iomart Group plc Annual report and accounts 2013 “Mobility is driving the fragmentation
of how people now access the internet
for both work and leisure and this
borderless access model means that
the only way to deliver services securely
and efficiently is from central points
through the cloud. iomart's datacentres
and cloud computing expertise are at
the heart of this cloud delivery service
capability.”
Angus MacSween,
CEO, iomart Group plc
iomart Group plc Annual report and accounts 2013 Financial statements for year ended 31March 2013
Highlights
Financial
· Revenue growth of 29% to £43.1m (2012: £33.5m)
· Adjusted EBITDA¹ growth of 48% to £16.5m (2012: £11.2m)
· Adjusted profit before tax growth² of 56% to £10.7m (2012: £6.9m)
· Adjusted basic earnings per share³ from operations increased by 21% to 8.46p (2012: 6.99p)
· Cashflow from operations increased by 54% to £14.8m (2012: £9.6m)
· Adjusted EBITDA¹ margins increased to 38% (2012: 33%)
· Proposed final dividend increased by 56% to 1.40p per share (2012: 0.90p per share)
Operational
· Acquisition of Melbourne Server Hosting Limited, Skymarket Limited & Internet Engineering Limited
further accelerating growth
· Deployment of resilient UK fibre network across all data centres
· Commencement of fit out of additional 600 racks of datacentre space
Revenue Growth
29% to £43.1M
EBITDA Growth
48% to £16.5M
PBT Growth
56% to £10.7M
Dividend Growth
56% to 1.40p/share
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, shared based payment charges, mark to mark adjustments in
respect of interest rate swaps and acquisition costs.
³ Throughout these financial statements adjusted earnings per share is earnings per share before amortisation charges on acquired intangible
assets, shared based payment charges, mark to mark adjustments in respect of interest rate swaps and acquisition costs, including the taxation effect of these.
⁴ At the start of the financial year some of the customers of Titan Internet Limited, which was acquired in October 2010, were transferred from the Hosting segment to the Easyspace segment. All of the
appropriate comparative figures for the previous financial year for both segments have been restated to reflect that transfer. Details of the comparative figures before the effect of the transfer have been
included in the Segmental Analysis note.
iomart Group plc Annual report and accounts 2013
SHI International Corp., one of
North America’s top 20 IT solutions
providers, has chosen iomartcloud’s
enterprise cloud platform to deliver
reliable and flexible backup solutions
for its customers in the United States.
iomart Group plc Annual report and accounts 2013 Contents
03
Chairman’s statement
04
Chief executive officer’s report
06
Finance director's report
10
Corporate governance
15
Report of the board to the members on directors’ remuneration
19
Directors' report
21
Directors' responsibilities statement
23
Board of directors
24
Independent auditor's report to the members of iomart Group plc
25
Consolidated statement of comprehensive income
26
Consolidated statement of financial position
27
Consolidated statement of cash flows
28
Consolidated statement of changes in equity
30
Notes to the financial statements
61
Parent company financial statements
71
Notice of the 2013 annual general meeting
77
Officers and professional advisers
iomart Group plc Annual report and accounts 2013 iomart Group plc has been selected for G-Cloud iii
Framework, the pre-approved group of Cloud ICT
suppliers to the UK Government.
iomart Group plc Annual report and accounts 2013 Chairman's Statement
I am very pleased to be able to report on another extremely strong performance by iomart over this financial year. We continue to
make excellent progress as we execute on our combined strategy of growing through both organic and acquisitive means and our
reputation as one of the UK’s leading cloud computing companies continues to develop.
We have again enjoyed a substantial increase in profitability over the year, driven both by organic and acquisitive growth. During
the year we welcomed Skymarket Limited, Melbourne Server Hosting Limited and Internet Engineering Limited into the Group. All
are performing as expected and have been integrated into iomart’s operations. As a result of these acquisitions we increased our
datacentre estate with the addition of three datacentres taking the total to eight datacentres spread across the UK.
All of this progress is a result of a great deal of hard work by our staff and I thank them all on behalf of the Board and the shareholders
for their efforts over the year. External acknowledgement of our performance is always gratefully received and we were delighted to be
chosen as Scottish AIM/Mid cap plc of the year for the second year in succession at the recent 2013 Scotland PLC Awards.
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 1.40p per share on 3 September 2013 to shareholders on the register on 16 August 2013, representing an
increase of 56% 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 2014 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 2013
3
iomart Group plc Annual report and accounts 2013 Chief Executive Officer's Report
Introduction
Once again I’m delighted to report on a very good year for iomart. Revenues and profits have grown substantially over the year, both
organically and through acquisition.
Firstly I thought it worth reflecting on the progress we have made over the last few years. Only three years ago, in the March 2010
financial year, we reported our first year of profit under our current strategy of building the UK’s leading Cloud company. Our revenues
in that year were £18.3m, our adjusted EBITDA £3.1m and our adjusted profit before tax £1.0m, excluding an exceptional gain that
was recorded in that year. Over the subsequent three years we have grown our revenues by 135% to £43.1m, our adjusted EBITDA by
430% to £16.5m and our adjusted profit before tax by 937% to £10.7m.
Whilst we are clearly extremely pleased with the development of the Company over that period we believe we are still in the early
stages of providing solutions to the cloud computing market and are confident that we can continue to grow our operations
significantly over the coming years.
Market
The market we address is growing and evolving, with the fundamental shift towards products and services delivered over the internet
continuing unabated. In our view, this is driven by three big trends:
One is the mobile world we now inhabit. Consumers and businesses alike are increasingly accessing, processing and interacting with
data over the internet through mobile devices while on the move.
The second is the demand for faster and more reliable connectivity, making it easier to access and operate in the cloud.
The third is the inevitable growth in volume of data being created which needs to be stored and managed securely.
These three overarching trends are interlinked, driving more and more internet traffic and usage, which will only keep growing
exponentially. For example, it would take over 6 million years to watch the amount of video that will cross global IP networks each
month in 2016.
This reality is clearly evident in any local electronics shop where anyone can witness the staggering array of internet devices that have
proliferated over the last year or so. This is driving the fragmentation of how people now access the internet for both work and leisure
and this borderless access model means that the only way to deliver services securely and efficiently is from central points through the
cloud. iomart’s datacentres and cloud computing expertise are at the heart of this cloud delivery service capability.
The growth in data means that all businesses are confronted with having to make more investment in storage and computing power,
and as a result, are looking to outsource their requirements in a flexible, scalable way with a predictable pricing model. We are able to
invest in the infrastructure required to bring these economies of scale to bear for our customers.
iomart is at the forefront of this transformational shift and I expect the move to the cloud to continue for many years to come.
Acquisitions
We again augmented our organic growth through the acquisition of three operations during the year. In July 2012 we acquired
Skymarket Limited (“Skymarket”), in August, Melbourne Server Hosting Limited (“Melbourne”) and in October, Internet Engineering
Limited which trades as HostingUK (“HostingUK”). All three have proven to be good additions to the Group and have now been
integrated into the business. We will continue to look for businesses that fit our acquisition criteria with a view to making further
acquisitions in the coming year.
4
iomart Group plc Annual report and accounts 2013 Chief Executive Officer's Report
Operational Review
Whilst all of our activities involve the provision of managed hosting services we are organised into two operating segments.
Hosting
Our Hosting segment, which now includes Melbourne, continued to perform well over the year.
We provide a wide range of managed hosting services to both SMEs and corporate customers. All our solutions are delivered from
our eight datacentres located throughout the UK. The more complex managed hosting solutions are delivered 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. Melbourne delivers complex
managed hosting solutions and provides us with a strong presence in the North West of England with a particular emphasis on the
creative sector.
We secured additional space at our Maidenhead datacentre earlier in the year and signed contracts to develop that space into a
datacentre in March 2013. This fit out, which we expect to be completed towards the end of this calendar year, will increase our
datacentre capacity by around 600 racks, thereby increasing our overall capacity by approximately one quarter.
A new fibre network was established during the year in partnership with Geo Networks which provides the Group with significantly
increased connectivity capacity within our datacentre estate thus addressing the need for faster connectivity which the market is
demanding.
Revenues in this segment have grown by 37% to £32.0m partly a result of the continued organic growth of iomart Hosting and in
part due the acquisitions of EQSN and Melbourne. iomart Hosting has won almost 800 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 Skymarket and HostingUK.
Both have now been 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 9% over the year to £11.1m, due to the contribution from the companies acquired in the last two years.
Current trading and outlook
Trading since the year end remains encouraging and in line with our expectations.
We continue to be well placed to deliver an ever wider range of cloud services and with our growing credibility and strength we expect
to be able to penetrate further into the corporate environment. Our experience and skills are growing and we continue to improve and
invest in our systems and people to support further significant growth.
I look forward once again with confidence to the year ahead.
Angus MacSween
Chief Executive Officer
28 May 2013
5
iomart Group plc Annual report and accounts 2013 Finance Director's Report
Trading Results
Revenue
Revenues for the year grew by 29% to £43.1m (2012: £33.5m) 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 grew by 37% to
£32.0m (2012: £23.3m4). This growth was helped by a full year contribution from EQSN which we acquired in November 2011 and
Melbourne which we acquired in August 2012. The growth in the Hosting segment revenues excluding the impact of acquisitions was
20%.
Our Easyspace segment also delivered a good level of revenue growth in the period with revenues of £11.1m (2012: £10.2m 4) showing
a 9% increase. As anticipated this growth was entirely as a result of the acquisitions of Switch Media in April 2011 and Global Gold in
the previous financial year and the contribution of HostingUK and Skymarket which were acquired in this financial year.
We continue to have good revenue visibility and high levels of recurring revenue. 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 £28.9m (2012: £22.4m) representing a gross margin of 67.2% (2012: 66.9%) with both operating
segments contributing to this improvement in both absolute and relative terms. The improvement in our Hosting segment is a result
of the operational leverage of the operation together with the impact of acquisitions. In our Easyspace segment it has been as a result
of the impact of acquisitions.
Adjusted EBITDA
The adjusted EBITDA for the year of £16.5m (2012: £11.2m) has increased by 48%. Our percentage adjusted EBITDA margin has also
significantly improved to 38.3% (2012: 33.4%). Once again both of our operating segments have contributed to the absolute level of
growth and the improvement in the percentage margin.
The Hosting segment’s adjusted EBITDA was £14.3m (2012: £9.7m 4), an increase of 48.0%. In percentage terms the adjusted EBITDA
margin has improved to 44.7% (2012: 41.4% 4). 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, customer service and technical roles. The contribution from EQSN 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 Melbourne since August has added to the growth in adjusted EBITDA.
The Easyspace segment’s adjusted EBITDA was £5.0m (2012: £4.0m 4) an increase of 23.1%. In percentage terms the adjusted EBITDA
margin has improved to 44.9% (2012: 39.7% 4). The improvement in adjusted EBITDA is primarily due to the impact of the synergies
achieved through the integration of the acquisitions made in both this and the previous financial years.
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 to £2.8m (2012: £2.5m) mainly due to increased payroll costs.
6
iomart Group plc Annual report and accounts 2013 Finance Director's Report
Adjusted profit before tax
Depreciation charges of £4.9m (2012: £3.7m) have increased largely as a result of charges for the equipment bought to provide services
to the additional Hosting segment customers, the investment in the new fibre network, additional expenditure on our datacentres 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 (2012: £0.5m) has remained fairly static over the year.
Finance income in the period was £0.1m (2012: £0.1m) and finance costs of £0.5m (2012: £0.3m), excluding the mark to market
adjustment in respect of an interest swap on one of the Company’s loans, include interest and charges 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, excluding the charges for the amortisation of acquired intangible assets,
and finance costs, excluding mark to market adjustments on the interest rate swap, and crediting the finance income from the adjusted
EBITDA, the Group’s adjusted profit before tax was £10.7m (2012: £6.9m) an increase of 56%.
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
Less: Mark to market adjustment on interest rate swap
Profit before tax
2013
£’000
10,668
(1,302)
(364)
(258)
(46)
8,698
2012
£’000
6,854
(604)
(304)
(104)
-
5,842
The adjusting items are: share based payment charges in the period of £0.3m (2012: £0.1m) which have increased as a result of
additional share options granted in the year; costs of £0.4m (2012: £0.3m) as a result of acquisition costs; charges for the amortisation
of acquired intangible assets of £1.3m (2012: £0.6m) which have increased substantially as a result of the acquisitions made in the year
and the full year effect of acquisitions made in previous years; and a mark to market adjustment in respect of an interest rate swap
relating to a company loan of £0.05m (2012: £nil).
After deducting the charges for share based payments; charges for the amortisation of acquired intangible assets; acquisition costs
and the mark to market adjustment in respect of the interest rate swap from the adjusted profit before tax; the reported profit before
tax was £8.7m (2012: £5.8m) an increase of 49%.
Taxation
There is a tax charge for the year of £1.7m (2012: tax credit of £0.4m). This significant change in the impact of taxation on the income
statement is a direct consequence of the favourable trading which the Group has enjoyed over the last few years. Prior to that the
Group had built up considerable tax losses which as it began to trade profitably over the last few years were used up resulting in tax
credits in prior periods in respect of deferred tax relating to these losses. At the end of the last financial year all of these tax losses
had been fully recognised in this way. Consequently, the Group is now in a position where it requires to make provision for tax on its
profits and the tax charge for the year is made up of a corporation tax charge of £1.5m (2012: £0.4m) with a deferred tax charge of
£0.2m (2012: credit of £0.7m). At the year end, the Group has unused tax losses of £5.1m (2012: £9.0m) available for offset against
future profits, which have been provided for in full within deferred tax.
Profit for the year from total operations
After deducting the tax charge for the year from the profit before tax the Group has recorded a profit for the year from total operations
of £6.9m (2012: £6.2m).
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, mark to market adjustments in respect of the interest rate swap, acquisition costs
and the tax effect of these items was 8.46p (2012: 6.99p) an increase of 21%.
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 6.91p (2012: 6.22p), an increase of 11% over the year.
7
iomart Group plc Annual report and accounts 2013
Finance Director's Report
Acquisitions
In July 2012 the Company acquired Skymarket for a maximum consideration of £1.4m, of which £1.2m was paid during the year,
in August 2012 the Company acquired Melbourne for a total consideration of £6.7m and in October 2012 the Company acquired
HostingUK for a maximum consideration of £1.4m, of which £1.2m was paid during the year. The remaining amounts due on the
acquisitions of both Skymarket and HostingUK are both expected to be settled in full during the next financial year.
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 £14.8m (2012: £9.6m)
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 £1.2m (2012: £0.6m) the net cash flow from operating activities was £13.6m (2012: £9.0m).
Cash flow from investing activities
In line with our strategy of accelerating our growth by acquisition the Group continued to incur substantial sums on investing activities,
spending a total of £13.6m (2012: £7.4m) in the period. Of this amount, £9.0m (2012: £4.5m) was incurred in relation to acquisition
activities. As well as the investment in the year to acquire Skymarket, Melbourne and HostingUK the Group also paid the contingent
consideration due on the acquisitions of EQSN and Global Gold in the previous financial year.
The Group continues to invest in property, plant and equipment through expenditure on its datacentres, on the equipment required
to provide managed services to both its existing and new customers and in the establishment of a fibre network. During the year the
Group spent £4.1m (2012: £2.4m) on such assets, net of related finance lease drawdown.
Expenditure was also incurred on development costs of £0.5m (2012: £0.5m) and the purchase of software of £nil (2012: £0.1m).
Cash flow from financing activities
The Group’s financing activities generated a net cash inflow of £2.5m (2012: £0.5m) over the year. The issue of new shares, due to the
exercise of share options by staff, generated £0.6m (2012: £0.5m) and the Group also drew down £9.0m of bank loans to help fund
acquisitions and to repay bank borrowings of £4.0m. The Group spent £1.4m (2012: £1.2m) repaying finance leases, £0.9m (2012:
£0.6m) on dividends, £0.6m (2012: £0.2m) on interest and repaid £0.2m (2012: £nil) of borrowings in acquired businesses.
Net cash flow
As a consequence, our overall cash generation during the year was £2.5m (2012: £2.1m) which resulted in cash and cash equivalent
balances at the end of the year of £11.4m (2012: £8.9m). After recognising bank loans of £8.8m (2012: £4.0m) and finance lease
obligations of £3.0m (2012: £2.5m) net debt balances at the end of the period stood at £0.4m (2012: net cash of £2.5m).
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 committed bank loan facility for acquisitions and capital expenditure of £20.0m, of which £9.0m has been drawn down and
finance lease facilities which are available to fund capital expenditure, the Group has 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 29 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.
8
iomart Group plc Annual report and accounts 2013
Finance Director's Report
Network
The service we provide to customers is dependent on the continued operation of our fibre network which connects our
datacentre estate. Should the network fail there would be an adverse impact on customers. The Group has implemented
a resilient network throughout its datacentre estate with no single points of failure to ensure the likelihood of network failure is
minimised.
Customers
The Group provides an essential service to an extensive client base many of whom rely on the provision of that service for
their major internet presence. Any diminution in the level of service could have serious consequences for customer acquisition
and retention. Our high level of recurring revenue and our low level of customer attrition are evidence of our ability to provide
the level of service required.
Key suppliers
The Group is dependent on certain key suppliers for the continued operation of its business, the most significant of which are
those for electricity, bandwidth and servers. Were 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 2013
9
iomart Group plc Annual report and accounts 2013
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 September 2012. 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 two independent
Non-Executive Directors. Short Biographies of the directors are given on page 23.
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 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.
10
iomart Group plc Annual report and accounts 2013 Corporate Governance
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.
During the year a formal evaluation was conducted by means of a detailed questionnaire which was completed by each Director. The
results of this process were collated by the Chairman and discussed by the Board collectively. The evaluation included a review of
the performance of individual Directors, including the Chairman, and the Board Committees. Based on this evaluation the Board has
concluded that its performance in the past year has been satisfactory.
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 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.
Two 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, Chris
Batterham and the Chief Executive Officer.
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:
Board
Remuneration
Committee
Audit
Committee
Held Attended
Held Attended
Held Attended
Ian Ritchie – Non-Executive Chairman
Angus MacSween – Chief Executive Officer
Sarah Haran – Chief Operating Officer
Chris Batterham – Non-Executive Director
Crawford Beveridge – Non-Executive Director
Richard Logan – Finance Director
10
10
10
10
10
10
10
9
10
9
10
9
3
-
-
3
3
-
3
-
-
3
3
-
3
-
-
3
3
-
3
-
-
3
3
-
11
iomart Group plc Annual report and accounts 2013
Corporate Governance
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. 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.
The Remuneration Committee
The Remuneration Committee is chaired by Crawford Beveridge 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.
12
iomart Group plc Annual report and accounts 2013
Corporate Governance
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.
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.
13
iomart Group plc Annual report and accounts 2013
Corporate Governance
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 2013
14
iomart Group plc Annual report and accounts 2013 Report of the board to the members on directors' remuneration
•
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).
• Other benefits
The executive directors are entitled to life insurance cover and
to participate in the Group’s Private Medical Insurance scheme.
All of 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.
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 2012 (“Code”) issued by the Financial
Reporting Council. However, in framing its remuneration policy
the committee has given consideration to the Code and other
than details of Directors’ remuneration which is required by AIM
Rule 19 the other 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:
• salaries and benefits available to executive directors of
comparable companies;
• the need to attract and retain executives of an
appropriate calibre; and
• the continued commitment of executives to the Group’s
success through appropriate incentive schemes.
The committee normally meets at least twice per 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.
• Pensions
to
individuals’ personal pension
Pension contributions
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.
15
iomart Group plc Annual report and accounts 2013
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
Sarah Haran
Richard Logan
Ian Ritchie
Fred Shedden (resigned 29 September 2011)
Salary or fees
£
243,800
30,000
25,000
150,000
160,000
50,000
-
Pension
Benefits contributions
£
24,380
-
-
15,000
16,000
-
-
£
2,623
-
-
525
2,058
-
-
Year ended Year ended
31 March
2012
Total
£
458,951
30,000
12,500
293,783
271,885
50,000
15,000
31 March
2013
Total
£
514,603
30,000
25,000
315,525
298,058
50,000
-
Bonus
£
243,800
-
-
150,000
120,000
-
-
658,800 513,800
5,206
55,380
1,233,186 1,132,119
Directors’ interests in shares
The interests of the directors in the shares of the company at 31 March 2013, together with their interests at 1 April 2012 were as
follows:
Name of director
Angus MacSween
Chris Batterham
Crawford Beveridge
Sarah Haran
Richard Logan
Ian Ritchie
Number of ordinary shares
31 March 2013
At 1 April 2012
20,436,916
90,621
30,000
2,345,565
1,254,120
151,400
19,336,304
90,621
12,000
1,024,944
100,500
151,400
On 14 December 2012 Crawford Beveridge bought 18,000 shares at a price of 195p per share. On 21 January Richard Logan sold
11,000 shares at a price of 225p per share.
The shareholdings of Angus MacSween, Sarah Haran and Richard Logan, as at 1 April 2012 exclude shares held under the Company’s
Joint Share Ownership Plan (JSOP), in which the directors were beneficial co-owners of shares at that time. On 27 March 2013 Angus
MacSween, Sarah Haran and Richard Logan swapped their interests in the shares held within the JSOP arrangements with the
iomart Group Employee Benefit Trust (“EBT”), the other co-owner of the shares, at a price of 231.50p which was the market price on
the day, such that as a result of the swap all parties had wholly owned rather than co-owned shares. The shareholdings for Angus
MacSween, Sarah Haran and Richard Logan as at 31 March 2013 include the shares that were acquired as a consequence of this swap
arrangement. The details of the swap arrangement are as follows:
16
iomart Group plc Annual report and accounts 2013
Report of the board to the members on directors' remuneration
Directors’ interests in shareholdings of Joint Share Ownership Plan (this information has been audited)
Market
price at
Initial Participation
date of participation price at time
of swap
price
of award
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
53.94p
78.5p
53.94p
53.94p
55.03p
78.5p
53.94p
53.94p
53.94p
53.94p
55.03p
53.94p
53.94p
Name of
director
Angus MacSween
Sarah Haran
Richard Logan
Total
Award date
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
31/03/2010
Number of
shares wholly
owned by
Number of
co-owned
Number of
shares wholly
shares before directors after owned by EBT
after swap
swap
swap
356,990
322,612
350,000
450,000
273,806
213,217
268,445
345,144
83,814
109,395
81,555
104,856
1,479,602
1,100,612
378,990
414,018
177,867
357,087
350,000
450,000
315,597
117,554
273,881
268,445
345,144
98,421
60,313
83,206
81,555
104,856
1,748,972
1,320,621
428,351
221,505
500,000
350,000
450,000
169,891
381,140
268,445
345,144
51,614
118,860
81,555
104,856
1,521,505
1,164,620
356,885
4,750,079
3,585,853
1,164,226
As a consequence of the swap arrangement there are no longer any shares held within the JSOP scheme by the directors or any other
employees. Further details of the effect of the swap arrangement are given in notes 24 and 25.
17
iomart Group plc Annual report and accounts 2013
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 2013 in options over the ordinary shares of the Company were as follows:
Name of
director
Angus MacSween
At
1 April
2012
127,388
43,010
-
-
-
Exercised
(127,388)
-
-
-
-
At 31
Granted Lapsed
March Exercise
price
2013
Date of
Date from
which
Grant exerciseable
Expiry
date
-
-
113,334
113,333
113,333
-
-
-
43,010
- 113,334
- 113,333
- 113,333
78.5p 17/11/2004
46.5p 06/10/2008
1p 27/03/2013
1p 27/03/2013
1p 27/03/2013
17/11/2007 17/11/2014
31/03/2009 06/10/2018
31/05/2014 27/03/2023
31/05/2015 27/03/2023
31/05/2016 27/03/2023
170,398
(127,388)
340,000
- 383,010
Sarah Haran
72,133
85,982
42,913
-
-
-
(72,133)
(27,867)
-
-
-
-
-
-
-
80,000
80,000
80,000
-
-
-
-
-
-
-
58,115
42,913
80,000
80,000
80,000
78.5p 17/11/2004
50.5p 27/09/2007
46.5p 06/10/2008
1p 27/03/2013
1p 27/03/2013
1p 27/03/2013
17/11/2007 17/11/2014
27/09/2010 27/09/2017
31/03/2009 06/10/2018
31/05/2014 27/03/2023
31/05/2015 27/03/2023
31/05/2016 27/03/2023
201,028
(100,000)
240,000
- 341,028
Richard Logan
50,000
120,500
28,495
-
-
-
-
(120,500)
-
-
-
-
-
-
-
80,000
80,000
80,000
-
-
-
-
-
-
50,000
-
28,495
80,000
80,000
80,000
74.0p 24/08/2006
46.5p 06/10/2008
46.5p 06/10/2008
1p 27/03/2013
1p 27/03/2013
1p 27/03/2013
24/08/2009 24/08/2016
31/03/2009 06/10/2018
31/03/2010 06/10/2018
31/05/2014 27/03/2023
31/05/2015 27/03/2023
31/05/2016 27/03/2023
198,995
(120,500)
240,000
- 318,495
On 27 March 2013 Angus MacSween was awarded 340,000, Sarah Haran was awarded 240,000 and Richard Logan was awarded
240,000 share options under the Company’s Unapproved Share Option Scheme at an exercise price of 1p. In all three cases the options
will vest evenly over the three financial years starting with the year to March 2014 subject to the achievement of certain performance
criteria.
On 29 May 2012, Richard Logan exercised 120,500 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 140.0p resulting in a gain on exercise of
£112,667.50. On 21 January 2013 Angus MacSween exercised 127,388 options under the Company’s Enterprise Management Incentive
Share Option Scheme at an exercise price of 78.5p. The market price on the date of exercise was 225.0p resulting in a gain on exercise
of £186,623.42. On 21 January 2013 Sarah Haran exercised 72,133 and 27,867 options under the Company’s Enterprise Management
Incentive Share Option Scheme at an exercise price of 78.5p and 50.5p respectively. The market price on the date of exercise was
225.0p resulting in a gain on exercise of £154,302.75.
The market price of the company’s shares at the end of the financial period was 231.5p and the range of prices during the period was
between 121.0p and 242.5p.
By order of the board
Crawford Beveridge
Chairman, Remuneration committee
28 May 2013
18
iomart Group plc Annual report and accounts 2013
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 2013.
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 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
2013
£43.1m
29% increase
2012
£33.5m
33% increase
Revenue from continuing operations grew by 29% over the year
compared to a growth of 33% in the previous year. The Hosting
segment grew revenues by 37% (2012: 34%) and the Easyspace
segment by 9% (2012: 29%). The comparative figures have been
restated to include the effect of the transfer of some of the
customers of Titan Internet Limited from the Hosting segment
to the Easyspace segment (note 3).
Adjusted EBITDA
Adjusted EBITDA margin
2013
£16.5m
38%
2012
£11.2m
33%
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 Melbourne Server
Hosting Limited which was acquired during the year and EQSN
Limited which was acquired during the previous year. Easyspace
has also contributed to the adjusted EBITDA margin improvement
through increased operational efficiencies resulting from the
acquisitions of Skymarket Limited and Internet Engineering
Limited during the year and of Switch Media Limited and its
subsidiaries and Global Gold Holdings Limited and its subsidiary
acquired in the previous 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
directly from its operations. The main purpose of these financial
instruments is to provide finance for the Group’s operations. On
21 June 2012 the Group agreed a new multi option revolving
credit facility of £16m and a term loan facility of £4m with Lloyds
Banking Group. This replaced the multi option revolving credit
facility of £10m which had been in place previously of which
£4m had already been drawn down. The facilities have been
Directors' Report
made available in order to finance business acquisitions, capital
expenditure and for guarantees, bonds and indemnities.
In June 2012, the £4m draw down under the previous revolving
credit facility was repaid and a new draw down of £4m under
the term loan facility was made which is repayable in June 2015.
Interest is charged on this loan for periods of three months at
an annual rate determined by the sum of the term loan margin,
LIBOR and the lender’s mandatory costs. The term loan margin
can fluctuate between 1.30% and 2.45% per annum depending
on the relationship of net borrowings to reported profits. A one-
off arrangement fee of 1% was payable when the term loan was
drawn down. The effective interest rate for the term loan in the
current year was 2.34% (2012: nil).
The £16m multi option revolving credit facility is available for a
period of 3 years until June 2015 at which point any advances
made under the revolving credit facility will become immediately
repayable. In addition, each advance made under this facility is
repayable at the end of each 6 month interest period. Interest
is charged on this loan at an annual rate determined by the
sum of the multi option revolving credit facility margin, LIBOR
and the lender’s mandatory costs. The multi option revolving
credit facility margin can fluctuate between 2.30% and 3.45%
per annum depending on the relationship of net borrowings to
reported profits. A one-off arrangement fee of 1% of the revolving
credit facility was paid when the facility was first drawn down and
a non-utilisation fee of 40% of the multi option revolving credit
facility margin is due on any undrawn portion of the facility. The
effective interest rate for the multi option revolving credit facility
loan in the current year was 6.69% (2012: nil).
In order to fund the acquisition of Melbourne Server Hosting
Limited in August 2012, £5m was drawn down on the revolving
credit facility. The £5m draw down for the revolving credit loan
has been classified as current borrowings.
The Group has exposure to movements in interest rates on its
borrowings. The Group has entered into an interest rate swap
in respect of its term loan and as a consequence the interest
rate on that loan is fixed at 1.02% until maturity. Amounts drawn
under the multi option revolving credit facility are not covered
by interest rate swap arrangements. The Group’s borrowings at
31 March 2013 comprise finance leases totalling £3.0m (2012:
£2.5m) and bank loans totalling £8.8m (2012: £4.0m). The
interest rates on the finance leases are fixed for the term of the
lease at between 5.7% and 24.1% and the average interest rate
was 8.2% (2012: 6.8%).
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 parent
company and the UK subsidiaries are in UK sterling and, with the
exception of forward foreign exchange contracts and interest
rate swaps, the Group does not use derivative instruments.
Additional information on financial instruments is included in
Note 29.
19
iomart Group plc Annual report and accounts 2013
Directors' Report
Dividend
The directors have not declared an interim dividend for the year
ended 31 March 2013 (2012: nil). The directors recommend a
final dividend for the year ended 31 March 2013 of 1.40p per
share (2012: 0.90p per share).
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.
Research and development
The Group develops cloud computing products including private
cloud platforms, hybrid cloud platforms, virtual platforms, online
backup and storage solutions and email related products.
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, Ian
Ritchie and Chris Batterham 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.
Substantial shareholdings
At 20 May 2013 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
20,436,916
19.54%
Legal & General Investment
Management
9,798,014
Majedie Asset Management
8,085,101
Liontrust Asset Management
5,863,938
Old Mutual Global
Investors (UK)
5,434,274
Henderson Global Investors
4,846,369
Universities Superannuation
Scheme
3,769,000
British Steel Pension Scheme
3,768,103
Bill Dobbie
3,454,500
9.37%
7.73%
5.61%
5.20%
4.63%
3.60%
3.60%
3.30%
River & Mercantile Asset
Management
3,259,877
3.12%
Transactions in own shares
On 27 March 2013 as a result of the JSOP swap arrangement,
as described in the Report of the Board to the Members on
Directors’ Remuneration on pages 15 to 18, the iomart Group plc
Employee Benefit Trust (“EBT”) became the owner of 1,164,226
of the Company’s ordinary shares of 1p each. The Company then
purchased 1,023,453 ordinary shares of 1p each from the EBT
which it placed into treasury. The EBT retains 140,773 ordinary
shares of 1p each in the Company.
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.
20
Employment of disabled persons
Full and fair consideration is given to applications for employment
made by disabled persons having regard to their particular
aptitudes and abilities. Appropriate training is arranged for
disabled persons, including retraining for alternative work of
employees who become disabled, to promote their career
development within the organisation.
Supplier payment policy and practice
The Company and its subsidiaries agree the terms of payment
when negotiating the terms and conditions for their transactions
with their suppliers. Payment is made in compliance with those
terms, subject to the terms and conditions of the relevant
transaction having been met by the supplier. Trade creditor
days of the Group at 31 March 2013 were 44 days (2012: 30
days), and of the company were 27 days (2012: 15 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.
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
Bruce Hall
Company secretary
28 May 2013
iomart Group plc Annual report and accounts 2013
Directors' Responsibilities Statement
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 to prepare 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.
21
iomart Group plc Annual report and accounts 2013
"We’re delighted that iomart,
already a progressive and
innovative EMC Velocity™ Service
Provider partner, has decided to
extend its leading-edge customer
centric services with VMAX
Cloud Edition. Other providers
hide behind jargon, iomart is
simply concerned with delivering
services. Cloud is in their DNA"
Matthew Yeager,
Chief Innovation Officer,
EMEA, EMC
iomart Group plc Annual report and accounts 2013 Board of Directors
Ian Ritchie
Angus MacSween
Chris Batterham
62, appointed 2008; currently Chairman
of Computer Application Services Ltd,
Interactive Design Institute Ltd, Blipfoto
Ltd, Cogbooks Ltd, Musemantik 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).
56, 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.
following
for 5 years
58, appointed 2005; Chris was finance
director of Unipalm plc, the first internet
company to IPO and stayed with the
company
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
Sarah Haran
Richard Logan
47, 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.
in
67, 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
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.
55, 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
iomart Group plc Annual report and accounts 2013 Independent auditor's report to the members of iomart Group plc
Opinion on other matter prescribed by the
Companies Act 2006
In our opinion the information given in the Directors’ Report for
the financial year for which the Group financial statements are
prepared is consistent with the Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if,
in our opinion:
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and
explanations we require for our audit.
Opinion on other matters prescribed by the terms of our
engagement
In our opinion the information, 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.
Other matter
We have reported separately on the parent company financial
statements of iomart Group plc for the year ended 31 March
2013.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
28 May 2013
We have audited the Group financial statements of iomart Group
Plc for the year ended 31 March 2013 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, required to
be disclosed in the financial statements in accordance with Rule
19 of the AIM Rules for Companies.
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 2013 and of its profit for the year
then ended;
• have been properly prepared in accordance with IFRSs
as adopted by the European Union; and
• have been prepared in accordance with the
requirements of the Companies Act 2006.
24
iomart Group plc Annual report and accounts 2013
Consolidated statement of comprehensive income. Year ended 31March 2013
Note
2013
£’000
2012
£’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 income 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
26
6
4
4
4
7
7
9
43,059
33,476
(14,131)
(11,094)
28,928
22,382
(19,768)
(16,358)
9,160
6,024
16,505
(258)
(364)
(4,909)
(1,302)
(512)
87
(549)
11,186
(104)
(304)
(3,698)
(604)
(452)
70
(252)
8,698
5,842
(1,749)
356
6,949
6,198
9
9
6,958
6,958
(10)
(10)
6,188
6,188
12
12
6.91 p
6.63 p
6.22 p
6.03 p
25
iomart Group plc Annual report and accounts 2013
Note
13
13
10
14
16
18
17
21
22
10
20
19
21
24
25
2013
£’000
31,781
8,028
-
2,416
19,884
62,109
11,392
5,761
2012
£’000
27,544
3,033
993
2,416
15,626
49,612
8,935
4,071
17,153
13,006
79,262
62,618
(5,696)
(1,097)
(468)
(7,261)
(358)
(12,491)
(812)
(6,124)
(19,785)
(1,211)
-
-
(1,211)
(246)
(10,592)
(255)
(5,251)
(16,344)
(27,046)
(17,555)
52,216
45,063
1,058
(576)
1,200
20,936
(1)
29,599
52,216
1,048
(2,351)
1,200
20,362
(10)
24,814
45,063
Consolidated statement of financial position. As at 31March 2013
ASSETS
Non-current assets
Intangible assets – goodwill
Intangible assets – other
Deferred tax
Lease deposits
Property, plant and equipment
Current assets
Cash and cash equivalents
Trade and other receivables
Total assets
LIABILITIES
Non-current liabilities
Non-current borrowings
Provisions for other liabilities and charges
Deferred tax
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 2013.
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.
26
iomart Group plc Annual report and accounts 2013
Consolidated statement of cash flows. Year ended 31March 2013
Profit before taxation
Finance costs – 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
Contingent consideration paid on prior period acquisition
Finance income received
Net cash used in investing activities
Cash flow from financing activities
Issue of shares
Draw down of bank loans
Repayment of finance leases
Repayment of bank loans
Repayment of borrowings on acquisition of business
Finance costs paid
Dividends paid
Net cash received from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Note
7
4
4
26
16
13
13
21
21
8
2013
£’000
8,698
462
4,909
1,814
258
9
-
(810)
(550)
14,790
(1,200)
13,590
(4,093)
(526)
(20)
(8,796)
(246)
68
(13,613)
584
9,000
(1,427)
(4,000)
(152)
(621)
(904)
2,480
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
2,457
2,071
8,935
6,864
Cash and cash equivalents at the end of the year
18
11,392
8,935
The following notes form part of the primary financial statements.
27
iomart Group plc Annual report and accounts 2013
Consolidated statement of changes in equity. Year ended 31March 2013
Changes in equity
Note
Share
capital
£’000
shares translation redemption premium Retained
account earnings
JSOP
£’000
EBT Treasury
£’000
£’000
reserve
£’000
reserve
£’000
£’000
Total
£’000 £’000
Own
Own
shares shares
Foreign
currency
Own
Capital
Share
Balance at 1 April 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
8
26
-
-
-
-
-
-
-
-
-
-
-
-
-
113
24
10
-
Total transactions with owners
10
113
Balance at 31 March 2012
1,048 (2,351)
Profit in the year
Currency translation differences
Total comprehensive income
Dividends – final (paid)
Share based payments
8
26
Deferred tax on share based
payments
Issue of own shares from JSOP 25
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Issue of new shares for option
redemption
24
10
-
-
-
Total transactions with owners
10
2,351
(70)
(506)
2,351
(70)
(506)
-
1,200
19,977
19,153 38,904
-
(10)
(10)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
385
6,198 6,198
(10)
6,198 6,188
-
(643)
(643)
104
104
(2)
(2)
4
-
117
395
385
(537)
(29)
(10)
1,200
20,362
24,814 45,063
-
9
9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6,949 6,949
-
9
6,949 6,958
(904)
(904)
258
258
257
257
(1,775)
-
574
-
584
574
(2,164)
195
Balance at 31 March 2013
1,058
-
(70)
(506)
(1)
1,200
20,936
29,599 52,216
The following notes form part of the primary financial statements.
28
iomart Group plc Annual report and accounts 2013
iomart’s award winning new fibre network has provided
a 1,860 kilometre fibre superhighway linking all the
company’s data centre locations, providing speeds
estimated to be four times faster than the current
industry average.
iomart Group plc Annual report and accounts 2013 Notes to the financial statements. Year ended 31March 2013
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 operates.
2. ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements have been prepared in
accordance with applicable International Financial Reporting
Standards (IFRS) as adopted by the EU and issued by the
in
International Accounting Standards Board
accordance with the Companies Act 2006. 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.
(IASB) and
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:
• Amendments to IAS 12 (December 2010, updated
January 2011) Deferred tax: recovery of underlying assets
(effective 1 January 2013).
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. The impact of
this on the financial statements of the Group has not yet been
assessed.
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 2014).
IFRS 11 (May 2011) Joint Arrangements (effective
•
1 January 2014).
•
IFRS 12 (May 2011, updated January 2012) Disclosures
of Interests in Other Entities (effective 1 January 2014).
•
IFRS 13 (May 2011) Fair Value Measurement (effective 1
January 2013).
30
•
IAS 27 (May 2011) Separate Financial Statements
(effective 1 January 2014).
IAS 28 (May 2011) Investments in Associates and Joint
•
Ventures (effective 1 January 2014).
• Amendments to IAS 1 (June 2011) Presentation of Items
of Other Comprehensive Income (effective 1 July 2012).
• Amendments to IAS 19 (June 2011) Employee Benefits
(effective 1 January 2013).
• Amendments to IFRS 7 (December 2011) Disclosures –
Offsetting Financial Assets and Financial Liabilities
(effective 1 January 2013).
• Amendments to IAS 32 (December 2011) – Offsetting
Financial Assets and Financial Liabilities (effective 1
January 2014).
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 2013. Subsidiaries are entities over which the Group
has the power to control the financial and operating policies so
as to obtain benefits from its activities. The Group obtains and
exercises control through voting rights.
Unrealised gains on transactions between the Group and
its subsidiaries are eliminated. Unrealised losses are also
eliminated unless the transaction provides evidence of an
impairment of the asset transferred. Amounts reported in the
financial statements of subsidiaries have been adjusted where
necessary to ensure consistency with the accounting policies
adopted by the Group.
Acquisitions of subsidiaries are dealt with by the acquisition
method. The acquisition method involves the recognition at fair
value of all identifiable assets and liabilities, including contingent
liabilities of the subsidiary, at the acquisition date, regardless of
whether or not they were recorded in the financial statements
of the subsidiary prior to acquisition. On initial recognition,
the assets and liabilities of the subsidiary are included in the
statement of financial position at their fair values, which are also
used as the bases for subsequent measurement in accordance
with the Group accounting policies.
Where the Group’s assessment of the net fair value of a
subsidiary’s identifiable assets acquired and liabilities assumed
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.
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
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 point of sale when the title to the domain
name passes to the customer. Revenue from the provision of
hosting services is recognised evenly over the period of the
service and only after 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 only after
the service has been established. Any unearned portion of
revenue is included in payables as deferred revenue.
Interest
Interest is recognised on a time-proportion basis using the
effective interest method.
Intangible assets
Goodwill
Goodwill arising on consolidation
is capitalised on 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.
Impairment reviews are carried out by the Board at least
annually. Impairments to goodwill are charged to profit or loss
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 for
each acquisition separately. Amortisation is charged over the
useful life of the relationships in proportion to the estimated
future cash flows, a period which is generally between five and
eight 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.
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 for all
developments capitalised. Amortisation charges are recognised
in administration 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. Where a change is made to the fair value of
31
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
2. ACCOUNTING POLICIES (CONTINUED)
contingent consideration within the initial measurement period
as a result of additional information obtained on facts and
circumstances that existed at the acquisition date then this is
accounted for as a change in goodwill. Where changes are made
to the fair value of contingent consideration as a result of events
that occurred after the acquisition date then the adjustment is
accounted for as a charge to profit or loss.
Property, plant and equipment
Property, plant and equipment is stated at cost net of
depreciation and any provision for impairment. Leasehold
property is included in property, plant and equipment only
where it is held under a finance lease.
Disposal of assets
The gain or loss arising on the disposal of an asset is determined
as the difference between the disposal proceeds and the
carrying amount of the asset and is recognised in the statement
of comprehensive income.
Depreciation
Depreciation is calculated to write down the cost of all property,
plant and equipment to the expected residual value by equal
annual instalments over their estimated useful economic lives.
All items of plant and equipment 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
Between 6% and 10% 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,
32
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.
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
profit or loss over the period of the lease.
All other leases are regarded as operating leases and the
payments made under them are charged to profit or loss 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, these are considered separately as to whether there
is a finance lease within the lease.
Lease deposits
Rental and re-instatement 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
are not interest earning they are discounted at an appropriate
rate.
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.
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
Reinstatement costs
The Group has made alterations to properties which it occupies
under lease arrangements. These lease arrangements contain
provision for reinstatement of the property to its original
condition at the Group’s cost at the end of the lease should the
landlord require that to happen. In respect of property leases
which contain such a reinstatement provision the estimated
cost of the reinstatement is provided in the financial statements.
The discounted value of the expected cost of reinstatement is
recorded as a leasehold improvement within property, plant
and equipment and is then depreciated over the remaining
term of the lease. A matching liability is recognised at the
same time which is increased over the period of the lease by
way of an interest charge such that the estimated cost of the
reinstatement has been fully provided at the end of the lease
period.
Income taxes
The tax expense recognised in the Statement of Comprehensive
Income comprises the sum of deferred tax and current tax not
recognised in other comprehensive income or directly in equity.
Current tax is the tax currently payable based on taxable profit
for the year. Deferred income taxes are calculated using the
liability method on temporary differences. Deferred tax is
generally provided on the difference between the carrying
amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of goodwill,
nor on the initial recognition of an asset or liability unless the
related transaction is a business combination or affects tax
or accounting profit. Deferred tax on temporary differences
associated with shares in subsidiaries is not provided if reversal
of these temporary differences can be controlled by the Group
and it is probable that reversal will not occur in the foreseeable
future. In addition, tax losses available to be carried forward as
well as other income tax credits to the Group are assessed for
recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting.
Deferred tax assets are recognised to the extent that it is
probable that the underlying deductible temporary differences
will be able to be offset against future taxable income. Current
and deferred tax assets and liabilities are calculated at tax
rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted
at the balance sheet date.
Changes in deferred tax assets or liabilities are recognised as a
component of tax expense in the Statement of Comprehensive
Income, except where they relate to items that are recognised
directly in other comprehensive income or equity (such as share
based remuneration) in which case the related deferred tax
is also recognised in other comprehensive income or equity
accordingly.
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.
All income and expenses relating to financial assets that
are recognised in statement of comprehensive income are
presented within ‘finance costs’ or ‘finance income’ except for
impairment of trade receivables which is presented within
‘administration expenses’.
Loans and receivables are non-derivative financial assets with
fixed or determinable payments that are not quoted in an active
market. Loans and receivables are measured subsequent to
initial recognition at amortised cost using the effective interest
method, less provision for impairment. Discounting is omitted
where the effect of discounting is immaterial. The Group’s cash
and cash equivalents, trade and most other receivables fall into
this category of financial instruments.
Provision against trade and other receivables is made when
there is objective evidence that the Group will not be able to
collect all amounts due to it in accordance with the original
terms of those receivables. The amount of the write-down
is determined as the difference between the asset’s carrying
amount and the present value of estimated future cash flows.
An assessment for impairment is undertaken at least at each
balance sheet date.
Financial derivatives such as forward foreign exchange contracts
are carried at fair value through the 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 profit or loss. 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.
33
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
2. ACCOUNTING POLICIES (CONTINUED)
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. Monetary assets
and liabilities denominated in foreign currencies at the balance
sheet date are retranslated at the rates ruling at that date. 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.
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
34
the iomart Group plc Employee Benefit Trust in respect
of the Joint Share Ownership Plan.
•
“Own shares Treasury” represents the amount of the
Company’s own equity shares, plus attributable
transaction costs, that is held by the Company as
treasury shares.
•
“Own shares EBT” 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.
“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
the
results and financial position of Group entities that have
a functional currency different from the presentation
•
exchange differences on
translation of
the
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’.
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
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
the present value. Full details of the assumptions used in the
calculation of intangible assets and fair value adjustments on
the acquisitions that have 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. These estimates
are based on information provided by external advisors, the
initial cost of the leasehold improvements and inflation rates
and discount rates until the end of the lease. The reinstatement
provision required at the end of the current year is shown in
note 22.
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. The deferred tax asset
in relation to tax losses is shown in note 10.
3. SEGMENTAL ANALYSIS
The chief operating decision-maker has been identified as the
Chief Executive Officer (“CEO”) of the Company. The Group
has two operating segments and the CEO reviews the Group’s
internal reporting which recognises these two segments in order
to assess performance and to allocate resources. The Group has
determined its reportable segments which are also its operating
segments based on these reports.
The Group currently has two operating and reportable segments.
• Easyspace – this segment provides a range of shared
hosting and domain registration services to micro
and SME companies. Skymarket and HostingUK 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. Melbourne was acquired during the
year and has been reported as part of the Hosting
segment since acquisition.
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 sheet date, that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial
year are discussed below.
Impairment of goodwill
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.
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
35
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
3. SEGMENTAL ANALYSIS (CONTINUED)
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.
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
At the start of this financial year a restructuring of the Titan Internet business resulted in the transfer of its trades to different legal
entities within the Group and this also altered the makeup of our operating segments. The impact of which was to increase Easyspace
revenue and profits and decrease Hosting revenue and profits by a similar amount. The comparative figures for the year to March
2012 have been restated to reflect this change. Prior to the restatement, external revenue for the 12 months to 31 March 2012 was
£9,131,000 for Easyspace and £24,345,000 for Hosting; adjusted EBITDA for the 12 months to 31 March 2012 was £3,600,000 for
Easyspace and £10,097,000 for Hosting; and operating profit for the 12 months to 31 March 2012 was £3,250,000 for Easyspace and
£5,693,000 for Hosting.
Revenue by Operating Segment
Easyspace
Hosting
External
£’000
11,081
31,978
43,059
2013
Internal
£’000
-
1,052
1,052
Total
£’000
11,081
33,030
44,111
2012 (restated)
External
£’000
Internal
£’000
10,171
23,305
33,476
-
955
955
Total
£’000
10,171
24,260
34,431
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
36
2013
£’000
39,190
3,869
43,059
2012
£’000
29,726
3,750
33,476
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
3. SEGMENTAL ANALYSIS (CONTINUED)
Profit by Operating Segment
2013
2012 (restated)
Depreciation,
EBITDA before amortisation,
acquisition
costs and
Depreciation,
EBITDA before amortisation,
acquisition
costs and
share based
acquisition
costs and share
based
payments
£’000
4,973
14,289
(2,757)
-
-
16,505
16,505
Operating
payments profit/(loss)
£’000
4,423
8,116
(2,757)
(364)
(258)
9,160
(2,211)
6,949
£’000
(550)
(6,173)
-
(364)
(258)
(7,345)
(7,345)
acquisition
costs and share
based
payments
£’000
4,040
9,657
(2,511)
-
-
11,186
11,186
share based Operating
payments profit/(loss)
£’000
3,690
5,253
(2,511)
(304)
(104)
6,024
174
6,198
£’000
(350)
(4,404)
-
(304)
(104)
(5,162)
(5,162)
Easyspace
Hosting
Group overheads
Acquisition costs
Share based payments
Group interest and tax
Profit for the year
Group overheads, acquisition costs, share based payments, interest and tax are not allocated to segments.
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
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
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
Audit services:
- Fees payable for the audit of the consolidation and the parent company accounts
- Fees payable for audit of subsidiaries, pursuant to legislation
Non-audit services:
- Assurance service fees
- Tax compliance fees
- Corporate finance and advisory transactions
2013
£’000
2012
£’000
10,281
9,376
3,663
1,246
1,931
208
1,302
512
125
613
70
3,876
2,816
882
1,702
182
604
452
68
493
29
3,603
2013
£’000
2012
£’000
32
58
3
23
8
124
30
49
-
27
17
123
37
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
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
2013
£’000
1,178
55
9
2012
£’000
1,038
94
69
490
24
409
50
During the year the Company made personal pension contributions to the personal pension schemes of 3 directors (2012: 3).
The aggregate amount of gains realised by directors on the exercise of share options during the year was £453,594 (2012: £21,830).
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
2013
No.
108
43
72
25
248
2013
£’000
9,568
970
136
258
10,932
2012
No.
104
27
54
26
211
2012
£’000
8,849
869
96
104
9,918
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
2013
£’000
220
144
364
2012
£’000
137
167
304
During the year costs of £220,000 (2012: £137,000) were incurred in respect of professional fees on various acquisitions. In addition
to these professional fees, one-off costs of £144,000 (2012: £167,000) directly related to the integration of acquisitions into the Group
were also incurred.
38
iomart Group plc Annual report and accounts 2013
7. NET FINANCE COST
Finance income:
Bank interest receivable
Other interest income
Finance income for the year
Finance expenses:
Bank loan
Finance leases
Mark to market interest adjustment
Other interest charges
Finance expense for the year
Net finance cost
Notes to the financial statements. Year ended 31March 2013
2013
£’000
2012
£’000
75
12
87
(288)
(194)
(46)
(21)
(549)
58
12
70
(123)
(123)
-
(6)
(252)
(462)
(182)
Included in other interest income is £12,000 (2012: £12,000) in respect of leasehold deposits.
8. DIVIDENDS ON SHARES CLASSED AS EQUITY
Paid during the year:
Final dividend
Equity dividends on ordinary shares
2013
Pence per
share
2013
£’000
2012
Pence per
share
2012
£’000
0.90p
904
0.65p
643
The directors have recommended a final dividend for the year ended 31 March 2013 of 1.40p per share (2012: 0.90p per share).
Subject to shareholder approval this proposed final dividend would be payable on 3 September 2013 to shareholders on the register
as of 16 August 2013.
39
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
9. TAXATION
Tax charge for the year
Adjustment relating to prior year
Total current taxation charge
Origination and reversal of temporary differences
Effect of changes in tax rates
Total deferred taxation (charge)/credit
Total taxation (charge)/credit
2013
£’000
2012
£’000
(1,423)
(121)
(1,544)
(311)
106
(205)
(1,749)
(249)
(134)
(383)
770
(31)
739
356
The Group has a deferred tax asset which has been recognised in respect of tax losses within one subsidiary company, which has
generated taxable profits and is expected to continue to do so.
The differences between the total current tax shown above and the amount calculated by applying the standard rate of UK corporation
tax to the profit before tax are as follows:
Profit before tax
Tax charge @ 24% (2012 – 26%)
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
2013
£’000
2012
£’000
8,698
5,842
2,088
1,519
146
(18)
121
(106)
(186)
(299)
-
7
-
-
(4)
82
(304)
134
31
(73)
(219)
(7)
128
(26)
(180)
(1,441)
Taxation charge/(credit) for the year
1,749
(356)
The weighted average applicable tax rate for the year ended 31 March 2013 was 24% (2012: 26%). The total current tax charge
of £1,423,000 (2012: £249,000) on operations represents 16.3% (2012: 4.3%) of the Group profit before tax of £8,698,000 (2012:
£5,842,000). 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 24% to 23% from 1 April 2013. These changes were substantively enacted at the balance
sheet date and, therefore, are included in these financial statements. Further reductions to the main rate have been proposed in the
March 2013 Budget Statement to reduce the rate to 20% by 1 April 2015. 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.
40
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
10. DEFERRED TAX
The Group recognised deferred tax assets and liabilities as follows:
2013
Deferred tax Deferred tax
Recognised Unrecognised
£’000
£’000
2012
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 (liability)/asset
1,167
681
282
(949)
(1,649)
(468)
-
-
-
-
-
-
2,152
381
67
(1,059)
(548)
993
-
-
-
-
-
-
At the year end, the Group has unused tax losses of £5.1m (2012: £9.0m) available for offset against future profits. A deferred tax asset
has been recognised in respect of £5.1m (2012: £9.0m) 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
Share based
carried
forward remuneration
£’000
£’000
Capital
allowances
timing
differences
£’000
Deferred tax
on acquired
assets with no
capital
Customer
allowances relationships
£’000
£’000
Balance at 1 April 2012
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 2013
2,152
-
-
(1,070)
85
1,167
381
-
257
73
(30)
681
67
(34)
-
254
(5)
282
(1,059)
(52)
-
122
40
(949)
(548)
(1,427)
-
310
16
(1,649)
Total
£’000
993
(1,513)
257
(311)
106
(468)
The deferred tax asset in relation to tax losses carried forward arises from unutilised tax losses in the Hosting operating segment.
The deferred tax asset has been recognised in line with future projections over a three year period. The basis of these projections is:
• 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.
41
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
11. ACQUISITIONS
Skymarket Limited
The Group acquired 100% of the issued share capital of Skymarket Limited (“Skymarket”) on 20 July 2012.
Skymarket provides hosting and domain registration services principally to SMEs and the acquisition is in line with the Group’s strategy
to grow its hosting operations both organically and by acquisition.
During the current period the Group incurred £69,000 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 2013.
The following table summarises the consideration to acquire Skymarket 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 liability
Deferred tax liability
Identifiable net liabilities
Goodwill
Total consideration
Satisfied by:
Cash consideration – paid on acquisition
Contingent consideration - paid
Cash paid to date
Contingent consideration
Total consideration transferred
£’000
258
86
18
461
(313)
(18)
(111)
381
1,023
1,404
1,012
160
1,172
232
1,404
The acquisition of Skymarket includes contingent consideration arrangements that require additional consideration to be paid
dependent on the level of net working capital and cash held by the company at the acquisition date, together with a maximum of
£232,000 to be paid subject to the successful migration and integration of the company’s operations into the Group. The level of
net working capital and cash held by the company at the acquisition date has been established and agreed with the vendors and
an additional payment of £160,000 was made to the vendors prior to the year end. The migration and integration of the company’s
operations is still in progress and it is expected that the maximum value of the balance of the contingent consideration will be paid
subsequent to the year end and therefore £232,000 has been accrued in respect of this contingent consideration. This amount is
expected to be paid before the end of the next financial year.
The goodwill arising on the acquisition of Skymarket is attributable to 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 £13,000. The gross amount due under contracts is £15,000 and value
of trade receivables not expected to be collected is £2,000.
The fair value included in respect of the acquired customer relationships intangible asset is £461,000, which is the final value.
To estimate the fair value of the customer relationships 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.
42
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
11. ACQUISITIONS (CONTINUED)
The name Skymarket Limited is not actively advertised or promoted, with the majority of Skymarket’s business being generated from
existing customers or by word of mouth. Skymarket has given a commitment to customers not to sell, distribute or lease information
held regarding them without their permission. As a consequence there is no significant value in either the trade name/brand or
customer lists acquired at the acquisition date and therefore no value has been attributed to either intangible asset.
A review of the intellectual property within Skymarket did not identify any intangible assets that required to be recognised in the fair
value balance sheet.
Skymarket earned revenue of £543,000 and generated profits before tax of £258,000 in the period since acquisition.
Melbourne Server Hosting Limited
The Group acquired 100% of the issued share capital of Melbourne Server Hosting Limited (“Melbourne”) on 15 August 2012.
Melbourne is a Manchester based provider of managed hosting solutions to over 600 customers. Melbourne operates its own
datacentres in Manchester, providing the group with additional datacentre capacity. As well as the addition of spare capacity, this
fills a geographical gap in the iomart datacentre estate and provides a sales platform to address the North of England market. The
acquisition is in line with the Group’s strategy to grow its hosting operations both organically and by acquisition.
During the current period the Group incurred £86,000 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 2013.
The following table summarises the consideration to acquire Melbourne 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
Deferred tax liability
Identifiable net assets
Goodwill
Total consideration
Satisfied by:
Cash – paid on acquisition
Contingent consideration – paid
Total consideration transferred
£’000
73
502
1,281
5,183
(716)
(129)
(293)
(91)
(1,246)
4,564
2,130
6,694
6,500
194
6,694
The acquisition of Melbourne includes contingent consideration arrangements that required additional consideration of up to £500,000
to be paid by the Group to the vendors contingent on the successful hand over of the operations of Melbourne into the Group and
on the amount of net debt and working capital of Melbourne at completion. The handover of the operations of Melbourne into the
Group has been successfully completed and the levels of working capital and net debt at the date of acquisition have been quantified
and agreed with the vendors at an amount of £306,000 payable by the vendors. Consequently the agreed amount of net contingent
consideration of £194,000 has been paid.
43
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
11. ACQUISITIONS (CONTINUED)
The goodwill arising on the acquisition of Melbourne is attributable to the premium payable for a pre-existing, well positioned business
and the specialised, industry specific knowledge of the management and staff, together with 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 £349,000. The gross amount due under contracts is £357,000 and
value of trade receivables not expected to be collected is £8,000.
The fair value included in respect of the acquired customer relationships intangible asset is £5,097,000, which has been determined
on a provisional basis pending a final review.
To estimate the fair value of the customer relationships 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 11.4% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 8 years.
The name Melbourne is not actively advertised or promoted, with the majority of Melbourne’s business being generated from existing
customers or by word of mouth. Melbourne has given a commitment to customers not to use for any purpose, other than the service
agreement, any confidential information received from the customer. As a consequence there is no significant value in either the trade
name/brand or customer lists acquired at the acquisition date and therefore no value has been attributed to either intangible asset.
A review of the intellectual property within Melbourne did not identify any intangible assets that required to be recognised in the fair
value balance sheet.
Melbourne earned revenue of £2,602,000 and generated profits before tax of £517,000 in the period since acquisition.
Internet Engineering Limited
The Group acquired 100% of the issued share capital of Internet Engineering Limited, which trades as HostingUK on 1 October 2012.
HostingUK is based in St Asaph in North Wales where it operates its own datacentre and provides hosting and domain registration
services principally to SMEs. The acquisition is in line with the Group’s strategy to grow its hosting operations both organically and by
acquisition.
During the current period the Group incurred £65,000 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 2013.
The following table summarises the consideration transferred to acquire HostingUK and the amounts of identified assets acquired and
liabilities assumed at the acquisition date:
44
iomart Group plc Annual report and accounts 2013 Notes to the financial statements. Year ended 31March 2013
11. ACQUISITIONS (CONTINUED)
Internet Engineering Limited (continued)
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
Deferred tax liability
Identifiable net assets
Goodwill
Total consideration
Satisfied by:
Cash consideration – paid on acquisition
Contingent consideration - paid
Cash paid to date
Contingent consideration
Total consideration transferred
£’000
(18)
273
142
620
(430)
(64)
(41)
(43)
(155)
284
1,084
1,368
1,224
19
1,243
125
1,368
The acquisition of HostingUK included contingent consideration arrangements that required additional consideration to be paid
dependent on the level of net working capital and cash held by the company at the acquisition date, together with a maximum of
£125,000 to be paid subject to the successful migration and integration of the company’s operations into the Group. The level of
net working capital and cash held by the company at the acquisition date has been established and agreed with the vendors and
an additional payment of £19,000 was made to the vendors prior to the year end. The migration and integration of the company’s
operations is now substantially complete and it is expected that the maximum value of the balance of the contingent consideration
will be paid subsequent to the year end and an amount of £125,000 has been accrued in respect of this contingent consideration.
The goodwill arising on the acquisition of HostingUK is attributable to the premium payable for a pre-existing, well positioned business
and the specialised, industry specific knowledge of the management and staff, together with 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 £45,000 and other receivables of £224,000. The gross amounts due
under contracts are £45,000 and £224,000 respectively and the full value of both the trade receivables and the other receivables has
been collected prior to the year end.
The fair value included in respect of the acquired customer relationships intangible asset is £620,000, 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 12.3% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 5 years.
A review of the intellectual property within HostingUK did not identify any intangible assets that required to be recognised in the fair
value balance sheet.
45
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
11. ACQUISITIONS (CONTINUED)
The names Internet Engineering and HostingUK are not actively advertised or promoted, with the majority of the company’s business
being generated from existing customers or by word of mouth. HostingUK has given a commitment to customers not to use for any
purpose, other than the service agreement, any confidential information received from the customer. As a consequence there is no
significant value in either the trade name/brand or customer lists acquired at the acquisition date and therefore no value has been
attributed to either intangible asset.
HostingUK earned revenue of £503,000 and generated profits before tax of £119,000 in the period since acquisition.
EQSN Limited and Global Gold Holdings Limited
The fair values of acquired assets and liabilities, including goodwill, previously disclosed as provisional for EQSN Limited and Global
Gold Holdings Limited have been finalised in the current period with no changes to the fair values disclosed in the Annual Report and
Accounts 2012.
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 2012. 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 2013
£’000
45,241
6,829
46
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
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
Own shares held in Treasury
Shares held by Employee Benefit Trust
New shares issued during year
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
Add: Mark to market interest adjustment
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
2013
£’000
6,949
No
000
104,817
(11)
(4,687)
468
100,587
1,018
3,200
104,805
6.91 p
6.63 p
2013
£’000
6,949
1,302
364
258
46
(409)
8,510
8.46 p
8.12 p
2012
£’000
6,198
No
000
103,840
-
(4,832)
623
99,631
780
2,372
102,783
6.22 p
6.03 p
2012
£’000
6,198
604
304
104
-
(247)
6,963
6.99 p
6.77 p
47
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
13. INTANGIBLE ASSETS
Development
costs
£’000
Goodwill
£’000
Customer
relationships
£’000
Software
£’000
Beneficial
contracts
£’000
Domain
names
£’000
Cost
At 1 April 2011
Additions
Acquired on acquisition of subsidiary
Development cost capitalised
At 1 April 2012
Additions
Acquired on acquisition of subsidiary
Development cost capitalised
At 31 March 2013
23,952
3,592
-
-
27,544
4,237
-
-
31,781
Accumulated amortisation:
At 1 April 2011
Charge for the year
At 1 April 2012
Charge for the year
At 31 March 2013
-
-
-
-
-
1,111
-
-
474
1,585
-
-
526
2,111
(653)
(335)
(988)
(408)
(1,396)
1,919
-
1,548
-
3,467
-
6,177
-
9,644
(577)
(604)
(1,181)
(1,297)
(2,478)
491
89
-
-
580
20
-
-
600
(325)
(107)
(432)
(102)
(534)
Carrying amount:
At 31 March 2013
At 31 March 2012
31,781
27,544
715
597
7,166
66
2,286
148
-
-
-
-
-
-
86
-
86
-
-
-
(5)
(5)
81
-
Total
£’000
27,504
3,681
1,548
474
33,207
4,257
6,263
526
44,253
31
-
-
-
31
-
-
-
31
(19)
(10)
(29)
(2)
(31)
(1,574)
(1,056)
(2,630)
(1,814)
(4,444)
-
39,809
2
30,577
All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-financial assets
classification, which is disclosed as administration expenses in the statement of comprehensive income.
During the year, goodwill was reviewed for impairment in accordance with IAS 36 “Impairment of Assets”. No impairment charges (2012:
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 Skymarket and HostingUK acquisitions in the current year has been allocated to
the Easyspace CGU and the goodwill acquired in the Melbourne Server Hosting acquisition has been allocated to the Hosting CGU, as
these are the CGUs expected to benefit from the respective business combinations. As described in note 3, at the start of this financial
year a restructuring of the Titan Internet business resulted in the transfer of its trades to different legal entities within the Group and
this altered the makeup of the CGUs. The impact of which was to increase the carrying value of the Easyspace CGU by £420,000 and
to reduce the carrying value of the Hosting CGU by the same amount.
The carrying value of goodwill by each CGU is as follows:
Cash Generating Units (CGU)
Easyspace
Hosting
2013
£’000
17,009
14,772
31,781
2012
£’000
14,482
13,062
27,544
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. These projections are the result of detailed
planning and assume similar levels of organic growth as the Group has experienced in the previous year unless there is a reason to
alter historic growth rates and also full year contributions from acquisitions.
48
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
13. INTANGIBLE ASSETS (CONTINUED)
The growth rates and margins used to extrapolate estimated future performance in the 3 years after the initial 2 year period continue
to be based on past growth performance adjusted downwards to take into account the additional risk due to the passage of time. 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
Average growth rate in years 3 to 5
Future perpetuity rate
Initial period for which cash flows are estimated (years)
Easyspace
10%
2.25%
2.25%
2
Hosting
11%
5.00%
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 DEPOSITS
The lease deposits of £2,416,000 (2012: £2,416,000) are made up of a rental deposit of £784,000 (2012: £784,000) and a reinstatement
deposit of £1,632,000 (2012: £1,632,000). The rental and reinstatement deposits are 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 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
iomart Development Limited
(formerly known as Westcoastcloud Limited)
iomart Cloud Inc
Easyspace Limited
Switch Media Limited
Internet Engineering Limited
Switch Media (Ireland) Limited
Global Gold Network Limited
Global Gold Holdings Limited
Skymarket Limited
Rapidswitch Limited
Titan Internet Limited
Melbourne Server Hosting Limited
iomart Datacentres Limited
Internetters Limited
NicNames Limited
Web Genie Internet Limited
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
USA
England
England
England
England
England
England
England
England
England
England
England
England
England
England
Dormant
Managed hosting services
Managed hosting services
Managed hosting services
Dormant
Dormant
Dormant
Managed hosting services
Webservices
Webservices
Webservices
Webservices
Webservices
Non-trading
Non-trading
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
100
-
-
-
-
-
-
100
100
100
49
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
16. PROPERTY, PLANT AND EQUIPMENT
Freehold
Property
£’000
Leasehold
improve-
ments
£’000
Datacentre
Equipment
£’000
Computer
equipment
£’000
Office
equipment
£’000
Motor
vehicles
£’000
Cost:
At 1 April 2011
Additions in the year
Acquisition of subsidiary
At 1 April 2012
Additions in the year
Acquisition of subsidiaries
Disposals in the year
At 31 March 2013
Accumulated depreciation:
At 1 April 2011
Charge for the year
At 1 April 2012
Charge for the year
Disposals in the year
At 31 March 2013
Carrying amount:
At 31 March 2013
At 31 March 2012
837
-
-
837
-
-
-
837
(40)
(19)
(59)
(20)
-
(79)
758
778
3,524
74
26
3,624
1,505
51
-
5,180
(593)
(228)
(821)
(276)
-
(1,097)
8,795
937
-
9,732
1,134
349
-
11,215
(2,038)
(793)
(2,831)
(844)
-
(3,675)
7,973
3,115
359
11,447
4,991
700
-
17,138
(4,033)
(2,561)
(6,594)
(3,624)
-
(10,218)
4,083
7,540
6,920
2,803
6,901
4,853
801
17
8
826
84
341
-
1,251
(474)
(80)
(554)
(125)
-
(679)
572
272
Total
£’000
21,968
4,143
393
26,504
7,726
1,441
(7)
35,664
(7,180)
(3,698)
(10,878)
(4,909)
7
(15,780)
38
-
-
38
12
-
(7)
43
(2)
(17)
(19)
(20)
7
(32)
11
19,884
19
15,626
The net book value of computer equipment held under finance lease at 31 March 2013 was £1,554,000 (2012: £2,253,000) and the
net book value of datacentre equipment held under finance lease at 31 March 2013 was £778,000 (2012: £nil). Of the total additions
in the year of £7,726,000 (2012: £4,143,000), £1,621,000 (2012: £1,746,000) were funded by finance leases, £1,041,000 (2012: £nil)
was included in trade creditors as unpaid invoices at the year end and £971,000 (2012: £nil) related to reinstatement provisions.
Consequently, the consolidated statement of cash flows discloses a figure of £4,093,000 (2012: £2,397,000) as the cash outflow in
respect of property, plant and equipment additions in the year.
17. TRADE AND OTHER RECEIVABLES
Trade receivables
Less: Provision for impairment
Trade receivables (net)
Other receivables
Prepayments and accrued income
Trade and other receivables
2013
£’000
2,546
(376)
2,170
421
3,170
5,761
2012
£’000
2,431
(371)
2,060
301
1,710
4,071
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.
50
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
17. TRADE AND OTHER RECEIVABLES (CONTINUED)
To consider the total exposure to credit risks, the Group uses figures net of VAT. At 31 March 2013, £2,045,000 (2012: £1,391,000)
of net trade receivables were fully performing. Net trade receivables of £125,000 (2012: £669,000) 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
2013
£’000
78
45
2
125
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at start of the year
(Decrease)/increase in provision for receivables impairment
Fair value of trade receivable provision acquired during the year
Balance at end of year
18. CASH AND CASH EQUIVALENTS
Cash at bank and on hand
Cash and cash equivalents
2013
£’000
371
(5)
10
376
2013
£’000
11,392
11,392
2012
£’000
599
34
36
669
2012
£’000
177
153
41
371
2012
£’000
8,935
8,935
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 0.85% (2012: 0.88%).
19. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Accruals
Deferred income
Other creditors
Trade and other payables
2013
£’000
(3,580)
(995)
(3,539)
(4,372)
(5)
(12,491)
2012
£’000
(1,751)
(970)
(3,316)
(4,536)
(19)
(10,592)
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.
51
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
20. CONTINGENT CONSIDERATION
Contingent consideration due on acquisitions:
- Skymarket Limited
- Internet Engineering Limited
- EQSN Limited
- Global Gold Holdings Limited
Total contingent consideration due on acquisitions
21. BORROWINGS
Current:
Obligations under finance leases
Bank loans
Current borrowings
Non-current:
Obligations under finance leases
Bank loans
Total non-current borrowings
Total borrowings
2013
£’000
2012
£’000
(232)
(126)
-
-
(358)
2013
£’000
(1,252)
(4,872)
(6,124)
(1,720)
(3,976)
(5,696)
-
-
(225)
(21)
(246)
2012
£’000
(1,251)
(4,000)
(5,251)
(1,211)
-
(1,211)
(11,820)
(6,462)
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
Due after more than five years
Capital
£’000
1,252
1,106
614
2,972
2013
Interest
£’000
186
391
173
750
Total
£’000
1,438
1,497
787
3,722
Capital
£’000
1,251
1,211
-
2,462
2012
Interest
£’000
123
66
-
189
Total
£’000
1,374
1,277
-
2,651
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 8.2% (2012: 6.8%). Lease payments are made on a monthly and quarterly
basis. The future lease obligation of £3,722,000 (2012: £2,651,000) has a present value of £2,913,000 (2012: £2,452,000).
On 21 June 2012 the Group agreed a new multi option revolving credit facility of £16m and a term loan facility of £4m with Lloyds
Banking Group. This replaced the multi option revolving credit facility of £10m which had been in place previously of which £4m had
already been drawn down. The £4m loan was repaid and a new borrowing of £4m under the term loan facility was drawn down and is
repayable in June 2015. Interest is charged on this loan at an annual rate determined by the sum of the term loan margin, LIBOR and
the lender’s mandatory costs. The term loan margin can fluctuate between 1.30% and 2.45% per annum depending on the relationship
of net borrowings to reported profits. An arrangement fee of 1% was payable when the term loan was drawn down. The effective
interest rate for the term loan in the current year was 2.34% (2012: nil). The £4m draw down for the term loan has been classified as
non-current borrowings.
52
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
21. BORROWINGS (CONTINUED)
The £16m multi option revolving credit facility may be used by the Group to finance capital expenditure, business acquisitions and for
guarantees, bonds or indemnities. The facility is available until June 2015 at which point any advances made under the revolving credit
facility will become immediately repayable. In addition, each draw down made under this facility can be for either 3 or 6 months and
can either be repaid or continued at the end of the period. Interest is charged on this loan at an annual rate determined by the sum
of the term loan margin, LIBOR and the lender’s mandatory costs. The term loan margin can fluctuate between 2.30% and 3.45% per
annum depending on the relationship of net borrowings to reported profits. A one-off arrangement fee of 1% of the revolving credit
facility was paid when the facility was first drawn down and a non-utilisation fee of 40% of the multi option revolving credit facility margin
is due on any undrawn portion of the facility. The effective interest rate for the multi option revolving credit loan in the current year
was 6.69% (2012: nil).
In order to fund the acquisition of Melbourne Server Hosting Limited in August 2012, £5m was drawn down on the revolving credit
facility. The £5m draw down for the revolving credit loan has been classified as current borrowings.
The future loan obligations of £9,657,000 (2012: £4,076,000) equate to a present value of £7,720,000 (2012: £4,076,000). The capital
element of the bank loans is £8,848,000 (2012: £4,000,000) and this differs from the total drawn down of £9,000,000 (2012: £4,000,000)
due to an effective interest rate adjustment.
The obligations under the multi option revolving credit facility and term loan facility are repayable as follows:
Due within one year
Due between two and five years
Capital
£’000
4,872
3,976
8,848
2013
Interest
£’000
344
465
809
Total
£’000
5,216
4,441
9,657
Capital
£’000
4,000
-
4,000
2012
Interest
£’000
76
-
76
Total
£’000
4,076
-
4,076
22. PROVISIONS FOR OTHER LIABILITIES AND CHARGES
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past events, it is probable that
an outflow of resources will be required to settle the obligation, and the amount can be reliably estimated. Provisions are measured at
the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market
assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time
is recognised as interest expense.
The Group has made provision for the reinstatement of certain leasehold properties and after initial measurement, any subsequent
adjustments to reinstatement provisions will be recorded against the original amount included in leasehold improvements with a
corresponding adjustment to future depreciation charges.
The directors consider the carrying values of the provisions to approximate to their fair values as they have been discounted.
The movement in the reinstatement provision during the year was as follows:
Balance at start of the year
Initial recognition on acquisition of subsidiary
Increase in provision
Unwinding of discount
Balance at end of year
2013
£’000
-
(105)
(971)
(21)
(1,097)
2012
£’000
-
-
-
-
-
53
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
23. 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
2013
2012
Land and
buildings
£’000
1,783
6,610
5,144
13,537
Other
£’000
210
894
1,504
2,608
Land and
buildings
£’000
1,729
5,703
4,885
12,317
Other
£’000
215
873
1,726
2,814
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 2013, the total future minimum sub-
lease payments expected to be received under non-cancellable sub-leases were £781,000 (2012: £794,000).
24. SHARE CAPITAL
Authorised
At 31 March 2011, 2012, and 2013
Called up, allotted and fully paid
At 31 March 2011
Exercise of options
At 31 March 2012
Exercise of options
At 31 March 2013
Ordinary shares of 1p each
Number of shares
200,000,000
103,839,843
977,561
104,817,404
942,472
105,759,876
£’000
2,000
1,038
10
1,048
10
1,058
During the year the Company issued 942,472 (2012: 977,561) ordinary shares of 1p each in respect of the exercise of share options
by employees for which a net total of £583,587 (2012: £396,314) was received.
At 31 March 2013 the Company held no shares (2012: 4,750,079 shares) as own shares in the JSOP scheme which were accounted for
in the Own Shares JSOP reserve and had a nominal value of £nil (2012: £47,501) and a market value of £nil (2012: £6,745,112). This
represents nil% (2012: 4.7%) of the issued share capital as at 31 March 2013 excluding own shares.
At 31 March 2013 the Company held 1,023,453 shares (2012: nil) as own shares in treasury which were accounted for in the Own
Shares Treasury reserve and had a nominal value of £10,235 (2012: £nil) and a market value of £2,369,294 (2012: £nil). This represents
1.0% (2012: nil%) of the issued share capital as at 31 March 2013 excluding own shares.
At 31 March 2013 the Company held 140,773 shares (2012: nil) as own shares in the iomart Group plc Employee Benefit Trust (“EBT”)
which were accounted for in the Own Shares EBT reserve and had a nominal value of £1,408 (2012: £nil) and a market value of
£325,889 (2012: £nil). This represents 0.1% (2012: nil%) of the issued share capital as at 31 March 2013 excluding own shares.
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 Company in treasury and the shares held by the EBT, are equally eligible to receive dividends and represent one vote at the
shareholders' meetings of iomart Group plc. All shares issued at 31 March 2013 are fully paid.
54
iomart Group plc Annual report and accounts 2013
25. OWN SHARES RESERVES
Notes to the financial statements. Year ended 31March 2013
Own
shares
JSOP
£’000
Own
shares
EBT
£’000
Own
shares
Treasury
£’000
Own
shares
Total
£’000
Opening balance at 31 March 2012
(2,351)
-
-
(2,351)
Issue of own shares from JSOP
2,351
2,351
Acquisition of own shares by EBT
Acquisition of own shares by Company
Closing balance at 31 March 20113
-
-
-
(576)
-
(576)
506
(506)
-
(70)
(506)
(576)
On 27 March 2013, 4,750,079 (carrying value: £2,351,289) ordinary shares were transferred from the Own Shares JSOP reserve
following a JSOP swap arrangement between the Executive Directors and the EBT, as described in the Report of the Board to the
Members on Directors’ Remuneration on pages 15 to 18. The exercise price of the JSOP options varied between 53.94p and 78.5p
and the market price on the exercise date was 231.5p. Of the 4,750,079 shares, 3,585,853 shares were transferred to the Executive
Directors resulting in a charge to Retained Earnings of £1,774,997 representing the difference between the original issued price of the
shares to the JSOP scheme of 49.5p per share and the share price on the exercise date of 231.5p. The remaining 1,164,226 shares
(carrying value: £576,292) were transferred to the EBT. The EBT then sold 1,023,453 shares to the Company at 231.5p which were
placed into treasury at the initial issue price of 49.5p resulting in a total carrying value of £506,609. The EBT retained 140,773 shares
with a carrying value of £69,682 based on the original issue price to the shares to the JSOP scheme of 49.5p.
Consequently, as at 31 March 2013 the Company held 1,023,453 shares (2012: nil) in treasury with a carrying value of £506,609 (2012:
£nil) which were accounted for in Own Shares treasury reserve; and 140,773 shares (2012: nil) in the EBT with a carrying value of
£69,982 (2012: £nil) which were accounted for in the Own Shares EBT reserve; and no shares (2012: 4,750,079) in the Own Shares JSOP
reserve with no carrying value (2012: £2,351,289).
55
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
26. SHARE BASED PAYMENTS
The Group operated the following share based payment employee share option schemes during the year; Enterprise Management
Incentive scheme, a number of other approved schemes and a number of unapproved schemes. All schemes are settled in equity only
and are summarised below.
Vesting period
Maximum term
Performance criteria
Required to remain
in employment
Enterprise Management
Incentive scheme
Up to 3 years
from grant
10 years after date
of grant
As set by Remuneration
Committee
Unapproved schemes
Up to 3 years
from grant
10 years after date
of grant
As set by Remuneration
Committee
Joint Share Ownership
Plan
Up to 3 years
from grant
10 years after date
of grant
As set by Remuneration
Committee
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 942,472 ordinary shares (2012: 977,561) were exercised and the average market price at the exercise
dates was 187.5p (2012: 103.8p). In addition, as described in the Report of the Board to the Members on Directors’ Remuneration in
pages 15 to 18, 4,750,079 ordinary shares (2012: nil) that previously were beneficially co-owned by certain directors and the EBT under
the Company’s Joint Share Ownership Plan were exercised as a result of a swap arrangement. Options over 1,570,000 ordinary shares
(2012: nil) were granted under the unapproved share option scheme with an average exercise price of 70.3p (2012: nil).
As disclosed in note 5, a share based payment charge of £258,000 (2012: £104,000) has been recognised in the statement of
comprehensive income during the year in relation to the above schemes. The fair value of the employee services received is valued
indirectly by valuing the options granted using the Black-Scholes option pricing model, which worked on the following assumptions for
the options granted in the year:
Grant date
Vesting date
Variables used
Share price at grant date
Volatility
Dividend yield
Number of employees holding options/units
Option/award life (years)
Expected life (years)
Risk free rate
Expectations of meeting performance criteria
Fair value
Exercise price per share
11-Jul-12
31-Mar-14
11-Jul-12
31-Mar-16
27-Mar-13
31-Mar-14
27-Mar-13
31-Mar-15
27-Mar-13
31-Mar-16
146.1p
61%
1.0%
2
10
1.75
0.80%
100%
44.6p
146.1p
146.1p
61%
1.0%
12
10
3.75
0.80%
100%
62.0p
146.1p
232.5p
75%
0.75%
3
10
3.2
1.03%
100%
227.0p
1p
232.5p
75%
0.75%
3
10
3.2
1.03%
100%
227.0p
1p
232.5p
75%
0.75%
3
10
3.2
1.03%
100%
227.0p
1p
i) Expected volatility was determined at the date of grant from historic volatility, adjusted for events that were not considered to be reflective of
the volatility of the share price going forward; and
ii) Risk free rate was calculated based on the average Bank of England zero coupon yields.
56
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
26. SHARE BASED PAYMENTS (CONTINUED)
The movement in options during the year in respect of the Company’s ordinary shares of 1p each under the various share option
schemes are as follows:
2013
Weighted
average
exercise price
per share (p)
2012
Weighted
average
Number of
share options
exercise price Number of
per share (p) share options
Outstanding at start of year
Granted
Forfeited
Expired
Exercised
Outstanding at end of year
Exercisable at end of year
59.03
70.32
-
-
61.92
64.60
52.67
2,065,151
1,570,000
-
-
(942,472)
2,692,679
996,013
50.27
-
37.00
11.75
40.54
59.03
54.85
3,592,712
-
(500,000)
(50,000)
(977,561)
2,065,151
1,545,153
The movement in options during the year in respect of the Company’s ordinary shares of 1p each, under the JSOP scheme are as
follows:
2013
Weighted
average
exercise price
per share (p)
2012
Weighted
average
Number of
share options
exercise price Number of
per share (p) share options
Outstanding at start of year
Exercised
Exercised (swap arrangement)
Outstanding at end of year
Exercisable at end of year
55.45
-
56.74
-
-
4,750,079
-
(4,750,079)
-
-
53.95
51.47
-
55.45
55.45
4,977,184
(227,105)
-
4,750,079
4,750,079
Summary of share options that were outstanding at the year end:
Share options - outstanding
Share options – exercisable
Range of
exercise
prices per Outstanding
shares
share (p)
Weighted
average
exercise
price per
share (p)
Weighted
average
remaining
contractual Outstanding
shares
life (years)
Weighted Weighted
average
average
exercise
remaining
price per contractual
life (years)
share (p)
Enterprise management
incentive scheme
Unapproved schemes
As at end of year
26.5 - 87.5
1.0 – 146.1
808,736
1,883,943
2,692,679
55.71
68.41
64.60
6.2
9.1
8.2
748,737
247,276
996,013
53.16
51.17
52.67
6.1
5.8
6.0
57
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
27. 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
2013
£’000
174
1
9
1
1
-
186
2012
£’000
126
1
7
1
1
5
141
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 to 18.
28. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
There were no contingent assets or liabilities as at 31 March 2013 (2012: nil).
(b) Commitments
Capital expenditure on property, plant and equipment committed by the Group at 31 March 2013 was £5,189,000 (2012: £74,000)
which relates mainly to the first phase of the extension to the Maidenhead datacentre.
29. 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:
58
iomart Group plc Annual report and accounts 2013
29. RISK MANAGEMENT (CONTINUED)
2013
Non-current:
Lease deposit
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Total for category
2012
Non-current:
Lease deposit
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Total for category
Notes to the financial statements. Year ended 31March 2013
Loans and
receivables
£’000
At fair value
through profit
or loss
£’000
2,416
2,170
11,392
421
16,399
2,416
2,060
8,935
301
13,712
-
-
-
-
-
-
-
-
-
-
Total
£’000
2,416
2,170
11,392
421
16,399
2,416
2,060
8,935
301
13,712
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
or loss
£’000
Financial
liabilities
measured at
amortised cost
£’000
Other
(non-IAS 39)
£’000
Total
£’000
2013
Non-current:
Finance leasing capital obligations
Bank loan
Current:
Trade payables
Accruals
Bank loan
Contingent consideration due on acquisitions
Finance leasing capital obligations
Interest rate swap contract
Forward foreign exchange contracts
Total for category
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
-
-
-
-
-
(358)
-
(46)
(7)
(411)
-
(3,976)
(1,720)
-
(1,720)
(3,976)
(3,580)
(3,486)
(4,872)
-
-
-
-
(15,914)
-
-
-
-
(1,252)
-
-
(2,972)
(3,580)
(3,486)
(4,872)
(358)
(1,252)
(46)
(7)
(19,297)
-
-
(1,211)
(1,211)
-
-
-
(246)
-
(21)
(267)
(1,751)
(3,335)
(4,000)
-
-
-
(9,086)
-
-
-
-
(1,251)
-
(2,462)
(1,751)
(3,335)
(4,000)
(246)
(1,251)
(21)
(11,815)
The interest rate swap and 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 prices are based on inputs other
than quoted prices that are observable for the asset, either directly or indirectly. The contingent consideration due on acquisitions
noted in the above table are considered to be Level 3 financial liabilities as there are no observable inputs for valuation.
59
iomart Group plc Annual report and accounts 2013
Notes to the financial statements. Year ended 31March 2013
29. 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 and term loan facilities is based on LIBOR plus a margin. An interest rate swap has been put in place in respect of the term loan
facility. This has the effect of fixing the LIBOR interest rate for the full period of the term at 1.02%. The fair value of the interest rate
swap contract is estimated to be a loss of £46,000 (2012: £nil) which has been recognised in the statement of comprehensive income
for the year.
Currency risk
During the year the Group made payments totalling US$2.1m (2012: US$1.9m) and EUR€0.2m (2012: EUR€ nil) 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 $600,000 (2012:
$1,800,000) for a total of £402,000 (2012: £1,148,000), at an average exchange rate of US$:GBP£ of 1.49 (2012: 1.57) over the period
to March 2013. The fair value of these currency contracts is estimated to be a loss of £7,000 (2012: loss £21,000) which 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 debt, due to its acquisition activities. 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 Group provides standard credit terms (normally 30 days) to some of its customers which has resulted in trade receivables of
£2,170,000 (2012: £2,060,000) which are stated net of applicable provisions and which represent the total amount exposed to credit
risk. The lease deposits of £2,416,000 (2012: £2,416,000) are held in escrow accounts with the landlord’s main UK bankers and the
landlord is a major UK plc. The Group’s cash at bank £11,392,000 (2012: £8,935,000) is held within the UK clearing banks.
In respect of trade receivables, lease deposits and cash in bank the directors consider the risk of exposure to credit is minimal due to
the reasons given above.
Further information on financial instruments policy and procedures is given in the Directors’ Report.
60
iomart Group plc Annual report and accounts 2013 Parent company financial statements. Year ended 31March 2013
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF IOMART GROUP PLC
We have audited the parent company financial statements of iomart Group plc for the year ended 31 March 2013 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
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the preparation of the parent
company financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an
opinion on the parent company financial statements in accordance with applicable law and International Standards on Auditing (UK and
Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB's website at www.frc.org.uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the parent company financial statements:
• give a true and fair view of the state of the company's affairs as at 31 March 2013;
• 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.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors' Report for the financial year for which the financial statements are prepared is
consistent with the parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our
opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been received
from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by 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 2013.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
28 May 2013
61
iomart Group plc Annual report and accounts 2013
Parent company financial statements. Year ended 31March 2013
BALANCE SHEET
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors
Cash at bank and in hand
CREDITORS: amounts falling due within one year
NET CURRENT (LIABILITIES)/ASSETS
TOTAL ASSETS LESS CURRENT ASSETS
CREDITORS: amounts falling after more than one year
NET ASSETS
CAPITAL AND RESERVES
Called up share capital
Own shares
Capital redemption reserve
Share premium account
Profit and loss account
Note
3
4
6
7
8
9
9
9
9
2013
£’000
45,639
45,639
15,649
10,202
25,851
2012
£’000
35,782
35,782
13,820
8,083
21,903
(27,175)
(17,923)
(1,324)
3,980
44,315
39,762
(4,000)
-
40,315
39,762
1,058
(576)
1,200
20,936
17,697
1,048
(2,351)
1,200
20,362
19,503
TOTAL EQUITY SHAREHOLDERS’ FUNDS
40,315
39,762
These financial statements were approved by the board of directors on 28 May 2013.
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.
62
iomart Group plc Annual report and accounts 2013
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iomart Group plc Annual report and accounts 2013 Parent company financial statements. Year ended 31March 2013
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.
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”.
64
iomart Group plc Annual report and accounts 2013 Parent company financial statements. Year ended 31March 2013
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. PROFIT/(LOSS) OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part
of these financial statements. The parent company’s profit for the financial period after taxation was £358,000 (2012: loss £1,006,000).
3. INVESTMENTS HELD AS FIXED ASSETS
Cost
At 1 April 2012
Additions
Share based payment
Cost at 31 March 2013
Impairment
At 1 April 2012
Charge for the year
Impairment at 31 March 2013
Net book value of Investments at 31 March 2013
Net book value of Investments at 31 March 2012
All of the above investments are unlisted.
Shares in subsidiary undertakings
£’000
37,504
9,685
205
47,394
(1,722)
(33)
(1,755)
45,639
35,782
65
iomart Group plc Annual report and accounts 2013
Parent company financial statements. Year ended 31March 2013
3. INVESTMENTS HELD AS FIXED ASSETS (CONTINUED)
The following subsidiaries are included in the Company financial statements:
Country of
registration
and operation
Activity
Owned by the
company
%
Owned by
subsidiary
undertakings
%
Ordinary share capital
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
USA
England
England
England
England
England
England
England
England
England
England
England
England
England
England
Dormant
Managed hosting services
Managed hosting services
Managed hosting services
Dormant
Dormant
Dormant
Managed hosting services
Webservices
Webservices
Webservices
Webservices
Webservices
Non-trading
Non-trading
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
-
-
-
2013
£’000
347
6
314
682
14,300
15,649
-
-
-
-
-
-
-
-
-
-
-
100
100
-
-
-
-
-
-
100
100
100
2012
£’000
163
5
172
381
13,099
13,820
iomart Limited
iomart Hosting Limited
iomart Cloud Services Limited
EQSN Limited
iomart Virtual Servers Hosting Limited
Netintelligence Limited
iomart Development Limited (formerly
known as Westcoastcloud Limited)
iomart Cloud Inc
Easyspace Limited
Switch Media Limited
Internet Engineering Limited
Switch Media (Ireland) Limited
Global Gold Network Limited
Global Gold Holdings Limited
Skymarket Limited
Rapidswitch Limited
Titan Internet Limited
Melbourne Server Hosting Limited
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
66
iomart Group plc Annual report and accounts 2013
Parent company financial statements. Year ended 31March 2013
5. DEFERRED TAXATION
The Company had recognised deferred tax assets and potential unrecognised deferred tax assets as follows:
2013
Recognised Unrecognised
£’000
£’000
2012
Recognised Unrecognised
£’000
£’000
Share based remuneration
682
-
381
-
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
2013
£’000
381
44
257
682
2012
£’000
354
29
(2)
381
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. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Bank loan
2013
£’000
172
49
654
358
5,000
20,942
27,175
2013
£’000
4,000
4,000
2012
£’000
87
43
653
246
4,000
12,894
17,923
2012
£’000
-
-
67
iomart Group plc Annual report and accounts 2013
Parent company financial statements. Year ended 31March 2013
8. SHARE CAPITAL
Authorised
At 31 March 2011, 2012, and 2013
Called up, allotted and fully paid
At 31 March 2011
Exercise of options
At 31 March 2012
Exercise of options
At 31 March 2013
Ordinary shares of 1p each
Number of shares
200,000,000
103,839,843
977,561
104,817,404
942,472
105,759,876
£’000
2,000
1,038
10
1,048
10
1,058
During the year the Company issued 942,472 (2012: 977,561) ordinary shares of 1p each in respect of the exercise of share options
by employees for which a net total of £583,587 (2012: £396,314) was received.
At 31 March 2013 the Company held no shares (2012: 4,750,079 shares) as own shares in the JSOP scheme which were accounted for
in the Own Shares JSOP reserve and had a nominal value of £nil (2012: £47,501) and a market value of £nil (2012: £6,745,112). This
represents nil% (2012: 4.7%) of the issued share capital as at 31 March 2013 excluding own shares.
At 31 March 2013 the Company held 1,023,453 shares (2012: nil) as own shares in treasury which were accounted for in the Own
Shares Treasury reserve and had a nominal value of £10,235 (2012: £nil) and a market value of £2,369,294 (2012: £nil). This represents
1.0% (2012: nil%) of the issued share capital as at 31 March 2013 excluding own shares.
At 31 March 2013 the Company held 140,773 shares (2012: nil) as own shares in the EBT which were accounted for in the Own Shares
EBT reserve and had a nominal value of £1,408 (2012: £nil) and a market value of £325,889 (2012: £nil). This represents 0.1% (2012:
nil%) of the issued share capital as at 31 March 2013 excluding own shares.
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 Company in treasury and the shares held by the EBT, are equally eligible to receive dividends and represent one vote at the
shareholders' meetings of iomart Group plc. All shares issued at 31 March 2013 are fully paid.
68
iomart Group plc Annual report and accounts 2013
Parent company financial statements. Year ended 31March 2013
9. STATEMENT OF MOVEMENT IN RESERVES
Profit for the financial period
Dividends
Share based payments
Deferred tax on share based remuneration
Issue of own shares from JSOP
Issue of new shares for option redemption
Own
shares
JSOP
£’000
Own
shares
EBT
£’000
Own
shares
Treasury
£’000
Capital
redemption
reserve
£’000
Share
premium
account
£’000
Profit and
loss account
£’000
-
-
-
-
2,351
-
2,351
-
-
-
-
(70)
-
(70)
-
-
-
-
(506)
-
(506)
-
-
-
-
-
-
-
-
-
-
-
-
574
574
358
(904)
258
257
(1,775)
-
(1,806)
Opening balance
Closing balance
(2,351)
-
-
1,200
20,362
19,503
-
(70)
(506)
1,200
20,936
17,697
On 27 March 2013, 4,750,079 (carrying value: £2,351,289) ordinary shares were transferred from the Own Shares JSOP reserve following
a JSOP swap arrangement between the Executive Directors and the EBT, as described in the Report of the Board to the Members on
Directors’ Remuneration on pages 15 to 18. The exercise price of the JSOP options varied between 53.94p and 78.5p and the market
price on the exercise date was 231.5p. Of the 4,750,079 shares, 3,585,853 shares were transferred to the Executive Directors resulting
in a charge to the Profit and Loss Account Reserve of £1,774,997 representing the difference between the original issued price of the
shares to the JSOP scheme of 49.5p per share and the share price on the exercise date of 231.5p. The remaining 1,164,226 shares
(carrying value: £576,292) were transferred to the EBT. The EBT then sold 1,023,453 shares to the Company at 231.5p which were
placed into treasury at the initial issue price of 49.5p resulting in a total carrying value of £506,609. The EBT retained 140,773 shares
with a carrying value of £69,682 based on the original issue price to the shares to the JSOP scheme of 49.5p.
Consequently, as at 31 March 2013 the Company held 1,023,453 shares (2012: nil) in treasury with a carrying value of £506,609 (2012:
£nil) which were accounted for in Own Shares treasury reserve; and 140,773 shares (2012: nil) in the EBT with a carrying value of
£69,982 (2012: £nil) which were accounted for in the Own Shares EBT reserve; and no shares (2012: 4,750,079) in the Own Shares JSOP
reserve with no carrying value (2012: £2,351,289).
10. SHARE BASED PAYMENTS
For details of share based payment awards and fair values see note 26 to the Group financial statements. The Company accounts
recognise the charge for share based payments for the year of £258,000 (2012: £104,000) by;
1)
2)
taking the charge in relation to employees of the parent company through the parent company statement of comprehensive
income £53,000 (2012: £83,000),
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 £205,000 (2012: £21,000).
69
iomart Group plc Annual report and accounts 2013
Parent company financial statements. Year ended 31March 2013
11. 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 27 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.
12. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
There were no contingent assets or liabilities as at 31 March 2013 (2012: nil).
(b) Commitments
There are no commitments present as at 31 March 2013 (2012: nil).
13. ULITIMATE CONTROLLING PARTY
The Directors’ have assessed that there is no ultimate controlling party.
70
iomart Group plc Annual report and accounts 2013 NOTICE IS HEREBY GIVEN that the 2013 annual general
meeting of the Company will be held at Lister Pavilion, Kelvin
Campus, West of Scotland Science Park, Glasgow G20 0SP on
28 August 2013 at 2.30 pm for the purpose of considering
and, if thought fit, passing the following resolutions, of which
resolutions 1 to 8 (inclusive) will be proposed as ordinary
resolutions and resolutions 9 to 10 (inclusive) will be proposed
as special resolutions:-
1 To receive and adopt the financial statements of the
Company and the directors' and auditors' reports thereon for
the year ended 31 March 2013.
2 To approve the report of the board to the members on
directors' remuneration for the year ended 31 March 2013.
3 To reappoint Ian Ritchie (who retires by rotation and, being
eligible, offers himself for re-election) as a director of the
Company.
4 To reappoint Chris Batterham (who retires by rotation and,
being eligible, offers himself for re-election) as a director of the
Company.
5 To declare a final dividend for the year ended 31 March
2013 of 1.40p per share payable on 3 September 2013 to
shareholders registered at the close of business on 16 August
2013.
6 To reappoint Grant Thornton UK LLP, Chartered Accountants,
as auditors of the Company and to authorise the directors to fix
their remuneration.
7 That, in accordance with section 551 of the Companies Act
2006 (the "Act"), the directors of the Company (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:
Notice of the 2013 Annual General Meeting
8 That, for the purposes of section 551 of the Act, the Directors
are generally and unconditionally authorised to exercise all
powers of the Company to allot equity securities (as defined in
section 560 of the Act) in connection with a rights issue in favour
of the holders of ordinary shares in the capital of the Company
(the "Ordinary Shareholders") where the equity securities
respectively attributable to the Ordinary Shareholders are
proportionate (as nearly as may be practicable) to the respective
numbers of Ordinary Shares held by them up to a maximum
nominal amount of £349,121.41 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 2014 save that the Company may,
before such expiry, make an offer or agreement which would or
might require equity securities to be allotted after such expiry
and the Directors may allot equity securities in pursuance of
any such offer or agreement notwithstanding that the power
conferred by this resolution has expired.
9 That subject to the passing of resolutions 7 and 8 and in
accordance with section 570 of the Act and in place of all existing
powers, the Directors are generally empowered to allot equity
securities of the Company (as defined in section 560 of the Act)
for cash pursuant to the authority conferred by resolutions 7
and 8 as if section 561 of the Act did not apply to such allotment
provided that this power shall be limited to:
(a) the allotment of equity securities in connection with an issue
in favour of holders of ordinary shares of 1 penny each in the
capital of the Company (the "Ordinary Shares") where the equity
securities are offered to such holders in proportion (as nearly
as may be) to the respective number of Ordinary Shares held,
or deemed to be held, by that shareholder but subject to such
exclusions or other arrangements as the Directors may deem
necessary or expedient in relation to fractional entitlements
or legal or practical problems under the laws of, or the
requirements of any recognised regulatory body or any stock
exchange in, any territory;
(a) the maximum aggregate nominal amount of shares to be
allotted in pursuance of such authority is an aggregate nominal
amount equal to £349,121.41; and
(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
(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 2014 save
that the Company may, before such expiry, make an offer or
agreement which would or might require shares to be allotted or
Rights to be 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 551 of
the Act.
(c) the allotment (otherwise than pursuant to (a) and (b) above)
of equity securities up to an aggregate nominal amount of
£104,736.42, 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 2014, save that the Company may at any time before
such expiry make an offer or agreement which would or might
require equity securities to be allotted after such expiry and the
Directors may allot equity securities in pursuance of such offer
or agreement notwithstanding that the power conferred by this
resolution has expired.
71
iomart Group plc Annual report and accounts 2013
Notice of the 2013 Annual General Meeting
10 That the Company be and
is hereby generally and
unconditionally authorised for the purposes of section 701
of the Act to make one or more market purchases (within
the meaning of section 693(4) of the Act) on a recognised
investment exchange (as defined in section 693(5) of the Act) of
Ordinary Shares provided that:
(a) the maximum number of Ordinary Shares hereby authorised
to be purchased is 10,473,642, representing 10% of the
Company's issued ordinary share capital (excluding for these
purposes the 1,023,453 shares held by the Company in treasury)
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,
26 June 2013
Glasgow G20 0SP
72
iomart Group plc Annual report and accounts 2013
Notice of the 2013 Annual General Meeting
NOTES:
Appointment of Proxy
EXPLANATORY NOTES TO THE NOTICE OF ANNUAL GENERAL
MEETING IOMART GROUP PLC
1 As a member of the Company you are entitled to appoint a
proxy to exercise all or any of your rights to attend, speak and
vote at a meeting of the Company. You should have received
a proxy form with this notice of meeting. You can only appoint
a proxy using the procedures set out in the notes to the proxy
form. A proxy need not be a member of the Company.
2 To be effective, the proxy form, and any power of attorney
or other authority under which it is executed (or a duly certified
copy of any such power or authority), must be deposited at the
office of the Company’s registrars, Capita Registrars, PXS, 34
Beckenham Road, Beckenham, Kent, BR3 4TU, not less than 48
hours (excluding weekends and bank holidays) before the time
for holding the meeting (i.e. by 2.30pm on Friday 23 August
2013) and if not so deposited shall be invalid.
Entitlement to attend and vote
Ordinary Resolutions
Resolutions 1 to 8 are all to be proposed as ordinary resolutions.
This means that for each of those resolutions to be passed, more
than half of the votes cast must be in favour of the resolution.
Resolution 1 – To receive and adopt the financial statements
for the year ended 31 March 2013 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
3 Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, only those members entered in the Company's
register of members at:
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.
• 6.00pm on 26 August 2013; 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
Resolution 3 and 4 – Re-election of directors
Under article 24 of the Company's articles of association one
third of the directors are required to retire by rotation at
each annual general meeting. Pursuant to those articles, Mr
Ian Ritchie and Mr Chris Batterham are required to retire by
rotation at this annual general meeting and, being eligible,
offer themselves for reappointment. The Board is satisfied that
the performance of Mr Ian Ritchie and Mr Chris Batterham
continues to be effective and demonstrates commitment to
their roles with the Company including commitment of time for
Board meetings and other duties required of them. Accordingly,
resolutions 3 and 4 propose the reappointment of Mr Ian Ritchie
and Mr Chris Batterham.
Brief biographical details of Mr Ian Ritchie and Mr Chris
Batterham are given below.
Ian Ritchie, 62, appointed 2008: currently Chairman of Computer
Application Services Ltd, Interactive Design Institute Ltd, Blipfoto
Ltd, Cogbooks Ltd, Musemantik 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
73
iomart Group plc Annual report and accounts 2013
Notice of the 2013 Annual General Meeting
(now part of Oberon Inc) and Sonaptic Ltd (now part of Wolfson
Microelectronics plc).
issued ordinary share capital of the Company (excluding for
these purposes the 1,023,453 shares held by the Company in
treasury) as at the date of the notice of this meeting.
Chris Batterham, 58, 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.
Resolution 5 – To declare a dividend 1.40p 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 1.40p
per Ordinary Share, to be payable to shareholders registered at
close of business on 16 August 2013.
Resolution 6 – 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.
Resolutions 7 and 8 – Grant of authority to the directors to
allot shares
Section 551 of the Companies Act 2006 (the "Act") requires that
the authority of the directors to allot shares shall be subject to
the approval of the shareholders in general meeting. These
resolutions, if passed, would give the directors general authority
to allot shares in the capital of the Company.
Resolution 7 would give the directors the authority to allot
shares up to an aggregate nominal amount of £349,121.41,
being approximately one-third of the issued ordinary share
capital of the Company (excluding for these purposes the
1,023,453 shares held by the Company in treasury) as at the
date of the notice of this meeting.
In line with recent guidance issued by the Association of British
Insurers, resolution 8 would give directors the authority to allot
shares in connection with a rights issue in favour of ordinary
shareholders up to an aggregate nominal amount equal to
£349,121.41 (representing 34,912,141 Ordinary Shares). This
amount represents approximately a further one third of the
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 2014.
Special Resolutions
Resolutions 9 and 10 will be proposed as special resolutions.
This means that for each of those resolutions to be passed, at
least three-quarters of the votes cast must be in favour of the
resolution.
Resolution 9 - Disapplication of statutory pre-emption rights
Resolution 9 gives authority to the directors of the Company to
disapply the provisions of section 561 of the Act. Under that
section, if the directors wish to allot any of the unissued shares
for cash the directors must in the first instance offer those
shares to existing shareholders in proportion to the number of
shares held by such shareholders. An offer of this type is called
a "rights issue" and the entitlement to be offered a new share is
known as a "pre-emption right".
There may be circumstances, however, where it is in the interests
of the Company for the directors to allot some of the new shares
for cash other than by way of a rights issue. This cannot be
done under the Act unless the shareholders first waive their pre-
emption rights. There are legal, regulatory and practical reasons
why it may not always be possible to issue new shares under a
rights issue to some shareholders, particularly those resident
overseas. To cater for this, resolution 9 (at paragraph (a)), in
authorising the directors to allot new shares by way of a rights
issue, also permits the directors to make appropriate exclusions
or arrangements to deal with such difficulties.
Under the Company's articles of association the Board may,
with the sanction of an ordinary resolution, offer the holders of
shares the right to receive shares, credited as fully paid, instead
of cash in respect of the whole (or some part, to be determined
by the Board) of such dividend or dividends as are specified by
such resolution. Paragraph (b) of resolution 9 asks shareholders
to waive their pre-emption rights in respect of any such issue of
shares.
Resolution 9 (at paragraph (c)) asks shareholders to waive their
pre-emption rights, but only for new shares equal to 10 per
cent. of the Company's issued ordinary share capital (excluding
for these purposes the 1,023,453 shares held by the Company
in treasury) 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
74
iomart Group plc Annual report and accounts 2013 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 9 will, unless sooner revoked
or renewed by the Company in general meeting, last until the
conclusion of the next annual general meeting of the Company
to be held in 2014.
Resolution 10 – Authority to purchase the Company's own
shares
This resolution grants authority to the Company to make
purchases of up to a maximum of 10% of the issued ordinary
share capital of the Company (excluding for these purposes the
1,023,453 shares held by the Company in treasury) 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
should have flexibility to buy back its own shares should the
directors in the future consider that it is appropriate to do so.
In relation to any buy back, the maximum price per Ordinary
Share at which the Company is authorised in terms of resolution
10 to effect that buy back is 5% above the average middle
market price of an Ordinary Share for the five business days
immediately preceding the date on which the buy back is
effected.
The statutory provisions governing buy backs of own shares are
currently contained in, inter alios, sections 693 and 701 of the
Companies Act 2006.
Notice of the 2013 Annual General Meeting
75
iomart Group plc Annual report and accounts 2013
This year’s Host Your Kit team strip giveaway
has been expanded to include both football and
basketball. Over 500 football clubs entered last
year’s competition.
Robbie Crawford, Rangers FC
Kieron Achara, GB and Scotland Basketball Star
iomart Group plc Annual report and accounts 2013 Officers and Professional Advisers
Directors
Ian Ritchie CBE, FREng, FRSE, FBCS, CEng, BSc
Non executive chairman
Chief executive officer
Non executive director
Non executive director
Director
Director
Angus MacSween
Chris Batterham MA, FCA
Crawford Beveridge CBE
Sarah Haran
Richard Logan BA, CA
Secretary
Bruce Hall BAcc(Hons), CA
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
iomart Group plc Annual report and accounts 2013 Group Contact Information
iomart Group
0141 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
iomartcloud
info@iomartcloud.com
www.iomartcloud.com
melbourne
inbox@melbourne.co.uk
www.melbourne.co.uk
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All rights reserved. © iomart Group plc 2013. All other trademarks and registered trademarks are the property of their respective owners.
78
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Robert Reilly, Head of IT for the Royal Horticultural Society
The Royal Horticultural Society was one of 800 new orders
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iomart Group plc Annual report and accounts 2013 iomart Group plc Annual report and accounts 2013