iomart group plc Annual Report 2011
Annual Report and Accounts 2011
“Our confidence in iomart Hosting is critical to our
business, if we can’t provide our service, there’s a
real risk that vulnerable people will not receive the
care they require.”
Ian McMullon, Managing Director, PeoplePlanner
iomart group plc Annual Report 2011
Financial Statements for year ended 31March 2011
Highlights
Financial
• Adjusted EBITDA growth of 113% to £6.6m (2010: £3.1m)
• Profit before tax growth of 618% to £2.8m (2010: £0.4m*)
• Revenue growth of 38% to £25.3m (2010: £18.3m)
• Cashflow from operations growth of 82% to £7.1m
(2010: £3.9m)
• Basic earnings per share from operations increased by 137%
to 2.91p (2010: 1.23p**)
• Proposed final dividend increased by 63% to 0.65p per share
(2010: 0.4p per share)
Operational
• iomart Hosting customer base increased by over 60% with
substantial increase in sales of cloud based solutions
• Additional 7,000 sq ft of space fully fitted out in Maidenhead
datacentre
• Acquisition of Titan Internet Limited for £4.2m in October
2010 adds strong customer base and additional virtualisation
expertise
• Introduction of additional cloud products to address back up,
storage, email and archiving
• Acquisition of Switch Media Limited for £1.2m post year end,
adding customers to Easyspace
* Profit before tax of £1.3m in 2010 included a net gain on reduction in deferred consideration of £0.9m. Excluding this gain, the
profit before tax would have been £0.4m in 2010.
** Reported basic earnings per share of 2.12p in 2010 was based on profit after tax of £2.1m which included a net gain on
reduction of deferred consideration of £0.9m. Excluding this gain, earnings per share would have been 1.23p in 2010.
iomart group plc Annual Report 2011
EBITDA Growth
113%
to £6.6M
PBT Growth
618%
to £2.8M
Revenue Growth
38%
to £25.3M
Dividend Growth
63%
to 0.65p/share
Operating Cash Growth
82%
to £7.1M
“We wanted a website that had a real design
edge to it that showed off the branded
quality products we had chosen in the best
possible light. Easyspace did just that.”
Maria Parpas, Owner, Bathbox
iomart group plc Annual Report 2011
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 statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the financial statements
Holding company financial statements
Notice of annual general meeting
Officers and professional advisers
Group contact information
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17
19
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26
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64
69
70
www.iomart.com
“Having the ability to deliver client software and our
cloud-based management console from iomart Hosting’s
infrastructure gives us a definite competitive and operational
edge in a market where reliability is paramount, and security
even more so.”
Tom Colvin, Chief Technology Officer, Conseal Security
iomart group plc Annual Report 2011
"The increasing demand for cloud services plays firmly to our strengths
with our extensive experience in the successful provision of a wide range
of hosting, virtual computing, storage and security services over many
years."
Ian Ritchie, Chairman
The Group has enjoyed another very successful year. That success is a result of a great deal
of hard work and consolidates our position as one of the UK’s leading managed hosting
operators.
Having moved into profitability in the previous financial year we have seen that level of
profitability more than double over this year and we have now laid very firm foundations
for continued growth. Our organic growth, especially from our Hosting segment, has been
very pleasing and we have added to that with the acquisition of Titan Internet Limited during
the year and also with the acquisition of Switch Media Limited after the year end. We are
confident that both will be excellent acquisitions for our Group.
The increasing demand for cloud services plays firmly to our strengths with our extensive
experience in the successful provision of a wide range of hosting, virtual computing, storage
and security services over many years. We are in the position of owning and operating our
own datacentre infrastructure and networks which we believe provides us with a significant
advantage over our competitors.
As ever the commitment, enthusiasm and energy of our senior management team and all of
our employees is essential in delivering this success. I thank them all on behalf of the Board
and the shareholders.
As I indicated last year we are committed to rewarding shareholders with dividends as we
deliver improved performance. Accordingly, the Board is proposing to pay a final dividend
of 0.65p per share on 5 October 2011 to shareholders on the register on 10 June 2011 an
increase of 63% over the dividend last year. We have decided that we will offer shareholders
the option to participate in a Dividend Reinvestment Plan (DRIP) as an alternative to receiving
cash. Details of the DRIP scheme will be distributed with the Annual Accounts in due course. I
can also reconfirm that it is our intention, depending on the underlying profitability and cash
generation of the business, to continue to pay annual dividends.
We begin the 2012 financial year in a strong position and I look forward to another exciting
year of growth, both organically and through acquisition, for the Group. We can look ahead
with considerable confidence.
Ian Ritchie
Chairman
31 May 2011
3
Chairman's Statement
"We begin the
2012 financial
year in a strong
position and I
look forward to
another exciting
year of growth,
both organically
and through
acquisition, for the
Group."
www.iomart.com
4
Chief Executive Officer's Report
"At iomart we have built our technologies from the ground up
specifically to be delivered via the cloud. As a result we are
becoming recognised as an authority on the provision of cloud-
hosting solutions and are well positioned to take advantage as
the market evolves and people look for reliable vendors.”
Angus MacSween, Chief Executive Officer
Introduction
I am once again delighted to report another excellent year of trading for the Group. Having
broken into profitability in our last financial year, we have more than doubled our profitability
in this year with adjusted EBITDA of £6.6m (2010: £3.1m) which is at the top end of the
upgraded market expectations. This significant increase in profitability resulted from increased
sales to both new and existing customers, with revenues growing by 38% to £25.3m (2010:
£18.3m). In addition we substantially increased our cash generation in the year with cashflow
from operations totalling £7.1m (2010: £3.9m).
We continue to see a growing trend for the outsourcing of infrastructure and services to
reliable suppliers with cloud computing expertise and experience. We are now recognised as
a leading player in the hosting/cloud/managed services arena.
Whilst cloud computing and cloud-based services have become the buzzwords du jour,
it’s important to understand the realities beyond the hype. Many companies are adding
the ‘cloud’ tag to whatever they do in the hope of some halo effect but many do not have
reliable or well tested delivery mechanisms and are trying to shoehorn legacy technology
into some form of online delivery. At iomart we have built our technologies from the ground
up specifically to be delivered via the cloud and are ideally positioned to take advantage of
the shift to cloud computing. We are continuing to expand our range of services to meet the
market demand through the introduction of products to provide back up; storage; email and
archiving as cloud based services.
During the year the Group grew through both organic and acquisitive means. We were
delighted to welcome Titan Internet to the Group in October 2010. The acquisition provides
the Group with an excellent customer base and a highly skilled and motivated workforce
with particular expertise in virtualisation technology. After the year-end on 26 April 2011
we acquired Switch Media, an organisation that provides similar services to our Easyspace
segment concentrating on providing services to newly created companies in the UK and the
Republic of Ireland. We expect both to contribute to the ongoing profit growth of the Group
as we fully exploit the integration synergies available.
Operational Review
Whilst all of our activities involve the provision of managed hosting services we are organised
into two segments.
Hosting
The Hosting segment has performed very well over the year. Its revenue growth has led to
a substantial increase in adjusted EBITDA due to the operational gearing we are able to
iomart group plc Annual Report 2011
“We have continued
to invest in
our datacentre
infrastructure, our
people and our
products giving us
an ideal platform
from which to move
forward. We are
in a market that is
growing and that
is here to stay and
we fully expect to
participate strongly in
that growth.”
5
Chief Executive Officer's Report
leverage. The adjusted EBITDA for the year from the Hosting segment was £6.2m (2010: £2.8m) an increase of 124%. This
increase includes the impact of the acquisition of Titan without which the increase would have been 106%.
Our hosting segment provides a range of managed hosting services, increasingly with an element of cloud or virtual computing,
to SMEs and corporate customers. We address different market segments with different brands but all ‘sweating’ the same physical
infrastructure and network. Complex hosting solutions to corporate customers are provided by iomart Hosting in a consultative
sales process; dedicated server hosting to SMEs is marketed online by Rapidswitch and cloud security services to the large
corporate and education sector through Netintelligence. In addition, Titan has been fully integrated into our Hosting segment
providing managed hosting solutions, with a high degree of virtualisation, to SMEs and corporate customers.
The Hosting segment has seen revenue growth of 61% to £17.7m including the impact of the acquisition of Titan for the last five
months of the year. The organic growth in this segment excluding Titan was an impressive 47% with the majority of this growth
coming from the activities of iomart Hosting. We have won over 400 new orders in the year, many of which were additional
orders from existing customers. Increasingly, these orders contain some aspects of cloud or virtual computing within the overall
solution and we are becoming recognised as an authority on the provision of cloud hosting solutions as that market opportunity
evolves.
We have continued to invest in our datacentre estate over the year. We clearly have a competitive advantage through the
ownership of our own datacentre capacity and we completed the fit out of a further 7,000 square feet of datacentre space in
Maidenhead during the year.
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 continued to perform well against its peers.
In a competitive market we have continued to increase revenues and profitability. Revenues have grown by 3% over the year to
£7.6m and the adjusted EBITDA margin has increased from 35% last year to 37% this year, having been 30% in the year before
last. The margin increase is largely as a result of the continued implementation of operational efficiencies within this segment.
Current Trading and outlook
The first two months of trading in the new financial year have been good and in line with expectations.
We are in a market that is both growing and we believe is here to stay. Combining the strength and resilience of our strong asset
base with our technical expertise and commitment to customer uptime we fully expect to continue the growth we have seen in the
last two years which we will achieve through both organic expansion and through the acquisition of businesses which we consider
to be complementary to the Group.
I look forward with confidence to the year ahead
Angus MacSween
Chief Executive Officer
31 May 2011
* Throughout the Chief Executive Officer, Finance Director and Directors’ reports adjusted EBITDA for March 2011 is earnings before interest, tax, depreciation and amortisation
(EBITDA) before share based payment charges and costs associated with acquisitions and for March 2010 is earnings before interest, tax, depreciation and amortisation
(EBITDA) before share based payment charges and gain on reduction of deferred consideration.
www.iomart.com
6
Finance Director's Report
“In the last two financial years the Hosting segment has grown
revenues, through both organic and acquisitive means, from
£4.6m in the year to March 2009 to £17.7m this year, an
almost four fold increase.”
Richard Logan, Finance Director
Trading Results
Revenues for the year of £25.3m (2010: £18.3m) have grown by 38% with both of our operating
segments having contributed to this growth.
The majority of the revenue growth was delivered by our Hosting segment. Revenues in the year
from this segment of £17.7m (2010: £11.0m) grew by 61%. This growth was helped by the
contribution from Titan Internet Limited which we acquired at the end of October. The growth in
Hosting segment revenues excluding the impact of Titan was 47%. In the last two financial years the
Hosting segment has grown revenues, through both organic and acquisitive means, from £4.6m
in the year to March 2009 to £17.7m this year, an almost four fold increase.
Our Easyspace segment continues to perform well in a very competitive market and revenues from
this segment of £7.6m (2010: £7.4m) grew by 3%.
Our gross margin, which is calculated by deducting our variable cost of sales such as domain
name costs, power charges and sales commission and the relatively fixed costs of operating
our datacentres from revenue, was £15.6m (2010: £10.5m). This very significant increase was
substantially a direct result of the contribution made from the additional revenues delivered by
our Hosting segment. In percentage terms the gross margin improved to 62% (2010: 57%)
demonstrating the high operational leverage of the Hosting segment. Easyspace has maintained
its gross margin percentage at a similar level to the previous year. The Hosting segment continues
to deliver an improved gross margin percentage through increased sales revenues whilst its fixed
costs of operations remain unchanged. The addition of Titan into the Hosting segment for the last
five months of the financial year has helped to improve the absolute level of gross margin and in
percentage terms has contributed at a similar level to the rest of the Hosting segment operations.
The adjusted EBITDA for the year of £6.6m (2010: £3.1m) has also shown a very high level of
growth. Our percentage adjusted EBITDA margin has also significantly improved to 26% (2010:
17%). Once again both of our operating segments have contributed to both the absolute growth
and the improvement in the percentage margin in adjusted EBITDA.
The Hosting segment’s adjusted EBITDA was £6.2m (2010: £2.8m) an increase of 124%. In
percentage terms the adjusted EBITDA margin has improved to 35% (2010: 25%). This greatly
improved performance is a direct result of the additional gross margin delivered by the increase
in sales revenue from the Hosting segment offset by an increase in administrative expenses.
Administrative expenses have increased as we have continued to invest in additional resources
within the Hosting segment during the year to support the high level of revenue growth that has
been achieved. As a result we have increased these costs, mainly through the introduction of
additional headcount, especially in sales and technical roles. The contribution from Titan since
November has contributed to the improvement in the adjusted EBITDA in absolute terms and has
helped maintain the percentage margin improvement.
The Easyspace segment’s adjusted EBITDA was £2.8m (2010: £2.6m) an increase of 8%.
In percentage terms the adjusted EBITDA margin has improved to 37% (2010: 35%). The
improvement in adjusted EBITDA is the result of the additional gross margin contributed from the
increased sales revenues together with reduced administrative expenses as we continue to run the
operation more efficiently.
Group overheads, which are not allocated to segments, include the cost of the Board; the running
costs of the headquarters in Glasgow; Group marketing, human resource, finance and design
functions; and legal and professional fees for the year. These overhead costs have increased
slightly to £2.3m (2010: £2.2m).
iomart group plc Annual Report 2011
"The Group
continues to
invest in both
its datacentre
infrastructure and
in the equipment
required to
provide managed
services to both its
existing and new
customers".
7
Finance Director's Report
Share based payment charges in the period of £0.3m (2010: £0.4m) have decreased as a result of both the lapsing of share options and
share options issued in previous periods having been fully charged to the statement of comprehensive income. Under IFRS 3 (revised) it is
no longer permissible to include costs incurred on professional fees during an acquisition as part of the overall cost of the balance sheet
investment. Consequently, during the period we incurred costs of £0.2m (2010: £nil) in respect of professional fees for the acquisition
of both Titan Internet Limited and Switch Media Limited.
Depreciation charges of £2.7m (2010: £1.8m) have increased largely as a result of charges for the additional equipment bought to
provide services to the additional Hosting segment customers and also as a consequence of the acquisition of Titan.
The charge for amortisation of intangibles of £0.7m (2010: £0.5m) has increased as a result of the acquisition of Titan which has resulted
in the recognition of additional intangible assets which are being amortised over their estimated useful lives.
Finance income in the period of £0.2m (2010: £0.1m) includes interest earned on the deferred consideration due to the Group from a
disposal in a previous year which was received during the period and also interest due on a lease rental deposit. Finance costs of £0.2m
(2010: £0.1m) includes interest on bank loans used to fund the Titan acquisition and also interest on finance leases which are used to
fund the purchase of some of the capital equipment needed to provide services to customers.
After deducting the charges for share based payments, acquisition related costs, depreciation, amortisation and finance costs and
crediting the finance income from the adjusted EBITDA the Group’s profit before tax was £2.8m (2010: £1.3m, including a net gain of
£0.9m arising from the renegotiation of deferred consideration payable).
There is a tax credit for the year of £0.1m (2010: £0.8m) arising from a deferred tax credit of £0.2m (2010: £0.8m) offset by a
corporation tax charge of £0.1m (2010: £nil) resulting in a profit for the year from total operations of £2.9m (2010: £2.1m, including
a net gain of £0.9m arising from the renegotiation of deferred consideration payable and a tax credit of £0.8m).
Earnings per share
Basic earnings per share from continuing operations was 2.91p (2010: 2.12p) an increase of 37% over the year. However, in the year to
March 2010 the earnings per share calculation included the effect of the exceptional net gain arising from the renegotiation of deferred
consideration payable of £0.9m. Excluding this from the calculation would result in a revised basic earnings per share of 1.23p for March
2010 and thus a 137% increase over this financial year.
Acquisitions
In October 2010 the company acquired Titan Internet Limited for a maximum consideration of £4.2m of which £3.6m was paid during
the year. On 26 April 2011, post year end, the company acquired Switch Media Limited for a maximum consideration of £1.2m, of
which £1.0m was paid at the time of the acquisition.
Cash flow and net cash
Net cash flows from operating activities
The Group continued to generate high levels of operating cash over the year. Cash flow from operations was £7.1m (2010: £3.9m)
with the significant increase over the previous year’s level largely due to the improvement in adjusted EBITDA and also helped by cash
received from the provision of Netintelligence in the Universal Home Access project. It is a feature of our operations that in many
instances the Group generates cash in advance of revenue recognition and consequently carries a substantial amount of deferred
revenue in its statement of financial position. After deducting a small cash payment for corporation tax in respect of the operations of
Rapidswitch the net cash flow from operating activities was £7.0m (2010: £3.7m).
Cashflow from investing activities
In line with our strategy the Group continues to spend substantial sums on investing activities, having invested a total of £7.1m (2010:
£11.0m) in the period. Of this amount a net sum of £3.3m (2010: £8.3m) was incurred in relation to acquisition activities. The single
biggest investment related to the acquisition of Titan Internet Limited in October 2010 for a net initial amount of £3.1m being the
payment of £3.6m made at the time of the acquisition net of the £0.5m bank balance held in Titan at that time. In addition the Group
settled the final amount of deferred consideration due on the acquisition of iomart Datacentres Limited (formerly known as Ezee DSL
Limited) of £1.0m and received the amount of deferred consideration due in respect of the disposal of Ufindus Limited in July 2008 of
£0.8m, net of related costs.
The Group continues to invest in both its datacentre infrastructure and in the equipment required to provide managed services to both
its existing and new customers. During the year the Group invested £3.4m (2010: £2.3m) in such activities, net of related finance lease
drawdown, including the fit out of 7,000 sq ft of datacentre space in Maidenhead at a cost of £1.2m.
Expenditure was also incurred on development costs of £0.4m (2010: £0.3m) and the purchase of software of £0.2m (2010: £0.1m).
Finally, the Group received interest in the period of £0.2m (2010: £0.2m) which included interest on the deferred consideration received
during the period.
www.iomart.com
8
Finance Director's Report
Cashflow from financing activities
The Group’s financing activities generated a net cash inflow of £1.2m (2010: expenditure of £0.9m) over the year. The issue of new
shares, due to the exercise of share options by staff generated £0.5m (2010: £nil) and the Group also drew down £2.0m of bank loans
to help fund the purchase of Titan. The Group spent £0.8m (2010: £0.4m) repaying finance leases, £0.4m (2010: £0.3m) on dividends
and £0.1m (2010: £0.1m) on interest.
Net cashflow
As a consequence our overall cash generation during the year was £1.1m (2010: expenditure of £8.2m) which resulted in cash and cash
equivalent balances at the end of the year of £6.9m (2010: £5.7m). After recognising bank loans of £2.0m (2010: £nil) and finance
lease obligations of £1.8m (2010: £1.3m) net cash balances at the end of the period stood at £3.1m (2010: £4.4m).
Financial position
The Group is now in a position where it is generating substantial amounts of operating cash. The generation of that cash flow together
with the bank loan facility for acquisitions and capital expenditure of £10m, of which £3.0m has been drawn down, including the £1.0m
drawn down after the year end and finance lease facilities for capital expenditure, provides the Group with the liquidity it requires to
continue its 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
31 May 2011
iomart group plc Annual Report 2011
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.
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.
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:
• Financial reporting: there is in place a comprehensive
system of financial reporting based on the annual
budget which the board approves. The results for the
Group as a whole and each business segment are
www.iomart.com
10
Corporate Governance
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 2011
11
Report of the board to the members on directors'
remuneration
The remuneration committee has given consideration to the
Combined Code on Corporate Governance issued by the
Financial Reporting Council 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:
• 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
Executive directors are entitled to participate in the Company’s
Joint Share Ownership Plan (JSOP).
salaries and benefits available to executive directors
of comparable companies;
• Other benefits
•
•
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. For the executive
directors, there may be an opportunity to sacrifice their
potential bonus in exchange for a payment into a pension
plan.
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.
www.iomart.com
12
Report of the board to the members on directors' remuneration
Directors’ remuneration (this information has been audited)
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
£
200,000
30,000
130,000
150,000
50,000
30,000
Bonus
£
95,000
-
117,000
75,000
-
-
Benefits
£
1,673
-
400
1,513
-
-
Pension
contributions
£
120,000
-
13,000
15,000
-
-
Year
ended
Year
ended
31 March 31 March
2010
Total
£
326,996
30,000
233,947
223,444
50,000
30,000
2011
Total
£
416,673
30,000
260,400
241,513
50,000
30,000
590,000 287,000
3,586
148,000 1,028,586 894,387
Directors’ interests in shares
The interests of the directors in the shares of the company at 31 March 2011, together with their interests at 1 April 2010 were as
follows:
Name of director
Angus MacSween
Chris Batterham
Sarah Haran
Richard Logan
Ian Ritchie
Fred Shedden
Number of ordinary shares
31 March 2011
At 1 April 2010
19,336,304
90,621
1,124,944
100,500
151,400
764,588
19,686,304
90,621
1,224,944
135,500
151,400
764,588
The shareholdings for Angus MacSween, Sarah Haran and Richard Logan exclude shares held under the Company’s Joint Share
Ownership Plan (JSOP), in which the directors are beneficial co-owners of shares. Details of such shareholdings are given below.
iomart group plc Annual Report 2011
Report of the board to the members on directors' remuneration
13
Directors’ interests in shareholdings of Joint Share Ownership Plan (this information has been audited)
The interests of the directors in the JSOP shares are as follows:-
Name of
director
Market
Current
Price at date Participation Participation
Price
of Award
Initial
Price
Award Date
Vesting Number
of shares
Date
Date
from which
exerciseable
Expiry date
Angus MacSween 31/03/2010
31/03/2010
31/03/2010
31/03/2010
Sarah Haran
Richard Logan
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
50.5p
78.5p
49.5p
49.5p
49.5p
49.5p
50.5p
49.5p
49.5p
51.0p 31/03/2010
78.5p 31/03/2010
51.0p 31/03/2011
51.0p 31/03/2012
356,990 31/03/2010 06/10/2018
322,612 31/03/2010 17/11/2014
350,000 31/03/2011 06/10/2018
450,000 31/03/2012 06/10/2018
1,479,602
52.0p 31/03/2010
78.5p 31/03/2010
51.0p 31/03/2010
51.0p 31/03/2011
51.0p 31/03/2012
414,018 31/03/2010 27/09/2017
177,867 31/03/2010 17/11/2014
357,087 31/03/2010 06/10/2018
350,000 31/03/2011 06/10/2018
450,000 31/03/2012 06/10/2018
1,748,972
51.0p 31/03/2010
52.0p 31/03/2010
51.0p 31/03/2011
51.0p 31/03/2012
221,505 31/03/2010 06/10/2018
500,000 31/03/2010 27/09/2017
350,000 31/03/2011 06/10/2018
450,000 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. Certain
of the JSOP shares are 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 2012 are subject to continuous employment criteria.
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 (this information has been audited)
The interests of the directors at 31 March 2011 in options over the ordinary shares of the company were as follows:
Name of
director
At
1 April
2010 Exercised Surrendered Lapsed
At
31 March Exercise
price
2011
Date of
Date from
which
Grant exerciseable
Expiry
date
Angus MacSween 127,388
43,010
Sarah Haran
Richard Logan
170,398
72,133
85,982
42,913
201,028
50,000
150,000
28,495
228,495
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
- 127,388
43,010
-
78.5p 17/11/2004 17/11/2007 17/11/2014
46.5p 06/10/2008 31/03/2009 06/10/2018
- 170,398
-
-
-
72,133
85,982
42,913
78.5p 17/11/2004 17/11/2007 17/11/2014
50.5p 27/09/2007 27/09/2010 27/09/2017
46.5p 06/10/2008 31/03/2009 06/10/2018
- 201,028
-
50,000
- 150,000
28,495
-
74.0p 24/08/2006 24/08/2009 24/08/2016
46.5p 06/10/2008 31/03/2009 06/10/2018
46.5p 06/10/2008 31/03/2010 06/10/2018
- 228,495
No share options were exercised 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 91.00p and the range of prices during the period was
between 44.50p and 99.75p.
By order of the board
Fred Shedden
Chairman, Remuneration committee
31 May 2011
iomart group plc Annual Report 2011
15
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 2011.
Principal activity
The principal activity of the Group is the provision of cloud
computing 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
Growth
2011
£25.3m
38% increase
2010
£18.3m
55% increase
Revenue from continuing operations grew by 38% over the
year compared to a growth of 55% in the previous year. The
Hosting segment grew revenues by 61% (2010: 139%) and
the Easyspace segment by 3% (2010: 2%).
Adjusted EBITDA
Adjusted EBITDA margin
2011
£6.6m
26%
2010
£3.1m
17%
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 Titan Internet Limited
which was acquired during the year. Easyspace has also
contributed to the adjusted EBITDA margin improvement
through increased revenues and operational efficiencies.
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. In June 2010 the Group obtained a multi option
revolving credit facility of £10m which was made available in
order to finance business acquisitions and to finance capital
expenditure. In order to fund the acquisition of Titan Internet
Limited, £2m of this facility was drawn down in November
2010. The main risk to the Group is interest rate risk arising
from floating rate interest rates. The Group’s borrowings at
31 March 2011 comprise finance leases totalling £1.8m
(2010: £1.3m) and a bank loan totalling £2.0m (2010: £nil).
The interest rates on the finance leases are fixed for the term
of the lease at between 5.0% and 12.2% and the average
interest rate was 6.9% (2010: 6.1%). The interest rate on the
bank loan is fixed for the term of the loan which is 6 months
at 3.0% per annum excluding any draw down fees and the
average annual interest rate during the year was 3.0% (2010:
nil). 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 have not declared an interim dividend for the
year ended 31 March 2011 (2010: 0.4p per share). The
directors recommend a final dividend for the year ended 31
March 2011 of 0.65p per share (2010: nil).
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,
Sarah Haran and Chris Batterham will offer themselves for
re-election at the forthcoming annual general meeting.
Financial instruments
The Group’s financial instruments comprise cash and liquid
resources, bank loans and finance leases together with
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 23 May 2011 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
Angus MacSween
19,336,304
19.58%
Legal & General
Investment
Management
Gartmore
Investment Limited
Majedie Asset
Management
British Steel
Pension Scheme
Universities
Superannuation
Scheme
12,885,000
13.05%
12,348,325
12.50%
8,185,101
8.29%
4,268,103
4.32%
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 2011 were 24 days (2010: 23
days), and of the company were 2 days (2010: 4 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:
4,169,000
4.22%
auditors are unaware, and
• there is no relevant audit information of which the
River & Mercantile
Asset Management
3,938,200
Bill Dobbie
3,361,369
3.99%
3.40%
Liontrust Asset
Management
3,294,767
3.34%
Transactions in own shares
At 31 March 2011 the iomart Group plc Employee Benefit
Trust held 4,977,184 shares (2010: 4,977,184) 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.
• 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 auditors does not involve consideration of these
matters and, accordingly, the auditors accept no responsibility
for any changes that may have occurred to the financial
statements since they were initially presented on the website.
Legislation in the United Kingdom governing the preparation
and dissemination of the financial statements may differ from
legislation in other jurisdictions.
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
their particular aptitudes and abilities. Appropriate training
is arranged for disabled persons, including retraining for
Bruce Hall
Company secretary
31 May 2011
iomart group plc Annual Report 2011
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
“iomart is currently enjoying the sort of momentum
that could soon place it on the list of European
heavyweights.”
Tier1 Research (T1R) June 2011
www.iomart.com
Board of Directors
Ian Ritchie
60, 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
54, 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
56, 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, office2office
plc and The Risk Advisory Group. He is also chairman of Eckoh plc. Chris has also served on
the boards of Staffware plc, DBS Management plc, DRS plc, Betfair Limited and The Invesco
Techmark Enterprise Trust plc.
Sarah Haran
45, 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
53, 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
66, appointed 2000; senior independent director of Murray International Trust plc
and formerly 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 2011 which comprise
the consolidated statement of comprehensive income,
consolidated statement of financial position, consolidated
statement of cash flows, 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
and express an opinion on 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/
private.cfm.
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 2011 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:
Under the Companies Act 2006 we are required 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
2011.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
31 May 2011
iomart group plc Annual Report 2011
Consolidated Statement of Comprehensive Income
Year ended 31March 2011
21
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Analysed as:
Earnings before interest, tax, depreciation, amortisation, share based payments,
acquisition costs and net gain on reduction of deferred consideration
Share based payments
Acquisition costs
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 before taxation
Taxation
Profit for the year from total operations
Total comprehensive income for the year
Note
2011
£’000
2010
£’000
4
4
24
4
4
6
6
8
25,252
18,327
(9,699)
(7,830)
15,553
10,497
(12,780)
(10,119)
2,773
378
6,644
3,112
(290)
(195)
(2,689)
(697)
-
-
197
(178)
(379)
-
(1,846)
(509)
1,000
(135)
77
(66)
2,792
1,254
70
816
2,862
2,070
2,862
2,070
Attributable to equity holders of the parent
2,862
2,070
Basic and diluted earnings per share
Total operations
Basic
Diluted
11
11
2.91 p
2.85 p
2.12 p
2.12 p
www.iomart.com
22
Consolidated Statement of Financial Position
31March 2011
Note
2011
£’000
2010
£’000
12
12
9
13
15
17
18
16
21
20
19
21
23
23,952
1,978
619
2,016
14,788
20,723
1,008
604
1,216
12,276
43,353
35,827
6,864
-
3,100
5,715
914
2,937
9,964
9,566
53,317
45,393
(920)
(920)
(834)
(834)
(600)
(10,047)
(2,846)
(13,493)
(1,000)
(7,489)
(480)
(8,969)
(14,413)
(9,803)
38,904
35,590
1,038
(2,464)
1,200
19,977
19,153
38,904
1,028
(2,464)
1,200
19,514
16,312
35,590
ASSETS
Non-current assets
Intangible assets – goodwill
Intangible assets – other
Deferred tax asset
Lease deposit
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 and contingent consideration due on acquisitions
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 31 May 2011.
Signed on behalf of the board of directors
Angus MacSween
Director and chief executive officer
iomart group plc Annual Report 2011
Consolidated Statement of Cash Flows
Year ended 31March 2011
Profit before taxation
Gain on reduction of deferred consideration - net
Finance income - net
Depreciation
Amortisation
Share based payments
Movement in lease deposits
Movement in trade receivables
Movement in trade payables
Cash flow from operations
Taxation paid
Net cash flow from operating activities
Cash flow from investing activities
Purchase of property, plant and equipment
Capitalisation of development costs
Purchase of intangible assets - software
Payment for acquisition of business net of cash acquired
Repayment of borrowings on acquisition of business
Deferred consideration paid on prior period acquisition
Receipt from disposal of discontinued operation
Interest received
Net cash used in investing activities
Cash flow from financing activities
Issue of shares
Bank loans
Repayment of finance leases
Repayment of borrowings
Interest paid
Dividends paid
Net cash received from / (used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
23
2010
£’000
1,254
(865)
(11)
1,846
509
379
(332)
(63)
1,169
3,886
(164)
3,722
(2,341)
(281)
(69)
(5,303)
(226)
(2,935)
-
172
(10,983)
41
-
(396)
(222)
(66)
(291)
(934)
Note
6
4
4
24
13
15
12
12
10
18
6
23
21
21
10
7
2011
£’000
2,792
-
(19)
2,689
697
290
(800)
194
1,211
7,054
(12)
7,042
(3,419)
(351)
(197)
(3,144)
-
(1,000)
795
237
(7,079)
473
2,000
(759)
-
(137)
(391)
1,186
1,149
(8,195)
5,715
13,910
Cash and cash equivalents at the end of the year
17
6,864
5,715
www.iomart.com
24
Consolidated Statement of Changes in Equity
Year ended 31March 2011
Changes in equity
Share
capital
£’000
Own
shares
JSOP
£’000
Note
Own
Share
Capital
shares redemption premium
account
reserve
£’000
£’000
treasury
£’000
Retained
earnings
£’000
Total
£’000
Balance at 1 April 2009
1,002
-
(678)
1,200
17,583
14,284
33,391
Profit in the year and total
comprehensive income
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
7
24
-
-
-
-
-
-
-
-
-
-
-
-
-
171
507
26
(2,464)
-
Total transactions with owners
26
(2,464)
678
-
-
-
-
-
-
-
-
-
-
-
712
1,219
1,931
2,070
2,070
(291)
379
(291)
379
(130)
41
-
-
1,219
(1,219)
(42)
129
Balance at 31 March 2010
1,028
(2,464)
-
1,200 19,514 16,312 35,590
Profit in the year and total
comprehensive income
7
24
Dividends – interim (paid)
Share based payments
Deferred tax on share based
payments
Issue of shares for option
redemption
Total transactions with owners
-
-
-
-
10
10
-
-
-
-
-
-
Balance at 31 March 2011
1,038
(2,464)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,862
2,862
-
-
-
463
463
(391)
290
(391)
290
80
-
(21)
80
473
452
1,200 19,977 19,153 38,904
iomart group plc Annual Report 2011
iomart Hosting's Customer Control Panel displays power
usage and CO2 emissions in real time, giving customers
the data required to make informed choices about their
environmental impact.
BCS Finalist Environmental Project of the Year
iomart group plc Annual Report 2011
26
Notes to the Financial Statements
Year ended 31March 2011
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 UK Pounds Sterling
because that is the currency of the primary economic
environment in which the Group and its subsidiaries
operates.
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
IFRS 3 Business Combinations (revised 2008). The revised
standard on business combinations has introduced major
changes to the accounting requirements for business
combinations. It continues to apply the acquisition method
to business combinations but the following are the most
significant changes the new standard has introduced which
have impacted the Group’s acquisition in the current year:
• Acquisition-related costs of the combination such as
professional fees are recorded as an expense in profit or
loss. Previously, these costs would have been accounted
for as part of the cost of acquisition; and
• Contingent consideration is measured at fair value at the
acquisition date. If the contingent consideration
arrangement gives rise to a financial liability, any
subsequent changes are recognised in profit or loss.
Previously, contingent consideration was recognised only
once its payment was probable and changes were
recognised as an adjustment to goodwill.
IFRS 3R has been applied prospectively to business combinations
for which the acquisition date is on or after 1 January 2010.
For the year ended 31 March 2011, the adoption of IFRS
3R has affected the accounting for the Group’s acquisition
of Titan Internet Limited (note 10) and in respect of the costs
incurred in relation to the post year acquisition of Switch
Media Limited up to the end of the financial year by increasing
the Group’s expenses related to acquisition costs by £0.2m.
The current tax expense and both basic and diluted earnings
per share have not been materially impacted.
Business combinations for which the acquisition date is before
1 January 2010 have not been restated.
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 27 Consolidated and Separate Financial Statements
•
(revised 2008).
• Amendment to IAS 32 Classification of Rights Issues.
•
IFRIC 17 Distributions of Non-cash Assets to Owners.
•
IFRIC 18 Transfers of Assets from Customers.
New standards and interpretations of existing standards
that are not yet effective and have not been adopted
early by the Group
IFRS 9 Financial Instruments (effective 1 January 2013). IFRS
9 introduces new requirements for classifying and measuring
financial assets and these new requirements will impact the
disclosure and carrying values of financial assets.
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 24 (revised 2009) Related Party Disclosures.
•
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments.
• Amendments to IAS 12 Income Taxes Deferred Tax:
Recovery of Underlying Assets.
• Amendments to IFRIC 14 Prepayments of a Minimum
Funding Requirement.
• Amendments to IFRS 7 Disclosures – Transfers of
Financial Assets.
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
27
Summary of Accounting Policies
Basis of consolidation
The Group financial statements consolidate those of the
company and all of its subsidiary undertakings drawn up to
31 March 2011. 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 acquisition
method. The acquisition 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 statement of financial position
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 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.
Revenue from the provision of domain names is recognised
at the time the title to the domain name passes.
Interest
Interest is recognised on a time-proportion basis using the
effective interest method.
Intangible assets
Goodwill
Goodwill arising on consolidation represents the excess of the
fair value of the consideration given over the fair value of the
identifiable net assets acquired. Goodwill is capitalised on
the consolidated statement of financial position and subject
to an annual impairment test. The carrying value of goodwill
is cost less accumulated impairment losses and is allocated
to cash generating units for the purpose of impairment
testing. The allocation is made to those cash generating units
that are expected to benefit from the business combination
in which the goodwill arose. Impairment reviews are carried
out by the Board at least annually. Impairments to goodwill
are charged to the statement of comprehensive income in
the period which they arise.
Customer relationships
Customer relationships are recognised only on acquisition.
The fair value is derived based on discounted cash flows
from estimated recurring revenue streams. The carrying
value is stated at fair value at acquisition less accumulated
amortisation and impairment losses. The useful economic
life is assessed on an individual basis. Amortisation is
charged over the useful life of the relationships in proportion
to the estimated future cash flows, a period which does not
generally exceed five years.
www.iomart.com
28
Notes to the Financial Statements. Year ended 31March 2011.
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:
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.
• 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
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 consolidated statement of comprehensive
income.
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
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
statement of comprehensive income.
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.
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
29
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
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 statement of comprehensive income over
the period of the lease.
All other leases are regarded as operating leases and the
payments made under them are charged to the statement
of comprehensive income 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.
Borrowings
Borrowings are initially stated at the amount of the net
proceeds after deduction of any issue costs. The carrying
amount is increased by the finance costs in respect of the
accounting period and reduced by payments made in the
period. Borrowings are subsequently stated at amortised cost,
any difference between the periods (net of transaction costs)
and the redemption value is recognised in the statement of
comprehensive income over the period of the borrowings
using the effective interest method.
Reinstatement costs
At the inception of the leases and annually thereafter, the
Directors assess the cost of restoring leasehold premises
to their original condition at the end of the lease and the
likelihood of such costs actually being incurred. If the
likelihood of this liability arising is judged as probable,
the discounted cost of the liability is included in leasehold
improvements and is depreciated over the duration of the
lease. The discount arising on the provision is amortised in
future years through interest. If the likelihood of this liability
arising is judged to be possible, rather than probable, it
is disclosed as a contingent liability. When assessing the
likely duration of the lease and the likelihood of this liability
arising, the Directors take into account their contractual and
statutory rights to renew or extend the lease terms.
Income taxes
The tax expense recognised in the statement of comprehensive
income comprises the sum of deferred tax and current tax not
recognised 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.
www.iomart.com
30
Notes to the Financial Statements. Year ended 31March 2011.
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 statement of
comprehensive income, except where they relate to items
that are recognised directly in equity (such as share based
remuneration) in which case the related deferred tax is also
recognised in equity.
Financial assets
All financial assets are recognised when the Group becomes
a party to the contractual provisions of the instrument.
Financial assets other than those categorised as at fair
value through profit or loss are recognised at fair value
plus transaction costs 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 statement of comprehensive income.
All income and expenses relating to financial assets that
are recognised in statement of comprehensive income are
presented within ‘finance costs’, ‘finance income’ or ‘other
financial items’ except for impairment of trade receivables
which is presented within ‘administration expenses’.
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market. 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
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 statement of
comprehensive income.
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 statement
of comprehensive income. 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 statement
of comprehensive income. 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 statement of comprehensive
income. Finance charges, including premiums payable on
settlement or redemption and direct issue costs, are charged
to the statement of comprehensive income 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.
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
31
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 statement of comprehensive income. Forward
foreign exchange contracts used to hedge the Group’s
exposure to foreign currency transactions are fair valued at
the balance date and the gain or loss is recognised in the
statement of comprehensive income 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.
Capital policy
The Group’s objectives when managing capital are to
safeguard the Group’s ability to continue as a going concern
in order to provide returns for shareholders and benefits for
other stakeholders and to maintain a capital structure that
optimises the cost of capital. In order to maintain or adjust
the capital structure, the Group may return or issue new
capital or acquire its own shares or adjust the amount of
dividends paid to shareholders. The Group may also make
use of bank facilities for acquisitions or capital expenditure
and finance leases for capital expenditure.
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.
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.
“Share premium” represents the excess over nominal
value of the fair value of consideration received for
equity shares, net of expenses of the share issue.
• “Capital redemption reserve” represents set aside
reserves in relation to previous redemption of own
shares.
•
• “Retained earnings” represents retained profits.
Employee benefits
The Group operates a stakeholder pension scheme 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 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
statement of comprehensive income 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 statement of comprehensive income
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.
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
the value of any such excess into a number of wholly owned
shares within the JSOP.
www.iomart.com
32
Notes to the Financial Statements. Year ended 31March 2011.
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 judgements and sources of estimation uncertainty
The key assumptions concerning the future, and other key
sources of estimation uncertainty at the balance date, that
have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
Impairment of goodwill
Determining whether goodwill is impaired requires an
estimation of the value in use of the cash-generating units
to which goodwill has been allocated. The value in use
calculation requires the entity to estimate the future cash
flows expected to arise from the cash-generating unit and
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
As the Group continues to implement its acquisition strategy
there is a requirement to fair value the assets and liabilities
of any business acquired during the year. Within these
adjustments consideration has been given to the valuation
of intangible assets including customer relationships and
brand. The valuation of customer relationships is based
on the value in use calculation which requires estimates
of the future cash flows expected to arise from the existing
customer relationships over their useful life and to select
a suitable discount rate in order to calculate the present
value. Full details of the assumptions used in the calculation
of intangible assets and fair value adjustments on the
acquisition that has occurred during the current year are
disclosed in note 10.
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.
iomart group plc Annual Report 2011
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 shared
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, Titan Internet and iomart Cloud
Services (formerly known as Netintelligence). Titan
Internet Limited was acquired during the year and
has been reported as part of the Hosting segment since
acquisition.
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, charges for share based payments or costs
associated with acquisitions. This 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. 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.
Notes to the Financial Statements. Year ended 31March 2011.
33
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. For that
reason 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
External
£’000
7,558
17,694
25,252
2011
Internal
£’000
-
896
896
Total
£’000
7,558
18,590
26,148
External
£’000
7,363
10,964
18,327
2010
Internal
£’000
-
717
717
Total
£’000
7,363
11,681
19,044
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.
Analysis of Revenue by Destination
United Kingdom
Rest of the World
Revenue from operations
Profit by Operating Segment
Easyspace
Hosting
Group overheads
Acquisition costs
Share based payments
Net gain on business combination
Group interest and tax
Profit for the year
2010
£’000
17,142
1,185
18,327
2011
£’000
22,585
2,667
25,252
2010
Share based
payments,
acquisation
costs
EBITDA
before
EBITDA
before
Share based
payments
and
2011
Share based
payments,
acquisation
costs
costs
£’000
2,794
6,178
(2,328)
-
-
6,644
acquisation depreciation & Operating
amortisation profit/(loss)
£’000
2,759
2,827
(2,328)
(195)
(290)
2,773
-
89
2,862
£’000
(35)
(3,351)
-
(195)
(290)
(3,871)
(3,871)
6,644
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
£’000
(35)
(2,320)
-
-
(379)
(2,734)
(2,734)
3,112
Group overheads, acquisition costs, share based payments, interest and tax are not allocated to segments.
www.iomart.com
34
Notes to the Financial Statements. Year ended 31March 2011.
4. OPERATING PROFIT
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 statement of comprehensive income
7,582
6,216
2011
£’000
2010
£’000
Depreciation of property plant and equipment
- Owned assets
- Leased assets
Property, plant and equipment hire
- Land and buildings
- Plant and machinery
Amortisation of intangible assets
R&D expensed to statement of comprehensive income
Marketing and sales
Infrastructure
Provision for doubtful debts
Premises and office
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
2,031
658
1,683
239
697
62
622
434
71
4,376
2011
£’000
26
38
19
55
138
1,498
348
1,299
242
509
162
604
337
57
3,778
2010
£’000
22
23
14
27
86
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
35
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
2011
£’000
2010
£’000
881
148
1
297
120
855
39
243
311
16
During the year the company made personal pension contributions to the personal pension schemes of 3 directors (2010: 3).
The aggregate amount of gains realised by directors on the exercise of share options during the year was £nil (2010: £129,395).
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.
76
20
39
25
160
93
21
41
27
182
No.
66
22
33
24
145
65
19
32
22
138
2011
£’000
2010
£’000
6,964
664
77
290
7,995
5,688
536
56
379
6,659
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.
www.iomart.com
36
Notes to the Financial Statements. Year ended 31March 2011.
6. NET FINANCE COST
Finance income:
Bank interest receivable
Other interest income
Finance income for the year
Finance expenses:
Bank loan
Finance leases
Other interest payable
Finance expense for the year
Net finance cost
2011
£’000
2010
£’000
45
152
197
(25)
(112)
(41)
(178)
19
77
-
77
-
(66)
-
(66)
11
Other interest income of £112,000 was received in the year relating to interest earned on sums held in escrow which have now been
released. In addition, £80,000 was received in the year relating to interest earned on sums held on a rental deposit by a landlord since
the inception of the agreement and of this, £40,000 had previously been accrued in interest receivable.
7. DIVIDENDS ON SHARES CLASSED AS EQUITY
2011
Pence per
share
2011
£’000
2010
Pence per
share
2010
£’000
Paid during the year:
Final dividend – for prior year
Equity dividends on ordinary shares
Interim dividend – for current year
Equity dividends on ordinary shares
-
-
0.3p
291
0.4p
391
391
-
-
291
The directors have recommended a final dividend for the year ended 31 March 2011 of 0.65p per share (2010: nil). Subject to
shareholder approval this proposed final dividend would be payable on 5 October 2011 to shareholders on the register as of 10 June
2011.
iomart group plc Annual Report 2011
8. TAXATION
Tax charge for the year
Adjustment relating to prior year
Deferred tax credit
Taxation
Notes to the Financial Statements. Year ended 31March 2011.
37
2011
£’000
(183)
33
220
70
2010
£’000
(12)
20
808
816
The Group has a deferred tax asset which has been recognised in respect of tax losses within three subsidiary companies, which have
generated taxable profits and are 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% (2010 – 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
Increase in tax losses recognised
2011
£’000
2,792
782
25
(33)
(50)
(191)
-
(7)
130
9
(735)
2010
£’000
1,254
351
23
(20)
(44)
50
(242)
(24)
(99)
(8)
(803)
Taxation (credit)/charge for the year
(70)
(816)
The weighted average applicable tax rate for the year ended 31 March 2011 was 28% (2010: 28%). The total current tax charge
of £183,000 (2010: £12,000) on operations represents 6.6% (2010: 1.0%) of the Group profit before tax of £2,792,000 (2010:
£1,254,000).
www.iomart.com
38
Notes to the Financial Statements. Year ended 31March 2011.
9. DEFERRED TAX
The Group had recognised deferred tax assets and liabilities as follows:
2011
Deferred tax Deferred tax
Recognised Unrecognised
£’000
£’000
2010
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
1,971
354
(1,367)
(339)
619
1,386
-
-
-
1,386
2,187
72
(1,504)
(151)
604
2,427
-
-
-
2,427
At the year end, the Group has unused tax losses of £13.2m (2010: £16.5m) available for offset against future profits. A deferred tax
asset has been recognised in respect of £7.7m (2010: £7.8m) of such losses. No deferred tax asset has been recognised in respect of
the remaining £5.5m (2010: £8.7m) as these losses are not currently expected to be used up by taxable profits by the end of the period
covered by future projections.
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 to equity
(Charged)/credited to statement of
comprehensive income
Closing balance
2,187
-
-
(216)
1,971
72
-
80
202
354
(1,504)
-
-
137
(1,367)
Customer
relationships
£’000
(151)
(285)
-
97
(339)
Total
£’000
604
(285)
80
220
619
The deferred tax asset in relation to tax losses carried forward arises from the unutilised tax losses in the hosting segment. The deferred
tax asset has been recognised in line with future projections 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 certain companies within the hosting segment, 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 iomart Datacentres Limited
(formerly known as 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 assets recognised on the acquisitions of Rapidswitch Limited on 11
May 2009 and Titan Internet Limited on 29 October 2010, which are being amortised over an estimated useful life of 5 years and on
which there are no capital allowances or other tax deductions available.
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
39
10. ACQUISITION
The Group acquired 100% of the issued share capital of Titan Internet Limited (“Titan”) on 29 October 2010. This transaction has been
accounted for by the acquisition method of accounting.
Titan delivers managed hosting solutions to its client base and the acquisition is in line with the group’s strategy to grow both organically
and by acquisition.
The acquired business contributed revenues of £1,625,000 and profit after tax of £216,000 to the group for the period from 30 October
2010 to 31 March 2011. The following unaudited pro forma summary presents consolidation information of the group as if the business
combination had occurred on 1 April 2010:
Revenue
Profit after taxation
Pro forma year ended
31 March 2011
£’000
27,107
2,985
These amounts have been calculated after applying the group’s accounting policies and after adjusting the results of Titan to reflect the
additional amortisation that would have been charged assuming the fair value adjustments to intangible assets had been applied from
1 April 2010, together with the consequential tax effects.
As a consequence of the acquisition of Titan, the company incurred £117,000 of third party acquisition related costs. These expenses
are included in administrative expenses in the company’s consolidated statement of comprehensive income for the year ended 31 March
2011.
The following table summarises the consideration transferred to acquire Titan Internet Limited and the amounts of identified assets
acquired and liabilities assumed at the acquisition date:
Fair value of consideration transferred:
Cash
Contingent consideration
Total consideration
Recognised amounts of net assets acquired and liabilities assumed:
Cash and cash equivalents
Trade and other receivables
Property, plant and equipment
Intangible assets
Trade and other payables
Deferred tax liability
Total identifiable assets
Goodwill
£’000
3,645
600
4,245
501
396
572
1,119
(1,287)
(285)
1,016
3,229
4,245
The acquisition of Titan Internet Limited includes a contingent consideration arrangement that requires additional consideration to be
paid by the company for Titan subject to the transfer of Titan’s server estate to the group’s datacentres. The directors consider that the
maximum value of contingent consideration will be payable and therefore have accrued the balance in full.
The goodwill arising on the acquisition of Titan Internet Limited is attributable to the specialised, industry specific knowledge of the
management and staff, the benefits to the Group in merging the business with its existing infrastructure and the anticipated future
operating synergies from the combination. The goodwill is not expected to be deductible for tax purposes.
The fair value of the assets acquired includes trade receivables of £125,000. The gross amount due under contracts is £125,000 and
there are no amounts which are expected to be uncollectable. The fair value of the acquired customer relationships intangible asset is
£1,119,000.
www.iomart.com
40
Notes to the Financial Statements. Year ended 31March 2011.
10. ACQUISITION (CONTINUED)
To estimate the fair value of the customer relationship intangible asset, 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
13.8% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 5 years.
The name, Titan Internet Limited, is not legally protected in any way and is not actively advertised or promoted, with the majority of Titan’s
business being generated from existing customers or by word of mouth. The terms and conditions of Titan specifically prohibit the sharing
of information held about customers with third parties. No value has therefore been attributed to either the trade name/brand or to the
customer lists acquired at the acquisition date.
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 held by an Employee Benefit Trust in a Joint Share Ownership
Plan (“JSOP”) and shares held in treasury. 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, after deducting any own shares
(JSOP) and shares held in treasury, and adjusting for the dilutive potential ordinary shares relating to share options, including the dilutive
effect of JSOP shares that have vested.
Total operations
Profit for the financial year and basic earnings attributed to ordinary shareholders
Weighted average number of ordinary shares:
Called up, allotted and fully paid at start of year
Shares held by Employee Benefit Trust
Own shares held in treasury
New shares issued during year (weighted average)
Weighted average number of ordinary shares - basic
Dilutive impact of share options
Dilutive impact of JSOP shares
Weighted average number of ordinary shares - diluted
Basic earnings per share
Fully diluted earnings per share
Adjusted earnings per share
Profit for the financial year and basic earnings attributed to ordinary shareholders
Less: net gain on reduction of deferred consideration
2011
£’000
2,862
No
000
102,753
(4,977)
-
674
98,450
958
1,026
100,434
2.91 p
2.85 p
2011
£’000
2,862
-
2010
£’000
2,070
No
000
100,239
-
(3,294)
632
97,577
230
-
97,807
2.12 p
2.12 p
2010
£’000
2,070
(865)
Adjusted profit for the financial year and adjusted earnings attributed to ordinary shareholders
2,862
1,205
Adjusted basic earnings per share
Adjusted fully diluted earnings per share
2.91 p
2.85 p
1.23 p
1.23 p
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
41
12. INTANGIBLE ASSETS
Cost
At 1 April 2009
Additions
Acquired on acquisition of subsidiary
Development cost capitalised
At 1 April 2010
Additions
Acquired on acquisition of subsidiary
Development cost capitalised
At 31 March 2011
Accumulated amortisation:
At 1 April 2009
Charge for the year
At 1 April 2010
Charge for the year
At 31 March 2011
Carrying amount:
At 31 March 2011
At 31 March 2010
Goodwill
£’000
Development
costs
£’000
Customer
relationships
£’000
Software
£’000
Domain
names
£’000
16,550
4,173
-
-
20,723
3,229
-
-
23,952
-
-
-
-
-
23,952
20,723
479
-
-
281
760
-
-
351
1,111
(169)
(209)
(378)
(275)
(653)
458
382
-
-
800
-
800
-
1,119
-
1,919
-
(261)
(261)
(316)
(577)
221
69
4
-
294
197
-
-
491
(199)
(30)
(229)
(96)
(325)
Total
£’000
17,281
4,242
804
281
22,608
3,426
1,119
351
27,504
31
-
-
-
31
-
-
-
31
-
(9)
(9)
(10)
(19)
(368)
(509)
(877)
(697)
(1,574)
1,342
166
12
25,930
539
65
22
21,731
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 statement of comprehensive income.
During the year, goodwill was reviewed for impairment in accordance with IAS 36 “Impairment of Assets”. No impairment charges (2010:
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. This allocation has been amended in the current year to reflect the way in which the Group both manages its
operations and the level at which the cash flows are internally monitored. The goodwill acquired in the Titan Internet Limited acquisition
in the current year has been allocated to the Hosting CGU which is the CGU expected to benefit from that business combination. The
carrying value of goodwill by each CGU is as follows:
Cash Generating Units (CGU)
Easyspace
Hosting
2011
£’000
12,314
11,688
24,002
2010
£’000
12,314
8,409
20,723
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 two-year period. Cash flows beyond the two-year period
are extrapolated using the estimated growth rates stated below.
www.iomart.com
42
Notes to the Financial Statements. Year ended 31March 2011.
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
11%
2.25%
2
Hosting
13%
2.25%
2
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 £2,016,000 (2010: £1,216,000) 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
iomart Cloud Services Limited
(formerly known as Netintelligence Limited)
iomart Virtual Servers Hosting Limited
Netintelligence Limited
(formerly known as Easyspace
Datacentres (UK) Limited)
Easyspace Limited
Rapidswitch Limited
Titan Internet Limtied
iomart Datacentres Limited
(formerly known as Ezee DSL Limited)
Internetters Limited
NicNames Limited
Web Genie Internet Limited
Scotland
Scotland
Dormant
Managed hosting services
Scotland
Scotland
Managed hosting services
Dormant
Scotland
England
England
England
England
England
England
England
Dormant
Webservices
Managed hosting services
Managed hosting services
Datacentre services
Webservices
Dormant
Webservices
100
100
100
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
-
100
100
100
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
43
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 2009
Additions in the year
Acquisition of subsidiary
Disposals in the year
At 1 April 2010
Additions in the year
Acquisition of subsidiary
Disposals in the year
At 31 March 2011
Accumulated depreciation:
At 1 April 2009
Charge for the year
Disposals in the year
At 1 April 2010
Charge for the year
Disposals in the year
At 31 March 2011
Carrying amount:
At 31 March 2011
837
-
-
-
837
-
-
-
837
(12)
(8)
-
(20)
(20)
-
(40)
360
480
1,299
-
2,139
1,371
14
-
3,524
(346)
(112)
-
(458)
(135)
-
(593)
7,584
645
166
-
8,395
400
-
-
8,795
(677)
(652)
-
(1,329)
(709)
-
(2,038)
1,869
2,088
727
-
4,684
2,868
421
-
7,973
(1,246)
(1,029)
-
(2,275)
(1,758)
-
(4,033)
797
2,931
6,757
3,940
At 31 March 2010
817
1,681
7,066
2,409
677
12
21
-
710
10
81
-
801
(374)
(40)
-
(414)
(60)
-
(474)
327
296
-
-
14
(7)
7
-
55
(24)
38
-
(5)
5
-
(7)
5
(2)
11,327
3,225
2,227
(7)
16,772
4,649
571
(24)
21,968
(2,655)
(1,846)
5
(4,496)
(2,689)
5
(7,180)
36
14,788
7
12,276
The net book value of computer equipment held under finance lease at 31 March 2011 was £1,735,000 (2010: £1,204,000).
16. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Provision for impairment
Trade receivables (net)
Other receivables
Prepayments and accrued income
Trade and other receivables
2011
£’000
1,358
(177)
1,181
240
1,679
3,100
2010
£’000
1,382
(124)
1,258
191
1,488
2,937
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.
www.iomart.com
44
Notes to the Financial Statements. Year ended 31March 2011.
16. TRADE AND OTHER RECEIVABLES (CONTINUED)
To consider the total exposure to credit risks, the Group uses figures net of VAT. At 31 March 2011, £686,000 (2010: £862,000) of
net trade receivables were fully performing. Net trade receivables of £495,000 (2010: £396,000) were past due, but not impaired. The
credit quality of financial assets that are neither past due or impaired can be assessed by reference to the customer type. 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
2011
£’000
434
33
28
495
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
Balance at end of year
17. CASH AND CASH EQUIVALENTS
2011
£’000
124
53
177
2010
£’000
337
55
4
396
2010
£’000
67
57
124
5,715
Cash at bank and on hand
Cash and cash equivalents
5,715
The credit risk on cash and cash equivalents is considered to be negligible because the counter parties are UK banking institutions. The
effective interest rate earned on short term deposits was 0.51% (2010: 0.51%).
6,864
6,864
2011
£’000
2010
£’000
18. DEFERRED CONSIDERATION RECEIVABLE ON DISPOSAL
Deferred consideration receivable on disposal: non-current
Deferred consideration receivable on disposal: current
Total deferred consideration receivable on disposal
2011
£’000
-
-
-
2010
£’000
-
(914)
(914)
The deferred consideration receivable on the disposal of disposal of Ufindus Limited in July 2008 of £914,000 was received in July 2010
net of costs associated with the disposal of £119,000.
iomart group plc Annual Report 2011
19. TRADE AND OTHER PAYABLES
Trade payables
Corporation tax
Other taxation and social security
Accruals
Deferred income
Trade and other payables
Notes to the Financial Statements. Year ended 31March 2011.
45
2011
£’000
(1,377)
(303)
(596)
(3,407)
(4,364)
(10,047)
2010
£’000
(1,044)
(12)
(915)
(2,399)
(3,119)
(7,489)
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 AND CONTINGENT CONSIDERATION
Deferred consideration due on acquisition:
- iomart Datacentres Limited (formerly known as Ezee DSL Ltd)
Contingent consideration due on acquisition:
- Titan Internet Limited
Total deferred and contingent consideration due on acquisitions
2011
£’000
2010
£’000
-
(1,000)
(600)
(600)
-
(1,000)
On 27 August 2010, the final instalment of deferred consideration of £1,000,000 was paid in relation to the acquisition of iomart
Datacentres Limited (formerly known as Ezee DSL Limited). The single share in iomart Datacentres Limited that had been placed
in escrow was transferred to iomart Group plc on payment of this final instalment and consequently iomart Group plc now owns
100% of the share capital of this company.
The contingent consideration due on the acquisition of Titan Internet Limited is subject to a successful transfer of Titan’s server
estate to the Group’s data centres and is expected to be completed within 12 months.
www.iomart.com
46
Notes to the Financial Statements. Year ended 31March 2011.
21. BORROWINGS
Current:
Obligations under finance leases
Bank loans
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:
2011
£’000
(846)
(2,000)
(2,846)
(920)
(920)
2010
£’000
(480)
-
(480)
(834)
(834)
(3,766)
(1,314)
Due within one year
Due between two and five years
Capital
£’000
846
920
1,766
2011
Interest
Total
£’000 £’000
938
964
136 1,902
92
44
Capital
£’000
480
834
1,314
2010
Interest
Total
£’000 £’000
561
903
150 1,464
81
69
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 6.9% (2010: 6.1%). Lease payments are made on a monthly and quarterly basis.
The future lease obligation of £1,902,000 (2010: £1,464,000) has a present value of £1,846,000 (2010: £1,367,000).
In June 2010 the Group obtained a multi option revolving credit facility of £10m which was made available in order to finance business
acquisitions and to finance capital expenditure. In order to fund the acquisition of Titan Internet Limited, £2.0m of this facility was drawn
down in November 2010 and this remained the only draw down of the facility at 31 March 2011. The interest rate on the bank loan is
fixed for the 6 month term of the loan at 3.0% per annum (2010: nil) which results in an effective annual interest rate, which includes the
cost of draw down fees, of 5.0% (2010: nil). Due to the short term nature of the loan, the future loan obligation of £2,030,000 (2010:
£nil) approximates the present value.
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
Between two to five years
After five years
2011
2010
Land and
buildings
£’000
2,222
5,189
6,006
13,417
Other
£’000
181
252
381
814
Land and
buildings
£’000
1,280
4,972
5,228
11,480
Other
£’000
240
347
387
974
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. At 31 March 2011, the total future minimum sub-lease
payments expected to be received under non-cancellable sub-leases were £226,000 (2010: £275,000)
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
47
Ordinary shares of 1p each
Number of shares
200,000,000
100,239,302
2,513,297
102,752,599
1,087,244
103,839,843
£’000
2,000
1,002
26
1,028
10
1,038
23. SHARE CAPITAL
Authorised
At 31 March 2009, 2010, and 2011
Called up, allotted and fully paid
At 31 March 2009
Issued to Employee Benefit Trust
At 31 March 2010
Exercise of options
At 31 March 2011
During the year the company issued 1,087,244 (2010: nil) ordinary shares of 1p each in respect of the exercise of share options by
employees for which a net total of £473,000 (2010: £nil) was received
As at 31 March 2011 the company held 4,977,184 shares (2010: 4,977,184) 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 (2010: £49,772).
The JSOP shares are valued at 49.5p per share, which was the mid-market value of the shares at the start of trading on the day they
were issued, resulting in a total 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. Certain
of the JSOP shares, as identified in the Remuneration Report on pages 11-14, are 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.
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, are equally eligible to receive dividends and represent one vote at the shareholders' meetings
of iomart Group plc. All shares issued at 31 March 2011 are fully paid.
www.iomart.com
48
Notes to the Financial Statements. Year ended 31March 2011.
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
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
Other approved schemes
Between 1 and
3 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
10 years after
date of grant
As set by Remuneration
Committee
As set by Remuneration
Committee
As set by Remuneration
Committee
As set by Remuneration
Committee
Yes
Yes
Yes
Yes
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 1,087,244 ordinary shares (2010: 830,660) were exercised and the average market price at the exercise
dates was 66.6p (2010: 32.0p).
As disclosed in note 5, a share based payment charge of £290,000 (2010: £379,000) has been recognised in the statement of
comprehensive income 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
29-Oct-10
31-Mar-12
02-Dec-10
31-Mar-13
02-Dec-10
31-Mar-14
88.5p
62%
1.0%
1
10
1.4
2.00%
100%
25.07p
90.5p
87.5p
63%
1.0%
1
10
2.3
2.02%
100%
32.04p
87.5p
87.5p
63%
1.0%
3
10
3.3
2.02%
100%
37.40p
87.5p
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 share option schemes are as follows:
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
49
24. SHARE BASED PAYMENTS (CONTINUED)
As at 31 March 2011
Details
Options for shares outstanding
Vested
options for
shares not yet
exercised
Exercise
price
Grant
date
Exercise
date
Expiry
date
31 March
2010
Issued
Transferred Forfeited Exercised 31 March 31 March
2011
2011
Enterprise management incentive scheme
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
29/10/2010
01/04/2010
31/03/2011
31/03/2012
31/03/2013
31/03/2014
31/10/2001
20/12/2009
20/06/2010
31/03/2009
31/03/2010
31/03/2011
30/09/2009
31/03/2011
31/03/2012
31/03/2013
01/14/2011
01/04/2012
31/03/2013
31/03/2014
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
29/10/2020
29/10/2020
02/12/2020
02/12/2020
02/12/2020
02/12/2020
31/10/2011
20/12/2017
20/12/2017
29/09/2018
29/09/2018
29/09/2018
05/02/2019
11/05/2019
11/05/2019
11/05/2019
29/10/2020
29/10/2020
02/12/2020
02/12/2020
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
-
-
-
-
-
-
50,000
40,230
100,000
80,647
166,667
172,042
12,000
125,676
225,000
225,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
83,333
49,263
16,667
76,668
81,808
59,999
-
-
-
-
-
-
-
-
-
-
34,071
83,333
28,191
66,667
-
-
-
-
-
-
-
-
-
-
-
-
(116,668)
(116,667)
(111,290)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,500)
-
(5,833)
-
(5,834)
-
-
-
-
-
-
- (100,000)
- (100,000)
(50,000)
-
(50,000)
-
(29,885)
-
-
-
(93,011)
-
(50,000)
-
-
(16,666)
-
-
-
-
-
-
(25,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
116,668
116,667
111,290
-
-
-
-
-
-
-
-
-
-
(40,230)
-
- (100,000)
- (197,315)
(50,000) (164,248)
-
(12,000)
-
-
-
-
-
-
-
(100,000)
-
-
-
-
-
-
-
-
42,081
42,083
42,086
224,521
50,000
85,982
50,000
60,000
110,000
110,000
69,770
10,000
136,021
50,001
83,331
235,923
28,495
100,000
225,000
124,324
25,000
25,000
200,000
83,333
49,263
16,667
76,668
81,808
59,999
50,000
-
-
-
69,086
183,332
-
125,676
225,000
225,000
34,071
83,333
28,191
66,667
42,081
42,083
42,086
224,521
50,000
85,982
50,000
60,000
110,000
110,000
69,770
10,000
136,021
50,001
83,331
235,923
28,495
-
225,000
124,324
-
-
-
83,333
-
16,667
-
-
-
50,000
-
-
-
69,086
183,332
-
125,676
-
-
-
-
-
-
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
90.50 29/10/2010
90.50 29/10/2010
87.50 02/12/2010
87.50 02/12/2010
87.50 02/12/2010
87.50 02/12/2010
Unapproved schemes
11.75 31/10/2001
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
26.50 05/02/2009
37.00 11/05/2009
37.00 11/05/2009
37.00 11/05/2009
90.50 29/10/2010
90.50 29/10/2010
87.50 02/12/2010
87.50 02/12/2010
Approved Schemes
44.00 24/01/2001
13.50 26/09/2001
11.75 31/10/2001
24/01/2004
26/09/2004
31/10/2004
24/01/2011
26/09/2011
31/10/2011
37,500
5,000
23,888
-
-
-
Total
Weighted Average Exercise price
4,266,622 580,000
43.14p 88.79p
-
-
-
-
-
-
-
-
(37,500)
-
(23,888)
-
5,000
-
-
5,000
-
(166,666) (1,087,244) 3,592,712 2,312,712
51.02p
51.62p
46.50p
43.39p
www.iomart.com
50
Notes to the Financial Statements. Year ended 31March 2011.
24. SHARE BASED PAYMENTS (CONTINUED)
As at 31 March 2010
Exercise
price
Details
Grant
date
Options for shares outstanding
Exercise
date
Expiry
date
31 March
2009
Issued Surrenderd Exercised Expired
31 March
2010
Enterprise management incentive scheme
Vested
options for
shares not yet
exercised
31 March
2010
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
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
31/03/2009
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
29/03/2010
29/03/2010
29/03/2010
31/10/2011
17/11/2014
27/09/2017
20/12/2017
20/12/2017
29/09/2018
29/09/2018
29/09/2018
06/10/2018
06/10/2018
06/10/2018
06/10/2018
05/02/2019
11/05/2019
11/05/2019
11/05/2019
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
Total
Weighted Average Exercise price
iomart group plc Annual Report 2011
8,916,045 1,200,000 (4,977,184) (830,660) (41,579) 4,266,622 2,637,311
44.66p
5.00p 76.00p
38.25p
50.41p
43.14p
44.45p
Notes to the Financial Statements. Year ended 31March 2011.
51
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 2011
Details
Options for shares outstanding
Vested options
for JSOP
shares not yet
exercised
Exercise
price
Grant
date
Exercise
date
Expiry
date
31 March
2010
Issued Surrenderd Exercised Expired
31 March
2011
31 March
2011
Joint Share Ownership Plan
50.99
50.99
50.99
52.00
78.50
50.99
50.99
50.99
50.99
Total
31/03/2010
31/03/2010
06/10/2018
935,582
31/03/2010
31/03/2011
06/10/2018
1,050,000
31/03/2010
31/03/2012
06/10/2018
1,350,000
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
914,018
500,479
20,115
50,000
90,324
66,666
4,977,184
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
935,582
935,582
1,050,000
1,050,000
1,350,000
914,018
500,479
20,115
50,000
90,324
66,666
-
914,018
500,479
20,115
50,000
90,324
66,666
-
4,977,184 3,627,184
Weighted Average Exercise price
52.60p
n/a
n/a
n/a
n/a
53.95p
55.05p
As at 31 March 2010
Details
Options for shares outstanding
Vested options
for JSOP
shares not yet
exercised
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
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
49.50
49.50
49.50
50.50
78.50
49.50
49.50
49.50
49.50
Total
Weighted Average Exercise price
25. RELATED PARTY TRANSACTIONS
-
-
-
-
-
-
-
-
-
-
935,582
1,050,000
1,350,000
914,018
500,479
20,115
50,000
90,324
66,666
-
-
-
-
-
-
-
-
-
4,977,184
52.60p
-
n/a
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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
-
-
4,977,184 2,460,518
n/a
n/a
52.60p
55.77p
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.
www.iomart.com
52
Notes to the Financial Statements. Year ended 31March 2011.
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
2011 (2010: nil).
(b) Commitments
Capital expenditure on property, plant and equipment committed by the Group at 31 March 2011 was £83,000 (2010: £249,000).
27. RISK MANAGEMENT
The Group finances its operations by raising finance through equity, bank borrowings and finance leases. 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.
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
53
27. RISK MANAGEMENT (CONTINUED)
The carrying amounts of financial assets presented in the statement of financial position relate to the following measurement categories
as defined in IAS 39:
2011
Non-current:
Lease deposit
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Total for category
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
Loans and
receivables
£’000
Designated at
fair value
through profit
or loss
£’000
2,016
1,181
6,864
240
10,301
1,216
914
1,258
5,715
172
-
9,275
-
-
-
-
-
-
-
-
-
-
19
19
Total
£’000
2,016
1,181
6,864
240
10,301
1,216
914
1,258
5,715
172
19
9,294
The carrying amounts of financial liabilities presented in the statement of financial position relate to the following measurement categories
as defined in IAS 39:
2011
Non-current:
Finance leasing capital obligations
Current:
Trade payables
Accruals
Bank loan
Contingent consideration due on acquisition
Finance leasing capital obligations
Forward foreign exchange contracts
Total for category
2010
Non-current:
Finance leasing capital obligations
Current:
Trade payables
Accruals
Deferred consideration due on acquisition
Finance leasing capital obligations
Total for category
Designated at
fair value
through profit
Financial
liabilities
measured at
or loss amortised cost
£’000
£’000
Other
(non-IAS 39)
£’000
Total
£’000
-
-
-
-
-
-
(30)
(30)
-
-
-
-
-
-
-
(920)
(920)
(1,377)
(3,401)
-
(600)
-
-
(5,378)
-
-
(2,000)
-
(846)
-
(3,766)
(1,377)
(3,401)
(2,000)
(600)
(846)
(30)
(9,174)
-
(834)
(834)
(1,044)
(2,399)
(1,000)
-
(4,443)
-
-
-
(480)
(1,314)
(1,044)
(2,399)
(1,000)
(480)
(5,757)
www.iomart.com
54
Notes to the Financial Statements. Year ended 31March 2011.
27. RISK MANAGEMENT (CONTINUED)
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$1.8m (2010: US$1.6m) 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 $840,000 (2010: $800,000) for a total of £555,000
(2010: £509,000), at an average exchange rate of US$:GBP of 1.51 (2010: 1.57) over the period to September 2011. The fair value
of these currency contracts is estimated to be approximately a loss of £30,000 (2010: gain £19,000). This has been recognised in the
statement of comprehensive income 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.
Capital risk
The Group currently has net cash. The Group’s policy on capital structure is to maintain a level of gross cash which the Board considers
to be adequate for the size of the Group’s operations. Consequently, the Group makes use of both banking facilities and finance lease
arrangements to help fund the acquisition of companies and capital expenditure in order to maintain that level of gross cash. The Group
is committed to paying annual dividends depending on the underlying profitability and cash generation of the business. The Group was
in compliance with all debt covenants in the banking facility arrangements throughout the reporting period.
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 £1,181,000 (2010: £1,258,000) 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.
28. POST BALANCE SHEET EVENT
The Group acquired 100% of the issued share capital of Switch Media Limited and its subsidiaries (“Switch Media”) on 26 April 2011.
This transaction will be accounted for by the acquisition method of accounting.
Switch Media supplies domain registration, web hosting and web design services to its client base primarily in the UK and in the Republic
of Ireland and the acquisition is in line with the group’s strategy to grow both organically and by acquisition.
The acquired business did not contribute to the revenues or profit of the group during the year ended 31 March 2011.
During the year the group incurred £78,000 of third party acquisition related costs in respect of this acquisition. These expenses are
included in administrative expenses in the group’s consolidated statement of comprehensive income for the year ended 31 March 2011.
After the year end a further £9,000 of third party acquisition related costs are expected to be incurred and these will be included in
administrative expenses in the group’s consolidated statement of comprehensive income for the year ending 31 March 2012.
iomart group plc Annual Report 2011
Notes to the Financial Statements. Year ended 31March 2011.
55
28. POST BALANCE SHEET EVENT (CONTINUED)
The following table summarises the consideration transferred to acquire Switch Media Limited and its subsidiaries and the amounts of
identified assets acquired and liabilities assumed at the acquisition date:
Fair value of consideration transferred:
Cash
Contingent consideration
Total consideration
Recognised amounts of net assets acquired and liabilities assumed (provisional):
Cash and cash equivalents
Trade and other receivables
Current deferred tax asset
Property, plant and equipment
Intangible assets
Trade and other payables
Current deferred tax liability
Non-current deferred tax liability
Total identifiable assets
Goodwill
£’000
1,025
225
1,250
126
75
52
47
395
(464)
(40)
(61)
130
1,120
1,250
The acquisition of Switch Media includes a contingent consideration arrangement that requires additional consideration to be paid by
the group for Switch subject to the successful integration of the business of Switch Media into the group, the successful transfer of Switch
Media’s provisioning platforms to existing group platforms and the successful transfer of Switch Media’s server estate to the group’s
datacentres.
The goodwill arising on the acquisition of Switch Media is attributable to the specialised, industry specific knowledge of the management
and staff, the benefits to the Group in merging the business with its existing infrastructure and the anticipated future operating synergies
from the combination. The goodwill is not expected to be deductible for tax purposes.
All services supplied by Switch Media are payable in advance and the fair value of the assets does not include any trade receivables. The
fair value of the acquired customer relationships intangible asset of £394,000 is provisional pending a final valuation.
To estimate the fair value of the customer relationship intangible asset, 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
13.8% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 3 years.
The name, Switch Media Limited, is not actively advertised or promoted, with the majority of Switch Media’s business being generated
from existing customers or by mail shots to newly registered companies. Switch Media has given a commitment to customers not to
share information held about them with third parties. No value has therefore been attributed to either the trade name/brand or to the
customer lists acquired at the acquisition date.
www.iomart.com
56
Holding Company Financial Statements
Year ended 31March 2011
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 2011 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
Respective responsibilities of directors and auditors
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 Group financial statements
of iomart Group plc for the year ended 31 March 2011.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
31 May 2011
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 and express an opinion on 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/
private.cfm.
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 2011;
• 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 2011
Holding Company Financial Statements. Year ended 31March 2011.
57
BALANCE SHEET
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
Note
4
5
7
8
9
9
9
9
2011
£’000
31,098
31,098
14,151
5,981
20,132
(10,433)
9,699
40,797
1,038
(2,464)
1,200
19,977
21,046
2010
£’000
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
TOTAL EQUITY SHAREHOLDERS’ FUNDS
40,797
39,538
These financial statements were approved by the board of directors on 31 May 2011.
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 2011.
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 2011
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 £807,000 (2010:
£1,022,000).
Holding Company Financial Statements. Year ended 31March 2011.
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
2011
£’000
523
110
466
135
156
2010
£’000
523
110
447
111
33
1,390
1,224
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 2010
Additions
Share based payment
Cost at 31 March 2011
Impairment
At 1 April 2010
Charge for the year
Impairment at 31 March 2011
Net book value of Investments at 31 March 2011
Net book value of Investments at 31 March 2010
All of the above investments are unlisted.
Shares in subsidiary undertakings
£’000
28,315
4,362
119
32,796
(1,685)
(13)
(1,698)
31,098
26,630
www.iomart.com
60
Holding Company Financial Statements. Year ended 31March 2011.
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
%
Scotland
Scotland Managed hosting services
Dormant
Scotland Managed hosting services
Scotland
Dormant
Dormant
Scotland
England Webservices
England Managed hosting services
England Managed hosting services
Datacentre services
England
England Webservices
England
England Webservices
Dormant
100
100
100
100
100
100
100
100
100
-
-
-
2011
£’000
160
1
220
354
13,416
-
-
-
-
-
-
-
-
-
100
100
100
2010
£’000
126
918
36
72
14,887
14,151
16,039
iomart Limited
iomart Hosting Limited
iomart Cloud Services Limited
(formerly known as Netintelligence Limited)
iomart Virtual Servers Hosting Limited
Netintelligence Limited (formerly known
as Easyspace Datacentres (UK) Limited)
Easyspace Limited
Rapidswitch Limited
Titan Internet Limtied
iomart Datacentres Limited
(formerly known as Ezee DSL Limited)
Internetters Limited
NicNames Limited
Web Genie Internet Limited
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 2011
Holding Company Financial Statements. Year ended 31March 2011.
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
Profit and loss account movement arising during the year
Profit and loss account reserve movement during the year
Balance carried forward
2011
Recognised Unrecognised
£’000
-
£’000
354
2010
Recognised Unrecognised
£’000
-
£’000
72
2011
£’000
2010
£’000
72
202
80
354
79
(7)
-
72
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
Contingent consideration
Bank loan
Amounts owed to subsidiary undertakings
8. SHARE CAPITAL
Authorised
At 31 March 2009, 2010, and 2011
Called up, allotted and fully paid
At 31 March 2009
Issued to Employee Benefit Trust
At 31 March 2010
Exercise of options
At 31 March 2011
2011
£’000
8
41
710
-
600
2,000
7,074
10,433
2010
£’000
43
184
801
1,000
-
-
6,327
8,355
Ordinary shares of 1p each
Number of shares
£’000
200,000,000
100,239,302
2,513,297
102,752,599
1,087,244
103,839,843
2,000
1,002
26
1,028
10
1,038
During the year the company issued 1,087,244 (2010: nil) ordinary shares of 1p each in respect of the exercise of share options by
employees for which a net total of £473,000 (2010: £nil) was received.
www.iomart.com
62
Holding Company Financial Statements. Year ended 31March 2011.
8. SHARE CAPITAL (CONTINUED)
As at 31 March 2011 the company held 4,977,184 shares (2010: 4,977,184) 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 (2010: £49,772).
The JSOP shares are valued at 49.5p per share, which was the mid-market value of the shares at the start of trading on the day they
were issued, resulting in a total 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
at the time of disposal. Certain of the JSOP shares, as identified in the Remuneration Report on pages 11-14, are 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.
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, are equally eligible to receive dividends and represent one vote at the shareholders' meetings
of iomart Group plc. All shares issued at 31 March 2011 are fully paid.
9. STATEMENT OF MOVEMENT IN RESERVES
Profit for the financial period
Dividends
Share based payments
Deferred tax on share based remuneration
Issue of own shares for option redemption
Opening balance
Closing balance
Own
shares
JSOP
£’000
Capital
redemption
reserve
£’000
Share
premium
account
£’000
Profit
and loss
account
£’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
463
463
807
(391)
290
80
-
786
(2,464)
1,200
19,514
20,260
(2,464)
1,200
19,977
21,046
iomart group plc Annual Report 2011
Holding Company Financial Statements. Year ended 31March 2011.
63
2011
£’000
807
(391)
473
-
-
290
80
1,259
39,538
40,797
2010
£’000
1,022
(291)
41
1,219
(1,219)
379
-
1,151
38,387
39,538
10. MOVEMENT IN SHAREHOLDERS’ FUNDS
Profit for the financial period
Dividend paid
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 £290,000 (2010: £379,000) by;
1) taking the charge in relation to employees of the holding company through the holding company statement of comprehensive
income £171,000 (2010: £256,000),
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 £119,000 (2010: £123,000).
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 2011 (2010: nil).
(b) Commitments
There are no commitments present as at 31 March 2011 (2010: Nil).
13. POST BALANCE SHEET EVENT
On 26 April 2011, the Group acquired 100% of the issued share capital of Switch Media Limited for a total consideration of £1,250,000.
Full details of this acquisition are disclosed in note 28 to the Group financial statements.
www.iomart.com
64
Notice of the 2011 Annual General Meeting
NOTICE IS HEREBY GIVEN that the 2011 annual general
meeting of the Company will be held at Lister Pavilion, Kelvin
Campus, West of Scotland Science Park, Glasgow G20
0SP on 29 September 2011 at 2.30 pm for the purpose
of considering and, if thought fit, passing the following
resolutions, of which resolutions 1 to 8 (inclusive) will be
proposed as ordinary resolutions and resolutions 9 to 10
(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 2011.
2 To approve the report of the board to the members on
directors' remuneration for the year ended 31 March 2011.
3 To reappoint Sarah Haran (who retires by rotation and,
being eligible, offers herself for re-election) as a director of
the Company.
4 To reappoint Chris Batterham (who retires by rotation and,
being eligible, offers himself for re-election) as a director of
the Company.
5 To declare a final dividend for the year ended 31 March
2011 of 0.65p per share payable on 5 October 2011 to
shareholders registered at the close of business on 10 June
2011.
6 To reappoint Grant Thornton UK LLP, Chartered Accountants,
as auditors of the Company and to authorise the directors to
fix their remuneration.
7 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 maximum aggregate nominal amount of shares to
be allotted in pursuance of such authority is an aggregate
nominal amount equal to £346,132.81; 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 2012 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
iomart group plc Annual Report 2011
conferred on the Directors in accordance with section 80 of
the Companies Act 1985 or section 551 of the Act.
8 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 £346,132.81 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 2012 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.
9 That subject to the passing of resolutions 7 and 8 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 7 and 8 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
£103,839.84;
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
held in 2012, 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.
10 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 10,383,984 (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 2011
Glasgow G20 0SP
Notice of the 2011 Annual General Meeting
65
www.iomart.com
66
Notice of the 2011 Annual General Meeting
NOTES:
Appointment of Proxy
EXPLANATORY NOTES TO THE NOTICE OF ANNUAL
GENERAL MEETING IOMART GROUP PLC
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, Kent, 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 Tuesday 27
September 2011) 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 27 September 2011; 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
Ordinary Resolutions
Resolutions 1 to 8 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 2011 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, Mrs
Sarah Haran and Mr Chris Batterham 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 Mrs Sarah Haran and Mr Chris Batterham
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 Mrs Sarah Haran and Mr Chris Batterham.
Brief biographical details of Mrs Sarah Haran and Mr Chris
Batterham are given below.
Sarah Haran 45, 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
iomart group plc Annual Report 2011
Notice of the 2011 Annual General Meeting
67
the day-to-day business processes and technical operations
to support the Group’s customer base.
capital of the Company as at the date of the notice of this
meeting.
Chris Batterham 56, 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, office2office
plc and The Risk Advisory Group. He is also chairman of
Eckoh plc. Chris has also served on the boards of Staffware
plc, DBS Management plc, DRS plc, Betfair Limited and The
Invesco Techmark Enterprise Trust plc.
Resolution 5 – To declare a dividend 0.65p per Ordinary
Share
Subject to the provisions of the Companies Acts, the
Company may by ordinary resolution declare dividends,
but no dividend shall exceed the amount recommended
by the Board. The Board recommends the payment of a
final dividend of 0.65p per Ordinary Share, to be payable
to shareholders registered at close of business on 10 June
2011.
In line with recent guidance issued by the Association of
British Insurers, resolution 8 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 £346,132.81 (representing 34,613,281 Ordinary
Shares). This amount represents approximately a further one
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 2012.
Special Resolutions
Resolutions 9 and 10 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 6 – Re-appointment and remuneration of
auditors
Resolution 9 - 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 9 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 7 and 8 – 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 7 would give the directors the authority to allot
shares up to an aggregate nominal amount of £346,132.81,
being approximately one-third of the issued ordinary share
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 9 (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.
www.iomart.com
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
resolution 10 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 2011 Annual General Meeting
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
9 asks shareholders to waive their pre-emption rights in
respect of any such issue of shares.
Resolution 9 (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 9 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 2012.
Resolution 10 – 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 earning per Ordinary Share.
iomart group plc Annual Report 2011
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
Peel Hunt LLP, 111 Old Broad Street, London EC2N 1PH
Bankers
Lloyds Banking Group, Bank of Scotland plc, 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
Titan Internet
* : sales@titaninternet.co.uk
www.titaninternet.co.uk
Westcoastcloud
* : info@westcoastcloud.com
www.westcoastcloud.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 2011. All other trademarks and registered trademarks are the property of their respective owners.
iomart group plc Annual Report 2011
William Strain, CTO iomart Group.
Tim Loughton, MP.
“I’m delighted that BSI have awarded the first Kitemark for parental control software to
Netintelligence. The standards set by BSI are rigorous and the availability of Kitemark
certified software will help give parents confidence that their children will be protected
from harmful or inappropriate content on the internet.”
Tim Loughton, Minister for Children and Families
iomart group plc Annual Report 2011
iomart group plc Annual Report 2011
iomart Group plc, Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow, G20 0SP. www.iomart.com