,886
11/05/2000 29/03/2010
-
-
276,887
11/02/2001 29/03/2010
-
-
276,887
11/02/2002 29/03/2010
-
-
50,000
31/10/2001 31/10/2011
- (3,755,703)
17/11/2007 17/11/2014 4,256,182
(64,865)
-
64,865
24/08/2009 24/08/2016
-
-
914,018
27/09/2010 27/09/2017
(20,115)
-
80,460
20/12/2009 20/12/2017
(50,000)
-
200,000
20/06/2010 20/12/2017
-
104,304
-
31/03/2009 29/09/2018
-
233,334
-
31/03/2010 29/09/2018
-
238,708
-
31/03/2011 29/09/2018
-
214,077
-
31/03/2009 06/10/2018
-
-
31/03/2010 06/10/2018
721,505
-
- 1,050,000
31/03/2011 06/10/2018
-
- 1,350,000
31/03/2012 06/10/2018
-
12,000
-
30/09/2009 05/02/2019
24/01/2004 24/01/2011
26/09/2004 26/09/2011
31/10/2004 31/10/2011
37,500
5,000
23,888
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44,581
47,916
47,920
224,521
50,000
85,982
150,000
160,000
160,000
160,000
99,655
10,000
345,700
216,668
211,287
235,923
28,495
100,000
-
-
-
44,581
47,916
47,920
224,521
-
-
150,000
160,000
160,000
-
-
-
345,700
-
-
235,923
-
-
41,579
41,579
276,886
-
276,887
-
276,887
-
50,000
-
500,479
-
-
-
914,018
-
60,345
-
150,000
-
104,304
-
233,334
-
238,708
-
214,077
-
-
721,505
- 1,050,000
- 1,350,000
12,000
-
276,886
276,887
276,887
50,000
500,479
-
-
-
-
104,304
-
-
214,077
-
-
-
-
-
-
-
37,500
5,000
23,888
37,500
5,000
23,888
Total
Weighted Average Exercise price
9,522,030 5,062,001 (4,867,986) (800,000)
6.25p
56.49p
75.95p
46.06p
- 8,916,045 3,224,048
40.32p
44.45p
n/a
www.iomart.com
52
Notes to the Financial Statements. Year ended 31March 2010.
24. SHARE BASED PAYMENTS (CONTINUED)
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 JSOP scheme are as follows:
As at 31 March 2010
Details
Options for shares outstanding
Vested
options for
shares not yet
exercisable
Exercise
price
Grant
date
Exercise
date
Expiry
date
31 March
2009
Issued Surrenderd Exercised Expired
31 March
2010
31 March
2010
Joint Share Ownership Plan
49.50
49.50
49.50
50.50
78.50
49.50
49.50
49.50
49.50
31/03/2010
31/03/2010 06/10/2018
31/03/2010
31/03/2011 06/10/2018
31/03/2010
31/03/2012 06/10/2018
31/03/2010
31/03/2010 27/09/2017
31/03/2010
31/03/2010 17/11/2014
31/03/2010
31/03/2010 20/12/2017
31/03/2010
20/06/2010 20/12/2017
31/03/2010
31/03/2010 29/09/2018
31/03/2010
31/03/2011 29/09/2018
-
-
-
-
-
-
-
-
935,582
1,050,000
1,350,000
914,018
500,479
20,115
50,000
90,324
66,666
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
935,582
935,582
1,050,000
1,350,000
914,018
500,479
20,115
50,000
90,324
66,666
-
-
914,018
500,479
20,115
-
90,324
-
Total
Weighted Average Exercise price
4,977,184
52.60p
-
n/a
-
n/a
-
n/a
4,977,184 2,460,518
55.77p
52.60p
25. 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.
26. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
The Group is a party to certain operating lease agreements for properties which have been converted into datacentres. These operating
leases impose a liability on the Group, at the request of the lessor, to reinstate the properties to the condition they were in before
conversion to datacentres. All of these properties are on long term leases and these leases may be extended. Consequently the Directors
believe that the likelihood of these liabilities crystalising is remote. There were no other contingent assets or liabilities as at 31 March
2010 (2009: nil).
(b) Commitments
Capital expenditure on property, plant and equipment committed by the Group at 31 March 2010 was £249,000 (2009: £261,000).
iomart group plc Annual Report 2010
Notes to the Financial Statements. Year ended 31March 2010.
53
27. RISK MANAGEMENT
The Group finances its operations by raising finance through equity and bank borrowings. No speculative treasury transactions are
undertaken however the Group does from time to time enter into forward foreign exchange contracts to hedge known currency exposures.
Financial assets and liabilities include those assets and liabilities of a financial nature, namely cash, investments, short term receivables/
payables and borrowings.
The carrying amounts of financial assets presented in the consolidated balance sheet relate to the following measurement categories as
defined in IAS 39:
2010
Non-current:
Lease deposit
Current:
Deferred consideration on disposal of subsidiary
Trade receivables
Cash and cash equivalents
Other receivables
Forward foreign exchange contracts
Total for category
2009
Non-current:
Lease deposit
Deferred consideration on disposal of subsidiary
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Forward foreign exchange contracts
Total for category
Designated at
fair value
through profit
or loss
£’000
Loans and
receivables
£’000
Total for
line item
£’000
1,216
-
1,216
914
1,258
5,715
172
-
9,275
884
1,000
697
13,910
174
-
16,665
-
-
-
-
19
19
-
-
-
-
-
59
59
914
1,258
5,715
172
19
9,294
884
1,000
697
13,910
174
59
16,724
www.iomart.com
54
Notes to the Financial Statements. Year ended 31March 2010.
27. RISK MANAGEMENT (CONTINUED)
The carrying amounts of financial liabilities presented in the consolidated balance sheet relate to the following measurement categories
as defined in IAS 39:
2010
Non-current:
Finance leasing capital obligations
Current:
Trade payables
Accruals
Deferred consideration due on acquisition
Finance leasing capital obligations
Total for category
2009
Non-current:
Finance leasing capital obligations
Current:
Trade payables
Accruals
Deferred consideration due on acquisition
Finance leasing capital obligations
Total for category
Financial
liabilities
measured at
amortised cost
£’000
Other
(non-IAS 39)
£’000
Total for
line item
£’000
-
(834)
(834)
(1,044)
(2,399)
(1,000)
-
(4,443)
-
-
-
(480)
(1,314)
(1,044)
(2,399)
(1,000)
(480)
(5,757)
-
(54)
(54)
(746)
(1,923)
(4,800)
-
(7,469)
-
-
-
(148)
(202)
(746)
(1,923)
(4,800)
(148)
(7,671)
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. The Group reviews its cash flow requirements on a monthly basis.
Interest rates
The interest rate on the Group’s cash at bank is determined by reference to the base rate.
Currency risk
During the year the Group made payments totalling US$1.6m (2009: US$1.4m) to acquire domain names for its Easyspace division.
The Group entered into forward exchange contracts to hedge its exposure to the US Dollar arising on these purchases. At the year end,
the Group had outstanding forward contracts under which it was due to purchase $800,000 (2009: $500,000) for a total of £509,000
(2009: £289,000), at an average exchange rate of US$:GBP of 1.57 (2009: 1.73) over the period to September 2010. The fair value of
these currency contracts is estimated to be approximately £19,000 (2009: £59,000). This has been recognised in the income statement
for the year. The Group has no non-monetary assets or liabilities denominated in foreign currencies and the level of monetary assets and
liabilities denominated in foreign currencies is minimal.
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 of £1,258,000 (2009: £697,000) which are stated
net of applicable provisions represent the total amount exposed to credit risk. The Group’s cash at bank is held within the UK clearing
banks.
Further information on financial instruments policy and procedures is given in the Directors’ Report.
iomart group plc Annual Report 2010
“We’re delighted that iomart Hosting have joined us as the
charity’s technology partners as their involvement removes
the worry for us of having to manage our website and ensure
that it’s always available to potential donors and restaurant
patrons. We are left free to concentrate on running the
campaign and raising vital funds to give homeless people hope
and a new start in life.”
Glenn Pougnet, Director of StreetSmart
UK Charity StreetSmart raises money for homeless people by asking diners in the nation’s top restaurants to give an extra £1 on top of their bill during the festive period.
iomart group plc Annual Report 2010
56
Holding Company Financial Statements
Year ended 31March 2010
INDEPENDENT AUDITOR’S REPORT 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 2010 which
comprise the parent company balance sheet and the related
notes. The financial reporting framework that has been
applied in their preparation is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
This report is made solely to the company’s members, as
a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. 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.
Opinion on other matter prescribed by the Companies
Act 2006
In our opinion the information given in the Directors' Report
for the financial year for which the financial statements are
prepared is consistent with the parent company financial
statements.
Matters on which we are required to report by
exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you
if, in our opinion:
• adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have
not been received from branches not visited by us; or
•
the parent company financial statements are not in
agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by
Respective responsibilities of directors and auditors
law are not made; or
• we have not received all the information and
explanations we require for our audit.
Other matter
We have reported separately on the Group financial statements
of iomart Group plc for the year ended 31 March 2010.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
1 June 2010
As explained more fully in the Directors’ Responsibilities
Statement, the directors are responsible for the preparation
of the parent company financial statements and for being
satisfied that they give a true and fair view. Our responsibility
is to audit the parent company financial statements in
accordance with applicable law and International Standards
on Auditing (UK and Ireland). Those standards require us to
comply with the Auditing Practices Board’s (APB’s) Ethical
Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is
provided on the APB's website at www.frc.org.uk/apb/scope/
UKNP.
Opinion on financial statements
In our opinion the parent company financial statements:
• give a true and fair view of the state of the company's
affairs as at 31 March 2010;
• have been properly prepared in accordance with United
Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements
of the Companies Act 2006.
iomart group plc Annual Report 2010
Holding Company Financial Statements. Year ended 31March 2010.
57
Note
2010
£’000
2009
£’000
4
5
7
8
9
9
9
9
26,630
26,630
16,039
5,224
21,263
(8,355)
12,908
39,538
1,028
(2,464)
1,200
19,514
20,260
17,129
17,129
13,081
13,577
26,658
(5,400)
21,258
38,387
1,002
(678)
1,200
17,583
19,280
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors
Cash at bank
CREDITORS: amounts falling due within one year
NET CURRENT ASSETS
NET ASSETS
CAPITAL AND RESERVES
Called up share capital
Own shares
Capital redemption reserve
Share premium account
Profit and loss account
TOTAL EQUITY SHAREHOLDERS’ FUNDS
39,538
38,387
These financial statements were approved by the board of directors on 1 June 2010.
Signed on behalf of the board of directors
Angus MacSween
Director and chief executive officer
iomart Group plc – Company Number: SC204560
www.iomart.com
58
Holding Company Financial Statements. Year ended 31March 2010.
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. As part of the acquisition
strategy of the Company, the trade and net assets of subsidiary
undertakings at or shortly after acquisition may be transferred
at book value to fellow subsidiaries. The cost of the Company's
investment in that subsidiary undertaking would have reflected
the underlying fair value of its net assets and goodwill at the
time of its acquisition. As a result of such a transfer, the value
of the Company's investment in that subsidiary undertaking may
fall below the amount at which it was stated in the Company's
accounting records.
Where this occurs, Schedule 4 of the Companies Act 2006
requires that the investment be written down accordingly and that
the amount be charged as a loss in the Company's profit and
loss account. However, the directors consider that, as there has
been no overall loss to the Group, it would fail to give a true and
fair view to charge the diminution to the Company's profit and
loss account. Instead, the carrying value of the investment in all
companies transferred will be considered together against the
future cashflows and net asset position of those companies which
received the trade and net assets.
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.
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.
iomart group plc Annual Report 2010
Income and expenditure on financial instruments is recognised on
the accruals basis and credited or charged to the profit and loss
account in the financial period to which it relates.
Pension scheme arrangements
The Group operates a stakeholder pension scheme and contributes
to a number of personal pension schemes on behalf of executive
directors and some senior employees. No other post retirement
benefits are provided to employees. Pension costs are charged to
the profit and loss account in the period to which they relate.
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 company are equity settled. All goods and services
received in exchange for the grant of any share-based payment
are measured at their fair values. Where employees are rewarded
using share-based payments, the fair values of employees’ services
are determined indirectly by reference to the fair value of the
instrument granted to the employee. This fair value is appraised
at the grant date and excludes the impact of non-market vesting
conditions (for example, profitability and sales growth targets).
All equity-settled share-based payments are ultimately recognised
as an expense in the profit and loss account 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.
Development expenditure
Development expenditure is charged to the profit and loss
account as incurred.
2. PROFIT OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, 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 £1,022,000 (2009:
£13,647,000).
Holding Company Financial Statements. Year ended 31March 2010.
59
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
Other wages and salaries
Social security costs
Pension contributions to personal money purchase schemes
2010
£’000
2009
£’000
523
110
447
111
33
520
110
447
108
29
1,224
1,214
The comparatives in the above table have been restated to reflect the impact of a staff reorganisation in the prior year in which certain
Group employees transferred their employment to the company. 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
Cost
At 1 April 2009
Additions
Share based payment
Cost at 31 March 2010
Impairment
At 1 April 2009
Charge for the year
Impairment at 31 March 2010
Net book value of Investments at 31 March 2010
Net book value of Investments at 31 March 2009
All of the above investments are unlisted.
Shares in subsidiary undertakings
£’000
18,803
9,390
122
28,315
(1,674)
(11)
(1,685)
26,630
17,129
www.iomart.com
60
Holding Company Financial Statements. Year ended 31March 2010.
4. INVESTMENTS HELD AS FIXED ASSETS (CONTINUED)
The following subsidiaries are included in the company financial statements:
Country
of registration
and operation
Activity
Ordinary share capital
Owned by the
company
%
Owned by the
subsidiary
undertakings
%
iomart Limited
iomart Hosting Limited
Netintelligence Limited
iomart Virtual Servers Hosting Limited
Easyspace Datacentres (UK) Limited
Easyspace Limited
Rapidswitch Limited
Ezee DSL Limited
Internetters Limited
NicNames Limited
Web Genie Internet Limited
Dormant
Dormant
Dormant
Scotland
Scotland Managed hosting services
Scotland Managed hosting services
Scotland
Scotland
England Webservices
England Managed hosting services
England
England Webservices
England
England Webservices
Datacentre services
Dormant
100
100
100
100
100
100
100
100*
-
-
-
-
-
-
-
-
-
-
-
100
100
100
* as described in Note 20 of the Group Financial Statements, the single share in Ezee DSL Limited, representing 0.2% of its issued
share capital, has been transferred to iomart Group plc through the completion of a signed stock transfer form that has been placed in
escrow until the final payment of deferred consideration is made on 27 August 2010. Until the final payment is made, under the terms
of the agreement, the vendor has undertaken to vote and otherwise exercise any and all rights in respect of the single share as directed
by iomart Group plc. Furthermore, the vendor has undertaken to waive any and all dividends or other distributions made or declared
in respect of the single share.
2010
£’000
126
918
36
72
14,887
16,039
2009
£’000
299
1,076
49
79
11,578
13,081
5. DEBTORS
Prepayments and accrued income
Other debtors
Other taxation and social security
Deferred taxation (note 6)
Amounts owed by subsidiary undertakings
iomart group plc Annual Report 2010
Holding Company Financial Statements. Year ended 31March 2010.
61
6. DEFERRED TAXATION
The company had recognised deferred tax assets and potential unrecognised deferred tax assets as follows:
Share based remuneration
The movement in the deferred tax account during the year was:
Balance brought forward
Income statement movement arising during the year
Profit and loss account reserve movement during the year
Balance carried forward
2010
Recognised Unrecognised
£’000
-
£’000
72
2009
Recognised Unrecognised
£’000
-
£’000
79
2010
£’000
79
(7)
-
72
2009
£’000
205
(51)
(75)
79
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
Trade creditors
Other taxation and social security
Accruals and deferred income
Deferred consideration
Amounts owed to subsidiary undertakings
8. SHARE CAPITAL
Authorised
At 31 March 2008, 2009, and 2010
Called up, allotted and fully paid
At 31 March 2008
Exercise of options
At 31 March 2009
Issued to Employee Benefit Trust
At 31 March 2010
2010
£’000
43
184
801
1,000
6,327
8,355
2009
£’000
58
169
824
-
4,349
5,400
Ordinary shares of 1p each
Number of shares
200,000,000
99,439,302
800,000
100,239,302
2,513,297
102,752,599
£’000
2,000
994
8
1,002
26
1,028
During the year the company issued 2,513,297 ordinary shares of 1p each to the iomart Group plc Employee Benefit Trust in relation
to the Joint Share Ownership Plan (JSOP) (2009: nil), for which a net total of £1,244,000 was received. In the previous year, the
company issued 800,000 ordinary shares of 1p each in respect of the exercise of share options by employees for which a net total of
£50,000 was received.
www.iomart.com
62
Holding Company Financial Statements. Year ended 31March 2010.
8. SHARE CAPITAL (CONTINUED)
At 31 March 2009 the company held 3,294,547 shares in treasury, which were accounted for in the Own Shares reserve and had a
nominal value of £32,945 and a market value of £1,070,728. This represented 3.4% of the issued share capital as at 31 March 2009
excluding treasury shares. During the year the company issued 830,660 shares from treasury in respect of the exercise of share options
by employees and 2,463,887 shares from treasury to the iomart Group plc Employee Benefit Trust in relation to the JSOP. At 31 March
2010 no shares were held in treasury.
Due to the issue of new ordinary shares and the issue of shares held in treasury at 31 March 2010 the company held 4,977,184 shares
(2009: nil) in the iomart Group plc Employee Benefit Trust in relation to the JSOP which are accounted for in the Own Shares JSOP
reserve and have a nominal value of £49,772 (2009: £nil).
During the year the company set up a Joint Share Ownership Plan (“JSOP”) to provide incentives to directors and employees. At 31
March 2010, 4,977,184 shares were held in the JSOP all with an initial participation price of 49.5p, which was the mid-market value
of the shares at the start of trading on the day they were issued, resulting in a total market value in the Own Shares JSOP reserve of
£2,463,706.
The JSOP shares are held jointly between employees and the iomart Group plc Employee Benefit Trust. Under the terms of the JSOP
rules employees are eligible to receive the excess of any disposal proceeds received for the JSOP shares over the participation price. The
participation price is subject to a 3% per annum escalation until the JSOP shares are sold. The JSOP shares do not carry dividend or
voting rights whilst they are jointly held by employees and the iomart Group plc Employee Benefit Trust.
Under the rules of the scheme should the market price of a vested JSOP share exceed the participation price the employee has the option
to convert the value of any such excess value into a number of wholly owned shares within the JSOP. If an employee exercises this right
then the wholly owned shares subsequently held within the JSOP by the employee shall be eligible for both dividend and voting rights.
The share capital of iomart Group plc consists of ordinary shares with a par value of 1p. All shares, excluding the shares held by the
iomart Group plc Employee Benefit Trust and in the prior year the treasury 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 2010 are fully paid.
9. STATEMENT OF MOVEMENT IN RESERVES
Profit for the financial period
Dividends
Share based payments
Issue of own shares for option redemption
Issue of own shares to Joint Share Ownership Plan
Issue of new shares to Joint Share Ownership Plan
Own
shares
JSOP
£’000
Own
shares
treasury
£’000
-
-
-
-
-
(2,464)
(2,464)
-
-
-
171
507
-
678
Capital
Share
redemption premium
account
£’000
reserve
£’000
Profit and
loss
account
£’000
-
-
-
-
-
-
-
-
-
-
-
712
1,219
1,931
1,022
(291)
379
(130)
-
-
980
Opening balance
Closing balance
-
(678)
1,200
17,583
19,280
(2,464)
-
1,200
19,514
20,260
iomart group plc Annual Report 2010
Holding Company Financial Statements. Year ended 31March 2010.
63
2010
£’000
1,022
(291)
-
41
1,219
(1,219)
379
-
1,151
38,387
39,538
2009
£’000
13,647
-
(678)
50
-
-
231
(75)
13,175
25,212
38,387
10. MOVEMENT IN SHAREHOLDERS’ FUNDS
Profit for the financial period
Dividend paid
Acquisition of own shares
Issue of own shares for option redemption
Issue of own shares to Joint Share Ownership Plan
Issue of new shares to Joint Share Ownership Plan
Share based payments
Deferred tax on share based remuneration
Opening shareholders’ funds
Closing shareholders’ funds
11. SHARE BASED PAYMENTS
For details of share based payment awards and fair values see note 24 to the Group financial statements. The Company accounts
recognise the charge for share based payments for the year of £379,000 (2009: £231,000) by;
1) taking the charge in relation to employees of the holding company through the holding company income statement £256,000
(2009: £152,000),
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 £123,000 (2009: £79,000).
12. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
The Company is a party to certain operating lease agreements for properties which have been converted into datacentres. These
operating leases impose a liability on the Company, at the request of the lessor, to reinstate the properties to the condition they were in
before conversion to datacentres. All of these properties are on long term leases and these leases may be extended. Consequently the
Directors believe that the likelihood of these liabilities crystalising is remote. There were no other contingent assets or liabilities as at 31
March 2010 (2009: nil).
(b) Commitments
There are no commitments present as at 31 March 2010 (2009: Nil).
www.iomart.com
64
Notice of the 2010 Annual General Meeting
NOTICE IS HEREBY GIVEN that the 2010 annual general
meeting of the Company will be held at Lister Pavilion, Kelvin
Campus, West of Scotland Science Park, Glasgow G20 0SP
on 23 August 2010 at 2.30 pm for the purpose of considering
and, if thought fit, passing the following resolutions, of which
resolutions 1 to 7 (inclusive) will be proposed as ordinary
resolutions and resolutions 8 to 9 (inclusive) will be proposed
as special resolutions:-
1 To receive and adopt the financial statements of the
Company and the directors' and auditors' reports thereon for
the year ended 31 March 2010.
2 To approve the report of the board to the members on
directors' remuneration for the year ended 31 March 2010.
3 To reappoint Ian Ritchie (who retires by rotation and,
being eligible, offers himself for re-election) as a director of
the Company.
4 To reappoint Fred Shedden (who retires by rotation and,
being eligible, offers himself for re-election) as a director of
the Company.
5 To reappoint Grant Thornton UK LLP, Chartered Accountants,
as auditors of the Company and to authorise the directors to
fix their remuneration.
6 That, in accordance with section 551 of the Companies
Act 2006 (the "Act"), the Directors are generally and
unconditionally authorised to allot shares in the Company or
grant rights to subscribe for or convert any security into shares
in the Company (the "Rights") provided that:
(a) the aggregate nominal amount of shares to be allotted in
pursuance of such authority is £342,508.66; and
(b) this authority shall expire, unless sooner revoked or varied
by the Company in general meeting, at the conclusion of the
Company's annual general meeting to be held in 2011 save
that the Company may, before such expiry, make an offer
or agreement which would or might require shares to be
allotted or Rights granted after such expiry and the Directors
may allot shares in pursuance of such offer or agreement
notwithstanding that the authority conferred by this resolution
has expired.
This authority is in substitution for all previous authorities
conferred on the Directors in accordance with section 80 of
the Companies Act 1985 or section 551 of the Act.
7 That for the purposes of section 551 of the Act, the
Directors are generally and unconditionally authorised to
exercise all powers of the Company to allot equity securities
(as defined in section 560 of the Act) in connection with a
rights issue in favour of the holders of ordinary shares in the
capital of the Company (the "Ordinary Shareholders") where
the equity securities respectively attributable to the Ordinary
Shareholders are proportionate (as nearly as may be) to the
respective numbers of Ordinary Shares held by them up to
a maximum nominal amount of £342,508.66 provided that
this authority shall expire, unless sooner revoked or varied by
the Company in general meeting, at the conclusion of the
Company's annual general meeting to be held in 2011 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 any such offer or agreement
notwithstanding that the power conferred by this resolution has
expired.
8 That subject to the passing of resolutions 6 and 7 and in
accordance with section 570 of the Act and in place of all
existing powers, the Directors are generally empowered to
allot equity securities of the Company (as defined in section
560 of the Act) for cash pursuant to the authority conferred by
resolutions 6 and 7 as if section 561 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 an
issue in favour of holders of ordinary shares of 1 penny each
in the capital of the Company (the "Ordinary Shares") where
the equity securities are offered to such holders in proportion
(as nearly as may be) to the respective number of Ordinary
Shares held, or deemed to be held, by that shareholder
but subject to such exclusions or other arrangements as the
Directors may deem necessary or expedient in relation to
fractional entitlements or legal or practical problems under the
laws of, or the requirements of any recognised regulatory body
or any stock exchange in, any territory;
(b) the allotment of equity securities pursuant to any authority
conferred upon the Directors in accordance with and pursuant
to article 41 of the articles of association of the Company;
and
(c) the allotment (otherwise than pursuant to (a) and (b) above)
of equity securities up to an aggregate nominal amount of
£51,376.29;
provided that this authority will expire, unless sooner revoked
or varied by the Company in general meeting, at the
conclusion of the Company's annual general meeting to be
iomart group plc Annual Report 2010
held in 2011, save that the Company may at any time 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 notwithstanding that the power conferred by this
resolution has expired.
9 That the Company be and is hereby generally and
unconditionally authorised for the purposes of section 701
of the Act to make one or more market purchases (within
the meaning of section 693(4) of the Act) on a recognised
investment exchange (as defined in section 693(5) of the Act)
of Ordinary Shares provided that:
(a) the maximum number of Ordinary Shares hereby authorised
to be purchased is 10,275,259 (representing 10% of the
Company's issued ordinary share capital at the date of the
notice of this annual general meeting);
(b) the minimum price, exclusive of any expenses, which may
be paid for any such Ordinary Share is 1p;
(c) the maximum price, exclusive of any expenses, which may
be paid for any such Ordinary Share shall be not more than
5% above the average of the middle market quotations for
an Ordinary Share on the relevant investment exchange on
which the Ordinary Shares are traded for the five business
days immediately preceding the date on which such Ordinary
Share is contracted to be purchased;
(d) unless previously revoked or varied, the authority hereby
conferred shall expire on the 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
Lister Pavilion, Kelvin Campus,
West of Scotland Science Park,
29 June 2010
Glasgow G20 0SP
Notice of the 2010 Annual General Meeting
65
www.iomart.com
66
Notice of the 2010 Annual General Meeting
NOTES:
Appointment of Proxy
1 As a member of the Company you are entitled to appoint a
proxy to exercise all or any of your rights to attend, speak and
vote at a meeting of the Company. You should have received
a proxy form with this notice of meeting. You can only appoint
a proxy using the procedures set out in the notes to the proxy
form. A proxy need not be a member of the Company.
2 To be effective, the proxy form, and any power of attorney
or other authority under which it is executed (or a duly certified
copy of any such power or authority), must be deposited at
the office of the Company’s registrars, Capita Registrars, PXS,
34 Beckenham Road, Beckenham, BR3 4TU, not less than
48 hours (excluding weekends and bank holidays) before the
time for holding the meeting (i.e. by 2.30pm on Thursday 19
August 2010) and if not so deposited shall be invalid.
Entitlement to attend and vote
3 Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, only those members entered in the
Company's register of members at:
• 6.00pm on 19 August 2010; or
• if this meeting is adjourned, at 6.00pm on the day two
days prior to the adjourned meeting,
shall be entitled to attend and vote at the meeting.
Documents on Display
4 Copies of the service contracts and letters of appointment
of the directors of the Company will be available:
• for at least 15 minutes prior to the meeting; and
• during the meeting.
Communication
5 Except as provided above, members who wish to
communicate with the Company in relation to the meeting
should do so by post to the Company's registered office, details
of which are below. No other methods of communication will
be accepted.
Address: The Company Secretary, iomart Group plc
Lister Pavilion, Kelvin Campus, West of Scotland Science Park,
Glasgow G20 0SP
EXPLANATORY NOTES TO THE NOTICE OF ANNUAL
GENERAL MEETING OF IOMART GROUP PLC
Ordinary Resolutions
Resolutions 1 to 7 are all to be proposed as ordinary
resolutions. This means that for each of those resolutions to
be passed, more than half of the votes cast must be in favour
of the resolution.
Resolution 1 – To receive and adopt the financial
statements for the year ended 31 March 2010 and the
directors' and auditors' reports thereon
For each financial year the directors of the Company must
present the audited financial statements, the directors' report
and the auditors' report on the financial statements to the
shareholders at an annual general meeting.
Resolution 2 – To approve the directors' remuneration
report
Shareholders are asked to approve the directors' remuneration
report which may be found in the annual report on pages 11
to 14. This resolution is an advisory one and no entitlement to
remuneration is conditional on the resolution being passed.
Resolution 3 and 4 – Re-election of directors
Under article 24 of the Company's articles of association one
third of the directors are required to retire by rotation at each
annual general meeting. Pursuant to those articles, Mr Ian
Ritchie and Mr Fred Shedden are required to retire by rotation
at this annual general meeting and, being eligible, offer
themselves for reappointment. The Board is satisfied that the
performance of Mr Ian Ritchie and Mr Fred Shedden continues
to be effective and demonstrates commitment to their roles
with the Company including commitment of time for Board
meetings and other duties required of them. Accordingly,
resolutions 3 and 4 propose the reappointment of Mr Ian
Ritchie and Mr Fred Shedden.
Brief biographical details of Mr Ian Ritchie and Mr Fred
Shedden are given below.
Ian Ritchie 59, appointed 2008; currently Chairman of
Computer Application Services Ltd, Caspian Learning Ltd and
iomart group plc Annual Report 2010
Notice of the 2010 Annual General Meeting
67
Interactive Design Institute 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 Toshiba), 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).
third of the issued ordinary share capital of the Company as
at the date of the notice of this meeting.
There is no present intention to exercise either of the
authorities sought under these resolutions, which will expire
at the conclusion of the Company's annual general meeting
to be held in 2011.
Fred Shedden 65, appointed 2000; independent director
of Murray International Trust plc; vice-chair of Glasgow
Housing Association and Glasgow School of Art; formerly
chairman of Halladale Group plc and senior partner of
McGrigors.
Special Resolutions
Resolutions 8 and 9 will be proposed as special resolutions.
This means that for each of those resolutions to be passed,
at least three-quarters of the votes cast must be in favour of
the resolution.
Resolution 5 – Re-appointment and remuneration of
auditors
Resolution 8 - Disapplication of statutory pre-emption
rights
The Company is required at each general meeting at which
financial statements are presented to shareholders to appoint
auditors who will remain in office until the next such meeting.
Grant Thornton UK LLP have expressed their willingness to
continue in office for a further year. In accordance with
company law and corporate governance best practice,
shareholders are also asked to authorise the directors to
determine the auditors' remuneration.
Resolution 8 gives authority to the directors of the Company
to disapply the provisions of section 561 of the Act. Under
that section, if the directors wish to allot any of the unissued
shares for cash the directors must in the first instance offer
those shares to existing shareholders in proportion to the
number of shares held by such shareholders. 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".
Resolutions 6 and 7 – Authority to authorise the
directors to allot shares
Section 551 of the Companies Act 2006 (the "Act") requires
that the authority of the directors to allot shares shall be
subject to the approval of the shareholders in general
meeting. These resolutions, if passed, would give the
directors general authority to allot shares in the capital of
the Company.
Resolution 6 would give the directors the authority to allot
shares up to an aggregate nominal amount of £342,508.66,
being approximately one-third of the issued ordinary share
capital of the Company as at the date of the notice of this
meeting.
In line with recent guidance issued by the Association of
British Insurers, resolution 7 would give directors the authority
to allot shares in connection with a rights issue in favour of
ordinary shareholders up to an aggregate nominal amount
equal to £342,508.66 (representing 34,250,866 Ordinary
Shares). This amount represents approximately a further one
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.
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 (at paragraph (a)),
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.
Under the Company's articles of association the Board may,
with the sanction of an ordinary resolution, offer the holders
of shares the right to receive shares, credited as fully paid,
instead of cash in respect of the whole (or some part, to be
determined by the Board) of such dividend or dividends as
are specified by such resolution. Paragraph (b) of resolution
8 asks shareholders to waive their pre-emption rights in
respect of any such issue of shares.
www.iomart.com
resolution 9 to effect that buy back is 5% above the average
middle market price of an Ordinary Share for the five
business days immediately preceding the date on which the
buy back is effected.
The statutory provisions governing buy backs of own shares
are currently contained in, inter alios, sections 693 and 701
of the Companies Act 2006.
68
Notice of the 2010 Annual General Meeting
Resolution 8 (at paragraph (c)) asks shareholders to waive
their pre-emption rights, but only for new shares equal to 5
per cent. of the Company's issued ordinary share capital as
at the date of the notice of this meeting. The directors will
be able to use this power without obtaining further authority
from shareholders before they allot new shares covered by
it. However, by setting the limit of 5 per cent., the interests
of existing shareholders are protected, as their proportionate
interest in the Company cannot, without their agreement, be
reduced by more than 5 per cent. by the issue of new shares
for cash to new shareholders. If the directors wish, other
than by rights issue, to allot for cash new shares which would
exceed this limit, 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.
The power given by resolution 8 will, unless sooner revoked
or renewed by the Company in general meeting, last until
the conclusion of the next annual general meeting of the
Company to be held in 2011.
Resolution 9 – Authority to purchase the 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 as at the date of the notice of
this meeting.
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 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 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
iomart group plc Annual Report 2010
69
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, 141 Bothwell Street, Glasgow G2 7EQ
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
www.iomart.com
70
Group Contact Information
iomart Group
) : + 44 (0) 141 931 6400
* : info@iomart.com
www.iomart.com
iomart hosting
* : info@iomarthosting.com
www.iomarthosting.com
Easyspace
* : sales@easyspace.com
www.easyspace.com
Rapidswitch
* : sales@rapidswitch.com
www.rapidswitch.com
Printed by CCB, FSC certified colour printers.This report is printed on Elimental Chlorine Free (ECF) paper, from sustainable managed forests.
Design by iomart group plc. All rights reserved. © iomart Group plc 2010. All other trademarks and registered trademarks are the property of their respective owners.
iomart group plc Annual Report 2010
Think Publishing , the
communications agency behind
Kate Humble’s Stuff Your
Rucksack Charitable initiative
chose iomart Hosting’s Cloud
solution to ensure the website
could cope with sudden surges
in activity at peak travelling
times of the year
iomart group plc Annual Report 2010
iomart group plc Annual Report 2010
iomart Group plc, Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow, G20 0SP. www.iomart.com