Annual Report and Accounts 2012
iomart group plc Annual Report 2012
Recognition
“The award of plc of the year goes
to the Scottish plc with the strongest
all round performance based on
profitability, growth and productivity.”
iomart has been named both Scottish
plc and AIM/Mid Sized Cap plc of the
Year at the 2012 Scottish plc Awards
iomart group plc Annual Report 2012
Financial Statements for year ended 31 March 2012
Highlights
Financial
• Revenue growth of 33% to £33.5m (2011: £25.3m)
• Adjusted EBITDA¹ growth of 68% to £11.2m (2011: £6.6m)
• Adjusted profit before tax² growth of 91% to £6.9m
(2011: £3.6m) benefitting strongly from operational leverage
• Adjusted basic earnings per share³ from operations increased
by 96% to 6.99p (2011: 3.56p)
• Cash flow from operations growth of 36% to £9.6m
(2011: £7.1m)
• Proposed final dividend increased by 38% to 0.90p per share
(2011: 0.65p per share)
Operational
• Acquisition and integration of Switch Media, EQSN and
Global Gold further accelerating growth
• Hosting segment organic revenue growth of 21%
1 Throughout these financial statements adjusted EBITDA is earnings before interest, tax, depreciation and amortisation
(EBITDA) before share based payment charges and acquisition costs. Throughout these financial statements acquisition
costs are defined as acquisition related costs and non-recurring acquisition integration costs.
2 Throughout these financial statements adjusted profit before tax is profit before tax, amortisation charges on acquired
intangible assets, share based payment charges and acquisition costs.
3 Throughout these financial statements adjusted earnings per share is earnings per share before amortisation charges on
acquired intangible assets, share based payment charges and acquisition costs.
iomart group plc Annual Report 2012
Revenue Growth
33%
to £33.5M
EBITDA Growth
68%
to £11.2M
PBT Growth
91%
to £6.9M
Dividend Growth
38%
to 0.9p/share
Social Responsibility
iomart is supporting British grassroots football by offering
free team strips to youth teams via its Host Your Kit initiative.
iomart group plc Annual Report 2012
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
Directors' responsibilities statement
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
1
3
4
6
10
15
19
21
23
24
25
26
27
28
30
63
71
77
www.iomart.com
Flexibility & Scalability
“iomart Hosting provided the flexible and scalable hosting and high
availability that we needed to cope with peaks in demand.”
Alex Hendry, Senior Web Team Project Manager, Science Museum
iomart group plc Annual Report 2012
By Jknight1603
Ian Ritchie, Chairman
iomart has once again delivered a strong performance in this financial year. Our continuing
success is as a result of a great deal of hard work and we continue to forge a growing
reputation as one of the UK’s foremost cloud computing organisations.
As with last year, we have enjoyed a substantial increase in profitability over the year, driven
both by organic and acquisitive growth. During the year we welcomed Switch Media Limited,
EQSN Limited and Global Gold Holdings Limited into the Group. All are performing as
expected and have now been fully integrated into iomart’s operations.
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. It was extremely gratifying that our achievements over the last year were
acknowledged when we were selected as the Scottish PLC of the Year at the recent 2012
Scotland PLC Awards.
During the year the composition of the Board changed with the retirement of Fred Shedden
as a non-executive director and the appointment of Crawford Beveridge as a non-executive
director. May I take this opportunity to thank Fred for his many years of first class service and
welcome Crawford to the Board.
We have a commitment to pay annual dividends as our profitability and cash generation
grows. This year the Board is proposing to pay a final dividend of 0.90p per share on
5 September 2012 to shareholders on the register on 17 August 2012 representing an
increase of 38% over the dividend last year. We have decided that we will continue to 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. It is our intention to continue to pay annual dividends in future years in line with
the underlying profitability and cash generation of the Group.
With the high level of revenue visibility we enjoy we have begun the 2013 financial year in
a strong position. I look forward to another exciting year of growth, both organically and
through acquisition and look ahead with considerable confidence.
Ian Ritchie
Chairman
28 May 2012
Chairman's Statement
3
With the high level of
revenue visibility we
enjoy we have begun
the 2013 financial
year in a strong
position.
www.iomart.com
4 Chief Executive Officer's Report
Angus MacSween,
Chief Executive Officer
Our market is
large, growing,
highly fragmented
and here to stay.
Introduction
This has been another important year in the development of iomart. We have continued
to build on the successful business model we established when we invested in our own
datacentre capacity and are now enjoying the operating leverage that that gives us. During
this year we have managed to increase the level of growth of revenue, adjusted EBITDA and
adjusted profit before tax ahead of the record amounts achieved in the last financial year
and once again this has been achieved through a combination of sustained organic growth
and growth by acquisition.
Market
Our market is large, growing, highly fragmented and here to stay. As I have often said, the
fundamental shift to products and services being delivered over the web is changing the way
companies organise their internet or ‘cloud’ infrastructure to ensure resilience, scalability,
security and value for money. They are increasingly looking to gain the economies of scale
and peace of mind that trusted vendors like iomart can give them by looking after their
mission critical business processes 24x7x365. As these services become ever more critical to
customers they are now doing far more diligence on the strength of their suppliers and those
with a strong balance sheet who have achieved the scale that iomart has are attracting more
of the market than was the case three or four years ago.
The next buzz word coming along is ‘Big Data’ which is a description of the inevitable growth
in transactions and information being transmitted around the Web which now need to be
stored, managed and analysed. This dramatic growth in data means that vendors in this
market will need to have the infrastructure in both storage and connectivity to cope with these
ever-increasing demands. iomart is investing in both storage infrastructure and in significantly
improving its network capacity to maintain a leading position that will lead to further premium
levels of service for our customers and prospects.
Acquisitions
We are pleased to have continued to accelerate our growth through the acquisition of three
operations during the year. In April 2011 we acquired Switch Media Limited (“Switch Media”)
and in November, EQSN Limited (“EQSN) and Global Gold Holdings Limited (“Global
Gold”). All three have proven to be good additions to the Group and have now been fully
integrated into the business operationally. We continue to look for businesses that fit our
acquisition criteria with a view to making further acquisitions in the coming year.
Operational Review
Whilst all of our activities involve the provision of managed hosting services we are organised
into two operating segments.
iomart group plc Annual Report 2012
5
Chief Executive Officer's Report
Hosting
Our Hosting segment, which now includes EQSN, continued to perform well over the year.
We provide a range of managed hosting services to both SMEs and corporate customers including the provision of complex
solutions that include both private and hybrid cloud solutions. We believe the corporate market in the UK will continue to prefer
bespoke ring-fenced quality infrastructure rather than the largely unsupported public clouds that are in the market. All our
solutions are provided from our network of five datacentres located throughout the UK. The more complex managed hosting
solutions are provided by iomart Hosting and customers typically pay for these services on a monthly basis on contracts ranging
between one and three years in length. We address the dedicated physical server market through our RapidSwitch brand largely
through online marketing. We are also building a reseller network to provide a variety of cloud products covering backup, email
and storage.
Revenues in this segment have grown by 38% to £24.4m with the majority of this growth as a result of the activities of iomart
Hosting. We have won over 600 new orders in the year, including a substantial amount of additional orders from existing
customers.
Easyspace
The Easyspace segment’s activities have been significantly increased over the year due to the acquisition of Switch Media and
Global Gold. Both have now been fully integrated into the operations of the segment.
Our activities within this segment provide a range of products to the micro and SME markets including domain names, shared,
dedicated and virtual servers and email services.
Revenues have increased by 21% over the year to £9.1m, largely due to the contribution of the two acquired businesses.
Current trading and outlook
Since the end of the financial year trading has been encouraging and in line with expectations.
We continue to be well placed to take advantage of the growing trend of companies organising their internet or ‘cloud’
infrastructure to ensure resilience, scalability, security and value for money. We believe we have the relevant skills and experience
which we have built up over many years to be the partner of choice for such organisations.
I look forward with confidence to the year ahead.
Angus MacSween
Chief Executive Officer
28 May 2012
www.iomart.com
6
Finance Director's Report
The Group is now
in a position where
it is generating
substantial amounts
of operating cash.
Richard Logan, Finance Director
Trading Results
Revenue
Revenues for the year of £33.5m (2011: £25.3m) have grown by 33% 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 £24.3m (2011: £17.7m) grew by 38%. This growth was helped by a full
year contribution from Titan Internet Limited (“Titan”) which we acquired at the end of October
2010 and EQSN which we acquired in November 2011. The growth in Hosting segment revenues
excluding the impact of acquisitions was 21%. Over the last four financial years the Hosting
segment has grown revenues, through both organic and acquisitive means, from £4.6m in the year
to March 2009 to £24.3m this year, an increase of more than five-fold.
Our Easyspace segment also delivered a good level of revenue growth in the period with revenues
of £9.1m (2011: £7.6m) showing a 21% increase. The majority of this growth was as a result of
the acquisitions of Switch Media in April 2011 and Global Gold in November 2011.
We have good revenue visibility with recurring levels of around 95%. With our larger customers we
have multi-year contracts for the provision of complex managed hosting solutions. Many of our
smaller customers pay in advance for the provision of hosting services resulting in a substantial
sum of deferred revenue which we then recognise during the period over which we provide our
services.
Gross Margin
Our gross profit for the year was £22.4m (2011: £15.6m) representing a gross margin of 67%
(2011: 62%) with both operating segments contributing to this improvement. The improvement in
our Hosting segment is a result of the high operational leverage of this business. In our Easyspace
segment it has been as a result of a small improvement in organically generated margin and also
as a result of the impact of acquisitions.
Adjusted EBITDA
The adjusted EBITDA for the year of £11.2m (2011: £6.6m) has increased by 68%. Our percentage
adjusted EBITDA margin has also significantly improved to 33% (2011: 26%). 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 £10.1m (2011: £6.2m), an increase of 63%. In
percentage terms the adjusted EBITDA margin has improved to 41% (2011: 35%).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. The increased costs, mainly relate to the introduction of additional headcount,
especially in sales and technical roles. The contribution from Titan for the full year has contributed
to the improvement in the adjusted EBITDA in absolute terms and has helped maintain the
percentage margin improvement and similarly the contribution from EQSN since November has
added to the growth in adjusted EBITDA.
The Easyspace segment’s adjusted EBITDA was £3.6m (2011: £2.8m) an increase of 29%.
In percentage terms the adjusted EBITDA margin has improved to 39% (2011: 37%). The
improvement in adjusted EBITDA is partly the result of improved organic margin and partly from
the impact of the acquisitions of Switch Media and Global Gold during the year.
iomart group plc Annual Report 2012
7
Finance Director's Report
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 £2.5m (2011: £2.3m).
Adjusted profit before tax
Depreciation charges of £3.7m (2011: £2.7m) have increased largely as a result of charges for the equipment bought to provide services
to the additional Hosting segment customers and also as a consequence of the acquisitions made in the year.
The charge for amortisation of intangibles, excluding amortisation of intangible assets resulting from acquisitions (“amortisation of
acquired intangible assets”) of £0.5m (2011: £0.4m) has remained fairly static over the year.
Finance income in the period was £0.1m (2011: £0.2m) and finance costs of £0.3m (2011: £0.2m) include interest on bank loans used
to fund acquisitions 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 depreciation, amortisation, amortisation of acquired intangible assets, and finance costs and crediting
the finance income from the adjusted EBITDA, the Group’s adjusted profit before tax was £6.9m (2011: £3.6m).
Profit before tax
The measure of adjusted profit before tax is a non-statutory measure which is commonly used to analyse the performance of companies
particularly where M&A activity forms a significant part of their activities.
A reconciliation of adjusted profit before tax to reported profit before tax is shown below:
Reconciliation of adjusted profit before tax to profit before tax
Adjusted profit before tax
Less: Amortisation of acquired intangible assets
Less: Acquisition costs
Less: Share based payments
Profit before tax
2012
£’000
6,854
(604)
(304)
(104)
5,842
2011
£’000
3,593
(316)
(195)
(290)
2,792
The adjusting items are: share based payment charges in the period of £0.1m (2011: £0.3m) which 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; costs of £0.3m (2011: £0.2m) as a result of acquisition costs; and charges for the amortisation of acquired intangible assets
of £0.6m (2011: £0.3m) which have increased as a result of the acquisitions made in the year and the full year effect of acquisitions
made in previous years.
After deducting the charges for share based payments, charges for the amortisation of acquired intangible assets and acquisition costs
from the adjusted profit before tax, the reported profit before tax was £5.8m (2011: £2.8m).
Profit for the year from total operations
There is a tax credit for the year of £0.4m (2011: £0.1m) arising from a deferred tax credit of £0.7m (2011: £0.2m). This was offset by
a corporation tax charge of £0.4m (2011: £0.1m) and resulted in a profit for the year from total operations of £6.2m (2011: £2.9m).
Earnings per share
Adjusted earnings per share is based on profit for the year attributed to ordinary shareholders before share based payment charges,
amortisation charges of acquired intangible assets and acquisition costs, and the tax effect of these items was 6.99p (2011: 3.56p)
being an increase of 96%.
The measure of adjusted earnings per share as described above is a non-statutory measure which is commonly used to analyse the
performance of companies particularly where M&A activity forms a significant part of their activities.
The calculation of both adjusted earnings per share and basic earnings per share is included at note 12.
Basic earnings per share from continuing operations was 6.22p (2011: 2.91p), an increase of 114% over the year.
Acquisitions
In April 2011 the Company acquired Switch Media for a total consideration of £1.25m, which was paid in full in the year, and in
November 2011 the Company acquired EQSN for a maximum consideration of £2.48m and Global Gold for a maximum consideration
of £1.20m. At the time of acquisition of EQSN the Company paid £2.25m towards the total purchase price and subsequent to the year-
end a further £0.23m has been paid. At the time of acquisition of Global Gold the Company paid £0.73m towards the total purchase
price and paid a further £0.02m subsequent to the year end.
www.iomart.com
8
Finance Director's Report
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 £9.6m (2011: £7.1m) with
the significant increase over the previous year’s level largely due to the improvement in adjusted EBITDA. After deducting a cash payment
for corporation tax of £0.6m (2011: £nil) the net cash flow from operating activities was £9.0m (2011: £7.0m).
Cash flow from investing activities
In line with our strategy of accelerating our growth by acquisition the Group continued to spend substantial sums on investing activities,
spending a total of £7.4m (2011: £7.1m) in the period. Of this amount, a net sum of £4.5m (2011: £3.3m) was incurred in relation to
acquisition activities. As well as the investment in the year to acquire Switch Media, EQSN and Global Gold, the Group also paid the
contingent consideration due on the acquisition of Titan Internet in the previous financial year.
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 £2.4m (2011: £3.4m) in such activities, net of related finance lease
drawdown.
Expenditure was also incurred on development costs of £0.5m (2011: £0.4m) and the purchase of software of £0.1m (2011: £0.2m).
Cash flow from financing activities
The Group’s financing activities generated a net cash inflow of £0.5m (2011: £1.2m) over the year. The issue of new shares, due to the
exercise of share options by staff, generated £0.5m (2011: £0.5m) and the Group also drew down £2.0m of bank loans to help fund
acquisitions. The Group spent £1.2m (2011: £0.8m) repaying finance leases, £0.6m (2011: £0.4m) on dividends and £0.2m (2011:
£0.1m) on interest.
Net cash flow
As a consequence, our overall cash generation during the year was £2.1m (2011: £1.1m) which resulted in cash and cash equivalent
balances at the end of the year of £8.9m (2011: £6.9m). After recognising bank loans of £4.0m (2011: £2.0m) and finance lease
obligations of £2.5m (2011: £1.8m) net cash balances at the end of the period stood at £2.5m (2011: £3.1m).
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 £10.0m, of which £4.0m has been drawn down 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 performance of the Group could be adversely affected if the required staffing levels
are not maintained. 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. Should the Group be unable to provide the required level of service this could have an adverse
effect on the Group’s performance through the loss of customers and reputation. 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.
iomart group plc Annual Report 2012
9
Finance Director's Report
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. Where any of these key suppliers to fail in their service provision to the Group this
could have an adverse effect on the Group’s ability to provide services to its customers. 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. Should the Group’s search engine optimisation performance deteriorate this could have an adverse effect on
the revenue of the Group. The Group continually monitors the position of its websites with respect to these search engines.
Through the allocation of experienced staff the Group seeks to maintain or enhance the position of its websites for detection by
internet search engines.
Growth management
The Group is experiencing high levels of growth through both organic and acquisitive means. As a consequence we need to
continue to evolve as an organisation to meet the demands that such growth places on our business operations. Failure to evolve
in the necessary way could lead to deterioration in overall business performance. As part of our annual strategy and budget
review process, which is updated as necessary throughout the year we identify the resource and organisational changes that are
needed to support our growth. In addition a detailed integration and migration plan is produced for each acquisition that is made
to ensure the acquired operation is successfully integrated into the Group’s operations.
Acquisitions
The Group has made several acquisitions over the last years and has a stated strategy to continue to make acquisitions. This
produces three areas of risk:
• Acquisition target risk – We may not be able to identify suitable targets for acquisition. Through a combination of internal
research and external relationships we maintain an active pipeline of potential acquisition targets.
• Acquisition integration risk – We may not integrate the acquired business into the Group in an effective manner and as a
consequence could lose staff and customers of the acquired business. For each acquisition we prepare a detailed integration
and migration plan which includes the participation of the vendor to ensure successful integration of the acquired business
into the Group’s operations.
• Acquisition performance risk – The acquired business may not perform in line with expectations. As a consequence the
expected financial performance of the operation may not be achieved with a resulting adverse effect on profits and cashflow.
For each acquisition diligence and integration planning is undertaken and all potential synergies identified.
Richard Logan
Finance Director
28 May 2012
www.iomart.com
10
Corporate Governance
As the company is listed on the Alternative Investment Market it is
not required to comply with the provisions of the UK Corporate
Governance Code (the “Code”) issued in June 2010. 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 Code is not appropriate.
The Board
The Code requires the Company to have an effective Board
whose role is to develop strategy and provide leadership to
the Company as a whole, as well as ensuring a framework of
controls exist which allow for the identification, assessment and
management of risk, ultimately taking collective responsibility
for the success of the Company.
Through the leadership of the Chairman, the Board sets
the Company’s strategic goals; ensuring obligations to
shareholders are met. Matters reserved for a decision of the
Board include approval of Group strategy, annual budgets and
business plans, acquisitions, disposals, business development,
annual reports, interim statements, and any significant funding
and capital expenditure plans.
The Board meets regularly, usually monthly, to discuss and agree
on the various matters brought before it, including the trading
results. The Company has a highly committed and experienced
Board, which is supported by a senior management team, with
the qualification and experience necessary for the running of
the Group.
In addition, there is regular communication between Executive
and Non-Executive Directors, where appropriate, to update
the Non-Executive Directors on matters requiring attention
prior to the next Board meeting.
Role of the Chairman and Chief Executive Officer
The Code requires that there should be a clear division of
responsibilities between the running of the Board and the
executive responsible for the Company’s business, so as
to ensure that no one person has unrestricted powers of
decision.
The Chairman is responsible for the leadership of the Board,
ensuring its effectiveness and setting its agenda. Once
strategic and financial objectives have been agreed by the
Board, it is the Chief Executive Officer’s responsibility to
ensure they are delivered upon. To facilitate this, the Chief
Executive Officer chairs the Group’s Operations Boards which
additionally comprises the other executive directors and, where
appropriate senior members of the management team. The
day-to-day operation of the Group’s business is managed by
these Boards.
The Chairman holds other directorships, as detailed in his
biography on page 23. The Board has considered the time
commitment required by his other roles and has concluded
they do not detract from his chairmanship of the Company.
Composition of and Appointments to the Board
The Code requires that there should be a balance of Executive
and Non-Executive Directors and when appointing new
Directors to the Board there should be a formal, rigorous and
transparent procedure.
The Board comprises a Non-Executive Chairman, Chief
Executive Officer, Finance Director, Chief Operating Officer
and
independent Non-Executive Directors. Short
Biographies of the directors are given on page 23.
two
All Non-Executive Directors serving at the year-end are
considered to be independent. The Board does not consider
the shareholdings of the Non-Executive Directors as detailed
on page 16 to have any effect on their independence.
The Board is satisfied with this balance between Executive
and Non-Executive Directors. The Board considers that its
composition is appropriate in view of the size and requirements
of the Group’s business and the need to maintain a practical
balance between Executive and Non-Executive Directors.
Each member of the Board brings different experience and
skills to the Board and its various committees. The Board
composition is kept under review as this mix of skills and
business experience is a major contributing factor to the proper
functioning of the Board, helping to ensure matters are fully
debated and that no individual or group dominates the Board
decision-making process.
When a new appointment to the Board is made, consideration
is given to the particular skills, knowledge and experience
that a potential new member could add to the existing
Board composition. A formal process is then undertaken,
which may involve external recruitment agencies, with
appropriate consideration being given, in regards to Executive
appointments, to internal and external candidates. Before
iomart group plc Annual Report 2012
undertaking the appointment of a Non-Executive Director, the
Chairman establishes that the prospective Director can give
the time and commitment necessary to fulfil their duties, in
terms of availability both to prepare for and attend meetings
and to discuss matters at other times.
Information and Development
A further principle of the Code is that information of a sufficient
quality is supplied to the Board in a timely manner.
The Chairman is responsible for ensuring that all the Directors
continually update their skills, their knowledge and familiarity
with the Group in order to fulfil their role on the Board and
the Board’s Committees. Updates dealing with changes in
legislation and regulation relevant to the Group’s business
are provided to the Board by the Company Secretary/Finance
Director and through the Board Committees.
All Directors have access to the advice and services of the
Company Secretary, who is responsible to the Board for ensuring
the Board procedures are properly complied with and that the
discussions and decisions are appropriately minuted. Directors
may seek independent professional advice at the Company’s
expense in furtherance of their duties as Directors.
Training in matters relevant to their role on the Board is
available to all Board Directors. New Directors are provided
with an induction in order to introduce them to the operations
and management of the business.
Performance Evaluation
The Code requires the Board to undertake a formal and
rigorous evaluation of its own performance annually and that
of its committees and individual Directors.
The Board has not undertaken such a review in this financial
year but now believes the Company is of a size that it should
comply with the Code in this regard in the future. Consequently
it intends to implement an evaluation process during the course
of the next financial year.
Re-election
Under the Code, Directors should offer themselves for re-
election at regular intervals and under the Company’s Articles
of Association, at every Annual General Meeting, at least one
third of the Directors who are subject to retirement by rotation,
are required to retire and may be proposed for re-election. In
addition, any Director who was last appointed or re-appointed
11
Corporate Governance
three years or more prior to the AGM is required to retire from
office and may be proposed for re-election. Such retirement
will count in obtaining the number required to retire at the
AGM. New Directors, who were not appointed at the previous
AGM, automatically retire at their first AGM and, if eligible,
can seek re-appointment.
Three Directors will retire from office at the Company’s
forthcoming AGM and stand for re-appointment.
Board Committees
The Board has established two committees to deal with
specific aspects of the Board’s affairs: Audit and Remuneration
Committees.
The Board has also established a Nominations Committee
which is chaired by Ian Ritchie and includes Crawford
Beveridge (appointed 29 September 2011), Chris Batterham
and the Chief Executive Officer.
www.iomart.com
12
Corporate Governance
Attendance at Board and Committee Meetings
Attendances of Directors at Board and Committee meetings convened in the year, along with the number of meetings that they
were invited to attend, are set out below:
Ian Ritchie – Non-Executive Chairman
Angus MacSween – Chief Executive Officer
Sarah Haran – Chief Operating Officer
Chris Batterham – Non-Executive Director
Fred Shedden – Non-Executive Director
Crawford Beveridge – Non-Executive Director
Richard Logan – Finance Director
* During period of appointment
Board
Remuneration
Committee
Audit
Committee
Held * Attended
Held * Attended Held *
Attended
10
10
10
10
5
5
10
10
9
10
9
5
5
10
3
-
-
3
1
1
-
3
-
-
3
1
1
-
3
-
-
3
1
2
-
3
-
-
3
1
2
-
The Audit Committee
The Audit Committee’s role is to assist the Board with the discharge of its responsibilities in relation to the internal and external
audits and controls. The Audit Committee will normally meet at least three times a year. The Audit Committee is chaired by Chris
Batterham and its other members are Ian Ritchie and Crawford Beveridge (appointed 29 September 2011). The Finance Director,
Chief Executive Officer and other senior management attend meetings by invitation and the Committee also meets the external
auditors without management present. Chris Batterham, as chairman of the Audit Committee, has recent and relevant financial
experience.
During the year, the Audit Committee, operating under its terms of reference, discharged its responsibilities, including reviewing
and monitoring:
• interim and annual reports, information including consideration of the appropriateness of accounting policies;
• material assumptions and estimates adopted by management;
• developments in accounting and reporting requirements;
• external auditors’ plans for the year-end audit of the Company and its subsidiaries;
• the Committee’s effectiveness;
• the Risk Register covering the systems of internal control and their effectiveness, reporting and making new
recommendations to the Board on the results of the review and receiving regular updates on key risk areas of
financial control;
• the performance and independence of the external auditors concluding in a recommendation to the Board on
the reappointment of the auditors by shareholders at the Annual General Meeting. The auditors report annually to
the Committee confirming their independence and stating the methods they employ to safeguard their
independence;
• non-audit fees charges by the external auditors; and
• the formal engagement terms entered into with the external auditors.
Under its terms of reference the Audit Committee is responsible for monitoring the independence, objectivity and performance of
external auditors, and for making a recommendation to the Board regarding the appointment of external auditors on an annual
basis. The Group’s external auditors, Grant Thornton UK LLP, were first appointed as external auditor of the Company for the period
ended 31 March 2005.
iomart group plc Annual Report 2012
13
Corporate Governance
The Remuneration Committee
The Remuneration Committee is chaired by Crawford Beveridge (appointed 29 September 2011) and its other members are Ian
Ritchie and Chris Batterham. It is normal for the Chief Executive Officer to be invited to attend meetings except where matters under
review by the Committee relate to him.
The Committee has responsibility for making recommendations to the Board on the remuneration packages of the Executive
Directors which includes:
• making recommendations to the Board on the Company’s policy on Directors’ remuneration and overseeing long
term incentive plans (including share option schemes for all employees);
• ensuring remuneration is both appropriate to the level of responsibility and adequate to attract and/or retain
Directors and staff of the calibre required by the Company; and
• ensuring that remuneration is in line with current industry practice.
Internal Control
The Directors, who are responsible for the Group’s system of internal control, have established systems to ensure that an appropriate
level of oversight and control is provided. The systems are reviewed for effectiveness annually by the Audit Committee and the
Board. The Group’s systems of internal control are designed to help the Company meet its business objectives by appropriately
managing, rather than eliminating, the risks to those objectives. The controls can only provide reasonable, not absolute, assurance
against material misstatement or loss. Executive Directors and senior management meet to review both the risks facing the business
and the controls established to minimise those risks and their effectiveness in operation on an on-going basis. The aim of these
reviews is to provide reasonable assurance that material risks and problems are identified and appropriate action taken at an early
stage.
The Board confirms that procedures to identify, evaluate and manage the significant risks faced by the Group have been in place
throughout the year and up to the date of approval of the Annual Report.
Financial Control
The annual financial plan is reviewed and approved by the Board. Financial results with comparisons to plan and forecast results
are reported on monthly to the Board together with a report on operational achievements, objectives and issues encountered.
Significant variances from plan are discussed at Board meetings and actions set in place to address them.
Approval levels for authorisation of expenditure are at set levels and cascaded through the management structure with any
expenditure in excess of predefined levels requiring approval from the executive directors.
Relations with Shareholders
The Chief Executive Officer and Finance Director have, where appropriate, had regular dialogue with shareholders and analysts to
discuss strategic and other issues including the Company’s financial results.
The Company engages in full and open communication with both institutional and private investors and responds promptly to all
queries received. In conjunction with the Company’s brokers and other financial advisers all relevant news is distributed in a timely
fashion through appropriate channels to ensure shareholders are able to access material information on the Company’s progress.
The Company’s website has a section for investors, which contains all publicly available financial information and news on the
Company.
Going Concern
The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to
continue in business for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing
the financial statements. In making this assessment, the Directors have considered the Group budgets, the cash flow forecasts and
associated risks and the availability of bank and leasing facilities.
www.iomart.com
14
Corporate Governance
AIM Rule Compliance Report
iomart Group plc is quoted on AIM and as a result the Company has complied with AIM Rule 31 which requires the following:
• Have in place sufficient procedures, resources and controls to enable its compliance with the AIM Rules;
• Seek advice from its Nominated Advisor (“Nomad”) regarding its compliance with the Rules whenever appropriate and
take that advice into account;
• Provide the Company’s Nomad with any information it reasonably requests in order for the Nomad to carry out its
responsibilities under the AIM Rules for Nominated Advisors, including any proposed changes to the Board and Provision
of draft notifications in advance;
• Ensure that each of the Company’s Directors accepts full responsibility, collectively and individually, for compliance with
the AIM rules; and
• Ensure that each Director discloses without delay all information which the Company needs in order to comply with
AIM Rule 17 (Disclosure of Miscellaneous Information) insofar as that information is known to the director or could with
reasonable diligence be ascertained by the Director.
Quality of Personnel and Employee Involvement
The Group is committed to attracting and retaining the highest level of personnel. It strives to do this through, amongst other things,
the application of high standards in recruitment. The Group is aware of the importance of good communication in relationships
with its staff and also follows a policy of encouraging training.
A number of employees participate in the growth of the business through the ownership of share options with some employees also
participating in the Group bonus scheme.
Business Ethics
The Board recognises that the Company is accountable to its shareholders and, at the same time, seeks to take into account the
interests of all its stakeholders including customers, suppliers and subcontractors, employees, as well as the local community, and
the environment in which it operates.
The Group maintains core values of Honesty, Integrity, Hard Work, Service and Quality and actively promotes these values in all
activities undertaken on behalf of the Group.
Customers
The Group treats all of its customers with the utmost respect and seeks to be honest and fair in all relationships with them. The
Group provides its customers with products of high quality.
Suppliers and Subcontractors
Relationships with suppliers and subcontractors are based on mutual respect, and the Group seeks to be honest and fair in its
relationships with suppliers and subcontractors, and to honour the terms and conditions of its agreements in place with such
suppliers and subcontractors.
The Group is aware that the giving or accepting of bribes is not acceptable business conduct.
Employees
The Group recognises the importance of its employees and that the success of the Group is due to their efforts. The Group respects
the dignity and rights of all its employees. The Group provides clean, healthy and safe working conditions. An inclusive working
environment and a culture of openness are maintained by the regular dissemination of information.
The Group endeavours to provide equal opportunities for all employees and facilitates the development of employees’ skill sets. A
fair remuneration policy is adopted throughout the Group.
The Group does not tolerate any sexual, physical or mental harassment of its employees. The Group operates an equal opportunities
policy and specifically prohibits discrimination on grounds of colour, ethnic origin, gender, ages, religion, political or other opinion,
disability, or sexual orientation.
Bruce Hall
Company secretary
28 May 2012
iomart group plc Annual Report 2012
15
Report of the board to the members on directors'
remuneration
The remuneration committee has given consideration to the
UK Corporate Governance Code 2010 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 the resolution 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
to
Pension contributions
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 executive directors are entitled to life insurance cover
and to participate in the Group’s Private Medical Insurance
scheme.
the continued commitment of executives to the
•
Group’s success through appropriate incentive
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.
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.
www.iomart.com
16
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
Crawford Beveridge (appointed 29 September 2011)
Sarah Haran
Richard Logan
Ian Ritchie
Fred Shedden (resigned 29 September 2011)
Salary or fees
£
206,000
30,000
12,500
133,900
154,500
50,000
15,000
Year
ended
Year
ended
31 March 31 March
2011
Total
£
416,673
30,000
-
260,400
241,513
50,000
30,000
2012
Total
£
458,951
30,000
12,500
293,783
271,885
50,000
15,000
Pension
Benefits contributions
£
50,000
-
-
28,390
15,450
-
-
£
2,351
-
-
593
685
-
-
Bonus
£
200,600
-
-
130,900
101,250
-
-
601,900
432,750
3,629
93,840 1,132,119 1,028,586
Directors’ interests in shares
The interests of the directors in the shares of the company at 31 March 2012, together with their interests at 1 April 2011 were as
follows:
Name of director
Angus MacSween
Chris Batterham
Crawford Beveridge (appointed 29 September 2011)
Sarah Haran
Richard Logan
Ian Ritchie
Number of ordinary shares
31 March 2012
At 1 April 2011
19,336,304
90,621
12,000
1,024,944
100,500
151,400
19,336,304
90,621
Nil
1,124,944
100,500
151,400
In addition, Fred Shedden, who served as a Director until his resignation on 29 September 2011, held 764,588 ordinary shares at 1
April 2011. 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 2012
Report of the board to the members on directors' remuneration
17
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
52.5p 31/03/2010
78.5p 31/03/2010
52.5p 31/03/2011
52.5p 31/03/2012
356,990
322,612
350,000
450,000
31/03/2010 06/10/2018
31/03/2010 17/11/2014
31/03/2011 06/10/2018
31/03/2012 06/10/2018
1,479,602
53.6p 31/03/2010
78.5p 31/03/2010
52.5p 31/03/2010
52.5p 31/03/2011
52.5p 31/03/2012
414,018
177,867
357,087
350,000
450,000
31/03/2010 27/09/2017
31/03/2010 17/11/2014
31/03/2010 06/10/2018
31/03/2011 06/10/2018
31/03/2012 06/10/2018
1,748,972
52.5p 31/03/2010
53.6p 31/03/2010
52.5p 31/03/2011
52.5p 31/03/2012
221,505
500,000
350,000
450,000
31/03/2010 06/10/2018
31/03/2010 27/09/2017
31/03/2011 06/10/2018
31/03/2012 06/10/2018
1,521,505
The JSOP shares are held jointly between the director and the iomart Group plc Employee Benefit Trust. Under the terms of the JSOP rules
the directors are eligible to receive the excess of any disposal proceeds received for the JSOP shares over the participation price. 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.
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
18
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 2012 in options over the ordinary shares of the Company were as follows:
2011 Exercised Surrendered Lapsed
At
31 March Exercise
price
2012
Date of
Date from
which
Grant exerciseable
Expiry
date
Name of
director
At
1 April
Angus MacSween 127,388
43,010
170,398
72,133
85,982
42,913
201,028
Sarah Haran
Richard Logan
-
-
-
-
-
-
-
50,000
150,000
28,495
-
(29,500)
-
228,495
(29,500)
-
-
-
-
-
-
-
-
-
-
-
- 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
- 120,500
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
- 198,995
On 29 November 2011, Richard Logan exercised 29,500 share options under the Company’s Enterprise Management Incentives Share
Option Scheme at an exercise price of 46.5p. The market price on the date of exercise was 120.5p resulting in a gain on exercise of
£21,830. No share options were exercised by directors in the previous year and no new share options were granted to directors during
the year. There have been no variations to the terms and conditions or performance criteria for share options during the year.
The market price of the company’s shares at the end of the financial period was 142.0p and the range of prices during the period was
between 84.5p and 151.0p.
By order of the board
Crawford Beveridge
Chairman, Remuneration committee
28 May 2012
iomart group plc Annual Report 2012
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 2012.
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
2012
£33.5m
33% increase
2011
£25.3m
38% increase
Revenue from continuing operations grew by 33% over the year
compared to a growth of 38% in the previous year. The Hosting
segment grew revenues by 38% (2011: 61%) and the Easyspace
segment by 21% (2011: 3%).
Adjusted EBITDA
Adjusted EBITDA margin
2012
£11.2m
33%
2011
£6.6m
26%
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 EQSN Limited which was acquired
during the year. Easyspace has also contributed to the adjusted
EBITDA margin improvement through increased revenues and
operational efficiencies and the inclusion of Switch Media Limited
and its subsidiaries and Global Gold Holdings Limited and its
subsidiary that were acquired during the year.
Financial instruments
The Group’s financial instruments comprise cash and liquid
resources, bank loans and finance leases together with various
items such as trade debtors and trade creditors that arise
19
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 £10.0m which was made available in order to finance
business acquisitions and to finance capital expenditure. At the
beginning of the year, £2.0m of this facility had been drawn down
in order to fund the acquisition of Titan Internet Limited. During
the year, a further £1.0m of the facility was down to fund the
acquisition of Switch Media Limited and its subsidiaries in April
2011 and another £1.0m was drawn down in order to fund the
acquisition of EQSN Limited in November 2011. The main risk
to the Group is interest rate risk arising from floating rate interest
rates. The Group’s borrowings at 31 March 2012 comprise
finance leases totalling £2.5m (2011: £1.8m) and a bank loan
totalling £4.0m (2011: £2.0m). The interest rates on the finance
leases are fixed for the term of the lease at between 3.2% and
12.2% and the average interest rate was 6.8% (2011: 6.9%).
The interest rate on the bank loan is fixed for periods of either
three or six months and at the moment is fixed for 6 months at
3.3% per annum excluding any draw down fees and the average
annual interest rate during the year was 3.3% (2011: 3.0%). 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 2012 (2011: nil). The directors recommend a
final dividend for the year ended 31 March 2012 of 0.90p per
share (2011: 0.65p per share).
Directors and their interests
The present membership of the board is set out on page 23. In
accordance with the company’s Articles of Association, Crawford
Beveridge, Angus MacSween and Richard Logan will offer
themselves for re-election at the forthcoming annual general
meeting.
Details of directors’ interests in the company’s shares are set
out in the Report of the Board to the Members on Directors’
Remuneration on pages 15 to 18.
www.iomart.com
20
Directors' Report
Substantial shareholdings
At 22 May 2012 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
19.32%
Legal & General
Investment
Management
Henderson
Global Investors
Majedie Asset
Management
Universities
Superannuation
Scheme
British Steel
Pension Scheme
13,175,400
13.17%
9,909,057
9.90%
8,085,101
8.08%
3,769,000
3.77%
3,768,103
Bill Dobbie
3,454,500
3.77%
3.45%
River & Mercantile
Asset Management
3,259,877
3.26%
Transactions in own shares
At 31 March 2012 the iomart Group plc Employee Benefit Trust
held 4,750,079 shares (2011: 4,977,184) which are accounted
for as Own Shares. On 9 August 2011, 227,105 ordinary shares
(2011: nil) were transferred from the Own Shares JSOP reserve
following the exercise of Joint Share Ownership options by an
employee.
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.
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 2012 were 30 days (2011: 24 days), and of the
company were 15 days (2011: 2 days). This represents the ratio,
expressed in days, between the amounts invoiced to the company
in the year by its suppliers and the amounts due, at the year end,
to trade creditors falling due for payment within one year.
Political and charitable donations
The Group did not make any charitable or political donations in
either the current or the previous year.
Awareness of relevant audit information
So far as each of the directors, at the time the report is approved,
is aware:
•
•
there is no relevant audit information of which the
auditors are unaware, and
the directors have taken all the steps they ought to
have taken to make themselves aware of any relevant
audit information and to establish that the auditors are
aware of that information.
Website disclaimer
The maintenance and integrity of the iomart Group plc website
is the responsibility of the directors. The work carried out by the
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 alternative work of
Bruce Hall
Company secretary
28 May 2012
iomart group plc Annual Report 2012
Directors' Responsibilities Statement
21
The directors confirm that:
•
•
so far as each director is aware, there is no relevant
audit information of which the Group and Parent
Company’s auditor is unaware; and
the directors have taken all the steps that they ought
to have taken as directors in order to make themselves
aware of any relevant audit information and to establish
that the auditors are aware of that information.
The directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Group's website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The directors are responsible for preparing the Directors’ Report,
the Report to the Members on Directors' Remuneration and the
Group and 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 financial statements in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs and profit or loss of the Company and
Group for that period. In preparing these financial statements, the
directors are required to:
•
select suitable accounting policies and then apply
them consistently;
• make judgments and accounting estimates that are
reasonable and prudent;
•
state whether applicable IFRSs have been followed
for the Group financial statements and whether
United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and
applicable laws) have been followed for the Parent
Company financial statements, subject to any
material departures disclosed and explained in the
financial statements;
• prepare the financial statements on the going
concern basis unless it is inappropriate to presume
that the company will continue in business.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group and
Parent Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Group and
Parent Company and enable them to ensure that the Group and
Parent Company financial statements and the Report to Members
on Directors' Remuneration comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of the Group
and Parent Company and hence for taking reasonable steps for
the prevention and detection of fraud and other irregularities.
www.iomart.com
Trusted
& Accountable
“The decision to use iomart Hosting as our sole host
has proved the right one. As soon as the relationship
was formalised, the benefits were tangible.”
Phil Davies, Director IS for Misys UK & EMEA
www.iomart.com
Board of Directors
Ian Ritchie
61, appointed 2008; currently Chairman of Computer Application Services Ltd, Interactive
Design Institute Ltd, Blipfoto Ltd and Red Fox Media Ltd. He is a past President of the British
Computer Society and the current Vice President (Business) of the Royal Society of Edinburgh.
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
55, 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
57, 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 chairman of Eckoh plc. Chris has also served on the boards of Staffware plc,
DBS Management plc, DRS plc, Betfair plc and The Invesco Techmark Enterprise Trust plc.
Crawford Beveridge
66, appointed 2011; Crawford Beveridge CBE has over 40 years experience in the technology
industry, including 16 years at Sun Microsystems ("Sun"), most recently as Executive Vice President
and Chairman, EMEA, APAC and the Americas until retiring in January 2010. His business
background also includes roles with Hewlett-Packard, Digital Equipment Corp., Analog Devices,
non-executive director of Hitachi Global Storage Technologies, a subsidiary of Hitachi Ltd and
Chief Executive of Scottish Enterprise. Current board roles include Chairman of the investment
advisory board at Scottish Equity Partners and Non Executive Chairman of NASDAQ listed Autodesk.
Sarah Haran
46, 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
54, 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.
23
www.iomart.com
24
Independent auditor's report to the members of
iomart Group plc
•
•
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 Report of the Board to
the Members on Directors Remuneration, which we were engaged
to audit, has been prepared in accordance with Rule 19 of the
AIM Rules for Companies.
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
2012.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
28 May 2012
We have audited the Group financial statements of iomart Group
Plc for the year ended 31 March 2012 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.
In addition to our audit of the financial statements, the directors
have engaged us to audit the information in the Report of the
Board to the Members on Directors' Remuneration that is described
as having been audited.
This report is made solely to the company’s members, as a body,
in accordance with 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 2012 and of its profit for the year then
ended;
iomart group plc Annual Report 2012
25
Consolidated Statement of Comprehensive Income
Year ended 31 March 2012
Note
2012
£’000
2011
£’000
Revenue
Cost of sales
Gross profit
Administrative expenses
Operating profit
Analysed as:
Earnings before interest, tax, depreciation, amortisation,
acquisition costs and share based payments
Share based payments
Acquisition costs
Depreciation
Amortisation – acquired intangible assets
Amortisation – other intangible assets
Finance income
Finance costs
Profit before taxation
Taxation
Profit for the year from total operations
Other comprehensive income
Currency translation differences
Other comprehensive expense for the year
Total comprehensive income for the year
Attributable to equity holders of the parent
Basic and diluted earnings per share
Total operations
Basic earnings per share
Diluted earnings per share
The following notes form part of the primary financial statements.
4
4
24
6
4
4
4
7
7
9
33,476
25,252
(11,094)
(9,699)
22,382
15,553
(16,358)
(12,780)
6,024
2,773
11,186
(104)
(304)
(3,698)
(604)
(452)
70
(252)
6,644
(290)
(195)
(2,689)
(316)
(381)
197
(178)
5,842
2,792
356
70
6,198
2,862
(10)
(10)
6,188
6,188
-
-
2,862
2,862
12
12
6.22 p
6.03 p
2.91 p
2.85 p
www.iomart.com
26
Consolidated Statement of Financial Position
31 March 2012
Note
13
13
10
14
16
18
17
21
20
19
21
23
2012
£’000
27,544
3,033
993
2,416
15,626
2011
£’000
23,952
1,978
619
2,016
14,788
49,612
43,353
8,935
4,071
13,006
6,864
3,100
9,964
62,618
53,317
(1,211)
(1,211)
(920)
(920)
(246)
(10,592)
(255)
(5,251)
(16,344)
(600)
(9,744)
(303)
(2,846)
(13,493)
(17,555)
(14,413)
45,063
38,904
1,048
(2,351)
1,200
20,362
(10)
24,814
45,063
1,038
(2,464)
1,200
19,977
-
19,153
38,904
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
Trade and other receivables
Total assets
LIABILITIES
Non-current liabilities
Non-current borrowings
Current liabilities
Contingent consideration due on acquisitions
Trade and other payables
Current income tax liabilities
Current borrowings
Total liabilities
Net assets
EQUITY
Share capital
Own shares
Capital redemption reserve
Share premium
Foreign currency translation reserve
Retained earnings
Total equity
These financial statements were approved by the board of directors on 28 May 2012.
Signed on behalf of the board of directors
Angus MacSween
Director and chief executive officer
The following notes form part of the primary financial statements.
iomart group plc Annual Report 2012
Consolidated Statement of Cash Flows
Year ended 31 March 2012
Profit before taxation
Finance costs/(income) – net
Depreciation
Amortisation
Share based payments
Exchange movements
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 acquisitions net of cash acquired
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
Interest paid
Dividends paid
Net cash received from financing activities
Net increase in cash and cash equivalents
Note
7
4
4
24
14
13
13
20
21
8
2012
£’000
5,842
182
3,698
1,056
104
(10)
(400)
(405)
(487)
9,580
(585)
8,995
(2,397)
(474)
(89)
(3,873)
(600)
-
31
(7,402)
512
2,000
(1,164)
(227)
(643)
478
2,071
27
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
Cash and cash equivalents at the beginning of the year
6,864
5,715
Cash and cash equivalents at the end of the year
18
8,935
6,864
The following notes form part of the primary financial statements.
www.iomart.com
28
Consolidated Statement of Changes in Equity
Year ended 31 March 2012
Changes in equity
Share
capital
£’000
Note
Own
Foreign
currency
shares translation
reserve
£’000
JSOP
£’000
Capital
Share
redemption premium Retained
account earnings
£’000
reserve
£’000
£’000
Total
£’000
Balance at 1 April 2010
1,028 (2,464)
-
1,200
19,514
16,312 35,590
Profit in the year
Total comprehensive income
Share based payments
Deferred tax on share based payments
Dividends – interim (paid)
Issue of new shares for option redemption
24
8
Total transactions with owners
-
-
-
-
-
10
10
-
-
-
-
-
-
-
Balance at 31 March 2011
1,038 (2,464)
Profit in the year
Currency translation differences
Total comprehensive income
Dividends – final (paid)
Share based payments
Deferred tax on share based payments
Issue of own shares from JSOP
Issue of new shares for option redemption
Total transactions with owners
8
24
-
-
-
-
-
-
-
10
10
-
-
-
-
-
-
113
-
113
-
-
-
-
-
-
-
-
-
(10)
(10)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,862
2,862
2,862
2,862
-
-
-
463
290
80
(391)
-
290
80
(391)
473
463
(21)
452
1,200
19,977
19,153 38,904
-
-
-
-
-
-
-
-
-
-
-
-
6,198
-
6,198
6,198
(10)
6,188
-
-
-
-
385
385
(643)
104
(2)
4
-
(537)
(643)
104
(2)
117
395
(29)
Balance at 31 March 2012
1,048 (2,351)
(10)
1,200
20,362
24,814 45,063
The following notes form part of the primary financial statements.
iomart group plc Annual Report 2012
Community
"Colin McGregor is a great ambassador for the iomart Group. He
works tirelessly for the Scouts, giving up his own time to encourage
young Scouts in Scotland to gain vital life skills, learn about adventure
and above all have fun.”
Angus MacSween CEO, iomart Group plc
Easyspace Customer Services Manager Colin McGregor
carried the Olympic Torch through Newburgh, Fife in June 2012.
iomart group plc Annual Report 2012
30
Notes to the Financial Statements
Year ended 31 March 2012
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 77 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 operate.
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
There were no additional
standards, amendments and
interpretations that had a material impact on the Group’s financial
statements during the year. The following standard, amendment
and interpretation were effective in the year but had no material
impact on the Group’s financial statements:
•
IAS 24 (revised 2009) Related Party Disclosures.
•
IFRIC 19 Extinguishing Financial Liabilities with Equity
Instruments.
• Amendments to IFRIC 14 Prepayments of a Minimum
Funding Requirement.
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 2015). 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 material
impact on the Group’s consolidated financial statements:
•
•
•
•
•
•
IFRS 10 (May 2011) Consolidated Financial Statements
(effective 1 January 2013).
IFRS 11 (May 2011) Joint Arrangements (effective 1 January
2013).
IFRS 12 (May 2011, updated January 2012) Disclosures of
Interests in Other Entities (effective 1 January 2013).
IFRS 13 (May 2011) Fair Value Measurement (effective 1
January 2013).
IAS 27 (May 2011) Separate Financial Statements (effective
1 January 2013).
IAS 28 (May 2011) Investments in Associates and Joint
Ventures (effective 1 January 2013).
• Amendments to IFRS 7 (October 2010) Transfers of financial
assets (effective 1 July 2011).
• Amendments to IAS 12 (December 2010, updated January
2011) Deferred tax: recovery of underlying assets (effective 1
January 2012).
• Amendments to IFRS 1 (December 2010) Severe
Hyperinflation and Removal of Fixed Dates for First-Time
Adopters (effective 1 July 2011).
• Amendments to IAS 1 (June 2011) Presentation of Items of
Other Comprehensive Income (effective 1 July 2011).
• Amendments to IAS 19 (June 2011) Employee Benefits
(effective 1 January 2011).
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 2012.
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.
iomart group plc Annual Report 2012
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.
Where the Group’s assessment of the net fair value of a
subsidiary’s net assets and liabilities is less than the fair value of the
consideration including contingent consideration of the business
combination then the excess is treated as goodwill. Where the
Group’s assessment of the net fair value of a subsidiary’s net
assets and liabilities exceeds the fair value of the consideration
including contingent consideration of the business combination
then the excess is recognised in the Statement of Comprehensive
Income immediately.
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.
Easyspace
This operating segment provides domain name registration and
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 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
Notes to the Financial Statements. Year ended 31 March 2012.
31
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.
is capitalised on
Intangible assets
Goodwill
Goodwill arising on consolidation
the
consolidated statement of financial position and, subject to an
annual impairment test, has an infinite life. 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.
Research and development
Expenditure on research (or the research phase of an internal
project) is recognised as an expense in the period in which it is
incurred. Development costs incurred are capitalised when all the
following conditions are satisfied:
• completion of the intangible asset is technically feasible so
•
•
•
•
•
that it will be available for use or sale
the Group intends to complete the intangible asset and use
or sell it
the Group has the ability to use or sell the intangible asset
the intangible asset will generate probable future economic
benefits
there are adequate technical, financial and other resources
to complete the development and to use or sell the
intangible asset, and
the expenditure attributable to the intangible asset during its
development can be measured reliably.
www.iomart.com
32
Notes to the Financial Statements. Year ended 31 March 2012.
2. ACCOUNTING POLICIES (CONTINUED)
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 administrative expenses in the consolidated
statement of comprehensive income.
Software
Software is recognised at cost on purchase and amortised on a
straight-line basis over its useful economic life, which does not
generally exceed four years.
Acquisition costs
In accordance with IFRS 3 Business Combinations, costs incurred
on professional fees during an acquisition are no longer included
in the overall cost of the investment in the acquired business.
Consequently, these acquisition costs are included as Administrative
Expenses in the Consolidated Statement of Comprehensive
Income. In addition, the costs associated with integrating the
acquired businesses into the Group are also included in this
category. The combination of both these types of expenses is also
shown in the Consolidated Statement of Comprehensive Income
as acquisition costs.
Contingent consideration
Where an acquisition involves a potential payment of contingent
consideration the estimate of any such payment is based on its
fair value. To estimate the fair value an assessment is made as
to the amount of contingent consideration which is likely to be
paid having regard to the criteria on which any sum due will be
calculated.
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.
iomart group plc Annual Report 2012
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 have immaterial residual values.
The rates generally applicable are:
Freehold property
Leasehold improvements
Computer equipment
Office equipment
Datacentre equipment
Motor vehicle
3.33% per annum
25% per annum
Between 20% and 50% per annum
Between 10% and 25% per annum
Between 6% and 10% per annum
25% per annum
Impairment testing of goodwill, other intangible assets and
property, plant and equipment
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
flows (cash-generating units). As a result, some assets are tested
individually for impairment and some are tested at cash-generating
unit level. Goodwill is allocated to those cash-generating units
that are expected to benefit from synergies of the related business
combination and represent the lowest level within the Group at
which management monitors goodwill.
Goodwill, other individual assets or cash-generating units that
include goodwill, and those intangible assets not yet available for
use are tested for impairment at least annually. All other individual
assets or cash-generating units are tested for impairment whenever
events or changes in circumstances indicate that the carrying
amount may not be recoverable.
An impairment loss is recognised for the amount by which the
asset’s or cash-generating unit’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of
fair value, reflecting market conditions less costs to sell, and value
in use based on an internal discounted cash flow evaluation.
Management estimate expected future cash flows from each
cash generating unit and determines a suitable interest rate to
determine the present value of the future cash flows. Discount
factors are determined for each cash generating unit to reflect
the underlying risks involved. The future cash flows used in the
calculation are based on the Group’s latest approved budget.
Impairment losses recognised for cash-generating units, to which
goodwill has been allocated, are credited initially to the carrying
amount of goodwill. Any remaining impairment loss is charged
pro rata to the other assets in 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
13.
Notes to the Financial Statements. Year ended 31 March 2012.
33
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.
Lease deposits
Deposits for leasehold premises are included in the Consolidated
Statement of Financial Position as either non-current assets
or current assets depending on the length of time to maturity.
Where lease deposits are interest earning the amount of deposit
is not discounted and where they not interest earning they are
discounted.
Borrowings
Borrowings are initially stated at fair value 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 profit and loss
account 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.
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 profit and loss account.
www.iomart.com
34
Notes to the Financial Statements. Year ended 31 March 2012.
2. ACCOUNTING POLICIES (CONTINUED)
All income and expenses relating to financial assets that are
recognised in the statement of comprehensive income are
presented within ‘finance costs’ or ‘finance income’ except
for impairment of trade receivables which is presented within
‘administrative 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 profit and loss account.
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. A financial liability is
derecognised only when the obligation is extinguished, that is,
when the obligation is discharged, cancelled or when it expires.
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.
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.
The results and financial position of all Group entities that have
a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• assets and liabilities for each balance sheet presented are
translated at the closing rate at the date of the balance
sheet;
income and expenses for each income statement are
translated at average exchange rates; and
•
• all resulting exchange differences are recognised as a
separate component of equity in the Foreign Currency
Translation reserve.
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and demand
deposits, together with other short-term, highly liquid investments
that are readily convertible into known amounts of cash and which
are subject to an insignificant risk of changes in value.
Dividends
Dividend distributions payable to equity shareholders are included
in the financial statements within ‘other short term financial
liabilities’ when a final dividend is approved in a general meeting.
Interim dividend distributions to equity shareholders approved by
the Board are not included in the financial statements until paid.
iomart group plc Annual Report 2012
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.
“Foreign currency translation reserve” represents all
exchange differences on the translation of the results and
financial position of Group entities that have a functional
currency different from the presentation currency.
“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’.
Notes to the Financial Statements. Year ended 31 March 2012.
35
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. The two main vesting conditions that apply
to share options relate to the achievement of annual objectives
and continuous employment. 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.
Segmental reporting
The Group provides segmental reporting on a basis consistent with
the provision of internal financial information used for decision
making purposes by the Chief Operating Decision Maker. Internal
reports are produced on a basis consistent with the accounting
policies adopted in the 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
The Group is required to make a judgment as to whether there
is any impairment of goodwill. This 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 13.
www.iomart.com
36
Notes to the Financial Statements. Year ended 31 March 2012.
2. ACCOUNTING POLICIES (CONTINUED)
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. The Group is required
to make a judgment as to what intangible assets exist within the
acquired business at the time of the acquisition. When reviewing
the existence of intangible assets consideration has been given
to potential intangible assets such as customer relationships and
brand. The estimation of 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 11.
Reinstatement provisions
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. If the likelihood of this liability arising is judged to
be possible, rather than probable, it is disclosed as a contingent
liability. The likelihood of certain datacentre leasehold premises
requiring restoration to their original office space layout has been
assessed as only possible, rather than probable, and as a result the
discounted cost of the liability has not been included in leasehold
improvements and therefore has not been depreciated.
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 Group 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. Switch Media Limited and Global Gold
Holdings Limited were acquired during the year and have
been reported as part of the Easyspace segment since
acquisition.
• 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,
EQSN and iomart Cloud Services. EQSN 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, Tax, 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.
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
37
3. SEGMENTAL ANALYSIS (CONTINUED)
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.
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
9,131
24,345
33,476
2012
Internal
£’000
-
955
955
Total
£’000
9,131
25,300
34,431
External
£’000
7,558
17,694
25,252
2011
Internal
£’000
-
896
896
Total
£’000
7,558
18,590
26,148
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
2012
2011
£’000
22,585
2,667
25,252
2012
£’000
29,726
3,750
33,476
2011
EBITDA Depreciation,
before amortisation,
acquisition
costs and
EBITDA Depreciation,
amortisation,
before
acquisition
acquisition
costs and
costs and
share based
payments
£’000
3,600
10,097
(2,511)
-
-
11,186
£’000
(350)
(4,404)
-
(304)
(104)
(5,162)
share based Operating
payments profit/(loss)
£’000
3,250
5,693
(2,511)
(304)
(104)
6,024
174
6,198
(5,162)
11,186
Easyspace
Hosting
Group overheads
Acquisition costs
Share based payments
Group interest and tax
Profit for the year
acquisition
costs and
share based
payments
£’000
2,794
6,178
(2,328)
-
-
6,644
6,644
share based Operating
payments 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)
Group overheads, acquisition costs, share based payments, interest and tax are not allocated to segments.
www.iomart.com
38
Notes to the Financial Statements. Year ended 31 March 2012.
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
9,376
7,582
2012
£’000
2011
£’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
- Acquired intangible assets
- Other 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
2,816
882
1,702
182
604
452
68
493
431
29
5,487
2012
£’000
30
49
27
17
123
2,031
658
1,683
239
316
381
62
622
434
71
4,376
2011
£’000
26
38
19
55
138
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
39
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
2012
£’000
1,038
94
69
409
50
2011
£’000
881
148
157
297
120
During the year the company made personal pension contributions to the personal pension schemes of 3 directors (2011: 3).
The aggregate amount of gains realised by directors on the exercise of share options during the year was £21,830 (2011: £nil).
The detailed numerical analysis of directors’ remuneration and share options is included in the Report of the Board to the Members on
Directors’ Remuneration on pages 15 to 18.
Average number of persons employed by the Group (including directors):
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
2012
No.
2011
No.
104
27
54
26
211
2012
£’000
8,849
869
96
104
9,918
76
20
39
25
160
2011
£’000
6,964
664
77
290
7,995
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 Report
of the Board to the Members on Directors’ Remuneration on pages 15 to 18. 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.
6. ACQUISITION COSTS
Professional fees
Non-recurring integration costs
Total acquisition costs
2012
£’000
137
167
304
2011
£’000
195
-
195
During the year costs of £137,000 (2011: £195,000) were incurred in respect of professional fees on various acquisitions. In addition
to these professional fees, one-off costs of £167,000 (2011: £nil) directly related to the integration of acquisitions into the Group were
also incurred.
www.iomart.com
40
Notes to the Financial Statements. Year ended 31 March 2012.
7. 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
2012
£’000
2011
£’000
58
12
70
(123)
(123)
(6)
(252)
45
152
197
(25)
(112)
(41)
(178)
(182)
19
Included in other interest income is £12,000 (2011: £40,000) in respect of leasehold deposits and £nil (2011: £112,000) in relation to
interest earned on sums held in escrow.
8. DIVIDENDS ON SHARES CLASSED AS EQUITY
Paid during the year:
Final dividend – for year ended 31 March 2011
Equity dividends on ordinary shares
Interim dividend – for year ended 31 March 2010
Equity dividends on ordinary shares
2012
Pence per
share
2012
£’000
2011
Pence per
share
2011
£’000
0.65p
643
-
-
-
-
0.4p
643
391
391
The directors have recommended a final dividend for the year ended 31 March 2012 of 0.90p per share (2011: 0.65p per share). Subject
to shareholder approval this proposed final dividend would be payable on 5 September 2012 to shareholders on the register as of 17
August 2012.
iomart group plc Annual Report 2012
9. TAXATION
Tax charge for the year
Adjustment relating to prior year
Total current taxation
Origination and reversal of temporary differences
Effect of changes in tax rates
Total deferred taxation credit
Total taxation credit
Notes to the Financial Statements. Year ended 31 March 2012.
41
2012
£’000
(249)
(134)
(383)
770
(31)
739
356
2011
£’000
(183)
33
(150)
220
-
220
70
The Group has a deferred tax asset which has been recognised in respect of tax losses within four 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 @ 26% (2011 – 28%)
Expenses disallowed for tax purposes
Non-taxable income
Adjustments in respect of prior years
Movement in deferred tax relating to changes in tax rates
Effect of research and development tax reliefs
Tax effect of share based remuneration
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
Movement in deferred tax relating to prior years
Increase in tax losses utilised and recognised
2012
£’000
5,842
1,519
82
(304)
134
31
(73)
(219)
(7)
128
(26)
(180)
(1,441)
2011
£’000
2,792
782
25
-
(33)
-
(50)
(191)
(7)
130
9
-
(735)
Taxation credit for the year
(356)
(70)
The weighted average applicable tax rate for the year ended 31 March 2012 was 26% (2011: 28%). The total current tax charge
of £249,000 (2011: £183,000) on operations represents 4.3% (2011: 6.6%) of the Group profit before tax of £5,842,000 (2011:
£2,792,000). A number of changes to the UK Corporation tax system were announced in the March 2012 Budget Statement with the
main rate of corporation tax reduced from 26% to 24% from 1 April 2012. Further reductions to the main rate are proposed to reduce
the rate by 1% per annum to 22% by 1 April 2014. These changes had not been substantively enacted at the balance sheet date and,
therefore, are not included in these financial statements. It is expected that the effect of these changes will have an immaterial impact on
the deferred tax asset currently recognised.
www.iomart.com
42
Notes to the Financial Statements. Year ended 31 March 2012.
10. DEFERRED TAX
The Group had recognised deferred tax assets and liabilities as follows:
2012
Deferred tax Deferred tax
Recognised Unrecognised
£’000
£’000
2011
Deferred tax Deferred tax
Recognised Unrecognised
£’000
£’000
Tax losses carried forward
Share based remuneration
Capital allowances timing differences
Deferred tax on acquired assets with no capital allowances
Deferred tax on customer relationships
Deferred tax
2,152
381
67
(1,059)
(548)
993
-
-
-
-
-
-
1,971
354
-
(1,367)
(339)
619
1,386
-
-
-
-
1,386
At the year end, the Group has unused tax losses of £9.0m (2011: £13.2m) available for offset against future profits. A deferred tax asset
has been recognised in respect of £9.0m (2011: £7.7m) of such losses as these losses are 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
Capital Deferred tax on
allowances acquired assets
timing with no capital
allowances
£’000
remuneration differences
£’000
£’000
Share based
Balance at 1 April 2011
Acquired on acquisition of subsidiary
Credited to equity
(Charged)/credited to statement
of comprehensive income
Effect of changes in tax rates
Balance at 31 March 2012
1,971
52
-
304
(175)
2,152
354
-
(2)
86
(57)
381
-
(26)
-
100
(7)
67
(1,367)
-
-
122
186
(1,059)
Customer
relationships
£’000
(339)
(389)
-
158
22
(548)
Total
£’000
619
(363)
(2)
770
(31)
993
The deferred tax asset in relation to tax losses carried forward arises from unutilised tax losses in both operating segments. 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 operating segments, 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 capital allowances timing differences arises mainly from plant and equipment in the Hosting segment where the tax
written down value varies from the net book value.
The deferred tax on acquired assets arises from datacentre equipment acquired through the acquisition of iomart Datacentres Limited on
which depreciation is charged but on which there are no capital allowances available.
The deferred tax on customer relationships arises from timing differences on acquired intangible assets.
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
43
11. ACQUISITIONS
Switch Media
The Group acquired 100% of the issued share capital of Switch Media Limited and its subsidiaries (“Switch Media”) on 26 April 2011. This
transaction has been 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 its hosting operations both organically and by acquisition.
During the current year the Group incurred £12,000 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
2012. In the prior year, £76,000 of third party acquisition related costs were incurred and these were included in administrative expenses
in the Group’s consolidated statement of comprehensive income for the year ending 31 March 2011.
The following table summarises the consideration transferred to acquire Switch Media and the amounts of identified assets acquired and
liabilities assumed at the acquisition date:
Recognised amounts of net assets acquired and liabilities assumed:
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
Identifiable net liabilities
Goodwill
Total consideration
Satisfied by:
Cash
Contingent consideration
Total consideration transferred
£’000
126
37
52
24
388
(571)
(39)
(60)
(43)
1,293
1,250
1,025
225
1,250
The acquisition of Switch Media included a contingent consideration arrangement that required additional consideration to be paid by the
Group for Switch Media subject to the integration of that business operation into the Group, the transfer of Switch Media’s provisioning
platforms to existing Group platforms and the transfer of Switch Media’s server estate to the Group’s datacentres. During the year
£225,000 was paid by the Group in relation to this acquisition and there are no further amounts of contingent consideration due to be
paid.
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 only invoiced after cash has been received and therefore the fair value of the assets does not
include any trade receivables.
The fair value included in respect of the acquired customer relationships intangible asset is £388,000, which is a final valuation.
www.iomart.com
44
Notes to the Financial Statements. Year ended 31 March 2012.
11. ACQUISITIONS (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 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.
The fair values of the acquired assets, liabilities and goodwill for Switch Media are final valuations.
Switch Media earned revenue of £1,179,000 and made profits after tax from operations of £233,000 in the period since acquisition.
EQSN
The Group acquired 100% of the issued share capital of EQSN Limited on 23 November 2011. This transaction has been accounted for
by the acquisition method of accounting.
EQSN provides colocation and managed hosting facilities and services to the larger SME and corporate markets and the acquisition is in
line with the Group’s strategy to grow its hosting operations both organically and by acquisition.
During the current year the Group incurred £64,000 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
2012.
The following table summarises the consideration transferred to acquire EQSN and the amounts of identified assets acquired and liabilities
assumed at the acquisition date:
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
Current income tax liabilities
Borrowings
Current deferred tax liability
Non-current deferred tax liability
Identifiable net assets
Goodwill
Total consideration
Satisfied by:
Cash
Contingent consideration
Total consideration transferred
£’000
221
354
104
979
(251)
(70)
(24)
(57)
(205)
1,051
1,424
2,475
2,250
225
2,475
The acquisition of EQSN includes a contingent consideration arrangement that requires additional consideration of £225,000 to be paid by
the Group for EQSN subject to the integration of that business operation into the Group. The maximum value of contingent consideration
has been paid subsequent to the year end and therefore £225,000 has been accrued in respect of this contingent consideration.
The goodwill arising on the acquisition of EQSN is attributable to the specialised, industry specific knowledge of the management and staff
and the anticipated future operating synergies from the combination. The goodwill is not expected to be deductible for tax purposes.
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
45
11. ACQUISITIONS (CONTINUED)
The fair value of the assets acquired includes trade receivables of £303,000. The gross amount due under contracts is £320,000 and
value of trade receivables against which there is a provision is £17,000.
The fair value included in respect of the acquired customer relationships intangible asset is £979,000, which has been determined on a
provisional basis pending a final review.
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
11.8% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 8 years.
The name EQSN Limited is not actively advertised or promoted, with the majority of EQSN’s business being generated from existing
customers or by word of mouth. EQSN has given a commitment to customers not to sell, distribute or lease information held regarding
them without their permission. No value has therefore been attributed to either the trade name/brand or to the customer lists acquired at
the acquisition date.
EQSN earned revenue of £807,000 and made profits after tax from operations of £36,000 in the period since acquisition.
Global Gold
The Group acquired 100% of the issued share capital of Global Gold Holdings Limited and its subsidiary (“Global Gold”) on 24
November 2011. This transaction has been accounted for by the acquisition method of accounting.
Global Gold supplies domain registration, web hosting and email services to its client base primarily in the UK and the acquisition is in
line with the Group’s strategy to grow its hosting operations both organically and by acquisition.
During the current year the Group incurred £61,000 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
2012.
The following table summarises the consideration transferred to acquire Global Gold and the amounts of identified assets acquired and
liabilities assumed at the acquisition date:
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
Current income tax liabilities
Current borrowings
Non-current borrowings
Current deferred tax liability
Non-current deferred tax liability
Identifiable net liabilities
Goodwill
Total consideration
Satisfied by:
Cash
Settlement of directors’ loan accounts
Contingent consideration
Total consideration transferred
£’000
6
137
265
181
(490)
(84)
(53)
(35)
(19)
(35)
(127)
875
748
680
47
21
748
www.iomart.com
46
Notes to the Financial Statements. Year ended 31 March 2012.
11. ACQUISITIONS (CONTINUED)
The acquisition of Global Gold includes a contingent consideration arrangement that requires additional consideration to be paid by the
Group for Global Gold subject to the levels of working capital and debt at the date of acquisition, the annualised revenue at 31 March
2012, and to the integration of the business operation into the Group, the transfer of Global Gold’s provisioning platforms to existing
Group platforms and the transfer of Global Gold’s server estate to the Group’s datacentres. The maximum contingent consideration
payable is £500,000. The levels of working capital and debt at the date of acquisition have now been quantified and agreed with the
vendors and the value of annualised revenue at 31 March 2012 has also been agreed. The agreed amount of contingent consideration
which has been paid subsequent to the year end was £21,000 and therefore £21,000 has been accrued in respect of this contingent
consideration.
The goodwill arising on the acquisition of Global Gold is attributable to 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 £50,000. The gross amount due under contracts is £74,000 and value
of trade receivables against which there is a provision is £24,000.
The fair value included in respect of the acquired customer relationships intangible asset is £181,000, which has been determined on a
provisional basis pending a final review.
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 Global Gold is not actively advertised or promoted, with the majority of Global Gold’s business being generated from existing
customers or by word of mouth. Global Gold has given a commitment to customers not to use for any purpose, other than the service
agreement, any confidential information received from the customer. No value has therefore been attributed to either the trade name/
brand or to the customer lists acquired at the acquisition date.
Global Gold earned revenue of £326,000 and incurred losses after tax from operations of £58,000 in the period since acquisition.
Pro-forma full year information
The following summary presents the Group as if the businesses acquired during the year had all been acquired on 1 April 2011. The
amounts include the results of the acquired businesses and depreciation and amortisation of the acquired fixed assets and intangible
assets recognised on acquisition. The amounts do not include any possible synergies from the acquisitions. The information is provided
for illustrative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of
the future results of the combined companies.
Revenue
Profit after tax for the year
Pro-forma year ended 31 March 2012
£’000
35,656
6,042
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
47
12. 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”). 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 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
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
Diluted earnings per share
Adjusted earnings per share
Profit for the financial year and basic earnings attributed to ordinary shareholders
Add: Amortisation of acquired intangible assets
Add: Acquisition costs
Add: Shared based payments
Less: Tax impact of adjusted items
Adjusted profit for the financial year and adjusted earnings
attributed to ordinary shareholders
Adjusted basic earnings per share
Adjusted diluted earnings per share
2012
£’000
6,198
No
000
103,840
(4,832)
623
99,631
780
2,372
102,783
2011
£’000
2,862
No
000
102,753
(4,977)
674
98,450
958
1,026
100,434
6.22 p
6.03 p
2.91 p
2.85 p
2012
£’000
6,198
604
304
104
(247)
2011
£’000
2,862
316
195
290
(163)
6,963
3,500
6.99 p
6.77 p
3.56 p
3.48 p
www.iomart.com
48
Notes to the Financial Statements. Year ended 31 March 2012.
13. INTANGIBLE ASSETS
Cost
At 1 April 2010
Additions
Acquired on acquisition of subsidiary
Development cost capitalised
At 1 April 2011
Additions
Acquired on acquisition of subsidiary
Development cost capitalised
At 31 March 2012
Accumulated amortisation:
At 1 April 2010
Charge for the year
At 1 April 2011
Charge for the year
At 31 March 2012
Carrying amount:
At 31 March 2012
At 31 March 2011
Goodwill
£’000
Development
costs
£’000
Customer
relationships
£’000
Software
£’000
Domain
names
£’000
20,723
3,229
-
-
23,952
3,592
-
-
27,544
-
-
-
-
-
27,544
23,952
760
-
-
351
1,111
-
-
474
1,585
(378)
(275)
(653)
(335)
(988)
597
458
800
-
1,119
-
1,919
-
1,548
-
3,467
(261)
(316)
(577)
(604)
(1,181)
294
197
-
-
491
89
-
-
580
(229)
(96)
(325)
(107)
(432)
Total
£’000
22,608
3,426
1,119
351
27,504
3,681
1,548
474
33,207
31
-
-
-
31
-
-
-
31
(9)
(10)
(19)
(10)
(29)
(877)
(697)
(1,574)
(1,056)
(2,630)
2,286
148
2
30,577
1,342
166
12
25,930
All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-financial assets classification,
which is disclosed as administrative 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 (2011:
nil) arose as a result of this review. For this review goodwill was allocated to individual Cash Generating Units (CGU) on the basis of the
Group’s operations. The goodwill acquired in the Switch Media and Global Gold acquisitions in the current year has been allocated to
the Easyspace CGU and the goodwill acquired in the EQSN acquisition has been allocated to the Hosting CGU which relate to the CGUs
expected to benefit from the respective business combinations. The carrying value of goodwill by each CGU is as follows:
Cash Generating Units (CGU)
Easyspace
Hosting
2012
£’000
14,482
13,062
27,544
2011
£’000
12,314
11,638
23,952
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 the Board covering a two-year period. Cash flows beyond the two-year period are extrapolated
using the estimated growth rates stated below.
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
49
13. 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
10%
2.25%
2
Hosting
12%
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.
14. LEASE DEPOSIT
The lease deposit of £2,416,000 (2011: £2,016,000) 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.
15. 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
EQSN Limited
iomart Virtual Servers Hosting Limited
Netintelligence Limited
Easyspace Limited
Switch Media Limited
Switch Media (Ireland) Limited
Global Gold Networks Limited
Global Gold Holdings Limited
Rapidswitch Limited
Titan Internet Limtied
iomart Datacentres Limited
Internetters Limited
NicNames Limited
Web Genie Internet Limited
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
England
England
England
England
England
England
England
England
England
England
England
Dormant
Managed hosting services
Managed hosting services
Managed hosting services
Dormant
Dormant
Webservices
Webservices
Webservices
Webservices
Non-trading
Non-trading
Managed hosting services
Datacentre services
Dormant
Dormant
Non-trading
100
100
100
100
100
100
100
100
-
-
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
100
100
-
-
-
-
100
100
100
www.iomart.com
50
Notes to the Financial Statements. Year ended 31 March 2012.
16. 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 2010
Additions in the year
Acquisition of subsidiary
Disposals in the year
At 1 April 2011
Additions in the year
Acquisition of subsidiaries
At 31 March 2012
Accumulated depreciation:
At 1 April 2010
Charge for the year
Disposals in the year
At 1 April 2011
Charge for the year
Disposals in the year
At 31 March 2012
Carrying amount:
At 31 March 2012
837
-
-
-
837
-
-
837
(20)
(20)
-
(40)
(19)
-
(59)
2,139
1,371
14
-
3,524
74
26
3,624
(458)
(135)
-
(593)
(228)
-
(821)
8,395
400
-
-
8,795
937
-
9,732
(1,329)
(709)
-
(2,038)
(793)
-
(2,831)
4,684
2,868
421
-
7,973
3,115
359
11,447
(2,275)
(1,758)
-
(4,033)
(2,561)
-
(6,594)
778
2,803
6,901
4,853
At 31 March 2011
797
2,931
6,757
3,940
710
10
81
-
801
17
8
826
(414)
(60)
-
(474)
(80)
-
(554)
272
327
7
-
55
(24)
38
-
-
38
-
(7)
5
(2)
(17)
-
(19)
16,772
4,649
571
(24)
21,968
4,143
393
26,504
(4,496)
(2,689)
5
(7,180)
(3,698)
-
(10,878)
19
15,626
36
14,788
The net book value of computer equipment held under finance lease at 31 March 2012 was £2,253,000 (2011: £1,735,000).
17. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Provision for impairment
Trade receivables (net)
Other receivables
Prepayments and accrued income
Trade and other receivables
2012
£’000
2,431
(371)
2,060
301
1,710
4,071
2011
£’000
1,358
(177)
1,181
240
1,679
3,100
The carrying amount of trade and other receivables approximates to their fair value, which has been calculated based on expectations of
debt recovery from historic performances feeding into impairment provision calculations. Some of the higher value trade receivables in the
Hosting division are reviewed individually for impairment and judgment made as to any likely impairment based on historic trends and the
latest communication with specific customers. The balance of trade receivables in the Group are individually small in terms of value, so
are considered for impairment by business unit specific provision calculations and are not individually impaired.
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
51
17. TRADE AND OTHER RECEIVABLES (CONTINUED)
To consider the total exposure to credit risks, the Group uses figures net of VAT. At 31 March 2012, £1,391,000 (2011: £686,000) of
net trade receivables were fully performing. Net trade receivables of £669,000 (2011: £495,000) 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. Trade receivables
consist of a large number of customers in various industries and geographical areas. The Group is not exposed to any significant credit
risk exposure to any single counterparty or any group of counterparties having similar characteristics. The aging below shows that almost
all are less than three months old and 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
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
Acquired during the year
Balance at end of year
18. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Cash and cash equivalents
2012
£’000
599
34
36
669
2012
£’000
177
153
41
371
2012
£’000
8,935
8,935
2011
£’000
434
33
28
495
2011
£’000
124
53
-
177
2011
£’000
6,864
6,864
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 0.88% (2011: 0.51%).
www.iomart.com
52
Notes to the Financial Statements. Year ended 31 March 2012.
19. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Accruals
Deferred income
Trade and other payables
2012
£’000
(1,751)
(970)
(3,335)
(4,536)
(10,592)
2011
£’000
(1,377)
(596)
(3,407)
(4,364)
(9,744)
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. CONTINGENT CONSIDERATION
Contingent consideration due on acquisitions:
- Titan Internet Limited
- EQSN Limited
- Global Gold Holdings Limited
Total contingent consideration due on acquisitions
Subsequent to the year end both contingent considerations have been settled.
2012
£’000
-
(225)
(21)
(246)
2011
£’000
(600)
-
-
(600)
iomart group plc Annual Report 2012
21. BORROWINGS
Current:
Obligations under finance leases
Bank loans
Current borrowings
Non-current:
Obligations under finance leases
Total non-current borrowings
Total borrowings
Notes to the Financial Statements. Year ended 31 March 2012.
53
2012
£’000
(1,251)
(4,000)
(5,251)
(1,211)
(1,211)
2011
£’000
(846)
(2,000)
(2,846)
(920)
(920)
(6,462)
(3,766)
The carrying amount of borrowings approximates to their fair value.
The obligations under finance leases are secured by the related assets and are repayable as follows:
Due within one year
Due between two and five years
Capital
£’000
1,251
1,211
2,462
2012
Interest
Total
£’000 £’000
1,374
1,277
189 2,651
123
66
Capital
£’000
846
920
1,766
2011
Interest
Total
£’000 £’000
938
964
136 1,902
92
44
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 6.8% (2011: 6.9%). Lease payments are made on a monthly and quarterly basis.
The future lease obligation of £2,651,000 (2011: £1,902,000) has a present value of £2,452,000 (2011: £1,846,000).
The Group has a multi option revolving credit facility of £10m which was made available in order to finance business acquisitions and to
finance capital expenditure. In the previous year, in order to fund the acquisition of Titan Internet Limited, £2.0m of this facility was drawn
down in November 2010. In the current year, in order to fund the acquisition of Switch Media Limited £1.0m was drawn down in April
2011 and in order to fund the acquisition of EQSN Limited in November 2011 a further £1.0m was drawn down. As a consequence the
total draw down on the facility as at 31 March 2012 is £4.0m (2011: £2.0m). The interest rate on the bank loan is fixed for periods of
either 3 or 6 months and is currently fixed for a 6 month term at 3.3% per annum (2011: 3.0%) which results in an effective annual interest
rate, which includes the cost of draw down fees, of 3.8% (2011: 5.0%). Due to the short term nature of the loan, the future loan obligation
of £4,076,000 (2011: £2,030,000) 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
2012
2011
Land and
buildings
£’000
1,729
5,703
4,885
12,317
Other
£’000
215
873
1,726
2,814
Land and
buildings
£’000
2,222
5,189
6,006
13,417
Other
£’000
181
252
381
814
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 2012, the total future minimum sub-lease
payments expected to be received under non-cancellable sub-leases were £181,000 (2011: £226,000).
www.iomart.com
54
Notes to the Financial Statements. Year ended 31 March 2012.
23. SHARE CAPITAL
Authorised
At 31 March 2010, 2011, and 2012
Called up, allotted and fully paid
At 31 March 2010
Exercise of options
At 31 March 2011
Exercise of options
At 31 March 2012
Ordinary shares of 1p each
Number of shares
£’000
200,000,000
102,752,599
1,087,244
103,839,843
977,561
104,817,404
2,000
1,028
10
1,038
10
1,048
During the year the Company issued 977,561 (2011: 1,087,244) ordinary shares of 1p each in respect of the exercise of share options
by employees for which a net total of £396,314 (2011: £473,000) was received.
On 9 August 2011, 227,105 ordinary shares (2011: nil) were transferred from the Own Shares JSOP reserve following the exercise of
Joint Share Ownership options by an employee. The exercise price of the JSOP option was 51.47p and the market price on the exercise
date was 97.0p (2011: nil). As at 31 March 2012 the Company held 4,750,079 shares (2011: 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
£47,501 (2011: £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 £2,351,289 (2011: £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 15-18, 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 2012 are fully paid.
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
55
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
Up to 3 years
Incentive scheme
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.
During the year, options over 977,561 ordinary shares (2011: 1,087,244) were exercised and the average market price at the exercise
dates was 103.8p (2011: 66.6p). The weighted average remaining contractual life is 6 years (2011: 7 years).
As disclosed in note 4, a share based payment charge of £104,000 (2011: £290,000) 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. No new share options were granted in the year
(2011: 580,000).
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:
www.iomart.com
56
Notes to the Financial Statements. Year ended 31 March 2012.
24. SHARE BASED PAYMENTS (CONTINUED)
As at 31 March 2012
Details
Options for shares outstanding
Vested
options for
shares not yet
exercised
Exercise
price
Grant
date
Exercise
date
Expiry
date
31 March
2011
Issued
Expired Forfeited Exercised 31 March 31 March
2012
2012
Enterprise management incentive scheme
6.25 02/07/2003
02/07/2004
02/07/2013
6.25 02/07/2003
02/07/2005
02/07/2013
6.25 02/07/2003
02/07/2006
02/07/2013
42,081
42,083
42,086
78.50 17/11/2004
17/11/2007
17/11/2014
224,521
74.00 24/08/2006
24/08/2009
24/08/2016
50.50 27/09/2007
27/09/2010
27/09/2017
43.50 20/12/2007
20/12/2007
20/12/2017
43.50 20/12/2007
20/06/2008
20/12/2017
50,000
85,982
50,000
60,000
43.50 20/12/2007
20/12/2008
20/12/2017
110,000
43.50 20/12/2007
20/06/2009
20/12/2017
110,000
43.50 20/12/2007
20/12/2009
20/12/2017
43.50 20/12/2007
20/06/2010
20/12/2017
69,770
10,000
46.50 29/09/2008
31/03/2009
29/09/2018
136,021
46.50 29/09/2008
31/03/2010
29/09/2018
46.50 29/09/2008
31/03/2011
29/09/2018
50,001
83,331
46.50 06/10/2008
31/03/2009
06/10/2018
235,923
46.50 06/10/2008
31/03/2010
06/10/2018
28,495
26.50 05/02/2009
05/02/2012
05/02/2019
100,000
37.00 11/05/2009
31/03/2010
11/05/2019
225,000
37.00 11/05/2009
31/03/2011
11/05/2019
124,324
37.00 11/05/2009
31/03/2012
11/05/2019
37.00 11/05/2009
31/03/2013
11/05/2019
25,000
25,000
44.50 09/12/2009
31/03/2013
09/12/2019
200,000
90.50 29/10/2010
29/10/2010
29/10/2020
90.50 29/10/2010
01/04/2010
29/10/2020
87.50 02/12/2010
31/03/2011
02/12/2020
87.50 02/12/2010
31/03/2012
02/12/2020
87.50 02/12/2010
31/03/2013
02/12/2020
87.50 02/12/2010
31/03/2014
02/12/2020
Unapproved schemes
11.75 31/10/2001
31/10/2001
31/10/2011
46.50 29/09/2008
31/03/2010
29/09/2018
83,333
49,263
16,667
76,668
81,808
59,999
50,000
69,086
46.50 29/09/2008
31/03/2011
29/09/2018
183,332
37.00 11/05/2009
31/03/2011
11/05/2019
125,676
37.00 11/05/2009
31/03/2012
11/05/2019
225,000
37.00 11/05/2009
31/03/2013
11/05/2019
225,000
90.50 29/10/2010
01/04/2011
29/10/2020
90.50 29/10/2010
01/04/2012
29/10/2020
87.50 02/12/2010
31/03/2013
02/12/2020
87.50 02/12/2010
31/03/2014
02/12/2020
34,071
83,333
28,191
66,667
Approved Schemes
13.50 26/09/2001
26/09/2004
26/09/2011
5,000
Total
Weighted Average Exercise price
3,592,712
50.27p
iomart group plc Annual Report 2012
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(50,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,333)
(3,333)
(3,334)
38,748
38,750
38,752
38,748
38,750
38,752
-
-
-
(50,000)
(50,000)
(68,500)
(50,000)
(29,885)
-
(76,344)
(33,334)
(66,665)
224,521
224,521
50,000
85,982
-
10,000
41,500
60,000
39,885
10,000
59,677
16,667
16,666
50,000
85,982
-
10,000
41,500
60,000
39,885
10,000
59,677
16,667
16,666
(29,500)
206,423
206,423
-
-
28,495
28,495
100,000
100,000
- (225,000)
- (124,324)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
200,000
83,333
49,263
16,667
76,668
81,808
59,999
-
-
-
-
-
-
83,333
49,263
16,667
76,668
-
-
-
69,086
69,086
-
-
-
34,071
83,333
28,191
66,667
-
-
-
34,071
-
-
-
-
(33,333)
149,999
149,999
- (125,676)
(25,000)
(25,000)
-
-
-
-
-
-
-
-
-
-
- (225,000)
- (225,000)
-
-
-
-
-
-
-
-
-
-
(5,000)
-
(50,000) (500,000) (977,561) 2,065,151 1,545,153
54.85p
40.54p
11.75p
37.00p
59.03p
Notes to the Financial Statements. Year ended 31 March 2012.
57
24. SHARE BASED PAYMENTS (CONTINUED)
As at 31 March 2011
Exercise
price
Details
Grant
date
Options for shares outstanding
Exercise
date
Expiry
date
31 March
2010
Issued Transferred Forfeited Excercissed
31 March
2011
Vested
options for
shares not yet
exercised
31 March
2011
Enterprise management incentive scheme
6.25 02/07/2003
6.25 02/07/2003
6.25 02/07/2003
78.50 17/11/2004
74.00 24/08/2006
27/09/2007
50.50
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
43.50
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
05/02/2009
26.50
11/05/2009
37.00
11/05/2009
37.00
11/05/2009
37.00
11/05/2009
37.00
09/12/2009
44.50
29/10/2010
90.50
29/10/2010
90.50
02/12/2010
87.50
02/12/2010
87.50
02/12/2010
87.50
02/12/2010
87.50
02/07/2004 02/07/2013
02/07/2005 02/07/2013
02/07/2006 02/07/2013
17/11/2007 17/11/2014
24/08/2009 24/08/2016
27/09/2010 27/09/2017
20/12/2007 20/12/2017
20/06/2008 20/12/2017
20/12/2008 20/12/2017
20/06/2009 20/12/2017
20/12/2009 20/12/2017
20/06/2010 20/12/2017
31/03/2009 29/09/2018
31/03/2010 29/09/2018
31/03/2011 29/09/2018
31/03/2009 06/10/2018
31/03/2010 06/10/2018
05/02/2012 05/02/2019
31/03/2010 11/05/2019
31/03/2011 11/05/2019
31/03/2012 11/05/2019
31/03/2013 11/05/2019
31/03/2013 09/12/2019
29/10/2010 29/10/2020
01/04/2010 29/10/2020
31/03/2011 02/12/2020
31/03/2012 02/12/2020
31/03/2013 02/12/2020
31/03/2014 02/12/2020
31/10/2001 31/10/2011
20/12/2009 20/12/2017
20/06/2010 20/12/2017
31/03/2009 29/09/2018
31/03/2010 29/09/2018
31/03/2011 29/09/2018
30/09/2009 05/02/2019
31/03/2011 11/05/2019
31/03/2012 11/05/2019
31/03/2013 11/05/2019
01/04/2011 29/10/2020
01/04/2012 29/10/2020
31/03/2013 02/12/2020
31/03/2014 02/12/2020
Unapproved schemes
11.75
43.50
43.50
46.50
46.50
46.50
26.50
37.00
37.00
37.00
90.50
90.50
87.50
87.50
31/10/2001
20/12/2007
20/12/2007
29/09/2008
29/09/2008
29/09/2008
05/02/2009
11/05/2009
11/05/2009
11/05/2009
29/10/2010
29/10/2010
02/12/2010
02/12/2010
Approved Schemes
44.00 24/01/2001
13.50 26/09/2001
11.75 31/10/2001
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)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(16,666)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
116,668
116,667
(50,000)
111,290 (100,000)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(2,500)
(5,833)
(5,834)
-
-
-
(100,000)
(100,000)
(50,000)
(50,000)
(29,885)
-
(93,011)
(50,000)
-
-
-
-
(25,000)
-
-
-
-
-
-
-
-
-
-
-
(40,230)
(100,000)
(197,315)
(164,248)
-
(12,000)
-
-
-
-
-
-
-
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
-
-
-
-
-
-
24/01/2004 24/01/2011
26/09/2004 26/09/2011
31/10/2004 31/10/2011
37,500
5,000
23,888
-
-
-
-
-
-
-
-
-
(37,500)
-
(23,888)
-
5,000
-
-
5,000
-
Total
Weighted Average Exercise price
4,266,622
48.23p
580,000
88.79p
- (166,666) (1,087,244) 3,592,712 2,312,712
51.02p
- 46.50p
50.27p
43.39p
www.iomart.com
58
Notes to the Financial Statements. Year ended 31 March 2012.
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 2012
Details
Options for shares outstanding
Vested options
for JSOP
shares not yet
exercised
Exercise
price
Grant
date
Exercise
date
Expiry
date
31 March
2011
Issued Surrenderd
Exercised Expired
31 March
2012
31 March
2012
Joint Share Ownership Plan
52.51
52.51
52.51
53.58
78.50
51.47
51.47
51.47
51.47
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2011
31/03/2012
31/03/2010
31/03/2010
31/03/2010
20/06/2010
31/03/2010
31/03/2011
06/10/2018
935,582
06/10/2018 1,050,000
06/10/2018 1,350,000
914,018
27/09/2017
500,479
17/11/2014
20,115
20/12/2017
50,000
20/12/2017
90,324
29/09/2018
66,666
29/09/2018
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(20,115)
(50,000)
(90,324)
(66,666)
Total
Weighted Average Exercise price
4,977,184
53.95p
-
n/a
-
n/a
(227,105)
51.47p
935,582
-
935,582
- 1,050,000 1,050,000
- 1,350,000 1,350,000
914,018
-
500,479
-
-
-
-
-
-
-
-
-
914,018
500,479
-
-
-
-
- 4,750,079 4,750,079
55.45p
55.45p
n/a
As at 31 March 2011
Details
Options for shares outstanding
Exercise
price
Grant
date
Exercise
date
Expiry
date
31 March
2010
Issued Surrenderd Exercised Expired
31 March
2011
Vested options
for JSOP
shares not yet
exercised
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
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010 06/10/2018
31/03/2011 06/10/2018
31/03/2012 06/10/2018
31/03/2010 27/09/2017
31/03/2010 17/11/2014
31/03/2010 20/12/2017
20/06/2010 20/12/2017
31/03/2010 29/09/2018
31/03/2011 29/09/2018
935,582
1,050,000
1,350,000
914,018
500,479
20,115
50,000
90,324
66,666
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
935,582
-
935,582
- 1,050,000 1,050,000
-
- 1,350,000
914,018
914,018
-
500,479
500,479
-
20,115
20,115
-
50,000
50,000
-
90,324
90,324
-
66,666
66,666
-
- 4,977,184 3,627,184
55.05p
53.95p
n/a
Total
Weighted Average Exercise price
4,977,184
52.60p
-
n/a
-
n/a
-
n/a
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
59
25. RELATED PARTY TRANSACTIONS
Dividends paid to key management (only directors are deemed to fall into this category) were as follows:
Angus MacSween
Chris Batterham
Sarah Haran
Richard Logan
Ian Ritchie
Fred Shedden (resigned 29 September 2011)
Total dividends paid to directors
2012
£’000
126
1
7
1
1
5
141
2011
£’000
77
-
4
-
1
3
85
The only other related party transactions in the year were the salary payments to key management as disclosed in note 5 and the Report
to the Board to the Members on Directors’ Remuneration on pages 15-18.
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 2012 (2011:
nil).
(b) Commitments
Capital expenditure on property, plant and equipment committed by the Group at 31 March 2012 was £74,000 (2011: £83,000).
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.
The carrying amounts of financial assets presented in the statement of financial position relate to the following measurement categories
as defined in IAS 39:
www.iomart.com
60
Notes to the Financial Statements. Year ended 31 March 2012.
27. RISK MANAGEMENT (CONTINUED)
2012
Non-current:
Lease deposit
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Total for category
2011
Non-current:
Lease deposit
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Total for category
Loans and
receivables
£’000
Designated at
fair value
through profit
or loss
£’000
2,416
2,060
8,935
301
13,712
2,016
1,181
6,864
240
10,301
-
-
-
-
-
-
-
-
-
-
Total
£’000
2,416
2,060
8,935
301
13,712
2,016
1,181
6,864
240
10,301
The carrying amounts of financial liabilities presented in the statement of financial position relate to the following measurement categories
as defined in IAS 39:
At
fair value
through profit
Financial
liabilities
measured at
or loss amortised cost
£’000
£’000
Other
(non-IAS 39)
£’000
Total
£’000
2012
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
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
-
-
-
-
-
-
(21)
(21)
-
-
-
-
-
-
(30)
(30)
-
(1,211)
(1,211)
(1,751)
(3,335)
-
(246)
-
-
(5,332)
-
-
(4,000)
-
(1,251)
-
(6,462)
(1,751)
(3,335)
(4,000)
(246)
(1,251)
(21)
(11,815)
-
(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)
The forward foreign exchange contracts noted in the above table are considered to be Level 2 financial assets per the fair value hierarchy
classifications under IFRS 7 ‘Financial Instruments: Disclosures’, as their price is based on inputs other than quoted prices that are
observable for the asset, either directly or indirectly.
iomart group plc Annual Report 2012
Notes to the Financial Statements. Year ended 31 March 2012.
61
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 and the interest rate on the Group’s revolving
credit facility is based on LIBOR plus a margin.
Currency risk
During the year the Group made payments totalling US$1.9m (2011: US$1.8m) 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 $1,800,000 (2011: $840,000) for a total of £1,148,000
(2011: £555,000), at an average exchange rate of US$:GBP of 1.57 (2011: 1.51) over the period to March 2013. The fair value of these
currency contracts is estimated to be approximately a loss of £21,000 (2011: loss £30,000). 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 which at the moment is no less than £5m. 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 covenants under its 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 £2,060,000 (2011: £1,181,000) 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.
www.iomart.com
Customer Focused
“As we win bigger and more complex contracts it’s great to know
that we have got a hosting partner that is prepared to go that extra
mile for us and adapt as our requirements change.”
Vincent Cassidy, Group IT Director, o2o
iomart group plc Annual Report 2012
63
Holding Company Financial Statements
Year ended 31 March 2012
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
IOMART GROUP PLC
Opinion on other matter prescribed by the Companies Act
2006
We have audited the parent company financial statements of iomart
Group plc for the year ended 31 March 2012 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.
Respective responsibilities of directors and auditors
in
fully
As explained more
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.
In our opinion the information given in the Directors' Report for the
financial year for which the financial statements are prepared is
consistent with the parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
•
•
•
adequate accounting records have not been kept by the
parent company, or returns adequate for our audit have not
been received from branches not visited by us; or
the parent company financial statements are not in
agreement with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by
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 2012.
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 2012;
•
•
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.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
28 May 2012
www.iomart.com
64
Holding Company Financial Statements. Year ended 31 March 2012.
BALANCE SHEET
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors
Cash at bank and in hand
Note
2012
£’000
2011
£’000
3
4
35,782
35,782
13,820
8,083
21,903
31,098
31,098
14,151
5,981
20,132
CREDITORS: amounts falling due within one year
6
(17,923)
(10,433)
NET CURRENT ASSETS
NET ASSETS
CAPITAL AND RESERVES
Called up share capital
Own shares
Capital redemption reserve
Share premium account
Profit and loss account
TOTAL EQUITY SHAREHOLDERS’ FUNDS
3,980
9,699
39,762
40,797
1,048
(2,351)
1,200
20,362
19,503
1,038
(2,464)
1,200
19,977
21,046
39,762
40,797
7
8
8
8
8
These financial statements were approved by the board of directors on 28 May 2012.
Signed on behalf of the board of directors
Angus MacSween
Director and chief executive officer
iomart Group plc – Company Number: SC204560
The following notes form part of the primary financial statements.
iomart group plc Annual Report 2012
Holding Company Financial Statements. Year ended 31 March 2012.
65
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 January 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”.
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. The carrying value of the investment in all
companies transferred is considered together against the future
cash flows 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.
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.
www.iomart.com
66
Holding Company Financial Statements. Year ended 31 March 2012.
1. ACCOUNTING POLICIES (CONTINUED)
Share-based payment (continued)
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. (LOSS)/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 (loss)/profit for the financial period after taxation was £1,006,000 (2011: profit
£807,000).
Shares in subsidiary undertakings
£’000
32,796
4,687
21
37,504
(1,698)
(24)
(1,722)
35,782
31,098
3. INVESTMENTS HELD AS FIXED ASSETS
Cost
At 1 April 2011
Additions
Share based payment
Cost at 31 March 2012
Impairment
At 1 April 2011
Charge for the year
Impairment at 31 March 2012
Net book value of Investments at 31 March 2012
Net book value of Investments at 31 March 2011
All of the above investments are unlisted.
iomart group plc Annual Report 2012
Holding Company Financial Statements. Year ended 31 March 2012.
67
3. 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
%
Dormant
Dormant
Dormant
Scotland
Scotland Managed hosting services
Scotland Managed hosting services
Scotland Managed hosting services
Scotland
Scotland
England Webservices
England Webservices
England Webservices
England Webservices
Non-trading
England
England
Non-trading
England Managed hosting services
England
England
England
England
Datacentre services
Dormant
Dormant
Non-trading
iomart Limited
iomart Hosting Limited
iomart Cloud Services Limited
EQSN Limited
iomart Virtual Servers Hosting Limited
Netintelligence Limited
Easyspace Limited
Switch Media Limited
Switch Media (Ireland) Limited
Global Gold Networks Limited
Global Gold Holdings Limited
Rapidswitch Limited
Titan Internet Limtied
iomart Datacentres Limited
Internetters Limited
NicNames Limited
Web Genie Internet Limited
4. DEBTORS
Prepayments and accrued income
Other debtors
Other taxation and social security
Deferred taxation (note 5)
Amounts owed by subsidiary undertakings
100
100
100
100
100
100
100
100
-
-
100
100
100
100
-
-
-
2012
£’000
163
5
172
381
13,099
-
-
-
-
-
-
-
-
100
100
-
-
-
-
100
100
100
2011
£’000
160
1
220
354
13,416
13,820
14,151
www.iomart.com
68
Holding Company Financial Statements. Year ended 31 March 2012.
5. 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
2012
Recognised Unrecognised
£’000
-
£’000
381
2011
Recognised Unrecognised
£’000
-
£’000
354
2012
£’000
354
29
(2)
381
2011
£’000
72
202
80
354
The deferred tax asset in relation to share based remuneration arises from the anticipated future tax relief on the exercise of share
options.
6. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade creditors
Other taxation and social security
Accruals and deferred income
Contingent consideration
Bank loan
Amounts owed to subsidiary undertakings
7. SHARE CAPITAL
Authorised
At 31 March 2010, 2011, and 2012
Called up, allotted and fully paid
At 31 March 2010
Exercise of options
At 31 March 2011
Exercise of options
At 31 March 2012
2012
£’000
87
43
653
246
4,000
12,894
17,923
Ordinary shares of 1p each
Number of shares
200,000,000
102,752,599
1,087,244
103,839,843
977,561
104,817,404
2011
£’000
8
41
710
600
2,000
7,074
10,433
£’000
2,000
1,028
10
1,038
10
1,048
During the year the company issued 977,561 (2011: 1,087,244) ordinary shares of 1p each in respect of the exercise of share options
by employees for which a net total of £396,314 (2011: £473,000) was received.
iomart group plc Annual Report 2012
Holding Company Financial Statements. Year ended 31 March 2012.
69
7. SHARE CAPITAL (CONTINUED)
As at 31 March 2012 the company held 4,750,079 shares (2011: 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 £47,501 (2011: £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 £2,351,289 (2011: £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 15-18, 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 2012 are fully paid.
8. STATEMENT OF MOVEMENT IN RESERVES
Loss for the financial period
Dividends
Share based payments
Deferred tax on share based remuneration
Issue of own shares from JSOP
Issue of new shares for option redemption
Opening balance
Closing balance
Own
shares
JSOP
£’000
Capital
redemption
reserve
£’000
Share
premium
account
£’000
-
-
-
-
113
-
113
-
-
-
-
-
-
-
-
-
-
-
-
385
385
Profit
and loss
account
£’000
(1,006)
(643)
104
(2)
4
-
(1,543)
(2,464)
1,200
19,977
21,046
(2,351)
1,200
20,362
19,503
www.iomart.com
70
Holding Company Financial Statements. Year ended 31 March 2012.
9. 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 £104,000 (2011: £290,000) by;
1) taking the charge in relation to employees of the holding company through the holding company statement of comprehensive
income £83,000 (2011: £171,000),
2) recording an increase to its investment in subsidiaries for the amounts attributable to employees of subsidiaries and recording a
corresponding entry to the profit and loss account reserve £21,000 (2011: £119,000).
10. RELATED PARTY TRANSACTIONS
The company has taken advantage of the exemption in Financial Reporting Standard No. 8 “Related Party Transactions” not to disclose
transactions with wholly owned subsidiaries. Dividends paid to key management (only directors are deemed to fall into this category) of
the Company have been disclosed in note 25 of the Group financial statements and the only other related party transactions in the year
were salary payments to key management as disclosed in note 5 of the Group financial statements.
11. 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 2012 (2011: nil).
(b) Commitments
There are no commitments present as at 31 March 2012 (2011: nil).
12. ULITIMATE CONTROLLING PARTY
The Directors’ have assessed that there is no ultimate controlling party.
iomart group plc Annual Report 2012
71
Notice of the 2012 Annual General Meeting
NOTICE IS HEREBY GIVEN that the 2012 annual general meeting
of the Company will be held at Lister Pavilion, Kelvin Campus,
West of Scotland Science Park, Glasgow G20 0SP on 30 August
2012 at 2.30 pm for the purpose of considering and, if thought
fit, passing the following resolutions, of which resolutions 1 to 9
(inclusive) will be proposed as ordinary resolutions and resolutions
10 to 11 (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 2012.
2 To approve the report of the board to the members on
directors' remuneration for the year ended 31 March 2012.
3 To reappoint Crawford Beveridge (who was appointed by the
board since the last annual general meeting) as a director of the
Company.
4 To reappoint Angus MacSween (who retires by rotation and,
being eligible, offers himself for re-election) as a director of the
Company.
5 To reappoint Richard Logan (who retires by rotation and,
being eligible, offers himself for re-election) as a director of the
Company.
6 To declare a final dividend for the year ended 31 March 2012
of 0.90p per share payable on 5 September 2012 to shareholders
registered at the close of business on 17 August 2012.
7 To reappoint Grant Thornton UK LLP, Chartered Accountants,
as auditors of the Company and to authorise the directors to fix
their remuneration.
8 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 £350,693.01; 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 2013 save
that the Company may, before such expiry, make an offer or
agreement which would or might require shares to be allotted or
Rights granted after such expiry and the Directors may allot shares
in pursuance of such offer or agreement notwithstanding that the
authority conferred by this resolution has expired.
This authority is in substitution for all previous authorities conferred
on the Directors in accordance with section 80 of the Companies
Act 1985 or section 551 of the Act.
9 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 £350,693.01 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 2013 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.
10 That subject to the passing of resolutions 8 and 9 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 8 and
9 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
£105,207.90;
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 2013, 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
www.iomart.com
72
Notice of the 2012 Annual General Meeting
that the power conferred by this resolution has expired.
11 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 10,520,790 (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
Lister Pavilion, Kelvin Campus,
Company Secretary
West of Scotland Science Park,
22 June 2012
Glasgow G20 0SP
iomart group plc Annual Report 2012
Notice of the 2012 Annual General Meeting
73
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 28 August 2012)
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 28 August 2012; 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 9 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 2012 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 15
to 18. This resolution is an advisory one and no entitlement to
remuneration is conditional on the resolution being passed.
Resolution 3, 4 and 5 – Re-election of directors
Under article 24 of the Company's articles of association one third
of the directors are required to retire by rotation at each annual
general meeting. Pursuant to those articles, Mr Angus MacSween
and Mr Richard Logan are required to retire by rotation at this
annual general meeting and, being eligible, offer themselves
for reappointment. In addition, the articles also stipulate that
any director appointed by the Board during the year must offer
themselves for reappointment at the next available annual general
meeting. Mr Crawford Beveridge was appointed on 29 September
2011 and accordingly offers himself for reappointment. The Board
is satisfied that the performance of Mr Crawford Beveridge, Mr
Angus MacSween and Mr Richard Logan 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, 4 and 5 propose the
reappointment of Mr Crawford Beveridge, Mr Angus MacSween
and Mr Richard Logan.
Brief biographical details of Mr Crawford Beveridge, Mr Angus
MacSween and Mr Richard Logan are given below.
Crawford Beveridge 66, appointed 2011; Crawford Beveridge
CBE has over 40 years experience in the technology industry,
including 16 years at Sun Microsystems ("Sun"), most recently as
www.iomart.com
74
Notice of the 2012 Annual General Meeting
Executive Vice President and Chairman, EMEA, APAC and the
Americas until retiring in January 2010. His business background
also includes roles with Hewlett-Packard, Digital Equipment Corp.,
Analog Devices, non-executive director of Hitachi Global Storage
Technologies, a subsidiary of Hitachi Ltd and Chief Executive of
Scottish Enterprise. Current board roles include Chairman of the
investment advisory board at Scottish Equity Partners and Non
Executive Chairman of NASDAQ listed Autodesk.
Angus MacSween 55, 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.
Richard Logan 54, 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.
Resolution 6 – To declare a dividend 0.90p 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 0.90p per
Ordinary Share, to be payable to shareholders registered at close
of business on 17 August 2012.
Resolution 7 – Re-appointment and remuneration of
auditors
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.
iomart group plc Annual Report 2012
Resolutions 8 and 9 – 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 8 would give the directors the authority to allot shares
up to an aggregate nominal amount of £350,693.01, being
approximately one-third of the issued ordinary share capital of the
Company as at the date of the notice of this meeting.
In line with recent guidance issued by the Association of British
Insurers, resolution 9 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
£350,693.01 (representing 35,069,301 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 2013.
Special Resolutions
Resolutions 10 and 11 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 10 - Disapplication of statutory pre-emption
rights
Resolution 10 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".
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 10 (at paragraph (a)), in authorising the
directors to allot new shares by way of a rights issue, also permits
the directors to make appropriate exclusions or arrangements to
deal with such difficulties.
Under the Company's articles of association the Board may, with
the sanction of an ordinary resolution, offer the holders of shares
the right to receive shares, credited as fully paid, instead of cash in
respect of the whole (or some part, to be determined by the Board)
of such dividend or dividends as are specified by such resolution.
Paragraph (b) of resolution 10 asks shareholders to waive their
pre-emption rights in respect of any such issue of shares.
Resolution 10 (at paragraph (c)) asks shareholders to waive their
pre-emption rights, but only for new shares equal to 10 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 10 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 10 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 10 per
cent. ceiling.
The power given by resolution 10 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 2013.
Resolution 11 – 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.
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
Notice of the 2012 Annual General Meeting
75
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
11 to effect that buy back is 5% above the average middle market
price of an Ordinary Share for the five business days immediately
preceding the date on which the buy back is effected.
The statutory provisions governing buy backs of own shares are
currently contained in, inter alios, sections 693 and 701 of the
Companies Act 2006.
www.iomart.com
Experts
iomart’s Chief Technology
Officer Bill Strain was named
IT Leader of the Year at the
IT Pro Awards
iomart group plc Annual Report 2012
Officers and Professional Advisers
Directors
Ian Ritchie CBE, FREng, FRSE, FBCS, CEng, BSc
Non executive chairman
Angus MacSween
Chris Batterham MA, FCA
Crawford Beveridge CBE
Sarah Haran
Richard Logan BA, CA
Secretary
Bruce Hall BAcc(Hons), CA
Chief executive officer
Non executive director
Non executive director
Director
Director
Registered office
Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow
G20 0SP
Nominated adviser and broker
Peel Hunt LLP, Moor House, 120 London Wall, London EC2Y 5ET
Principal Bankers
Lloyds Banking Group, Bank of Scotland plc, 235 Sauchiehall Street
Glasgow G2 3EY
Solicitors
Pinsent Masons 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
77
www.iomart.com
78
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
Westcoastcloud
* : info@westcoastcloud.com
www.westcoastcloud.com
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iomart group plc Annual Report 2012
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iomart continues to invest in innovative marketing and sales
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Image taken at iomart's cloud seminar at London Film Museum May 2012
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iomart group plc Annual Report 2012
iomart Group plc, Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow, G20 0SP. www.iomart.com