Annual Report and Accounts 2014
iomart Group plc Annual report and accounts 2014 OVERVIEW
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Our Business
Highlights
STRATEGIC REPORT
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Chairman’s statement
Chief executive officer’s report
Finance director's report
Key performance indicators and principal risks and uncertainties
CORPORATE GOVERNANCE
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Board of directors
Corporate governance report
Report of the board to the members on directors’ remuneration
Directors' report
Directors' responsibilities statement
FINANCIAL STATEMENTS
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Independent auditor's report to the members of iomart Group plc
Consolidated statement of comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the financial statements
Parent company financial statements
ANNUAL GENERAL MEETING
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Notice of annual general meeting
OFFICERS AND PROFESSIONAL ADVISERS
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Officers and professional advisers
iomart Group plc Annual report and accounts 2014 Our Business
The iomart Group is one of Europe’s leading providers of cloud
computing and managed hosting services. The Group specialises
in the design, delivery and management of business-critical hosting
services enabling companies and organisations to reduce the cost,
complexity and risks associated with maintaining their web and
online applications.
The Group holds a unique position within the marketplace. By owning
its own extensive data centre and fibre network, the company is able
to deliver the complete set of vertical components in the hosting
stack from network, compute through to complex cloud storage
solutions.
As more and more mission critical business applications move on
to the web, so organisations need more resilience, security and 24
hour management; the market for managed hosting services, data
storage and the outsourcing of IT infrastructure is expected to grow
significantly over the next few years.
“Moving our hosting to iomart has ensured we can continue to expand with the confidence that
we have the infrastructure able to expand with us. The platform allows us to have the flexibility we
need for our future plans and iomart's proactive support ensures we have the systems expertise to
hand as the business expands."
Nick Creed, Digital Director, The Drum
iomart Group plc Annual report and accounts 2014 Our Locations
We own and operate one of the most comprehensive data centre networks in the
United Kingdom. Every data centre offers full 24 x 7 on site support and is connected
by our own fully resilient fibre network stretching over 1,800 kilometres. With our
international points of presence (POPs) we are able to connect our clients around the
globe.
“We use enterprise-class hardware which feeds through to high availability and
recoverability. Our whole critical IT structure is safeguarded by the controls and security
that iomart has in place."
Phil Davies, Director IS for Misys UK & EMEA
iomart Group plc Annual report and accounts 2014 Our Track
Record
The iomart Group plc has enjoyed several years of good
organic growth and profitability, buoyed further by eleven
acquisitions since 2009. The financial objectives and goals
set by iomart aim to strengthen the company’s place in the
emerging global cloud market. There is no doubt that there
is a long term shift towards a cloud dominated technology
landscape, and iomart, with its infrastructure, expertise and
product set, is well positioned to take advantage of that.
Cloud computing will be a key
theme as corporate budgets
continue to support online,
outsourced and hosted IT.
High visibility from recurring
revenues, scope to sell more services
to customers and excellent cash flow
makes this a high-quality business.
Steven Frazer, Shares Magazine,
April 2014
iomart Group plc Annual report and accounts 2014 Our Products
iomart’s suite of services covers the main areas of
hosting infrastructure compute services and storage
that are of increasing importance to any organization
of any size.
The Group has created a complete end to end hosting
service delivery platform, enabling clients to avail
themselves of a range of hosting products and services,
from traditional managed networking solutions to
hosted desktops. Our portfolio of hosting and data
centre services addresses the issues and complexities
that are commonly experienced by customers when
attempting to host and manage their IT infrastructures
internally.
“SHI sought out iomart based on its extensive experience in the
European market with BaaS and Disaster Recovery offerings based on
EMC Avamar technologies. Our customers can now take advantage
of iomart’s advanced customer interface, which offers a more
user-friendly and efficient experience when executing simple or
even advanced backup and recovery tasks.” Richard Place, General
Manager, Cloud Services at SHI International Corp
iomart Group plc Annual report and accounts 2014 Our Customers
The Group currently serves thousands of customers of all
sizes across all sectors through six main brands – Easyspace,
RapidSwitch, Redstation, Backup Technology, iomart and
Melbourne.
Recognising the dawning of the ‘cloud age’ over five years ago,
iomart Group has built its technologies from the ground up
specifically to be delivered via the cloud. Underpinning its strategy
was the acquisition of its own network and UK data centre estate.
This is the key feature that sets iomart Group apart from many of
its competitors in that it is essentially a cloud services company
with its own infrastructure.
Clients include: Liverpool FC, Royal Horticultural Society,
Stagecoach, Mysis, Centrica, Atos, British Red Cross, Papworth
Trust and Network Rail.
“Hosting World Whisky Day with iomart is beneficial in two ways.
Not only does it mean the website is always up and people can
access it from anywhere in the world, but it also lends weight when
I am talking to the big whisky brands they can see that I am being
supported by a successful UK Plc.”
Blair Bowman
iomart Group plc Annual report and accounts 2014 Our Corporate & Social
Responsibility
The Stronger the Community - the Stronger we are. Our approach to corporate citizenship mirrors our
core values. We seek to involve ourselves in projects that help young people achieve their personal
goals through teamwork.
Host Your Kit
50 Football & Basketball youth teams across Britain received complete team strips through our
Host Your Kit Campaign.
“The kit looks outstanding and all players, parents and spectators
mentioned how great that it looked. Once again, thank you! This had
made a huge impact on the squad.”
Dave Evans, Stirling West Lothian Basket Ball Club
iomart Group plc Annual report and accounts 2014 Supporting the next
generation
The Group believes that it is vitally important to support projects
that inspire young people whilst challenging them to learn about the
opportunities that the digital world offers them.
University of Strathclyde
Business and Enterprise Challenge
“This year’s Challenge has been outstanding and we’re really delighted that iomart supported us to enable so
many pupils take part. The young people who take part do show significant improvements in their attitude to
their existing academic ability and this gives them the confidence to undertake a university degree as a result.”
Jan McGhie, Innovative Routes to Learning Centre, University of Strathclyde.
Overseas Support
“The combination of kit and donation from iomart was a massive boost to the success of the trip and is
hugely appreciated by all.” Rebecca Cumming, Coach St Mirren U14s Basketball Squad
“Thanks to iomart, it’s the first time we’ve taken the wind band abroad so it’s a fantastic opportunity for our
young musicians. To be playing while Spain are defending the World Cup will make it even more exciting
as there’s bound to be an incredible atmosphere in Barcelona.” Pamela Frew, Principle Music Teacher,
Helensburgh Academy
iomart Group plc Annual report and accounts 2014 Our
Employees
Talented, motivated and creative people lie at the
heart of our success and the Group has now grown to
employ over 300 UK based employees. We want our
people to thrive, prosper and to leave work every day
feeling valued and that they have made a difference.
In return, iomart is committed to their professional
and personal development and to ensuring that we
deliver a fantastic place to work.
We are proud of the impact our employees make in
their local communities. We encourage our team to
get involved with projects, voluntary organisations
and charities wherever and whenever they can.
We'll support them in any number of ways from the
provision of services, donations or equipment and
we’re delighted to do so. Whether our employees are
abseiling from bridges, climbing mountains, running
marathons, running Scout Groups, organising Dance
classes, they can be assured that their colleagues are
cheering them on!
“I just wanted to write to say a huge thank you to everyone
at iomart for supporting With Kids and our Christmas
appeal. We had such a brilliant response that we were able
to provide 101 families with food parcels and presents
on Christmas morning. We also had 175 children at our
Christmas Parties and all of them received presents from
Santa. We really couldn’t have been able to support so
many families without the generosity of you all and we
really can’t thank you enough.” Suzy Blair, With Kids
iomart Group plc Annual report and accounts 2014 iomart in Numbers
iomart Group plc Annual report and accounts 2014 Financial statements for year ended 31March 2014
Highlights
Financial
· Revenue growth of 29% to £55.6m (2013: £43.1m)
· Adjusted EBITDA1 growth of 43% to £23.6m (2013: £16.5m)
· Adjusted profit before tax growth2 of 37% to £14.6m (2013: £10.7m)
· Adjusted basic earnings per share3 from operations increased by 29% to 10.95p (2013: 8.46p)
· Cashflow from operations increased by 62% to £24.0m (2013: £14.8m)
· Adjusted EBITDA1 margins increased to 42% (2013: 38%)
· Proposed final dividend increased by 25% to 1.75p per share (2013: 1.40p per share)
Operational
·
Increased European footprint and dedicated server expertise through the acquisition of
Redstation Limited for a maximum consideration of £8.1m
· Acquired major presence in the Cloud backup and disaster recovery market through the acquisition
of Backup Technology Holdings Limited for a total consideration of £23.0m
· Completion of fit out of around 600 racks of datacentre space in Maidenhead
1 Throughout these financial statements adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges and acquisition costs. Throughout
these financial statements acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.
2 Throughout these financial statements adjusted profit before tax is profit before tax, amortisation charges on acquired intangible assets, share based payment charges, mark to market adjustments in
respect of interest rate swaps, the accelerated write off of arrangement fees on the bank borrowing facilities which were repaid early in the year and acquisition costs.
3 Throughout these financial statements adjusted earnings per share is earnings per share before amortisation charges on acquired intangible assets, share based payment charges, mark to market
adjustments in respect of interest rate swaps, the accelerated write off of arrangement fees on the bank borrowing facilities which were repaid early in the year and acquisition costs, including the taxation
effect of these.
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iomart Group plc Annual report and accounts 2014 Financial statements for year ended 31March 2014
Revenue Growth
EBITDA Growth
29%
to £55.6M
43%
to £23.6M
Margins
Increased to
42%
PBT Growth
37%
to £14.6M
Cashflow Increased
Proposed Final Dividend
Increased by
62%
to £24.0M
25%
to 1.75p
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iomart Group plc Annual report and accounts 2014 “The core of our strategy is to offer all three
main layers of the cloud - network, compute
and storage - from resilient secure infrastructure
through a range of ever more sophisticated
control panels.”
iomart Group plc Annual report and accounts 2014 Strategic Report
Strategic Report
Chairman's Statement
I am delighted to report on another very good year for your Group. We continue to make excellent progress as we execute on our
combined strategy of both growing our own business and acquiring others 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. Over the
last five years we have made eleven acquisitions in total and two of those we made this year, Redstation and Backup Technology are
the largest to date. 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 a datacentre in Portsmouth and we now have datacentres in eight locations
throughout the UK to support the delivery of our cloud solutions. We appreciate the continued support shown by the Bank of Scotland
through the provision of additional loan facilities to help fund our acquisition activity.
All of this progress is a result of a great deal of hard work by our executives and staff and I thank them all on behalf of the Board and
the shareholders for their efforts over the year.
We have a commitment to a progressive dividend policy as our profitability and cash generation grows. This year the Board is proposing
to pay a final dividend of 1.75p per share on 2 September 2014 to shareholders on the register on 15 August 2014, representing an
increase of 25% 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.
With the high level of revenue visibility we enjoy, we have begun the 2015 financial year in a strong position. I look forward to another
exciting year of growth and look ahead with considerable confidence.
Ian Ritchie
Chairman
27 May 2014
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iomart Group plc Annual report and accounts 2014 Strategic Report
Chief Executive Officer's Report
Introduction
I am pleased once more to report on another excellent year for iomart. We have increased our revenues and profits both organically
and through acquisition as we continue to deliver a widening range of cloud computing solutions.
Our revenues in the year were £55.6m, an increase of 29% over the previous year and our adjusted EBITDA of £23.6m showed a 43%
increase over the previous year.
We continue to believe in the long term opportunity for iomart as IT spending moves towards the ‘cloud’, as networks and connectivity
expand and mobility increases. Our vision remains to be the best in the UK at the delivery of compute, storage and network in the
cloud in a seamless, efficient and scalable way.
Market
The market continues to grow and evolve. All the trends I have spoken about in recent years remain intact.
One is the increasingly mobile world which we inhabit. Many of us have multiple devices that need to connect to data residing in
datacentres, the totality of which effectively define the ‘cloud’.
The second is the growth in faster and more reliable connectivity, making it easier to access and operate in the cloud.
The third is the inevitable growth in the volume of data being created which needs to be stored and managed securely.
These three overarching trends are interlinked, driving each other forward, and are set to continue growing for many years to come.
The core of our strategy is to offer all three main layers of cloud, ie network, compute and storage from resilient secure infrastructure
through a range of ever more sophisticated control panels.
As business cycles in the cloud arena become more apparent and as we learn more about long term customer behaviour we will
continue to develop our products to ensure we offer what the customer wants at the right price, on demand and in line with their
growing and changing needs. This requires us to be at the leading edge of cloud technologies.
The tools and technologies used to deliver these services are constantly evolving and we continue to invest to ensure we are at the
forefront of this evolution. It is important that as we grow bigger we continue to invest in the automation required to ensure we
can continue to scale the business in a well thought through and planned way. There is a lot of ongoing development in network
technology, in the compute and virtualisation layer and in the storage layer as the big technology vendors evolve their own solutions
for a future in the cloud. We have strong and growing relationships with all our technology partners and we work hard to ensure we
are aware of, and are following, all the relevant technology roadmaps.
There are many IT companies who now sell ‘cloud’ services. This is more of an opportunity than a threat as we see a future where
specialist service providers will provide wholesale cloud products to the market. iomart is well positioned to be a leading provider of
such products.
To date it has mainly been the web-facing elements of infrastructure that have been outsourced to the cloud and the back-office
workload continues to be handled “on premise”. Most of this back-office infrastructure is bought in the same way as it was 15 years
ago. We believe this will change and we can already see the early adopters starting to move to the cloud. This defines the ‘dripping
roast’ nature of the market opportunity and as I have been saying for the last five years, it has a long, long way to go.
iomart is at the forefront of this transformational shift and I expect the cloud opportunity to continue for many years to come.
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iomart Group plc Annual report and accounts 2014 Strategic Report. Chief Executive Officer's Report
Acquisitions
We again augmented our organic growth through the acquisition of three operations during the year. In September 2013 we acquired
Redstation Limited (“Redstation”), Backup Technology Holdings Limited (“BTL”) and Open Minded Solutions Limited (“Open Minded”).
All three have proven to be good additions to the Group and have now been integrated into the business. We continue to look for
businesses that fit our acquisition criteria with a view to making further acquisitions in the coming year.
Operational Review
Whilst all of our activities involve the provision of services from common infrastructure we are organised into two operating segments.
Hosting
Our Hosting segment, which now includes Redstation and BTL, 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
network of 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 and Redstation operations 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. BTL provides enterprise class cloud backup and business continuity services.
We have made a substantial investment in our Maidenhead datacentre which has increased our overall capacity substantially and in
addition we acquired additional datacentre space in Portsmouth as a consequence of the acquisition of Redstation.
Further investment has been made in our network to make use of the dark fibre we put in place last year with our Manchester operation
now fully connected and we expect to integrate our Portsmouth facility into our network over the course of the current financial year.
Revenues in this segment have grown by 40% to £44.7m (2013: £32.0m) partly as a result of the continued organic growth and in part
due to acquisitions.
Easyspace
The Easyspace segment, which now includes Open Minded, has performed well over the year.
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.
There has been a significant change to the domain name market which began late in the year. There are now substantially more domain
suffixes available and more continue to be added on a daily basis. We expect Easyspace to benefit from this new market opportunity.
As anticipated revenues of £11.0m (2013: £11.1m) have remained around the same level as in the previous year, delivering strong
levels of cash for the Group.
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 to our increasing customer base. With our growing
reputation and ongoing investment in leading edge technologies, alongside our own development skills, we are well positioned for
further significant growth.
I look forward, once again, with confidence to the year ahead.
Angus MacSween
Chief Executive Officer
27 May 2014
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iomart Group plc Annual report and accounts 2014
Strategic Report.
Finance Director's Report
Trading Results
Revenue
Revenues for the year grew by 29% to £55.6m (2013: £43.1m) through the combination of continued organic growth and the impact
of acquisitions.
Our Hosting segment grew revenues by 40% to £44.7m (2013: £32.0m). This growth was helped by a full year contribution from
Melbourne which we acquired in August 2012 and Redstation and Backup Technology both of which were acquired in September 2013.
The growth in the Hosting segment revenues excluding the impact of acquisitions was 14%.
Revenues within the Easyspace segment of £11.0m (2013: £11.1m) were close to the level of the previous year showing a very modest
1% decrease.
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 £37.8m (2013: £28.9m) representing a gross margin of 68.0% (2013: 67.2%) 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 was £23.6m (2013: £16.5m) an increase of 43%. Our percentage adjusted EBITDA margin has also
significantly improved to 42.5% (2013: 38.3%). The Hosting segment increased both its absolute and relative margin over the period
whilst the Easyspace segment performed very much in line with the previous year.
The Hosting segment’s adjusted EBITDA was £21.7m (2013: £14.3m), an increase of 51.9%. In percentage terms the adjusted EBITDA
margin has improved to 48.6% (2013: 44.7%). 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 principally due to the impact of the acquisitions made in the period and the full impact of the acquisitions
made in the previous period. The inclusion of Melbourne for the full year has contributed to the improvement in the adjusted EBITDA
in absolute terms and has helped maintain the percentage margin improvement. Similarly the contribution from both Redstation and
BTL since their acquisition in September has contributed to both the absolute and relative improvement in the margin.
The Easyspace segment’s adjusted EBITDA was £5.0m (2013: £5.0m) which was the same as in the previous year. In percentage terms
the adjusted EBITDA margin has improved slightly to 45.2% (2013: 44.9%). 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 £3.0m (2013: £2.8m) mainly due to increased payroll costs.
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iomart Group plc Annual report and accounts 2014 Strategic Report. Finance Director's Report
Adjusted profit before tax
Depreciation charges of £7.2m (2013: £4.9m) have increased largely as a consequence of the acquisitions made in the year and also
as a result of charges for the equipment bought to provide services to the additional Hosting segment customers.
The charge for amortisation of intangibles, excluding amortisation of intangible assets resulting from acquisitions (“amortisation of
acquired intangible assets”) of £0.7m (2013: £0.5m) has remained fairly static over the year.
Finance income in the period was £0.1m (2013: £0.1m). Finance costs of £1.2m (2013: £0.5m), excluding the mark to market adjustment
in respect of interest swaps on the Company’s loans and the accelerated write off of arrangement fees on the early repayment of bank
facilities, increased substantially over the period. This was largely due to the new bank facilities which have been drawn down to fund
the acquisitions made in the year.
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 the accelerated write off of arrangement fees
on the early repayment of the bank facilities, and crediting the finance income from the adjusted EBITDA, the Group’s adjusted profit
before tax was £14.6m (2013: £10.7m) an increase of 37%.
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 swaps
Less: Accelerated write off of arrangement fees on early repayment of bank facilities
Profit before tax
2014
£’000
14,612
(3,093)
(374)
(1,257)
(20)
(153)
9,715
2013
£’000
10,668
(1,302)
(364)
(258)
(46)
-
8,698
The adjusting items are: charges for the amortisation of acquired intangible assets of £3.1m (2013: £1.3m) 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; costs of
£0.4m (2013: £0.4m) as a result of acquisition costs; share based payment charges in the period of £1.3m (2013: £0.3m) which have
increased substantially as a result of additional share options granted; a mark to market adjustment in respect of interest rate swaps
on the Company’s loans of £0.02m (2013: £0.05m) and the accelerated write off of arrangement fees on the early repayment of bank
facilities during the year of £0.15m (2013: £nil).
After deducting charges for the amortisation of acquired intangible assets; acquisition costs; share based payments; mark to market
adjustments in respect of interest rate swaps and the accelerated write off of arrangement fees on the early repayment of bank facilities
during the year from the adjusted profit before tax; the reported profit before tax was £9.7m (2013: £8.7m) an increase of 12%.
Taxation
There is a tax charge for the year of £2.0m (2013: £1.7m). The tax charge for the year is made up of a corporation tax charge of £2.5m
(2013: £1.5m) with a deferred tax credit of £0.5m (2013: charge £0.2m). At the year end, the Group has unused tax losses of £4.0m
(2013: £5.1m) 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 £7.7m (2013: £6.9m).
Earnings per share
Adjusted earnings per share is based on profit for the year attributed to ordinary shareholders before share based payment charges,
amortisation charges of acquired intangible assets, mark to market adjustments in respect of interest rate swaps, the accelerated write
off of arrangement fees on the early repayment of bank facilities during the year, acquisition costs and the tax effect of these items was
10.95p (2013: 8.46p) an increase of 29%.
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 7.30p (2013: 6.91p), an increase of 6% over the year.
17
iomart Group plc Annual report and accounts 2014
Strategic Report. Finance Director's Report
Acquisitions
On 4 September 2013 the Company acquired Redstation for a maximum consideration of £8.1m; on a no cash no debt, normalised
working capital basis. An initial payment of £2.0m in cash and £1.5m in shares was made to the vendors and debt of £3.1m was
also repaid. A further sum of £0.2m was paid in cash in December 2013 to reflect the additional debt assumed, cash acquired and
normalised working capital position of the company at completion. An additional sum is due related to the profitability of Redstation in
the period to March 2014 and the estimated amount to be paid in this regard is £1.2m. Payment of this sum is expected to be made
during June 2014.
On 30 September 2013 the Company acquired BTL for a total consideration of £23.0m; on a no cash no debt, normalised working
capital basis. At completion, there was a payment made of £14.9m in cash, plus another £1.1m in cash to reflect the additional debt
assumed, cash acquired and normalised working capital position of the company at completion, thereby totalling a payment of £16.0m
in cash and £3.5m in shares to the vendors. There was also a repayment of debt of £2.6m. A further deferred sum of £2.0m was paid
in January 2014.
On 9 September 2013 the Company acquired the entire share capital of Open Minded for a total consideration of £0.1m. Open Minded
is a customer of Rapidswitch.
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 £24.0m (2013: £14.8m)
with the significant increase of 62% over the previous year’s level largely due to the improvement in adjusted EBITDA. After deducting
payments for corporation tax of £2.3m (2013: £1.2m) the net cash flow from operating activities was £21.7m (2013: £13.6m).
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 £31.5m (2013: £13.6m) in the period. Of this amount, £19.0m (2013: £8.8m), net of cash acquired on acquisition of
£1.4m and shares issued of £5.0m, was incurred in relation to acquisition activities described above. As well as the investment in the
year to acquire Redstation, BTL and Open Minded the Group also paid contingent and deferred considerations due on the acquisitions
of Internet Engineering and Skymarket respectively in the previous financial year.
The Group continues to invest in property, plant and equipment through expenditure on datacentres and on equipment required
to provide managed services to both its existing and new customers. In particular the Group significantly expanded its datacentre in
Maidenhead and as a result the Group spent £11.7m (2013: £4.1m) on assets, net of related finance lease drawdown and non-cash
reinstatement provisions.
Expenditure was also incurred on development costs of £0.6m (2013: £0.5m).
Cash flow from financing activities
There was net cash generated from financing activities of £11.4m (2013: £2.5m). The Company’s borrowing facilities were restructured
in the period. Bank loans of £37.5m were drawn down (2013: £9.0m) out of which existing facilities of £14.0m (2013: £4.0m) were
repaid, including £5.0m which had been drawn down in the period to help finance the acquisition of Redstation, and the balance of
£18.5m was used to help finance the acquisition of BTL (2013: £5.0m used to finance the acquisition of Melbourne). Subsequently, a
further loan repayment of £2.5m was made in March 2014. £5.7m of borrowings in acquired businesses were repaid (2013: £0.2m) of
which £3.1m related to the acquisition of Redstation and £2.6m to the acquisition of BTL and £1.4m (2013: £1.4m) of finance leases
were also repaid. We received £0.2m (2013: £0.6m) from the issue of shares as a result of the exercise of options by employees. We
also made a dividend payment of £1.5m (2013: £0.9m) and incurred finance costs of £1.2m (2013: £0.6m).
Net cash flow
As a consequence, our overall cash generation during the year was £1.6m (2013: £2.5m) which resulted in cash and cash equivalent
balances at the end of the year of £13.0m (2013: £11.4m). After recognising bank loans of £30.0m (2013: £8.8m) and finance lease
obligations of £2.8m (2013: £3.0m) net debt balances at the end of the period stood at £19.8m (2013: £0.4m) a level the Board is
comfortable with given the strong cash generation of the Group.
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 finance lease facilities which are available to fund capital expenditure, means
that the Group has the liquidity it requires to continue its growth through both organic and acquisitive means.
Richard Logan
Finance Director
27 May 2014
18
iomart Group plc Annual report and accounts 2014
Strategic Report. Key Performance Indicators and Prinicipal Risks and Uncertainties
Key performance indicator review
Revenue Growth
Revenue
Growth
2014
£55.6m
29% increase
2013
£43.1m
29% increase
Revenue from continuing operations grew by 29% over the year compared to a growth of 29% in the previous year. The Hosting
segment grew revenues by 40% (2013: 37%) and the Easyspace segment declined by 1% (2013: grew by 9%).
Adjusted EBITDA Margin
Adjusted EBITDA
Adjusted EBITDA margin
2014
£23.6m
42%
2013
£16.5m
38%
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 Redstation and BTL which were acquired during the year and Melbourne 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 in the previous year.
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.
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.
19
iomart Group plc Annual report and accounts 2014
Strategic Report. Key Performance Indicators and Prinicipal Risks and Uncertainties
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.
The Strategic Report on pages 13 to 20 has been approved by the Board and is signed on its behalf:
Richard Logan
Finance Director
27 May 2014
20
iomart Group plc Annual report and accounts 2014
Nottingham Forrest Ladies Under 15 team winning the League Cup
Abingdon Town FC Under 10 team
iomart supporting GB Youth Teams via its Host Your Kit Campaign
21
iomart Group plc Annual report and accounts 2014 Corporate Governance
Board of Directors
1
3
5
1. Ian Ritchie, Chairman
2. Angus MacSween, Chief Executive
3. Crawford Beveridge, Non Executive Director
4. Chris Batterham, Non Executive Director
5. Richard Logan, Group Finance Director
6. Sarah Haran, Operations Director
22
2
4
6
iomart Group plc Annual report and accounts 2014 Ian Ritchie
Chairman
Angus MacSween
Chief Executive
Chris Batterham
Non Executive Director
63, appointed 2008; currently Chairman
of Computer Application Services Ltd,
Interactive Design Institute Ltd, Blipfoto
Ltd, Cogbooks 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
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).
several
57, 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.
59, 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 Toumaz Ltd,
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
Non Executive Director
Sarah Haran
Operations Director
Richard Logan
Group Finance Director
48, 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.
68, appointed 2011; Crawford Beveridge
CBE has over 40 years experience in
the technology industry, including 16
years at Sun Microsystems ("Sun"), most
recently as Executive Vice President
and Chairman, EMEA, APAC and the
Americas until retiring in January 2010.
His business background also includes
roles with Hewlett-Packard, Digital
Equipment Corp., Analog Devices, non-
executive director of Hitachi Global
Storage Technologies, a subsidiary
of Hitachi Ltd and Chief Executive of
Scottish Enterprise. Current board roles
include Chairman of the investment
advisory board at Scottish Equity
Partners and Non Executive Chairman
of NASDAQ listed Autodesk.
is a
56, appointed 2006; Richard
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 2014 Corporate Governance Report
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.
We do not comply with the Code. We have reported on our Corporate Governance arrangements by drawing upon best practice
available including those aspects of the Code we consider to be relevant to the Company. 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 13. 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 30 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.
24
iomart Group plc Annual report and accounts 2014
Corporate Governance Report
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
Held Attended
Held Attended
Audit
Committee
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
10
10
10
10
10
3
-
-
3
3
-
3
-
-
3
3
-
3
-
-
3
3
-
3
-
-
3
3
-
25
iomart Group plc Annual report and accounts 2014
Corporate Governance Report
The Audit Committee
The Audit Committee’s role is to assist the Board with the discharge of its responsibilities in relation to the internal controls and external
audits . 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 charged 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.
26
iomart Group plc Annual report and accounts 2014
Corporate Governance Report
Financial Control
The annual financial plan is reviewed and approved by the Board. Financial results with comparisons to plan and forecast results are
reported on monthly to the Board together with a report on operational achievements, objectives and issues encountered. Significant
variances from plan are discussed at Board meetings and actions set in place to address them.
Approval levels for authorisation of expenditure are at set levels and cascaded through the management structure with any expenditure
in excess of predefined levels requiring approval from the executive directors.
Relations with Shareholders
The Chief Executive Officer and Finance Director have, where appropriate, had regular dialogue with shareholders and analysts to
discuss strategic and other issues including the Company’s financial results.
The Company engages in full and open communication with both institutional and private investors and responds promptly to all
queries received. In conjunction with the Company’s brokers and other financial advisers all relevant news is distributed in a timely
fashion through appropriate channels to ensure shareholders are able to access material information on the Company’s progress. The
Company’s website has a section for investors, which contains all publicly available financial information and news on the Company.
Going Concern
The Directors, having made suitable enquiries and analysis of the accounts, consider that the Group has adequate resources to
continue in business for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing
the financial statements. In making this assessment, the Directors have considered the Group budgets, the cash flow forecasts and
associated risks and the availability of bank and leasing facilities.
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.
27
iomart Group plc Annual report and accounts 2014
Corporate Governance Report
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
27 May 2014
28
iomart Group plc Annual report and accounts 2014 Report of the board to the members on directors' remuneration
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;
• Pensions
to
Pension contributions
individuals’ personal pension
arrangements are payable by the Group at the rate of twice
the contribution made by the director subject to a maximum
employer contribution of 10% of basic salary.
•
Share options
The Group operates share option plans for executive directors
and managers as a combined reward and incentive for those
who have made a major contribution to the Group and will
continue to play a key role in helping the Group achieve its
objectives in the future. Whenever an award under a share
option plan is made performance conditions are attached to
the award consistent with the objectives of the Group. No share
options awarded will vest any earlier than the third anniversary
of the date of grant of the option.
•
•
the need to attract and retain executives of an appropriate
calibre; and
• Other benefits
the continued commitment of executives to the Group’s
success through appropriate incentive schemes.
The executive directors are entitled to life insurance cover and
to participate in the Group’s Private Medical Insurance scheme.
The committee normally meets at least twice per year.
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.
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. Base salaries are reviewed annually and the
remuneration committee considers external expert advice when
setting the level of reward packages. 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.
The level of executive directors’ discretionary bonus payments is
determined by a number of factors including the Group’s financial
performance and the individual’s non-financial performance. For
the executive directors, there may be an opportunity to sacrifice
their potential bonus in exchange for a payment into a pension
plan.
29
iomart Group plc Annual report and accounts 2014
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
Salary or fees
£
267,000
30,000
25,000
160,000
170,000
50,000
Bonus
£
262,000
-
-
155,000
144,500
-
Pension
Benefits contributions
£
26,700
-
-
16,000
17,000
-
£
3,129
-
-
846
2,306
-
Year ended Year ended
31 March
2013
Total
£
514,603
30,000
25,000
315,525
298,058
50,000
31 March
2014
Total
£
558,829
30,000
25,000
331,846
333,806
50,000
702,000 561,500
6,281
59,700
1,329,481 1,233,186
Directors’ interests in shares
The interests of the directors in the shares of the company at 31 March 2014, together with their interests at 1 April 2013 were as
follows:
Name of director
Angus MacSween
Chris Batterham
Crawford Beveridge
Sarah Haran
Richard Logan
Ian Ritchie
Number of ordinary shares
31 March 2014
At 1 April 2013
16,800,552
90,621
30,000
1,963,747
981,393
151,400
20,436,916
90,621
30,000
2,345,565
1,254,120
151,400
On 1 October 2013, Angus MacSween sold 3,636,364 shares at a price of 275p per share, Sarah Haran sold 381,818 shares at a price
of 275p per share and Richard Logan sold 272,727 shares at a price of 275p per share.
30
iomart Group plc Annual report and accounts 2014
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 2014 in options over the ordinary shares of the Company were as follows:
Name of
director
At
1 April
2013 Exercised
At 31
Granted Lapsed
March Exercise
price
2014
Date of
Date from
which
Grant exerciseable
Expiry
date
Angus MacSween
Sarah Haran
Richard Logan
43,010
113,334
113,333
113,333
383,010
58,115
42,913
80,000
80,000
80,000
341,028
50,000
28,495
80,000
80,000
80,000
318,495
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43,010
- 113,334
- 113,333
- 113,333
- 383,010
-
-
-
-
-
58,115
42,913
80,000
80,000
80,000
- 341,028
-
-
-
-
-
50,000
28,495
80,000
80,000
80,000
- 318,495
46.5p 06/10/2008
1p 27/03/2013
1p 27/03/2013
1p 27/03/2013
31/03/2009 06/10/2018
31/05/2014 27/03/2023
31/05/2015 27/03/2023
31/05/2016 27/03/2023
50.5p 27/09/2007
46.5p 06/10/2008
1p 27/03/2013
1p 27/03/2013
1p 27/03/2013
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
74.0p 24/08/2006
46.5p 06/10/2008
1p 27/03/2013
1p 27/03/2013
1p 27/03/2013
24/08/2009 24/08/2016
31/03/2010 06/10/2018
31/05/2014 27/03/2023
31/05/2015 27/03/2023
31/05/2016 27/03/2023
During the year no share options were awarded to or exercised by the Directors.
The market price of the company’s shares at the end of the financial period was 246.75p and the range of prices during the period
was between 226.0p and 319.0p.
By order of the board
Crawford Beveridge
Chairman, Remuneration committee
27 May 2014
31
iomart Group plc Annual report and accounts 2014
Directors' Report
The directors present their annual report on the affairs of the
Group, together with the financial statements and auditor’s
report, for the year ended 31 March 2014.
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 27 September 2013 the Group agreed a new
multi option revolving credit facility of £20m and a term loan
facility of £15m with Bank of Scotland plc. This replaced the
multi option revolving credit facility of £16m which had been in
place previously of which £10m had already been drawn down,
including £5m drawn down during the year to help finance the
purchase of Redstation, and a term loan facility of £4m which
had been drawn down in full. The new facilities have been made
available in order to finance acquisitions and for the issue of
guarantees, bonds and indemnities.
In September 2013, £15m was drawn down on the new term
loan facility and £17.5m was drawn down on the new multi
option revolving credit facility and the proceeds used to repay
the £10m which had been draw down under the previous
revolving credit facility and to repay the £4m draw down under
the previous term loan facility and the remaining £18.5m was
used to fund the purchase of BTL. In March 2014, a repayment
of £2.5m was made against the multi option revolving credit
facility.
The £20m multi option revolving credit facility may be used
by the Group to finance acquisitions and for the issue of
guarantees, bonds or indemnities. The facility is available until
October 2017 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 multi option
revolving credit facility margin can fluctuate between 2.50%
and 3.50% per annum depending on the relationship of net
borrowings to reported profits. A one-off arrangement fee of
£337,500 was paid when the facility was first drawn down and
a non-utilisation fee of 45% of the multi option revolving credit
facility margin is due on any undrawn portion of the facility. The
effective interest rate for multi option revolving credit loans in
the current year was 4.41% (2013: 6.69%).
The £15m term loan was drawn down in September 2013 for
the purpose of acquiring BTL and is repayable in instalments
until October 2017 with two instalments totalling £3m due to
be repaid within one year. 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
32
can fluctuate between 2.50% and 3.50% per annum depending
on the relationship of net borrowings to reported profits. There
was no arrangement fee associated with the term loan when it
was drawn down. The effective interest rate for the term loan in
the current year was 4.40% (2013: 2.34%).
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 2.03% from April 2015 until maturity.
The Group has also entered interest rate swap arrangements in
respect of £4m which has been drawn under the multi option
credit facility which has been fixed at 1.02% until June 2015 and
£5m drawn under the multi option credit facility which has been
fixed at 1.26% from August 2014 for 12 months. The remaining
£6m drawn under the multi option credit facility is not covered
by interest rate swap arrangements. The Group’s borrowings at
31 March 2014 comprise finance leases totalling £2.8m (2013:
£3.0m) and bank loans totalling £30.0m (2013: £8.8m). The
interest rates on the finance leases are fixed for the term of the
lease at between 5.6% and 24.1% and the average interest rate
was 8.4% (2013: 8.2%).
The Group has exposure to movements in the exchange rate of
the US dollar as certain domain name purchases are transacted
in this currency. To protect cash flows against the level of
exchange rate risk, the Group entered into forward exchange
contracts to hedge foreign exchange exposures arising on the
forecast payments. The majority of transactions of the 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.
Dividend
The directors have not declared an interim dividend for the year
ended 31 March 2014 (2013: nil). The directors recommend a
final dividend for the year ended 31 March 2014 of 1.75p per
share (2013: 1.40p per share).
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
85. In accordance with the company’s Articles of Association,
Sarah Haran and Crawford Beveridge 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 29 to 31.
iomart Group plc Annual report and accounts 2014 Directors' Report
Substantial shareholdings
At 21 May 2014 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
Angus MacSween
Shares Percentage held
15.75%
16,800,552
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
11,747,861
11.01%
Liontrust Asset
Management
Old Mutual Global
Investors (UK)
6,701,304
Majedie Asset Management
6,359,856
Bruce Hall
Company secretary
27 May 2014
6.28%
5.96%
River & Mercantile Asset
Management
3,687,513
3.46%
Transactions in own shares
During the year 40,250 (2013: nil) own shares held in treasury at
a carrying value of 46.5p each were issued following the exercise
of share options by employees for which a net total of £20,869
(2013: £nil) was received.
Employee involvement
The Group regularly communicates with all staff providing
information on developments within the Group including
updates on the Group’s strategy and details of new products
and services provided by the Group.
Staff are eligible to receive share options in the company under
the Group’s share incentive schemes and it is the board’s policy
to make specific awards as appropriate to attract and retain the
best available people.
Employment of disabled persons
Full and fair consideration is given to applications for employment
made by disabled persons having regard to their particular
aptitudes and abilities. Appropriate training is arranged for
disabled persons, including retraining for alternative work of
employees who become disabled, to promote their career
development within the organisation.
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.
33
iomart Group plc Annual report and accounts 2014 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.
Directors' Responsibilities Statement
The directors are responsible for preparing the Strategic Report
and 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 judgements 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 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.
34
iomart Group plc Annual report and accounts 2014
GB basketball team co-captain Kieron Achara, “This
project by iomart and Wheatley Housing Group to
give away free sports kit and equipment is a great
initiative which will inspire more children get healthy
and active.”
iomart Group plc Annual report and accounts 2014 Financial Statements
Independent auditor's report to the members of iomart Group plc
We have audited the Group financial statements of iomart Group
Plc for the year ended 31 March 2014 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.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in Note 2 to the Group financial statements, the
Group in addition to complying with its legal obligation to apply
IFRSs as adopted by the European Union, has also applied IFRSs
as issued by the International Accounting Standards Board
(IASB).
In our opinion the financial statements comply with IFRSs as
issued by the IASB.
Opinion on other matter prescribed by the
Companies Act 2006
In our opinion the information given in the Strategic Report
and Directors’ Report for the financial year for which the Group
financial statements are prepared is consistent with the Group
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you
if, in our opinion:
• certain disclosures of directors’ remuneration specified
by law are not made; or
• we have not received all the information and
explanations we require for our audit.
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
2014.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
27 May 2014
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 Financial Reporting Council’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 2014 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.
36
iomart Group plc Annual report and accounts 2014
Consolidated statement of comprehensive income. Year ended 31March 2014
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
Amounts which may be reclassified to profit or loss
Currency translation differences
Other comprehensive income for the year
Note
2014
£’000
2013
£’000
55,618
43,059
4
4
26
6
4
4
4
7
7
9
(17,794)
(14,131)
37,824
28,928
(26,767)
(19,768)
11,057
9,160
23,611
(1,257)
(374)
(7,170)
(3,093)
(660)
68
(1,410)
9,715
(1,995)
7,720
16,505
(258)
(364)
(4,909)
(1,302)
(512)
87
(549)
8,698
(1,749)
6,949
3
3
9
9
Total comprehensive income for the year
7,723
6,958
Attributable to equity holders of the parent
7,723
6,958
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.
12
12
7.30 p
7.23 p
6.91 p
6.63 p
37
iomart Group plc Annual report and accounts 2014
2013
£’000
31,781
8,028
2,416
19,884
62,109
11,392
5,761
17,153
79,262
(5,696)
(1,097)
(468)
(7,261)
(358)
(12,491)
(812)
(6,124)
(19,785)
44,879
19,488
2,416
32,533
99,316
13,025
7,696
20,721
120,037
(13,716)
(1,566)
(2,443)
(17,725)
(1,271)
(15,158)
(1,868)
(19,128)
(37,425)
(55,150)
(27,046)
64,887
52,216
1,078
(556)
1,200
21,067
4,983
2
37,113
64,887
1,058
(576)
1,200
20,936
-
(1)
29,599
52,216
Consolidated statement of financial position. As at 31March 2014
Note
2014
£’000
13
13
14
16
18
17
21
22
10
20
19
21
24
25
ASSETS
Non-current assets
Intangible assets – goodwill
Intangible assets – other
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
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
Merger reserve
Foreign currency translation reserve
Retained earnings
Total equity
These financial statements were approved by the board of directors on 27 May 2014.
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.
38
iomart Group plc Annual report and accounts 2014
Consolidated statement of cash flows. Year ended 31March 2014
Profit before taxation
Finance costs – net
Depreciation
Amortisation
Share based payments
Exchange movements
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
Proceeds on disposal of property, plant and equipment
Payments for current period acquisitions net of cash acquired
Contingent consideration paid on prior period acquisition
Deferred 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
2014
£’000
9,715
1,342
7,170
3,753
1,257
-
250
503
23,990
(2,277)
21,713
(11,651)
(557)
(24)
22
(19,016)
(125)
(201)
91
(31,461)
154
37,500
(1,384)
(16,503)
(5,731)
(1,172)
(1,483)
11,381
1,633
11,392
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
2,457
8,935
Cash and cash equivalents at the end of the year
18
13,025
11,392
The following notes form part of the primary financial statements.
39
iomart Group plc Annual report and accounts 2014
Consolidated statement of changes in equity. Year ended 31March 2014
Changes in equity
Note
Share
capital
£’000
shares translation redemption premium Merger Retained
reserve account reserve earnings
£’000
reserve
£’000
EBT Treasury
£’000
£’000
£’000
£’000
£’000
Total
£’000
JSOP
£’000
Own
Own
shares shares
Foreign
currency
Own
Capital
Share
Balance at 1 April 2012
1,048 (2,351)
Profit in the year
Currency translation differences
Total comprehensive income
Dividends – final (paid)
Share based payments
Deferred tax on share based
payments
Issue of own shares from JSOP
Issue of new shares for option
redemption
Total transactions with owners
8
26
24
-
-
-
-
-
-
-
-
-
-
-
-
-
2,351
10
10
-
2,351
-
-
-
-
-
-
-
-
-
-
-
-
-
(70)
-
(70)
-
(506)
-
(506)
(10)
1,200 20,362
- 24,814 45,063
-
9
9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
574
574
-
-
-
-
-
-
-
-
-
6,949 6,949
9
6,949 6,958
-
(904)
258
(904)
258
257
(1,775)
-
(2,164)
257
-
584
195
Balance at 31 March 2013
1,058
-
(70)
(506)
(1)
1,200 20,936
- 29,599 52,216
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 for option
redemption
Issue of new shares for option
redemption
Issue of new shares for business
acquisition
Total transactions with owners
8
26
25
24
24
-
-
-
-
-
-
-
3
17
20
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
20
-
-
20
-
3
3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
131
-
-
-
-
-
-
-
-
7,720 7,720
3
7,720 7,723
-
(1,483) (1,483)
1,257 1,257
19
1
19
21
-
134
- 4,983
131 4,983
- 5,000
(206) 4,948
Balance at 31 March 2014
1,078
-
(70)
(486)
2
1,200 21,067 4,983 37,113 64,887
The following notes form part of the primary financial statements.
40
iomart Group plc Annual report and accounts 2014
"It is great to see the business expanding and it shows
the importance of the provision of these services to the
economy as a whole.”
"Everybody relies on accessibility and use of the internet
to access services and for marketing themselves, so this is
important." The Rt Hon Theresa May MP
Rt Hon Theresa May MP and Angus MacSween CEO, iomart Group
at the opening of the Maidenhead data centre expansion.
iomart Group plc Annual report and accounts 2014 Notes to the financial statements. Year ended 31March 2014
1. GENERAL INFORMATION
iomart Group plc is a company incorporated and domiciled in the
United Kingdom under the Companies Act 2006. The address
of the registered office is given on page 85 of this report. The
nature of the Group’s operations and its principal activities are
set out in the Strategic Report and Directors’ Report.
The financial statements are presented in UK Pounds Sterling
is the currency of the primary economic
because that
environment in which the Group operates.
2. ACCOUNTING POLICIES
Basis of preparation
The consolidated financial statements have been prepared in
accordance with applicable International Financial Reporting
Standards (IFRS) as adopted by the EU and issued by the
International Accounting Standards Board
in
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:
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 amendments 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:
• Amendments to IAS 19 (November 2013) Defined Benefit
Plans: Employee Contributions (effective 1 July 2014).
• Amendments to IAS 32 (December 2011) Offsetting
Financial Assets and Financial Liabilities (effective 1 January
2014).
• Amendments to IAS 36 (May 2013) Recoverable Amount
Disclosures for Non-Financial Assets (effective 1 January
2014).
• Amendments to IAS 39 (June 2013) Novation of Derivatives
and Continuation of Hedge Accounting (effective 1 January
2014).
• IFRS 10 (May 2011) Consolidated Financial Statements
(effective 1 January 2013).
• IFRS 11 (May 2011) Joint Arrangements (effective 1 January
2013).
• Amendments to IFRS 10,12 & 27 (October 2012)
Investment Entities (effective 1 January 2014).
• IFRIC 21 (March 2013) Levies (effective 1 January 2014).
• IFRS 12 (May 2011, updated January 2012) Disclosures of
Summary of Accounting Policies
Interests in Other Entities (effective 1 January 2013).
• IFRS 13 (May 2011) Fair Value Measurement (effective 1
January 2013).
• IAS 27 (May 2011) Separate Financial Statements (effective
1 January 2013).
• IAS 28 (May 2011) Investments in Associates and Joint
Ventures (effective 1 January 2013).
• Amendments to 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 1 (March 2012) Government Loans
(effective 1 January 2013).
• Amendments to IFRS 7 (December 2011) Disclosures –
Offsetting Financial Assets and Financial Liabilities (effective
1 January 2013).
• Amendments to IFRSs 10, 11 & 12 (June 2012) Transitional
Guidance (effective 1 January 2013).
• IFRIC 20 (October 2011) Stripping Costs in the Production
Phase of a Surface Mine (effective 1 January 2013).
Basis of consolidation
The Group financial statements consolidate those of the
Company and all of its subsidiary undertakings drawn up to 31
March 2014. 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.
42
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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.
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 an accruals 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 five years.
43
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
2. ACCOUNTING POLICIES (CONTINUED)
Acquisition costs
In accordance with IFRS 3 Business Combinations, costs
incurred on professional fees during an acquisition are not
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 and is probability based to reflect the likelihood of
different amounts being paid. Where a change is made to the fair
value of 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 or credit 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 profit or loss.
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
Between 2.00% and 3.33% per
annum
Leasehold improvements
Between 6% and 10% per annum
Computer equipment
Office equipment
Between 20% and 50% per
annum
Between 10% and 25% per
annum
Datacentre equipment
Between 6% and 10% per annum
Motor vehicles
25% per annum
Land
Not depreciated
44
Impairment testing of goodwill, other intangible assets and
property, plant and equipment
For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable
cash flows (cash-generating units). As a result, some assets
are tested individually for impairment and some are tested at
cash-generating unit level. Goodwill is allocated to those cash-
generating units that are expected to benefit from synergies of
the related business combination and represent the lowest level
within the Group at which management monitors goodwill.
Goodwill, other individual assets or cash-generating units that
include goodwill, and those intangible assets not yet available
for use are tested for impairment at least annually. All
other individual assets or cash-generating units are tested for
impairment whenever events or changes in circumstances
indicate that the carrying amount may not be recoverable.
An impairment loss is recognised for the amount by which the
asset’s or cash-generating unit’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher
of fair value, reflecting market conditions less costs to sell,
and value in use based on an internal discounted cash flow
evaluation. Management estimate expected future cash flows
from each cash generating unit and determines a suitable
interest rate to determine the present value of the future cash
flows. Discount factors are determined for each cash generating
unit to reflect the underlying risks involved. The future cash flows
used in the calculation are based on the Group’s latest approved
budget.
Impairment losses recognised for cash-generating units, to
which goodwill has been allocated, are credited initially to the
carrying amount of goodwill. Any remaining impairment loss
is charged pro rata to the other assets in the cash generating
unit. With the exception of goodwill, all assets are subsequently
reassessed for indications that an impairment loss previously
recognised may no longer exist.
Details of the key assumptions and judgements are shown in
note 13.
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.
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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. Where borrowings are repaid
early and new loan facilities agreed the terms of each loan
facility are compared. Where the terms of the new borrowings
are significantly different from those of the previous borrowings,
the previous borrowings are treated as extinguished rather than
modified as prescribed under IAS 30.
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.
Provisions
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.
Income taxes
The tax expense recognised in profit or loss 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 profit or loss.
All income and expenses relating to financial assets that are
recognised in the statement of comprehensive income are
presented within ‘finance costs’ or ‘finance income’ except for
impairment of trade receivables which is presented within
‘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
reporting date.
Financial derivatives such as forward foreign exchange contracts
are carried at fair value through profit or loss.
45
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
2.ACCOUNTING POLICIES (CONTINUED)
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. 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.
46
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 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.
• “Merger reserve” represents the excess over nominal value
of the fair value of consideration received for equity shares,
net of expenses of the share issue, when ordinary share
capital is included in the consideration for business
acquisitions.
• “Capital redemption reserve” represents set aside reserves
in relation to previous redemption of own shares.
• “Foreign currency translation reserve” represents all
exchange differences on the translation of the results
and financial position of Group entities that have a
functional currency different from the presentation
currency.
• “Retained earnings” represents retained profits.
Employee benefits
The Group operates a stakeholder pension scheme and also
contributes to a number of personal pension schemes on behalf
of executive directors and some senior employees. The pension
costs charged against operating profit are the contributions
payable to the schemes in respect of the accounting period.
Share-based payment
The Group operates equity-settled share-based remuneration
plans for its employees. All goods and services received in
exchange for the grant of any share-based payment are
measured at their fair values. Where employees are rewarded
using share-based payments, the fair values of employees’
services are determined indirectly by reference to the fair value
of the instrument granted to the employee. This fair value is
appraised at the grant date and excludes the impact of non-
market vesting conditions (for example, profitability and sales
growth targets).
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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. Where the fair
value of the replaced share based incentive is less than that of
the replacement incentives then the incremental fair value is
recognised over the remaining vesting period in addition to the
original share based payment charge.
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
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.
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 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.
47
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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.
Open Minded was acquired during the year and has 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, Melbourne and iomart Cloud Services. Redstation and BTL were acquired during the
year and have been reported as part of the Hosting segment since acquisition.
Information regarding the operation of the reportable segments is included below. The CEO assesses the performance of the operating
segments based on revenue and a measure of Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) before any
allocation of Group overheads, charges for share based payments or costs associated with acquisitions. This segment EBITDA is used
to measure performance as the CEO believes that such information is the most relevant in evaluating the results of the segment.
The Group’s EBITDA for the year has been calculated after deducting Group overheads from the EBITDA of the two segments as
reported internally. Group overheads include the cost of the Board, all the costs of running the premises in Glasgow, the Group
marketing, human resource, finance and design functions and legal and professional fees.
The segment information is prepared using accounting policies consistent with those of the Group as a whole.
The assets and liabilities of the Group are not reviewed by the chief operating decision-maker on a segment basis. Therefore none of
the Group’s assets and liabilities are segmental assets and liabilities and are all unallocated for segmental disclosure purposes. For that
reason the Group has not disclosed details of segmental assets and liabilities.
All segments are continuing operations. No customer accounts for more than 10% of external revenues. Inter-segment transactions
are accounted for using an arms-length commercial basis.
Operating Segments
Revenue by Operating Segment
Easyspace
Hosting
External
£’000
10,959
44,659
55,618
2014
Internal
£’000
-
932
932
Total
£’000
10,959
45,591
56,550
External
£’000
11,081
31,978
43,059
2013
Internal
£’000
-
1,052
1,052
Total
£’000
11,081
33,030
44,111
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
48
2014
£’000
48,005
7,613
55,618
2013
£’000
39,190
3,869
43,059
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
3.SEGMENTAL ANALYSIS (CONTINUED)
Profit by Operating Segment
2014
2013
Depreciation,
EBITDA before amortisation,
acquisition
costs and
Depreciation,
EBITDA before amortisation,
acquisition
costs and
share based
acquisition
costs and share
based
payments
£’000
4,953
21,700
(3,042)
-
-
23,611
23,611
Operating
payments profit/(loss)
£’000
4,348
11,382
(3,042)
(374)
(1,257)
11,057
(3,337)
7,720
£’000
(605)
(10,318)
-
(374)
(1,257)
(12,554)
(12,554)
acquisition
costs and share
based
payments
£’000
4,973
14,289
(2,757)
-
-
16,505
16,505
share based 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)
Easyspace
Hosting
Group overheads
Acquisition costs
Share based payments
Profit before tax and interest
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
2014
£’000
2013
£’000
13,046
10,281
6,191
979
2,139
366
3,093
660
132
597
350
4,597
3,663
1,246
1,931
208
1,302
512
125
613
70
3,876
2014
£’000
2013
£’000
38
67
-
25
4
32
58
3
23
8
134
124
49
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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
2014
£’000
1,270
60
1,035
532
27
2013
£’000
1,178
55
9
490
24
During the year the Company made personal pension contributions to the personal pension schemes of 3 directors (2013: 3).
The aggregate amount of gains realised by directors on the exercise of share options during the year was £nil (2013: £453,594).
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 29 to 31.
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
2014
No.
136
53
79
25
293
2014
£’000
11,178
1,182
118
1,257
13,735
2013
No.
108
43
72
25
248
2013
£’000
9,568
970
136
258
10,932
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 29 to 31. 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
2014
£’000
374
-
374
2013
£’000
220
144
364
During the year costs of £374,000 (2013: £220,000) were incurred in respect of professional fees on various acquisitions. In addition
to these professional fees, one-off costs of £nil (2013: £144,000) directly related to the integration of acquisitions into the Group were
also incurred.
50
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
7. NET FINANCE COST
Finance income:
Bank interest receivable
Other interest income
Finance income for the year
Finance expenses:
Bank loan
Finance leases
Other interest charges
Mark to market interest adjustment
Accelerated write off of arrangement fees on early repayment of facilities
Finance expense for the year
Net finance cost
2014
£’000
56
12
68
(962)
(235)
(40)
(20)
(153)
(1,410)
(1,342)
Included in other interest income is £12,000 (2013: £12,000) in respect of leasehold deposits.
8. DIVIDENDS ON SHARES CLASSED AS EQUITY
2014
Pence per
share
2014
£’000
2013
Pence per
share
2013
£’000
75
12
87
(288)
(194)
(21)
(46)
-
(549)
(462)
2013
£’000
Paid during the year:
Final dividend
Equity dividends on ordinary shares
1.40p
1,483
0.90p
904
The directors have recommended a final dividend for the year ended 31 March 2014 of 1.75p per share (2013: 1.40p per share).
Subject to shareholder approval this proposed final dividend would be payable on 2 September 2014 to shareholders on the register
as of 15 August 2014.
51
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
9. TAXATION
Tax charge for the year
Adjustment relating to prior years
Total current taxation charge
Origination and reversal of temporary differences
Effect of changes in tax rates
Total deferred taxation credit/(charge)
2014
£’000
(3,002)
480
(2,522)
486
41
527
2013
£’000
(1,423)
(121)
(1,544)
(311)
106
(205)
Total taxation charge
(1,995)
(1,749)
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 @ 23% (2013 – 24%)
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
Movement in unprovided deferred tax related to fixed assets
Movement in deferred tax relating to prior periods
Increase in tax losses utilised and recognised
2014
£’000
9,715
2,234
263
-
(480)
(41)
(350)
142
103
124
-
2013
£’000
8,698
2,088
146
(18)
121
(106)
(186)
(299)
7
-
(4)
Taxation charge for the year
1,995
1,749
The weighted average applicable tax rate for the year ended 31 March 2014 was 23% (2013: 24%). The total current tax charge of
£3,002,000 (2013: £1,423,000) on operations represents 30.9% (2013: 16.3%) of the Group profit before tax of £9,715,000 (2013:
£8,698,000). A number of changes to the UK Corporation tax system were announced in the March 2013 Budget Statement with the
main rate of corporation tax reduced from 23% to 21% from 1 April 2014 and further reductions to the main rate have been proposed
to reduce the rate to 20% by 1 April 2015. These changes were substantively enacted at the balance sheet date and therefore are
included in these financial statements.
52
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
10. DEFERRED TAX
The Group recognised deferred tax assets and liabilities as follows:
2014
Deferred tax Deferred tax
Recognised Unrecognised
£’000
£’000
2013
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
831
600
414
(765)
(3,523)
(2,443)
-
-
-
-
-
-
1,167
681
282
(949)
(1,649)
(468)
-
-
-
-
-
-
At the year end, the Group has unused tax losses of £4.0m (2013: £5.1m) available for offset against future profits. A deferred tax asset
has been recognised in respect of £4.0m (2013: £5.1m) of such losses as these losses are expected to be used up by taxable profits
by the end of the period covered by future projections.
The movement in the deferred tax account during the year was:
Tax losses
carried
Share based
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 2013
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 2014
1,167
-
-
(222)
(114)
831
681
-
19
(41)
(59)
600
282
215
-
(64)
(19)
414
(949)
-
-
104
80
(765)
(1,649)
(2,736)
-
709
153
(3,523)
Total
£’000
(468)
(2,521)
19
486
41
(2,443)
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.
53
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
11. ACQUISITIONS
Redstation Limited
The Group acquired 100% of the issued share capital of Redstation Limited (“Redstation”) on 4 September 2013.
Redstation is a Portsmouth based provider of dedicated servers to over 3,000 customers. Redstation owns and operates its own
datacentres in Portsmouth, providing the Group with additional datacentre capacity. As well as the addition of datacentre facilities, this
acquisition fills a geographical gap in the markets currently addressed by the Group. 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 £126,000 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 period
ended 31 March 2014.
The following table summarises the consideration to acquire Redstation 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
Shares issued
Contingent consideration - payable
Deferred consideration – paid
Total consideration transferred
£’000
456
584
4,970
2,896
(1,275)
(283)
(83)
(3,257)
(292)
3,716
1,184
4,900
1,958
1,500
1,200
242
4,900
The recognised amounts of all the net assets acquired and liabilities assumed are final.
An amount of £242,000 was due to the vendors in respect of the additional debt assumed, cash acquired and normalised working
capital position of Redstation at completion and this amount was paid in December 2013.
The contingent consideration arrangement requires the Company to pay the former shareholders of Redstation an additional amount
contingent on the level of profitability delivered by Redstation in the period to 31 March 2014. The potential undiscounted amount of
the payment that the company could be required to make is between £nil and £1,500,000. The amount of contingent consideration
payable which was recognised as of the acquisition date was £1,200,000. The fair value of the contingent consideration arrangement
of £1,200,000 was estimated by applying the income approach to different scenarios based on historic performance and forecasts
which had a range of outcomes of £1,040,000 to £1,297,000. A weighted average based on management estimates of the probability
of the achievement of various levels of profitability was then calculated to give the fair value. The level of profitability of Redstation in
the period ended 31 March 2014 has been determined since the year end and the revised estimation of the amount payable in respect
of the contingent consideration arrangement is £1,239,000. The additional payment due of £39,000 is included in administrative
expenses in the Group’s consolidated statement of comprehensive income for the year ended 31 March 2014. Payment of the
contingent consideration is expected to be paid during June 2014.
The total consideration transferred to the vendors of £4,900,000 together with the debt repaid at completion of £3,162,000 and the
additional £39,000 of contingent consideration resulted in an estimated total cost of acquisition of £8,101,000 including an amount of
£242,000 in respect of the cash, additional debt and normalised working capital position of Redstation at completion.
54
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
11. ACQUISITIONS (CONTINUED)
Redstation Limited (continued)
The goodwill arising on the acquisition of Redstation 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 financial assets acquired includes trade receivables with a fair value of £154,000. The gross amount due under
contracts is £165,000 of which £11,000 is expected to be uncollectable.
The fair value included in respect of the acquired customer relationships intangible asset is £2,647,000.
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 10.8% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 8 years.
Redstation earned revenue of £4,202,000 and generated profits before tax of £838,000 in the period since acquisition.
Backup Technology Holdings Limited
The Group acquired 100% of the issued share capital of Backup Technology Holdings Limited (“BTL”) on 30 September 2013.
BTL is a Leeds based provider of cloud backup and disaster recovery services to over 200 customers. BTL provides the Group with
a proven product, based on Asigra technology, for the cloud backup and recovery market and significantly enhances the Group’s
existing capability in that area. 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 £248,000 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 period
ended 31 March 2014.
The following table summarises the consideration to acquire BTL 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
Shares issued
Deferred consideration – paid
Total consideration transferred
£’000
897
1,633
1,831
11,736
(868)
(515)
(705)
(2,022)
(2,229)
9,758
11,786
21,544
16,044
3,500
2,000
21,544
The recognised amounts of all the net assets acquired and liabilities assumed are final.
The acquisition of BTL included deferred consideration arrangements that required an additional consideration of £2,000,000 to be
paid by the Group to the vendors and this amount was paid on 31 January 2014.
55
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
11. ACQUISITIONS (CONTINUED)
Backup Technology Holdings Limited (continued)
The total consideration transferred to the vendors of £21,544,000 together with the debt repaid at completion of £2,569,000 resulted
in a total cost of acquisition of £24,113,000, including an amount of £1,113,000 in respect of the cash, additional debt and normalised
working capital position of BTL at completion.
The goodwill arising on the acquisition of BTL 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 financial assets acquired includes trade receivables with a fair value of £1,058,000. The gross amount due under
contracts is £1,383,000 of which £325,000 is expected to be uncollectable.
The fair value included in respect of the acquired customer relationships intangible asset is £10,688,000.
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 10.8% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 8 years.
BTL earned revenue of £2,860,000 and generated profits before tax of £1,242,000 in the period since acquisition.
Open Minded Solutions Limited
The Group acquired 100% of the issued share capital of Open Minded Solutions Limited (“Open Minded”) on 9 September 2013 for a
total consideration of £128,432.
The acquisition of Open Minded has had no material effect on the results or the financial position of the Group.
Internet Engineering Limited
The fair values of acquired assets and liabilities, including goodwill, previously disclosed as provisional for Internet Engineering Limited
have been finalised in the current period with no changes to the fair values disclosed in the Annual Report and Accounts 2013.
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 2013. The
amounts include the results of the acquired businesses, a charge for interest on the additional debt incurred to finance the acquisitions
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 2014
£’000
61,227
7,492
56
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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
- Amortisation of acquired intangible assets
- Acquisition costs
- Shared based payments
- Mark to market interest adjustment
- Accelerated write off of arrangement fees
- 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
2014
£’000
7,720
No
000
105,760
(1,016)
(141)
1,101
105,704
1,005
-
106,709
7.30 p
7.23 p
2014
£’000
7,720
3,093
374
1,257
20
153
(1,039)
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)
11,578
8,510
10.95 p
10.85 p
8.46 p
8.12 p
57
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
13. INTANGIBLE ASSETS
Development
Customer
costs relationships
£’000
£’000
Domain
Software
£’000
Beneficial names & IP
addresses
contracts
£’000
£’000
Cost
At 1 April 2012
Additions
Acquired on acquisition of subsidiary
Development cost capitalised
At 1 April 2013
Additions
Disposals
Acquired on acquisition of subsidiary
Development cost capitalised
At 31 March 2014
Goodwill
£’000
27,544
4,237
-
-
31,781
13,098
-
-
-
44,879
1,585
-
-
526
2,111
-
-
-
557
2,668
3,467
-
6,177
-
9,644
-
-
13,335
-
22,979
(1,181)
(1,297)
(2,478)
-
(3,086)
(5,564)
580
20
-
-
600
24
(15)
1,048
-
1,657
(432)
(102)
(534)
15
(156)
(675)
-
-
-
-
-
-
(988)
(408)
(1,396)
-
(473)
(1,869)
Accumulated amortisation:
At 1 April 2012
Charge for the year
At 1 April 2013
Disposal
Charge for the year
At 31 March 2014
Carrying amount:
At 31 March 2014
At 31 March 2013
-
-
86
-
86
-
-
-
-
86
-
(5)
(5)
-
(7)
(12)
74
81
Total
£’000
33,207
4,257
6,263
526
44,253
13,122
(15)
14,632
557
72,549
(2,630)
(1,814)
(4,444)
15
(3,753)
(8,182)
31
-
-
-
31
-
-
249
-
280
(29)
(2)
(31)
-
(31)
(62)
44,879
31,781
799
715
17,415
982
7,166
66
218
64,367
-
39,809
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 (2013:
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 Open Minded Solutions acquisition in the current year has been allocated to the
Easyspace CGU and the goodwill acquired in the Redstation and Backup Technology acquisitions have been allocated to the Hosting
CGU, as these are the CGUs expected to benefit from the respective business combinations.
The carrying value of goodwill by each CGU is as follows:
Cash Generating Units (CGU)
Easyspace
Hosting
2014
£’000
17,137
27,742
44,879
2013
£’000
17,009
14,772
31,781
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.
58
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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
9%
2.25%
2.25%
2
Hosting
10%
3.50%
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 reasonably possible scenario where the CGU’s recoverable amount would fall below its carrying
amount.
14. LEASE DEPOSITS
The lease deposits of £2,416,000 (2013: £2,416,000) are made up of a rental deposit of £784,000 (2013: £784,000) and a reinstatement
deposit of £1,632,000 (2013: £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.
59
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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
%
Scotland Dormant
Scotland Managed hosting services
Scotland Managed hosting services
Scotland Non-trading
Scotland Dormant
Scotland Dormant
Scotland Dormant
USA Managed hosting services
England Webservices
England Webservices
England Non-trading
England Non-trading
England Webservices
England Webservices
England Webservices
England Dormant
England Webservices
England Webservices
England Non-trading
England Non-trading
England Non-trading
England Non-trading
England Managed hosting services
England Non-trading
England Dormant
England Dormant
England Non-trading
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
-
-
-
100
100
100
100
100
100
-
-
-
-
-
-
-
-
-
-
-
-
-
-
100
-
-
-
100
100
100
-
-
-
-
-
-
100
100
100
iomart Limited
iomart Hosting Limited
iomart Cloud Services Limited
EQSN Limited
iomart Virtual Servers Hosting Limited
Netintelligence Limited
iomart Development Limited
iomart Cloud Inc
Easyspace Limited
Open Minded Solutions Limited
Backup Technology Holdings Limited
Backup Technology Limited
Switch Media Limited
Internet Engineering Limited
Redstation Limited
My Documents 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
60
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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 2012
Additions in the year
Acquisition of subsidiaries
Disposals in the year
At 31 March 2013
Additions in the year
Acquisition of subsidiaries
Disposals in the year
At 31 March 2014
Accumulated depreciation:
At 1 April 2012
Charge for the year
Disposals in the year
At 31 March 2013
Charge for the year
Disposals in the year
At 31 March 2014
Carrying amount:
At 31 March 2014
837
-
-
-
837
-
1,225
-
2,062
(59)
(20)
-
(79)
(37)
-
(116)
3,624
1,505
51
-
5,180
1,195
357
-
6,732
(821)
(276)
-
(1,097)
(321)
-
(1,418)
9,732
1,134
349
-
11,215
5,305
325
-
16,845
(2,831)
(844)
-
(3,675)
(1,109)
-
(4,784)
11,447
4,991
700
-
17,138
6,290
4,831
(192)
28,067
(6,594)
(3,624)
-
(10,218)
(5,535)
170
(15,583)
1,946
5,314
12,061
12,484
At 31 March 2013
758
4,083
7,540
6,920
826
84
341
-
1,251
249
59
-
1,559
(554)
(125)
-
(679)
(164)
-
(843)
716
572
Total
£’000
26,504
7,726
1,441
(7)
35,664
13,039
6,802
(192)
55,313
(10,878)
(4,909)
7
(15,780)
(7,170)
170
(22,780)
38
12
-
(7)
43
-
5
-
48
(19)
(20)
7
(32)
(4)
-
(36)
12
32,533
11
19,884
The net book value of computer equipment held under finance lease at 31 March 2014 was £1,839,000 (2013: £1,554,000) and the
net book value of datacentre equipment held under finance lease at 31 March 2014 was £690,000 (2013: £778,000). Of the total
additions in the year of £13,039,000 (2013: £7,726,000), £894,000 (2013: £1,621,000) were funded by finance leases, £1,577,000 (2013:
£1,512,000) was included in trade creditors as unpaid invoices at the year end resulting in a net £65,000 (2013: £1,041,000) movement
in trade creditors and £429,000 (2013: £971,000) related to non-cash reinstatement provisions. Consequently, the consolidated
statement of cash flows discloses a figure of £11,651,000 (2013: £4,093,000) 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
2014
£’000
3,939
(686)
3,253
442
4,001
7,696
2013
£’000
2,546
(376)
2,170
421
3,170
5,761
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 segment 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.
61
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
17. TRADE AND OTHER RECEIVABLES (CONTINUED)
To consider the total exposure to credit risks, the Group uses figures net of VAT. At 31 March 2014, £2,116,000 (2013: £1,720,000) of
net trade receivables were fully performing. Net trade receivables of £1,137,000 (2013: £450,000) 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
2014
£’000
1,037
89
11
1,137
The movement in the allowance for impairment in respect of trade receivables during the year was as follows:
Balance at start of the year
Increase/(decrease) 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
2014
£’000
376
192
118
686
2014
£’000
13,025
13,025
2013
£’000
403
45
2
450
2013
£’000
371
(5)
10
376
2013
£’000
11,392
11,392
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 0.50% (2013: 0.85%).
19. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Accruals
Deferred income
Other creditors
Trade and other payables
2014
£’000
(3,733)
(1,360)
(4,334)
(5,677)
(54)
(15,158)
2013
£’000
(3,580)
(995)
(3,539)
(4,372)
(5)
(12,491)
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.
62
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
20. CONTINGENT CONSIDERATION
Contingent consideration due on acquisitions:
- Skymarket Limited
- Internet Engineering Limited
- Redstation 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
2014
£’000
(32)
-
(1,239)
(1,271)
2014
£’000
(1,038)
(18,090)
(19,128)
(1,780)
(11,936)
(13,716)
2013
£’000
(232)
(126)
-
(358)
2013
£’000
(1,252)
(4,872)
(6,124)
(1,720)
(3,976)
(5,696)
(32,844)
(11,820)
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
1,038
1,277
503
2,818
2014
Interest
£’000
183
348
110
641
Total
£’000
1,221
1,625
613
3,459
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
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 8.4% (2013: 8.2%). Lease payments are made on a monthly and quarterly
basis. The future lease obligation of £3,459,000 (2013: £3,722,000) has a present value of £2,710,000 (2013: £2,913,000).
63
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
21. BORROWINGS (CONTINUED)
On 4 September 2013, the Group drew down £5m from its existing bank facilities to help fund the purchase of Redstation.
On 27 September 2013 the Group agreed new bank facilities with Lloyds Banking Group totalling £35m with a multi option revolving
credit facility of £20m and a term loan facility of £15m. This replaced a multi option revolving credit facility of £16m and a term loan of
£4m which had previously been in place.
On 30 September 2013 the new term loan was drawn down in full and £17.5m was drawn on the new multi option revolving credit
facility resulting in a total drawn down of £32.5m. From this the amount outstanding on the previous multi option revolving credit facility
of £10m and the amount outstanding on the previous term loan of £4m were repaid. The remaining £18.5m was used to finance the
purchase of BTL.
In March 2014, a repayment of £2.5m was made against the new multi option revolving credit facility.
The £20m multi option revolving credit facility may be used by the Group to finance acquisitions and for the issue of guarantees, bonds
or indemnities. The facility is available until October 2017 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 multi option credit facility margin can fluctuate between 2.50% and 3.50% per
annum depending on the relationship of net borrowings to reported profits. A one-off arrangement fee of £337,500 was paid when the
facility was first drawn down and a non-utilisation fee of 45% of the multi option revolving credit facility margin is due on any undrawn
portion of the facility. The effective interest rate for multi option revolving credit loans in the current year was 4.41% (2013: 6.69%).
The £15m term loan was drawn down in September 2013 for the purpose of acquiring BTL and is repayable in instalments until October
2017 with two instalments totalling £3m due to be repaid within one year. 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 2.50% and
3.50% per annum depending on the relationship of net borrowings to reported profits. There was no arrangement fee associated
with the term loan when it was drawn down. The effective interest rate for the term loan in the current year was 4.40% (2013: 2.34%).
The future loan obligations of £32,865,000 (2013: £9,657,000) equate to a present value of £23,630,000 (2013: £7,720,000). The capital
element of the bank loans is £30,026,000 (2013: £8,848,000) and this differs from the net amount drawn down of £30,000,000 (2013:
£9,000,000) 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
18,090
11,936
30,026
2014
Interest
£’000
1,104
1,735
2,839
Total
£’000
19,194
13,671
32,865
Capital
£’000
4,872
3,976
8,848
2013
Interest
£’000
344
465
809
Total
£’000
5,216
4,441
9,657
22. PROVISIONS
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
64
2014
£’000
(1,097)
-
(429)
(40)
(1,566)
2013
£’000
-
(105)
(971)
(21)
(1,097)
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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
2014
2013
Land and
buildings
£’000
2,012
6,884
3,233
12,129
Other
£’000
288
890
1,281
2,459
Land and
buildings
£’000
1,783
6,610
5,144
13,537
Other
£’000
210
894
1,504
2,608
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 2014, the total future minimum sub-
lease payments expected to be received under non-cancellable sub-leases were £664,000 (2013: £781,000).
24. SHARE CAPITAL
Authorised
At 31 March 2012, 2013, and 2014
Called up, allotted and fully paid
At 31 March 2012
Exercise of options
At 31 March 2013
Exercise of options
Issue of new shares for business acquisition
At 31 March 2014
Ordinary shares of 1p each
Number of shares
200,000,000
104,817,404
942,472
105,759,876
321,809
1,721,321
107,803,006
£’000
2,000
1,048
10
1,058
3
17
1,078
During the year the Company issued 321,809 (2013: 942,472) ordinary shares of 1p each in respect of the exercise of share options
by employees for which a net total of £134,583 (2013: £583,587) was received.
On 4 September 2013, 515,464 ordinary shares of 1p each were issued for £2.91 each in order to acquire Redstation and on 30
September 2013, 1,205,857 ordinary shares of 1p each were issued for £2.90 each in order to acquire BTL, resulting in a merger
reserve of £4,982,787.
At 31 March 2014 the Company held 983,203 shares (2013: 1,023,453) as own shares in treasury which were accounted for in the Own
Shares Treasury reserve and had a nominal value of £9,832 (2013: £10,235) and a market value of £2,426,053 (2013: £2,369,294). This
represents 0.9% (2013: 1.0%) of the issued share capital as at 31 March 2014 excluding own shares.
At 31 March 2014 the Company held 140,773 shares (2013: 140,773) 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 (2013: £1,408) and a market value
of £347,357 (2013: £325,889). This represents 0.1% (2013: 0.1%) of the issued share capital as at 31 March 2014 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 2014 are fully paid.
65
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
25. OWN SHARES RESERVES
Own shares
EBT
£’000
Own shares
Treasury
£’000
Own shares
Total
£’000
Opening balance at 1 April 2013
Issue of own shares from Treasury for option redemption
Closing balance at 31 March 2014
(70)
-
(70)
(506)
20
(486)
(576)
20
(556)
During the year 40,250 (2013: nil) own shares held in treasury at the carrying value of 46.5p each were issued following the exercise
of share options by employees for which a net total of £20,869 (2013: £nil) was received. As a consequence, at 31 March 2014 the
Company held 983,203 shares (2013: 1,023,453) in treasury with a carrying value of £486,685 (2013: £506,609) which were accounted
for in Own Shares treasury reserve; and 140,773 shares (2013: 140,773) in the EBT with a carrying value of £69,982 (2013: £69,982)
which were accounted for in the Own Shares EBT reserve.
26. SHARE BASED PAYMENTS
The Group operated the following share based payment employee share option schemes during the year; Enterprise Management
Incentive scheme, a SAYE sharesave scheme 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
Sharesave scheme
3 years from
grant
6 months after
vesting period
No
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 362,059 ordinary shares (2013: 942,472) were exercised and the average market price at the exercise
dates was 269.3p (2013: 187.5p). Options over 120,000 ordinary shares (2013: 1,570,000) were granted under the unapproved share
option scheme with an average exercise price of 1.0p (2013: 70.3p) and options over 274,435 ordinary shares (2013: nil) were granted
under the sharesave scheme with an exercise price of 191.4p.
As disclosed in note 5, a share based payment charge of £1,257,000 (2013: £258,000) 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
01-Oct-13
31-Mar-15
01-Oct-13
31-Mar-16
01-Oct-13
31-Mar-17
08-Jan-14
08-Jan-17
276.0p
57%
0.5%
1
10
3.75
1.69%
50%
269.9p
1p
276.0p
57%
0.5%
1
10
3.75
1.69%
50%
269.9p
1p
276.0p
57%
0.5%
1
10
3.75
1.69%
50%
269.9p
1p
260.0p
57%
0.5%
100
3.5
3.25
1.82%
100%
127.5p
191.4p
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.
66
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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:
Outstanding at start of year
Granted
Forfeited
Expired
Exercised
Outstanding at end of year
Exercisable at end of year
2014
2013
Weighted
average
exercise price
per share (p)
Number of
share options
Weighted
average
Number of
exercise price
per share (p) share options
64.60
133.47
146.10
-
42.94
76.16
51.27
2,692,679
394,435
(50,000)
-
(362,059)
2,675,055
1,083,954
59.03
70.32
-
-
61.92
64.60
52.67
2,065,151
1,570,000
-
-
(942,472)
2,692,679
996,013
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:
Outstanding at start of year
Exercised
Exercised (swap arrangement)
Outstanding at end of year
Exercisable at end of year
2014
2013
Weighted
average
exercise price
per share (p)
Number of
share options
Weighted
average
exercise price
Number of
per share (p) share options
-
-
-
-
-
-
-
-
-
-
55.45
-
56.74
-
-
4,750,079
-
(4,750,079)
-
-
Summary of share options that were outstanding at the year end:
Share options – outstanding
Share options – exercisable
Weighted
average
Range of
exercise
exercise
price per Outstanding price per
share (p)
share (p)
shares
Weighted
average
remaining
contractual
life (years)
Weighted Weighted
average
average
exercise
remaining
price per contractual
life (years)
share (p)
Outstanding
shares
Enterprise management
incentive scheme
Unapproved schemes
Sharesave scheme
As at end of year
26.5 – 87.5
1.0 – 146.1
191.4
446,677
1,953,943
274,435
2,675,055
66.06
62.28
191.4
76.16
5.0
8.2
3.3
7.1
446,677
637,277
-
1,083,954
66.06
40.90
-
51.27
5.0
7.0
-
6.2
67
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
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
Crawford Beveridge
Total dividends paid to directors
2014
£’000
286
1
33
18
2
-
340
2013
£’000
174
1
9
1
1
-
186
The only other related party transactions in the year were the salary payments to key management as disclosed in note 5 and the
Report of the Board to the Members on Directors’ Remuneration on pages 29 to 31.
28. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
There were no contingent assets or liabilities as at 31 March 2014 (2013: nil).
(b) Commitments
Capital expenditure on property, plant and equipment committed by the Group at 31 March 2014 was £482,000 (2013: £5,189,000)
which relates mainly to network equipment.
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:
2014
Non-current:
Lease deposit
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Total for category
2013
Non-current:
Lease deposit
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Total for category
68
Loans and receivables
£’000
2,416
3,253
13,025
442
19,136
2,416
2,170
11,392
421
16,399
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
29. RISK MANAGEMENT (CONTINUED)
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
Financial
liabilities
through profit measured at
or loss amortised cost
£’000
£’000
Other
(non-IAS 39)
£’000
Total
£’000
2014
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
Total for category
2013
Non-current:
Finance leasing capital obligations
Bank loan
Current:
Trade payables
Accruals
Bank loan
Contingent consideration due on acquisition
Finance leasing capital obligations
Interest rate swap contract
Forward foreign exchange contracts
Total for category
-
-
-
(11,936)
(1,780)
-
(1,780)
(11,936)
-
-
-
(1,271)
-
(66)
(1,337)
(3,733)
(4,268)
(18,090)
-
-
-
(38,027)
-
-
-
-
(1,038)
-
(2,818)
(3,733)
(4,268)
(18,090)
(1,271)
(1,038)
(66)
(42,182)
-
-
-
(3,976)
(1,720)
-
(1,720)
(3,976)
-
-
-
(358)
-
(46)
(7)
(411)
(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)
69
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
29. RISK MANAGEMENT (CONTINUED)
The Group’s financial liabilities per the fair value hierarchy classifications under IFRS 13 ‘Financial Instruments: Disclosures’ are
described below:
Category of
financial liability
Fair value
at 31 March
2014
£’000
Level
in
hierarchy
Description
of valuation
technique
Contingent
consideration due on
acquisition
(32)
3
Contingent
consideration due on
acquisition
(1,239)
3
Interest rate
swap contracts
(66)
2
Forward foreign
exchange contracts
-
2
Inputs used
for valuation
model
Management estimate
on probability and time
scale of vendor
complying with
obligations.
Information from the
draft financial
statements.
Based on probability
that vendor will comply
with obligations under
sale and purchase
agreement.
Using formula specified in
the purchase agreement
together with the relevant
information in the financial
statements.
Interest rate swap contracts
are not traded in active
markets. Fair valued using
observable forward exchange
rates and interest rates
corresponding to the maturity
of the contracts.
Observable forward exchange
rates and interest rates
corresponding to the maturity
of the contracts. Effects of
non-observable inputs are not
significant for interest
rate swaps.
Forward foreign exchange
contracts are not traded in
active markets. Fair valued
using observable forward
exchange rates and interest
rates corresponding to the
maturity of the contracts.
Observable forward exchange
rates and interest rates
corresponding to the maturity
of the contracts. Effects of
non-observable inputs are not
significant for forward
foreign exchange contracts.
Total gains
and (losses)
recognised in
profit or loss
£’000
-
(39)
(20)
7
(52)
Total fair value
(1,337)
Total net losses
There have been no changes to valuation techniques or any amounts recognised through ‘Other Comprehensive Income’. The £20,000
loss recognised in profit or loss on interest rate swap contracts is included in finance costs and the £7,000 gain recognised in profit or
loss on forward foreign exchange contracts is included in administrative expenses in the Consolidated Statement of Comprehensive
Income. As described in Note 11, the contingent consideration in relation to the Redstation acquisition has changed from £1,200,000
when it was originally estimated to £1,239,000 when the draft financial statements became available. The effects of changing non-
observable inputs on the contingent consideration is described in note 11.
70
iomart Group plc Annual report and accounts 2014
Notes to the financial statements. Year ended 31March 2014
29. RISK MANAGEMENT (CONTINUED)
The reconciliation of the carrying amounts of financial instruments classified within Level 3 is as follows:
Contingent consideration
Balance at start of the year
Acquired through business combination
Settled in cash during the year
Loss recognised in profit of loss under:
- Administrative expenses
Balance at end of year
Total amount included in profit or loss on Level 3 instruments under administrative expenses
2014
£’000
(358)
(1,200)
326
(39)
(1,271)
(39)
2013
£’000
(246)
(358)
246
-
(358)
-
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 period of the term loan April 2015 to maturity at 2.03%. The
Group has also entered interest rate swap arrangements in respect of £4m which has been drawn under the multi option credit facility
which has been fixed at 1.02% until June 2015 and £5m drawn under the multi option credit facility which has been fixed at 1.26%
from August 2014 for 12 months. The remaining £6m drawn under the multi option credit facility is not covered by interest rate swap
arrangements. The fair value of the interest rate swap contracts is estimated to be a loss of £20,000 (2013: £46,000) which has been
recognised in profit or loss for the year.
Currency risk
During the year the Group made payments totalling US$4.1m (2013: US$2.1m) and EUR€0.1m (2013: EUR€0.2m) to acquire domain
names for its Easyspace division and licences for its Hosting division. During the year, the Group entered into forward exchange
contracts to hedge its exposure to the US Dollar arising on these purchases but at the year end the Group had no outstanding forward
contracts in place (2013: $600,000 for a total of £402,000 at an average exchange rate of US$:GBP£ of 1.49:1 over the period to March
2014). Consequently, the fair value of currency contracts at the year end was £nil (2013: loss £7,000). 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
£10m. 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
£3,363,000 (2013: £2,170,000) which are stated net of applicable provisions and which represent the total amount exposed to credit
risk. The lease deposits of £2,416,000 (2013: £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 £13,025,000 (2013: £11,392,000) 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.
71
iomart Group plc Annual report and accounts 2014
Parent company financial statements. Year ended 31March 2014
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 2014 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 Financial Reporting Council'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 2014;
• 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 2014.
Andrew Howie
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
Glasgow
27 May 2014
72
iomart Group plc Annual report and accounts 2014 Parent company financial statements. Year ended 31March 2014
Note
2014
£’000
72,797
72,797
25,036
11,850
36,886
2013
£’000
45,639
45,639
15,649
10,202
25,851
3
4
6
7
8
9
9
9
9
9
BALANCE SHEET
FIXED ASSETS
Investments
CURRENT ASSETS
Debtors
Cash at bank and in hand
CREDITORS: amounts falling due within one year
NET CURRENT LIABILITIES
TOTAL ASSETS LESS CURRENT LIABILITIES
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
Merger reserve
Profit and loss account
TOTAL EQUITY SHAREHOLDERS’ FUNDS
These financial statements were approved by the board of directors on 27 May 2014.
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.
(49,968)
(27,175)
(13,082)
59,715
(12,000)
47,715
1,078
(556)
1,200
21,067
4,983
19,943
47,715
(1,324)
44,315
(4,000)
40,315
1,058
(576)
1,200
20,936
-
17,697
40,315
73
iomart Group plc Annual report and accounts 2014
“Melbourne have been busy working behind the scenes to help TechHub Manchester
grow over the past six months as part of working towards my vision of Manchester one
day becoming a top 5 European start-up destination. Now they’re front of house and
giving the tech start-up stars of Manchester a great chance to learn from their proven
expertise and their own business success.”
Doug Ward, Co-Founder & CEO of TechHub Manchester
iomart Group plc Annual report and accounts 2014 Parent company financial statements. Year ended 31March 2014
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. Where a trade is hived across to a fellow subsidiary undertaking, the cost of the investment in the original
subsidiary, which then becomes a non-trading subsidiary, is added to the cost of the investment in the entity to which the trade has
been hived. In order to accurately assess any potential impairment of investments, 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”.
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.
75
iomart Group plc Annual report and accounts 2014 Parent company financial statements. Year ended 31March 2014
2. PROFIT OF PARENT COMPANY
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the parent company is not presented as part
of these financial statements. The parent company’s profit for the financial period after taxation was £2,452,000 (2013: £358,000).
3. INVESTMENTS HELD AS FIXED ASSETS
Cost
At 1 April 2013
Additions
Share based payment (note 10)
Cost at 31 March 2014
Impairment
At 1 April 2013
Charge for the year
Impairment at 31 March 2014
Net book value of Investments at 31 March 2014
Net book value of Investments at 31 March 2013
All of the above investments are unlisted.
The following subsidiaries are included in the Company financial statements:
Shares in subsidiary undertakings
£’000
47,394
26,986
193
74,573
(1,755)
(21)
(1,776)
72,797
45,639
Country of
registration
and operation
Activity
Ordinary share capital
Owned by the
company
%
Owned by
subsidiary
undertakings
%
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
Scotland
USA
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
England
Dormant
Managed hosting services
Managed hosting services
Non-trading
Dormant
Dormant
Dormant
Managed hosting services
Webservices
Webservices
Non-trading
Non-trading
Webservices
Webservices
Webservices
Dormant
Webservices
Webservices
Non-trading
Non-trading
Non-trading
Non-trading
Managed hosting services
Non-trading
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
100
100
-
-
-
-
-
-
100
100
100
iomart Limited
iomart Hosting Limited
iomart Cloud Services Limited
EQSN Limited
iomart Virtual Servers Hosting Limited
Netintelligence Limited
iomart Development Limited
iomart Cloud Inc
Easyspace Limited
Open Minded Solutions Limited
Backup Technology Holdings Limited
Backup Technology Limited
Switch Media Limited
Internet Engineering Limited
Redstation Limited
My Documents 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
76
iomart Group plc Annual report and accounts 2014
Parent company financial statements. Year ended 31March 2014
4. DEBTORS
Prepayments and accrued income
Other debtors
Other taxation and social security
Deferred taxation (note 5)
Amounts owed by subsidiary undertakings
2014
£’000
495
-
344
600
23,597
2013
£’000
347
6
314
682
14,300
25,036
15,649
5. DEFERRED TAXATION
The Company had recognised deferred tax assets and potential unrecognised deferred tax assets as follows:
2014
2013
Recognised Unrecognised
£’000
£’000
Recognised Unrecognised
£’000
£’000
Share based remuneration
600
-
682
-
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
2014
£’000
682
(101)
19
600
2013
£’000
381
44
257
682
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
2014
£’000
137
55
1,108
1,271
18,000
29,397
49,968
2014
£’000
12,000
12,000
2013
£’000
172
49
654
358
5,000
20,942
27,175
2013
£’000
4,000
4,000
77
iomart Group plc Annual report and accounts 2014
Parent company financial statements. Year ended 31March 2014
8. SHARE CAPITAL
Authorised
At 31 March 2012, 2013, and 2014
Called up, allotted and fully paid
At 31 March 2012
Exercise of options
At 31 March 2013
Exercise of options
Issue of new shares for business acquisition
At 31 March 2014
Ordinary shares of 1p each
Number of shares
200,000,000
104,817,404
942,472
105,759,876
321,809
1,721,321
107,803,006
£’000
2,000
1,048
10
1,058
3
17
1,078
During the year the Company issued 321,809 (2013: 942,472) ordinary shares of 1p each in respect of the exercise of share options
by employees for which a net total of £134,583 (2013: £583,587) was received.
On 4 September 2013, 515,464 ordinary shares of 1p each were issued for £2.91 each in order to acquire Redstation and on 30
September 2013, 1,205,857 ordinary shares of 1p each were issued for £2.90 each in order to acquire BTL, resulting in a merger
reserve of £4,982,787.
At 31 March 2014 the Company held 983,203 shares (2013: 1,023,453) as own shares in treasury which were accounted for in the Own
Shares Treasury reserve and had a nominal value of £9,832 (2013: £10,235) and a market value of £2,426,053 (2013: £2,369,294). This
represents 0.9% (2013: 1.0%) of the issued share capital as at 31 March 2014 excluding own shares.
At 31 March 2014 the Company held 140,773 shares (2013: 140,773) 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 (2013: £1,408) and a market value
of £347,357 (2013: £325,889). This represents 0.1% (2013: 0.1%) of the issued share capital as at 31 March 2014 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 2014 are fully paid.
9. STATEMENT OF MOVEMENT IN RESERVES
Profit for the financial period
Dividends
Share based payments
Deferred tax on share based remuneration
Issue of own shares from Treasury
Issue of new shares for business acquisition
Issue of new shares for option redemption
Own
shares
EBT
£’000
-
-
-
-
-
-
-
-
Own
Capital
shares redemption
reserve
£’000
Treasury
£’000
Share
premium
account
£’000
Merger
reserve
£’000
Profit
and loss
account
£’000
-
-
-
-
20
-
-
20
-
-
-
-
-
-
-
-
-
-
-
-
-
-
131
131
-
-
-
-
-
4,983
-
4,983
2,452
(1,483)
1,257
19
1
-
-
2,246
Opening balance
Closing balance
(70)
(506)
1,200
20,936
-
17,697
(70)
(486)
1,200
21,067
4,983
19,943
During the year 40,250 (2013: nil) own shares held in treasury at the carrying value of 46.5p each were issued following the exercise
of share options by employees for which a net total of £20,869 (2013: £nil) was received. As a consequence, at 31 March 2014 the
Company held 983,203 shares (2013: 1,023,453) in treasury with a carrying value of £486,685 (2013: £506,609) which were accounted
for in Own Shares treasury reserve; and 140,773 shares (2013: 140,773) in the EBT with a carrying value of £69,982 (2013: £69,982)
which were accounted for in the Own Shares EBT reserve.
78
iomart Group plc Annual report and accounts 2014
Parent company financial statements. Year ended 31March 2014
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 £1,257,000 (2013: £258,000) by;
1) taking the charge in relation to employees of the parent company through the parent company statement of comprehensive
income £1,064,000 (2013: £53,000),
2) recording an increase to its investment in subsidiaries for the amounts attributable to employees of subsidiaries and
recording a corresponding entry to the profit and loss account reserve £193,000 (2013: £205,000).
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 directors 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 2014 (2013: nil).
(b) Commitments
There are no commitments present as at 31 March 2014 (2013: nil).
13. ULITIMATE CONTROLLING PARTY
The Directors’ have assessed that there is no ultimate controlling party.
79
iomart Group plc Annual report and accounts 2014
Annual General Meeting
Notice of the 2014 Annual General Meeting
NOTICE IS HEREBY GIVEN that the 2014 annual general meeting
of the Company will be held at Lister Pavilion, Kelvin Campus, West
of Scotland Science Park, Glasgow G20 0SP on 27 August 2014 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 2014.
2 To approve the report of the board to the members on
directors' remuneration for the year ended 31 March 2014.
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 £356,066.01 provided that this authority shall expire, unless
sooner revoked or varied by the Company in general meeting,
at the conclusion of the Company's annual general meeting to
be held in 2015 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.
3 To reappoint Sarah Haran (who retires by rotation and,
being eligible, offers herself for re-election) as a director of the
Company.
4 To reappoint Crawford Beveridge (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 2014
of 1.75p per share payable on 2 September 2014 to shareholders
registered at the close of business on 15 August 2014.
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 (“Directors”) are
generally and unconditionally authorised to allot shares in the
Company or grant rights to subscribe for or convert any security
into shares in the Company (the "Rights") provided that:
(a) the maximum aggregate nominal amount of shares to be
allotted in pursuance of such authority is an aggregate nominal
amount equal to £356,066.01; and
(b) this authority shall expire, unless sooner revoked or varied
by the Company in general meeting, at the conclusion of the
Company's annual general meeting to be held in 2015 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.
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
9 That, subject to the passing of resolutions 7 and 8, and in
accordance with section 570 of the Act, and in place of all existing
powers, the Directors are generally empowered to allot equity
securities of the Company (as defined in section 560 of the Act)
for cash pursuant to the authority conferred by resolutions 7
and 8 as if section 561 of the Act did not apply to such allotment
provided that this power shall be limited to:
(a) the allotment of equity securities in connection with an issue
in favour of holders of ordinary shares of 1 penny each in the
capital of the Company (the "Ordinary Shares") where the equity
securities are offered to such holders in proportion (as nearly
as may be) to the respective number of Ordinary Shares held,
or deemed to be held, by that shareholder but subject to such
exclusions or other arrangements as the Directors may deem
necessary or expedient in relation to fractional entitlements or
legal or practical problems under the laws of, or the requirements
of any recognised regulatory body or any stock exchange in, any
territory;
(b) the allotment of equity securities pursuant to any authority
conferred upon the Directors in accordance with and pursuant to
article 41 of the articles of association of the Company; and
(c) the allotment (otherwise than pursuant to (a) and (b) above)
of equity securities up to an aggregate nominal amount of
£106,819.80, 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 2015, save that the Company may at any time before
such expiry make an offer or agreement which would or might
require equity securities to be allotted after such expiry and the
Directors may allot equity securities in pursuance of such offer
or agreement notwithstanding that the power conferred by this
resolution has expired.
10 That the Company be and
is hereby generally and
unconditionally authorised for the purposes of section 701 of the
Act to make one or more market purchases (within the meaning
of section 693(4) of the Act) on a recognised investment exchange
(as defined in section 693(5) of the Act) of Ordinary Shares
provided that:
80
iomart Group plc Annual report and accounts 2014 Notice of the 2014 Annual General Meeting
(a) the maximum number of Ordinary Shares hereby authorised to
be purchased is 10,681,980, representing 10% of the Company's
issued ordinary share capital (excluding for these purposes the
983,203 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.
NOTES:
Appointment of Proxy
1 As a member of the Company you are entitled to appoint a
proxy to exercise all or any of your rights to attend, speak and
vote at a meeting of the Company. You should have received a
proxy form with this notice of meeting. You can only appoint a
proxy using the procedures set out in the notes to the proxy form.
A proxy need not be a member of the Company.
2 To be effective, the proxy form, and any power of attorney or
other authority under which it is executed (or a duly certified
copy of any such power or authority), must be deposited at the
office of the Company’s registrars, Capita Asset Services, 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 22 August 2014)
and if not so deposited shall be invalid.
Entitlement to attend and vote
3 Pursuant to Regulation 41 of the Uncertificated Securities
Regulations 2001, only those members entered in the Company's
register of members at:
• 6.00pm on 22 August 2014; or
By order of the board
• if this meeting is adjourned, at 6.00pm on the day two days prior
to the adjourned meeting,
Bruce Hall
Lister Pavilion, Kelvin Campus,
Company Secretary
West of Scotland Science Park,
25 June 2014
Glasgow G20 0SP
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
81
iomart Group plc Annual report and accounts 2014
Notice of the 2014 Annual General Meeting
EXPLANATORY NOTES TO THE NOTICE OF ANNUAL GENERAL
MEETING IOMART GROUP PLC
Ordinary Resolutions
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.
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 5 – To declare a dividend 1.75p per Ordinary
Share
Resolution 1 – To receive and adopt the financial statements
for the year ended 31 March 2014 and the directors' and
auditors' reports thereon
For each financial year the directors of the Company must present
the audited financial statements, the directors' report and the
auditors' report on the financial statements to the shareholders
at an annual general meeting.
Resolution 2 – To approve the directors' remuneration
report
Shareholders are asked to approve the directors' remuneration
report which may be found in the annual report on pages 29
to 31. This resolution is an advisory one and no entitlement to
remuneration is conditional on the resolution being passed.
Resolution 3 and 4 – Re-election of directors
Under article 24 of the Company's articles of association one third
of the directors are required to retire by rotation at each annual
general meeting. Pursuant to those articles, Mrs Sarah Haran
and Mr Crawford Beveridge are required to retire by rotation at
this annual general meeting and, being eligible, offer themselves
for reappointment. The Board is satisfied that the performance
of Mrs Sarah Haran and Mr Crawford Beveridge continues to be
effective and demonstrates commitment to their roles with the
Company including commitment of time for Board meetings and
other duties required of them. Accordingly, resolutions 3 and 4
propose the reappointment of Mrs Sarah Haran and Mr Crawford
Beveridge.
Brief biographical details of Mrs Sarah Haran and Mr Crawford
Beveridge are given below.
Sarah Haran 48, appointed 2000; Sarah has spent her career
large
implementing and managing operations centres for
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.
Crawford Beveridge, 68, appointed 2011; has over 40 years
experience in the technology industry, including 16 years at Sun
Microsystems ("Sun"), most recently as Executive Vice President
and Chairman, EMEA, APAC and the Americas until retiring in
January 2010. His business background also includes roles with
Hewlett-Packard, Digital Equipment Corp., Analog Devices, non-
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 1.75p per
Ordinary Share, to be payable to shareholders registered at close
of business on 15 August 2014.
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 £356,066.01, being
approximately one-third of the issued ordinary share capital of
the Company (excluding for these purposes the 983,203 shares
held by the Company in treasury) as at the date of the notice of
this meeting.
In line with 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 £356,066.01
(representing 35,606,601 Ordinary Shares).
This amount
represents approximately a further one third of the issued
ordinary share capital of the Company (excluding for these
purposes the 983,203 shares held by the Company in treasury)
as at the date of the notice of this meeting.
There is no present intention to exercise either of the authorities
sought under these resolutions, which will expire at the conclusion
of the Company's annual general meeting to be held in 2015.
82
iomart Group plc Annual report and accounts 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 983,203 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
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.
Notice of the 2014 Annual General Meeting
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 2015.
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
983,203 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.
83
iomart Group plc Annual report and accounts 2014
Officers and Professional Advisers
84
iomart Group plc Annual report and accounts 2014 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
Shepherd & Wedderburn, 5th Floor, 1 Exchange Crescent, Conference Square, Edinburgh EH3 8UL
Pinsent Masons LLP, 141 Bothwell Street, Glasgow G2 7EQ
Independent auditors
Grant Thornton UK LLP, 95 Bothwell Street, Glasgow G2 7JZ
Registrars
Capita Asset Services, 34 Beckenham Road, Beckenham, Kent BR3 4TU
Company registration number
SC204560
85
iomart Group plc Annual report and accounts 2014 Group Contact Information
86
iomart Group plc Annual report and accounts 2014 iomart Group
0141 931 6400 • info@iomart.com • www.iomart.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
Backup Technology
sales@backup-technology.co.uk • www.backup-technology.com
Redstation
sales@redstation.com • www.redstation.com
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iomart Group plc Annual report and accounts 2014 www.iomart.com
iomart Group plc, Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow G20 0SP
iomart Group plc Annual report and accounts 2014