ANNUAL
REPORT AND
ACCOUNTS
2021
Our Business
Values
Our core values reflect our commitment to deliver service excellence
and peace of mind to our customers.
We are proud of the talented people who work across our business
and who strive every day to deliver their best.
We are focused on leading the way in our sector by delivering
innovative solutions to the highest standards.
#weareiomart
ONE TEAM
We work together to achieve great things.
We treat others with respect.
BE ACCOUNTABLE
We take ownership of what we do and how we do it.
We deliver on our promises and are open to feedback.
PEOPLE FIRST
Our people are at the heart of everything we do. We support them
to anticipate our customers’ needs and exceed their expectations.
BE CURIOUS
We are always striving to expand our expertise.
We challenge the status quo.
BE AMBITIOUS
We take pride in and are passionate about our work.
We insist on the highest standards from ourselves and others.
1
iomart Group plc Annual Report and Accounts 2021
Contents
OVERVIEW
Our business values
Highlights
STRATEGIC REPORT
Chairman’s statement
Chief executive officer’s report
Chief financial officer's report
Principal risks and uncertainties
Stakeholder engagement
CORPORATE GOVERNANCE
Board of directors
Corporate governance report
Report of the board to the members on directors’ remuneration
Directors' report
Directors' responsibilities statement
FINANCIAL STATEMENTS
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
Notice of the 2021 Annual General Meeting
OFFICERS AND PROFESSIONAL ADVISERS
Officers and professional advisers
iomart Group plc Annual Report and Accounts 2021
1
4
6
8
13
18
20
27
29
38
44
49
50
60
61
62
63
64
100
112
119
2
REVENUE
£111.9m
2020 : £112.6m
% OF
RECURRING
REVENUE
90%
2020 : 85%
ADJUSTED
EBITDA
£41.4m
2020 : £43.5m
ADJUSTED
PROFIT
BEFORE TAX
£19.6m
PROFIT
BEFORE TAX
£12.5m
CASHFLOW
FROM
OPERATIONS
£43.7m
2020 : £22.8m
2020 : £16.8m
2020 : £41.3m
ADJUSTED
DILUTED EPS
14.4p
2020 : 16.3p
BASIC EPS
9.3p
2020 : 12.5p
PROPOSED
FINAL
DIVIDEND
PER SHARE
4.5p
2020 : 3.93p
"The year covered by this report coincided almost to the day with the onset of the pandemic in the UK. We can look back with pride on
what has been achieved during this unprecedented time for all of our employees and wider stakeholders. Our focus during the year was
on the protection of our people and the business and our team responded with commitment, resilience, and dedication. I would like to
take this opportunity once again to thank them for their efforts and support.
"We have now begun a new chapter for iomart, and I am proud to be at the helm of this great team. We have identified a significant
market opportunity, growing our propositions in hybrid cloud, security, the digital workplace and connectivity, supporting our customers
as they adapt to new ways of working now and in the future.
"We have proven the robustness of our business, underpinned by high levels of recurring revenues, breadth of customer base and strong
cash generation. This is now enhanced with a clear strategic vision and roadmap to re-position the Group for growth, both organically
and through selective acquisitions, and the Board is increasingly confident in the positive outlook for the long-term prospects for the
Group."
Reece Donovan, CEO
3
iomart Group plc Annual Report and Accounts 2021
ANNUAL REPORT AND ACCOUNTS 2021
HIGHLIGHTS
Financial Highlights
» Revenue resilient through the Covid-19 pandemic at £111.9m (2020: £112.6m), with revenue mix improving as
growth in core cloud managed services was offset by reduction in non-recurring revenue. Positive contribution from
prior year acquisitions.
» Adjusted EBITDA¹ of £41.4m (2020: £43.5m) with 37.0% adjusted EBITDA margin (2020: 38.6%), higher than
industry average and in-line with expectations.
» Adjusted profit before tax² impacted by an increase of £1.3m in the depreciation charge in the year following
acquisitions.
» High levels of operating cash generated in the year at £43.7m (2020: £41.3m) which represents a 106% conversion
of adjusted EBITDA (2020: 95%).
» Year end cash position of £23.0m (2020: £15.5m) with net debt of £54.6m (2020: £57.6m) which remains at a
comfortable level of 1.3 times adjusted EBITDA.
Operational Highlights
» Appointment of Reece Donovan as Chief Executive Officer, from 1 October 2020, following retirement of founder
and long-standing CEO, Angus MacSween.
» Strategic review completed and refreshed strategy launched post year end, re-positioning iomart's offerings around
the growing hybrid cloud market.
» Progress achieved on greater integration to 'one-iomart'; retirement of SystemsUp consultancy brand, merger of
sales and operational teams within Cloud Services, IaaS and consulting and recent appointments for key positions in
leadership team.
» Investment in data centre infrastructure and network, which continues to be a competitive differentiator, to improve
resilience and reduce environmental impact.
» Commitment to purchase Renewable Energy Guarantees of Origin ("REGO") certified renewable electricity across
our data centre estate.
Statutory equivalents
A full reconciliation between adjusted and statutory profit before tax is contained within this report on page 15.
The largest item is the consistent add back of the non-cash amortisation of acquired intangible assets of £5.5m. The
largest variance, year on year, is a £1.8m lower gain on the revaluation of contingent consideration relating to historic
acquisitions.
¹ Throughout these financial statements adjusted EBITDA (as disclosed in the consolidated statement of comprehensive income) is earnings before interest, tax, depreciation and amortisation (EBITDA)
before share-based payment charges, acquisition costs and gain on the revaluation of contingent consideration. 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 (as disclosed in the Chief Financial Officer's report) is profit before tax, amortisation charges on acquired intangible assets, share-based
payment charges, acquisition costs and gain on revaluation of contingent consideration.
iomart Group plc Annual Report and Accounts 2021
4
Navigating
unprecedented
challenges
It was the dual challenge, of helping the council adapt to the
government-enforced lockdown with an IT estate that could not yet
support the urgent need for staff to work remotely, that Ben Goward
faced when he arrived to take up the post of Director of Information
Communication Technology at the beginning of April 2020. “It was
a perfect storm,” Ben Goward refl ects. “We had to change direction
quickly to stem the tide.”
"
It was a perfect
storm
- Ben Goward,
ICT Director
Harrow Council
"
iomart’s consultants became part of the crisis strategy team. They
packaged every application, and supplied and built the Microsoft Surface
devices, installing Windows 10 and Microsoft 365 on each one. The
council’s email was migrated to Exchange Online, Teams was introduced
as the collaboration platform, with SharePoint Online, Skype for Business
and OneDrive for Business implemented across the IT estate.
Emergency deployment clinics were set up in the civic offi ces, manned by
iomart consultants wearing PPE and working under full social distancing
rules. Week by week, all 2100 members of staff, as well as the elected
members of the council, were invited in to pick up their new device and
spend over an hour being taught how to use it properly.
"
“What they got from us and iomart was a real hands-on,
caring experience.”
- Ben Goward, ICT Director Harrow Council
"
This dramatic change had immediate and positive consequences. “Staff
had a pretty indifferent attitude to IT until we did this,” says Ben. “What
they got from us and iomart was a real hands-on, caring experience. It
was a massively successful project and has changed the perception of IT
within Harrow. Whereas before IT was seen as a thorn in everyone’s side,
it’s now seen as a positive force and a key enabler for the delivery of our
vital public services.”
5
iomart Group plc Annual Report and Accounts 2021
ANNUAL REPORT AND ACCOUNTS 2021
Chairman's
Statement
I am pleased to report that iomart (the “Group”) has performed resiliently during a year over-shadowed by the impact of the Covid-19
pandemic. Our financial performance was stable throughout the year and we remain strongly profitable and cash generative.
In October 2020, following 20 years at the helm of iomart, building a £100m turnover business, with industry leading margins and a
growing reputation in the private cloud market, the Group’s founder, Angus MacSween retired as CEO to take up a Non-Executive
Director position. Angus was succeeded by Reece Donovan. Over the last six months Reece has led a detailed review of our medium
to long-term strategy, the output of which was presented at a Capital Markets Day on 5 May 2021. The Capital Markets Day centred
around the concept of ‘one iomart’ and the expansion of our offering. Sector expectation is that all areas of the cloud will undoubtedly
grow and that hybrid and public cloud will grow most noticeably. Our resources, including our infrastructure and in house skills, enables
us to grow into the hybrid and public spaces more easily than most, all the while continuing our ongoing eminence in the private cloud.
We are upscaling the business, we remain acquisitive and we remain ambitious.
I would like to thank the iomart team for their hard work and commitment during this year. One of the strengths of the Group is the
quality of it's fantastic workforce, investing in them and their further development and support is one of the central tenets of the
refreshed strategy. The strategy also sees an increased focus on the environment and our impact on the societies around us, as detailed
later in this report.
During the year we paid an interim dividend of 2.60p per share which was paid to shareholders in January 2021. In addition, after
updating our dividend policy, the Board is now proposing to pay a final dividend of 4.50p per share. With this final dividend payment, the
total for the year will be 7.10p representing a 9% increase on the prior year. We believe this is appropriate given our funding position,
robust business model, the low level of indebtedness within the Group and the fact we have not utilised any of the government furlough
schemes.
The Board is satisfied with the balance between Executive and independent Non-Executive Directors which operated throughout
the year. Further to the announcement made last September, it is now expected that Angus MacSween will extend his Non-Executive
involvement beyond the initial expected 12 months from 1 October 2020, given the value he continues to add to the Board. In addition,
the Board is seeking to appoint a fourth independent Non-Executive Director to add additional sector skills to support our execution of
the refreshed medium term strategic plan.
The progress we have already seen in the delivery of the new strategy and the continued solid financial performance gives me and the
Board confidence in a bright future for iomart.
Ian Steele
Non-Executive Chairman
15 June 2021
iomart Group plc Annual Report and Accounts 2021
6
SNAPSHOT OF THE
BUSINESS
iomart Group plc
UK HEADQUARTERED
PROVIDER OF CLOUD HOSTING
AND MANAGED SERVICES
13 DATACENTRES LOCATED
ACROSS THE UK, LINKED BY
2500 KM OF PRIVATE NETWORK
INFRASTRUCTURE, WITH MORE
THAN 25 POINTS OF PRESENCE
GLOBALLY
FOCUSED ON DIRECT SELLING
TO THE UK MARKET AND UK
HEADQUARTERED BUSINESSES
IN THE SME SPACE
£112M OF TURNOVER (FY21)
WITH MARKET LEADING
PROFITABILITY
OVER 10,000 CUSTOMERS IN
CLOUD SERVICES. OVER 70,000
CUSTOMERS IN EASYSPACE
FINANCIALLY RESILIENT,
HIGH LEVELS OF RECURRING
REVENUE, AND STRONG CASH
GENERATION
400+ EMPLOYEES MAINLY IN
THE UK WITH A SMALL TEAM
IN THE US
20+ YEARS IN THE BUSINESS,
OVER 21 ACQUISITIONS IN THE
LAST 10 YEARS, LISTED ON THE
AIM MARKET OF THE LONDON
STOCK EXCHANGE
7
iomart Group plc Annual Report and Accounts 2021
ANNUAL REPORT AND ACCOUNTS 2021
Chief Executive
Officer's Report
Introduction
I am delighted to be presenting the first set of full year financial results as the Group’s new CEO, having joined as COO during lockdown
in March 2020, before taking over from founder and long-standing CEO Angus MacSween on 1 October 2020. As I outlined in the half
year report, during the year the Board requested a detailed review of our medium to long-term strategy. We performed an extensive
exercise involving detailed analysis of both internal and external factors with contribution from a wide variety of stakeholders. The
output was presented at a Capital Markets Day on 5 May 2021. We have identified a clear strategic vision, which is outlined below, and
the iomart team are now very much focused on the execution of this plan as we enter our new financial year.
Impact of Covid-19
The year covered by this report coincided almost to the day with the onset of the pandemic in the UK. We can look back with pride on
what has been achieved during this unprecedented time for all of our employees and wider stakeholders. Our focus during the year was
on the protection of our people and the business and our team responded with commitment, resilience, and dedication. I would like to
take this opportunity once again to thank them for their efforts and support.
The strength of our model can be seen in our resilience in the face of the Covid-19 pandemic, particularly the limited concentration of
our customer base. We are not significantly exposed to industries that have suffered the worst. We did provide some financial support,
in the form of extended credit, to a small number of customers during the lockdown period but have seen no change to what is a low
level of bad debts during this year. However, we remain vigilant to the economic impact the ongoing situation may create, particularly
on the SME segment of the market as government support schemes expire.
We did not apply for any support from the government’s furlough scheme or funding loans. We continued to pay the salaries of the
small number of the team whose roles were not required at various times, while encouraging them to offer their time to support their
communities.
Resilient financial performance
iomart’s robust business model has led to a solid financial performance across the year. Revenue for the full year was resilient at
£111.9m (2020: £112.6m) with an improving mix of recurring revenue to 90% (2020: 85%). The Group’s adjusted EBITDA¹ reduced by
4.8% to £41.4m (2020: £43.5m) reflecting the underlying mix of the business activity in the year. This performance still translates to a
market leading adjusted EBITDA margin of 37.0% (2020: 38.6%) which importantly, as in the past, has converted to strong operating
cash flow. The asset base inherited with the prior year acquisitions drove an increase of £1.3m in the depreciation charge in the year,
which along with a stable level of intangible asset amortisation and finance costs takes the Group’s adjusted profit before tax² to £19.6m
(2020: £22.8m) for the year, representing an adjusted profit before tax margin of 17.5% (2020: 20.2%). These financial metrics, along
with the strength of our balance sheet, puts us in a strong position from which to push forward with the execution of the updated
strategy over the coming months and years.
Strong foundation for the next stage of growth
iomart benefits from multiple strengths in its model, offering and business make up. We have over 10,000 customers in our core cloud
services segment, providing breadth and resilience and an opportunity for future expansion as we grow our offering. We have 13
data centres located across the UK, united by over 2000kms of private network infrastructure, offering outstanding resilience and
connectivity for our customers, with over 25 points of presence globally, meaning we can deliver the services our customers need,
whether inside the UK or out. We are financially robust, with high levels of recurring revenue and strong levels of cash generation,
and importantly, as we embark on our new strategy, we do so with over 20 years’ experience in our industry, having completed over 21
successful acquisitions.
Market and Strategy
The structural growth drivers for cloud computing solutions have remained consistent for a long period. This includes the greater
demand to outsource, increasing complexity of IT requirements, more workloads being hosted in the cloud and ever growing demand
for data and content. The current situation around Covid-19 have seen the acceleration in the adoption of digital transformation and
remote working, both of which are likely to further enhance long-term drivers to the cloud.
As part of the strategic review process, we engaged consultants to provide insight into the market and our relative position. Their work
reaffirmed that we are in a positive, growing market with lots of opportunity, but we do need to improve iomart’s alignment to this
future market and to ensure we are recognised as experts across a number of both existing and new service areas. This formed the
backdrop to the review of our medium to long-term strategy.
8
iomart Group plc Annual Report and Accounts 2021
Strategic Report - Chief Executive Officer's Report
Our strategic plans
The Capital Markets Day on 5 May 2021 provided insight into the markets we operate in, our starting position today and our future
strategic plans. The presentation material, including a video recording, is available on our website at www.iomart.com. This presentation
concluded with an aspiration to become a £200m revenue business within 5 years, and be recognised as a leading secure hybrid cloud
business. To achieve this, three specific items were highlighted as important enablers:
·
·
·
Connect – connecting with our customers and employees, connecting employees with their businesses, connecting parts of
their businesses to each other, connecting businesses to data centres, and providing tools to enable collaboration facilitated
by the digital workplace. Hybrid working is here to stay and connectivity is the glue to make this successful;
Secure – keeping applications, data and business operations safe, allowing people to connect to their businesses safely,
preventing cyber-attacks wherever possible, and providing the support when a recovery is needed; and
Scale – allowing businesses to scale their infrastructure and capabilities, when and where they need to, helping provide cost
certainty, and access to the right tools at the right time. We need to ensure that iomart has the right foundations on which to
scale to meet this demand, and taking a long-term skills development approach.
Our strategic value creation roadmap will focus on three main activities:
·
·
·
New services and geographies - we will focus on four new service areas – hybrid cloud, security, the future digital workplace
and connectivity;
Complementary acquisitions - to expand the customer base and to acquire new skillsets; and
Protect and expand the existing base of run rate revenue and EBITDA.
In order to make all of this a success, we are shifting our values and culture to put our people and customers at the heart of all that we
do. We will have a strong focus on delivering results, being ambitious and embedding learning in the way in which we work. We will also
increase the way in which we care for our people, society and the environment. We have highly experienced staff with a broad range of
technical knowledge and skills, and they will be a key area of investment over the coming years, broadening and deepening the available
skill sets for the benefit of our customers.
From a structural perspective, our existing suite of underlying tooling, previously only deployed in a somewhat siloed manner, will be
harnessed across the business to deliver the future product and service portfolio and deliver competitive advantages. We are also
introducing a service team to work across the business and put the customer experience at the heart of everything we do.
Our customers are looking for a straightforward, trusted and expert partner to support their digital business needs and enable their
long term success. iomart operates its own data centre estate and secure fibre network across the UK, with an additional 25 points of
presence globally. These assets provide our customers with a single source of accountability, with full end-to-end control and knowledge
of the quality of the underlying components, to deliver a secure and reliable 24/7 service. Our people provide expertise and build
relationships with customers to understand both current and future requirements. We have partnerships with multiple vendors and
extensive technical knowledge ensuring we can design agile solutions that deliver value for money and cost certainty, while ensuring full
data sovereignty. It is this intricate blend of our straightforward brand approach, owned assets, people and relationships focus, and agile
solution model, along with our extensive customer base and more than 20 years’ experience, that gives us our competitive advantage
and allows us to differentiate ourselves in the market.
Through these initiatives, and the reduction in the number of brands within the group, we will create a single refreshed ‘one iomart’
organisation over the next 12 to 24 months.
Operational Review
While all of our activities involve the provision of services from common infrastructure, we are organised into two operating segments,
Cloud Services (£99.9m revenue) and Easyspace (£11.9m revenue).
Cloud Services is our core area of strategic focus, containing three offerings to which we can disaggregate revenue: iomart cloud
managed services, self-managed infrastructure and non-recurring revenue. Easyspace is a highly profitable and cash generative
segment, but is less of a focus area for growth.
Cloud Services
Revenues in this segment have grown by £0.1m to £99.9m (2020: £99.8m) benefitting from the acquisitions made in the prior year.
Organic Cloud Services revenue declined by 6%, or £6.0m, due to a £5.5m reduction in non-recurring revenue, with higher reductions
in on-premise project revenues, due to the impact of Covid-19 on corporate spend, being partially offset by completion of a £1m
consultancy project for a local government customer, supporting deployment of modern workplace technology. There was continued
organic growth in our core cloud managed services area, however this was offset by a £2.3m reduction in self-managed infrastructure
revenues from smaller legacy customers resulting in an overall £0.5m net reduction in recurring revenue. Cloud Services adjusted
EBITDA (before share based payments, acquisition costs and central group overheads) was £40.5m being 40.5% of revenue (2020:
£42.3m, 42.4% of revenue).
iomart Group plc Annual Report and Accounts 2021
9
Strategic Report - Chief Executive Officer's Report
Within our Cloud Services division, we have three core offerings, recognising the differing complexity of the solutions designed and
the level of ongoing managed services we provide. This means we are able to supply products and services across the full cloud
spectrum and to do so using shared resources and common platforms across the Group. For the first time we have provided additional
disaggregated revenue values for each of these offerings:
·
·
·
iomart cloud managed services (£57.9m revenue): provides fully managed, complex bespoke designs, resulting in resilient
solutions involving various infrastructures. This has a wide range of offering across the full cloud spectrum from simpler
colocation data centre services to a full 24/7 managed service complemented by all of our offering around back-up and
disaster recovery. The provision of a full managed service to our customers is the strategic focus for the Group as discussed
earlier, with the strongest market outlook and gives a great opportunity for us to accelerate growth by supporting customers
now and into the future on their cloud journey. Currently, private cloud dominates the installed customer solutions but as part
of our strategic review, we intend to expand further into specific hybrid solutions, encompassing the public cloud.
Self-managed infrastructure (£30.3m revenue): delivers dedicated, physical, self-service servers to customers. We provide
many thousands of physical severs for our customers using highly automated systems and processes which we continue to
develop and improve. Over the last few years we have been a consolidator of the UK market within this area, via our M&A
activity, including our most recent acquisition of Memset in the prior year. In line with our ‘one iomart’ objective, ensuring
minimum disruption to the customer experience, we continue to consolidate legacy brands within this offering.
Non-recurring revenue (£11.7m revenue): this represents point in time type revenue in the form of hardware/software
reselling and also consultancy projects. Cristie Data which we acquired in 2017 makes up the bulk of the non-recurring
hardware revenue activity.
Easyspace
The Easyspace segment which provides a range of products to the micro and SME markets including domain names, shared, dedicated
and virtual servers and email services, saw a reduction in revenue in the year to £11.9m (2020: £12.8m). To grow Easyspace significantly
would mean competing in a more commoditised market with the need for a high marketing budget. As a result, our target for Easyspace
is to retain our existing presence in the UK market via selective marketing and responding to market conditions with dynamic pricing.
As in the past, Easyspace delivered strong profitability with an adjusted EBITDA (before share-based payments, acquisition costs and
central group overheads) of £5.3m, 44.8% of revenue (2020: £5.6m, 44.2% of revenue). The business benefits from use of the Group
infrastructure meaning this profitability translates to strong cash flow for the Group.
Infrastructure investment
We believe controlling our own infrastructure is important to delivering high quality, secure and robust solutions to customers. In June
2020, we extended our London data centre property lease from June 2030 to June 2035. Following this, we commenced the upgrade
to the main cooling system which was well progressed at the year end with completion expected in July 2021, with an upgrade of the
electrical systems expected to commence thereafter. These data centre projects improve resilience but also reduce the environmental
impact of our operations. During the year we approved the investment of nearly £2m in next generation core routing technology, which
will provide 100GB capacity on our network with the ability to scale to 400GB. As a result, customers will benefit from faster, even more
reliable connections to support their data and applications.
Commitment to ESG and sustainability
As part of our environmental, social and governance (“ESG”) and wider sustainability programme, in the current year, the Board
approved the commitment to purchase Renewable Energy Guarantees of Origin (“REGO”) certified renewable electricity across our
UK data centre estate. This will be effective from July 2021 and remain in place until the expiry of our current electricity contract in
September 2022. During the year we also started working with Katrick Technology Limited, a start-up company based in Glasgow
focused on innovative engineering technologies who have developed patented means to capture unharnessed energy within a data
centre. We are pleased to say we signed an alliance agreement in June 2021 and will begin an exploratory project with them at our
Glasgow data centre later this year.
One iomart
While the updated strategy will be fully launched in FY22, we undertook early steps in FY21 towards the ‘one iomart’ concept and to
accelerate the greater level of integration of the group. Immediate steps within this area involves collapsing some of the legacy brands
into the iomart brand and merging our teams to ensure the customer journey is consistent. This process has commenced and towards
the end of the year we retired the SystemsUp consultancy brand and simplified our internal organisation to merge previously separate
teams within Cloud Services, IaaS and consulting. The recent appointment of a Chief Marketing Officer and Chief Operating Officer are
also important steps to ensure we have the correct structure to position the Group for success.
10
iomart Group plc Annual Report and Accounts 2021
Strategic Report - Chief Executive Officer's Report
Implementing the strategic roadmap in FY22
We committed to completing the strategic review by the end of FY21, which was achieved. We are now focused on execution and have
started a number of new initiatives:
·
·
·
·
·
·
Hybrid preparation: the new hybrid cloud solution framework, product and partner selections, public cloud portfolio
definitions and market reviews have now started and will be completed around the mid year point of FY22. Following this,
we will begin to setup and implement the new services;
Security maturation: while we continue to provide and mature our new security services, a full review of our expansion
opportunities is underway. We plan to extend our security services during FY22;
Connectivity: building on our existing assets and partnerships, we will be releasing an updated connectivity portfolio in the
early part of FY22 in support of hybrid working requirements;
Future digital workplace: we are now entering the Unified Communications market and the support for customers
future digital workplace roll out has started with the formalisation of arrangements with our partner of choice, Gamma
Communications now put in place. We will be building our expertise and targeting customers early in FY22;
Sales, operational and organisational improvements: sales and operational improvements are underway, which is an ongoing,
long-term initiative. The appointment of a new COO to oversee all operational activities across the majority of brands will
serve to provide customers with a more consistent and reliable customer experience, irrespective of the services being
consumed. This is vital to have in place as we scale the business;
Brand development: in parallel with the new strategy development, we have been redesigning the iomart brand so it is
more contemporary, closely aligned to what we want to achieve, and supportive of our new values and culture. We intend
to release the updated brand details mid-way through FY22;
· M&A: M&A is a core of part of our strategy, and potential targets are being compiled with the view of acquiring additional
assets and skills during FY22; and
·
ESG: we will continue to put the environment and people high up on the Group’s agenda, developing a more robust and
long-term ESG strategy covering both areas. We have been involved in a number of charitable events, and we plan to
continue and expand on these in the future.
Current trading and outlook
The start of the new financial year has seen financial results in line with our expectations, consistent with our high recurring revenue
business model which gives good visibility.
While we begin the new financial year with a similar level of cloud managed services recurring revenue as 12 months ago, we do so
from a stronger position due to the success of the UK vaccination programme, the resulting growing confidence across the UK business
landscape and from the positive changes we have put in place through the year. We have verified that the market we operate in is
growing and customers are looking for a partner who can provide a full breadth of service offering across the hybrid cloud.
We anticipate our sales pipeline will result in a stronger level of new customer wins as we move through the year as budgets for digital
transformation programmes start to release. We will execute on the strategic improvement initiatives around our value proposition,
branding and new service offerings, with a positive impact on revenue expected in the second half of the year and beyond, in line with
expectations.
We have proven the robustness of our business, underpinned by high levels of recurring revenues, breadth of customer base and strong
cash generation. This is now enhanced with a clear strategic vision and roadmap to re-position the Group for growth, both organically
and through selective acquisitions, and the Board is increasingly confident in the positive outlook for the long-term prospects for the
Group.
Reece Donovan
Chief Executive Offi cer
15 June 2021
Definition of alternative performance measures:
¹ Throughout these financial statements adjusted EBITDA (disclosed in the consolidated statement of comprehensive income) is earnings before interest, tax, depreciation and
amortisation (EBITDA) before share-based payment charges, acquisition costs and gain on the revaluation of contingent consideration. 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 (disclosed on page 14) is profit before tax, amortisation charges on acquired intangible assets, share-based
payment charges, acquisition costs and gain on revaluation of contingent consideration.
iomart Group plc Annual Report and Accounts 2021
11
A STRAIGHTFORWARD CHOICE
PEOPLE
We are experts in what we do
We care about you
Personal 24x7 support
Dedicated deployment & support teams
Professional
OWNED ASSETS
We control everything from start to fi nish
Single point of accountability
Extensive global services catalogue
Secure high availability & uptime
Data sovereignty
WHY
IOMART?
BRAND
Straightforward
Make the complex simple
Strong and stable business
Big enough to deliver, small enough to care
20 years of experience
AGILE
Build what you need
Tailored services/bespoke
Any cloud, any time
Trusted business partner
Cost certainty & value for money
Supporting
customers with
their journey to
the cloud
iomart Group plc Annual Report and Accounts 2021
12
ANNUAL REPORT AND ACCOUNTS 2021
Chief Financial
Officer's Report
Financial Review
Key Performance Indicators
Revenue
% of recurring revenue1
Gross Profit %2
Adjusted EBITDA3
Adjusted EBITDA margin %4
Adjusted profit before tax5
Adjusted profit before tax margin %6
Profit before tax
Profit before tax margin %7
Basic earnings per share
Adjusted earnings per share (diluted) 8
Cash flow from operations / Adjusted EBITDA %9
Net debt / Adjusted EBITDA leverage ratio10
See page 17 for definition of alternative performance measures
Revenue
2021
2020
£111.9m
90%
60.5%
£41.4m
37.0%
£19.6m
17.5%
£12.5m
11.1%
9.3p
14.4p
106%
1.3
£112.6m
85%
60.8%
£43.5m
38.6%
£22.8m
20.2%
£16.8m
14.9%
12.5p
16.3p
95%
1.3
Total revenue for the year is consistent with the prior year at £111.9m (2020: £112.6m), with growth from the acquisitions made in the
prior year offset by, to the largest extent, a reduction in non-recurring revenue as a result of the impact of Covid-19 on customers, plus
a £0.9m reduction within Easyspace, our domain name and mass hosting business, in line with our expectations.
Cloud Services
Overall, our Cloud Services segment grew revenues by £0.1m. For the first time, we have provided some additional disaggregation of
revenue which is relevant for the Cloud Services segment. The following is the disaggregation of the Cloud Services revenue of £99.9m
(2020: £99.8m):
Disaggregation of Cloud Services revenue
Cloud managed services
Self-managed infrastructure
Non-recurring revenue
2021
£’000
57,961
30,311
11,672
99,944
2020
£’000
54,590
28,009
17,190
99,789
Cloud managed services
Cloud managed services is the area we have focused our development and commercial efforts on and where we have consistently
achieved organic growth. Growth was achieved both organically (£1.8m) and through the acquisition of ServerChoice on the 28
February 2020. The strongest element of new orders in the year was from our existing customer base as they required increased
capacity or additional services, with a lower contribution from new client wins. We believe the growth would have been higher if Covid-
19 had not delayed the larger digital transformation projects which is often the catalyst for attracting new customers to iomart. We
experienced higher than normal levels of non-renewals in the final months of the year, which while not significantly impacting recognised
revenue in 2021, has resulted in an opening recurring revenue level within cloud managed services going into the new year at a level
similar to 12 months ago.
Self-managed infrastructure
Over the previous two years we have experienced some reduction in revenue within the self-managed infrastructure activity,
predominantly from the large tail of smaller customers within some of the acquired brands. Overall, this segment grew in the year, due
to the contribution from the Memset acquisition, which was made on the 12 March 2020, however organic revenue reduced by £2.3m.
13
iomart Group plc Annual Report and Accounts 2021
Strategic Report - Chief Financial Officer's Report
Non-recurring revenue
The largest area of revenue reduction in the current year was in non-recurring revenue in respect of on-premise hardware and software
solution sales. This represented a £5.5m net reduction in revenue. This activity saw the most immediate impact from Covid-19 as
customers simply delayed IT expenditure.
Easyspace
Our Easyspace segment has performed in line with expectations over the year with revenues reducing by £0.9m (6.7%) to £11.9m (2020:
£12.8m). The domain name and web hosting business is a growing market but one in which we concluded that the marketing spend to
compete with the global players was not the best use of our resources. The activity remains highly profitable and cash generative.
Business model
Our business model in both segments generally involves the provision of cloud and managed hosting services from our data centres,
delivering the computing power, storage, and network capability our customers require for the operation of their own businesses. We
have invested in an estate of data centres, an extensive fibre network and for each customer the servers, routers, firewalls etc that are
necessary to create the IT infrastructure they require. These resources, along with the associated staff, are shared across most of our
revenue streams. Customers pay us for the provision of that infrastructure, with the potential to add 3rd party technology and various
degrees of a managed services wrapper.
Larger customers tend to have multi-year contracts for complex cloud solutions, which are invoiced and paid on a monthly basis. Many of
our smaller customers pay in advance for the provision of services which results in a substantial sum of deferred revenue, which is then
recognised over the period of the service provision. A significant proportion of our revenue is therefore recurring and the combination
of multi-year contracts and payment in advance provides us with excellent revenue visibility.
Gross Profit
Gross profit in the year, which is calculated by deducting from revenue variable cost of sales such as domain costs, public cloud costs,
the cost of hardware and software sold, power, sales commission and the relatively fixed costs of operating our data centres, reduced
by £0.9m to £67.6m (2020: £68.5m). In percentage terms, gross margin² was broadly stable at 60.5% (2020: 60.8%), however, the
movement in the year is a combination of a reduction in on-premise hardware and software solution sales which are typically lower gross
margin given the inclusion of the reselling element of their solutions, offset by initial lower contribution levels on some of the larger
managed cloud solutions compared to margins from the self-managed infrastructure only deals made in previous years.
We have not seen any significant individual price change in any of the components of the purchased cost base in the last 12 months,
although as more complex solutions are designed for customers we generally see more bought in recurring costs being introduced to
our cost of sales.
Adjusted EBITDA3
The Group’s adjusted EBITDA reduced by 4.8% to £41.4m (2020: £43.5m) which in adjusted EBITDA margin4 terms translates to 37.0%
(2020: 38.6%). The impact of the acquisitions is the main factor behind the increase in the administration expense (before depreciation,
amortisation, share based payment charges and acquisition cost) of £1.2m versus the previous year comparative with a small £0.2m
saving within the underlying business.
Cloud Services segment saw a 4.3% reduction in adjusted EBITDA to £40.5m (2020: £42.3m). In percentage terms the Cloud Services
margin decreased to 40.5% (2020: 42.4%). This adjusted EBITDA profitability reflects the reducing revenue contribution from the
higher margin legacy self-managed infrastructure, which cannot be fully replaced by the initial profitability of wins within the more
complex managed cloud services, along with some investments in operations in the year. Although at a lower overall level, stability was
achieved during the year, with the second half adjusted EBITDA margin being consistent with those achieved in the first half of the year.
The Easyspace segment’s adjusted EBITDA was £5.3m (2020: £5.6m) reflecting the impact of slightly lower revenue this year offset
with some improvement in gross margin due to the specific bundle of packages sold to hosting customers. In percentage terms the
adjusted EBITDA margin increased to 44.8% (2020: 44.2%).
Group overheads remained stable at £4.4m (2020: £4.4m). These are costs which are not allocated to segments, including 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.
Adjusted profit before tax5
The depreciation charge of £16.9m (2020: £15.6m) has increased by £1.3m in the year, driven by the acquired asset base of the Memset
and ServerChoice acquisitions at the end of last year. The depreciation charge as a percentage of recurring revenue is 16.8% which is
broadly consistent with prior year of 16.4%.
The charge for amortisation of intangibles, excluding amortisation of intangible assets resulting from acquisitions (“amortisation of
acquired intangible assets”), of £2.9m (2020: £2.9m) has remained stable year on year.
Finance costs of £2.0m (2020: £2.2m), has reduced due to lower bank loan interest as LIBOR rates fell.
iomart Group plc Annual Report and Accounts 2021
14
Strategic Report - Chief Financial Officer's Report
Adjusted profit before tax (continued)
After deducting the charges for depreciation, amortisation (excluding the charges for the amortisation of acquired intangible assets)
and finance costs from the adjusted EBITDA, the Group’s adjusted profit before tax reduced to £19.6m (2020: £22.8m), representing
an adjusted profit before tax margin6 of 17.5% (2020: 20.2%).
Profit before tax
The measure of adjusted profit before tax is an alternative profit 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 tax5
Less: Amortisation of acquired intangible assets
Less: Acquisition costs
Less: Share-based payments
Add: Gain on revaluation of contingent consideration
Profit before tax
2021
£’000
19,628
(5,457)
(493)
(1,247)
33
12,464
2020
£’000
22,768
(6,159)
(438)
(1,243)
1,856
16,784
The adjusting items are: charges for the amortisation of acquired intangible assets of £5.5m (2020: £6.2m) with the reduction being from
expiry of the amortisation charge on earlier acquisitions; acquisition costs of £0.5m (2020: £0.4m) and share-based payment charges of
£1.2m (2020: £1.2m).
In addition, the adjusting items also include a minor gain on the revaluation of contingent consideration in the year on the prior year
acquisitions. During the year to 31 March 2020, the equivalent value was higher at £1.9m which related to the reduction in the earn-out
payment on the December 2019 LDeX acquisition.
After deducting these items from the adjusted profit before tax, the reported profit before tax was £12.5m (2020: £16.8m). In
percentage terms the profit before tax margin7 was a reduction to 11.1% (2020: 14.9%) with one third of the reduction coming from
a one off gain on contingency consideration in prior year not repeated, with the majority of the balance driven by the trading result in
the year.
Taxation
The tax charge for the year is £2.3m (2020: £3.1m). The tax charge for the year is made up of a corporation tax charge of £3.5m (2020:
£3.6m) with a deferred tax credit of £1.2m (2020: £0.5m). The effective rate of tax for the year is 18.1% (2020: 18.7%). The increase to
a 25% UK corporation tax rate was not substantively enacted at 31 March 2021 consequently, at the year end, the deferred tax balances
have been calculated with a 19% rate. We believe the UK headline corporation tax rate, is considered a reasonable recurring effective
tax rate for underlying profits. Further explanation of the tax charge for the year is given in note 9.
Profit for the year
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 £10.2m (2020: £13.6m).
Earnings per share
The calculation of both adjusted earnings per share and basic earnings per share is included at note 11.
Basic earnings per share from continuing operations was 9.3p (2020: 12.5p), a reduction of 25.6%.
Adjusted diluted earnings per share8, based on profit for the year attributed to ordinary shareholders before amortisation charges of
acquired intangible assets, acquisition costs, share-based payment charges, the gain on the revaluation of contingent consideration, and
the tax effect of these items was 14.4p (2020: 16.3p), a reduction of 11.7%.
The measure of adjusted diluted 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.
Dividends
Our dividend policy, which has been in place for several years now, is based on the profitability of the business in the period measured
with reference to the adjusted diluted earnings per share we deliver in a financial year. For the last few years we have been paying
dividends at the maximum level allowed by our stated policy. We have reviewed our dividend policy in the year and with the continued
strong level of cash generation in the business are increasing the maximum pay-out policy from 40% to 50% of adjusted diluted earnings
per share. This amendment allows the Directors to propose a final dividend of 4.50p which is above the prior year of 3.93p and we
believe is fully appropriate given the recurring revenue nature of the Group, the level of operating cash which we deliver, the low level
of indebtedness within the Group and the fact we have not utilised any of the government furlough schemes. As a result, along with
the interim dividend of 2.60p (2020: 2.60p), which was paid in January 2021, the total dividend for the year is 7.10p (2020: 6.53p), an
increase of 8.7%.
15
iomart Group plc Annual Report and Accounts 2021
Strategic Report - Chief Financial Officer's Report
Cash flow and net debt
Net cash flows from operating activities
The Group continued to generate high levels of operating cash over the year. Cash flow from operations was £43.7m (2020: £41.3m)
which represents a 106% conversion9 of adjusted EBITDA (2020: 95%). During the year the Group received £2.3m of cash deposit back
from our landlord as part of the negotiation of the extension of the London data centre lease to June 2035. Adjusting for this one item
takes the EBITDA conversion to cash ratio to 100% in the year. This strong level of cash flow conversion has been a constant feature
over the years, recognising the strength of our business model and cash cycle.
Payments of taxation in the year was £1.1m lower at £3.6m (2020: £4.7m) and results in a net cash flow from operating activities in the
year of £40.1m (2020: £36.6m), an increase of 9.4%.
Cash flow from investing activities
Our strategy is to continue to reinvest some of our strong operating cash flow we generate back into the business both in the form of
internal investments into our global infrastructure but also in the continuation of our disciplined acquisition strategy.
The Group invested a total of £19.2m (2020: £21.3m) during the year.
The Group continues to invest in property, plant and equipment through expenditure on data centres and on equipment required to
provide managed services to both its existing and new customers. As a result, the Group spent £15.2m (2020: £14.7m) on assets, net
of related lease drawdowns, trade creditor movements and non-cash reinstatement provisions. Most of the spend in the year was on
operational items such as servers and storage to support customer deployments. Project type capital expenditure on the infrastructure
was £0.7m higher than last year. This included payments associated with the investment in the London data centre chiller replacement
and the network upgrade in the last quarter of the year.
Expenditure was also incurred on development costs of £1.3m (2020: £1.4m) and on intangible assets of £0.6m (2020: £1.1m).
We made no acquisitions in the last year (2020: £4.1m of payments, net of cash acquired). During the year we incurred £2.4m of
expenditure in respect of contingent consideration due on previous year acquisitions (2020: £nil). As we have outlined in our strategy
we do expect M&A activity will continue to support and accelerates our organic growth ambitions over the coming five years.
Cash flow from financing activities
Drawdowns of £1.2m (2020: £6.2m) were made from the revolving credit facility in the year to fund the payment of contingent
consideration due on acquisitions. Bank loan repayments of £1.2m (2020: £2.0m) were made in the year thus the closing drawn bank
loan remains unchanged at £52.8m (2020: £52.8m). Cash received in the year from issue of shares was £0.4m (2020: £0.6m). We also
made dividend payments of £7.1m (2020: £8.3m); paid finance costs of £1.1m (2020: £1.7m); and made lease repayments of £5.4m
(2020: £4.7m).
Net cash flow
As a consequence, our overall cash generated during the year was £7.5m (2020: £5.4m) which resulted in cash and cash equivalent
balances at the end of the year of £23.0m (2020: £15.5m).
Net Debt
The net debt position of the Group at the end of the year was £54.6m (2020: £57.6m) as shown below. The increase in the lease liability
to £24.9m (2020: £20.3m) primarily relates to extensions to existing lease arrangements, including the five-year extension to our
London data centre. The net debt position represents a multiple of 1.3 times10 (2020: 1.3 times) our adjusted EBITDA which we believe
is a comfortable level of debt to carry given the recurring revenue business model and strong cash generation in the business.
Bank revolver loan
Lease liabilities
Less: cash and cash equivalents
Net Debt
The banking facility, which provides an £80m revolving credit facility, matures in September 2022.
Exposure to credit and liquidity risks
Disclosures relating to our exposure to credit and liquidity risks are outlined in note 15.
2021
£’000
52,791
24,867
(23,038)
54,620
2020
£’000
52,791
20,347
(15,497)
57,641
iomart Group plc Annual Report and Accounts 2021
16
Strategic Report - Chief Financial Officer's Report
Financial position
The strength of our business model, with high recurring revenue, low customer concentration across wide sectors and a positive cash
cycle is well established and creates a very strong financial position. This resilience has been proven during the last 12 months in what
has been an unprecedented period globally with the challenges caused by the Covid-19 pandemic. The Group continues to generate
substantial amounts of operating cash. The generation of that cash flow, together with the committed bank loan facility for acquisitions,
capital expenditure and general business purposes, means that the Group has the liquidity it requires to continue its growth through
both organic and acquisitive means.
Scott Cunningham
Chief Financial Offi cer
15 June 2021
Definition of alternative performance measures:
¹ Recurring revenue is the revenue the repeats either under long-term contractual arrangement or on a rolling basis by predictable customer habit. % of recurring revenue is
defined as Recurring Revenue (as disclosed in note 3) / Revenue (as disclosed in the consolidated statement of comprehensive income)
² Gross profit margin % is defined as Gross Profit / Revenue as a % (both as disclosed in the consolidated statement of comprehensive income)
³ Adjusted EBITDA (as disclosed in the consolidated statement of comprehensive income) is earnings before interest, tax, depreciation and amortisation (EBITDA) before
share-based payment charges, acquisition costs and gain on the revaluation of contingent consideration. Throughout these financial statements acquisition costs are defined
as acquisition related costs and non-recurring acquisition integration costs.
4 Adjusted EBITDA margin % is defined as adjusted EBITDA (as defined on page 11) / Revenue (as disclosed in the consolidated statement of comprehensive income) as a %
5 Adjusted profit before tax (as disclosed on page 14) is profit before tax, amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs
and gain on revaluation of contingent consideration.
6 Adjusted profit before tax margin % is defined as adjusted PBT (as defined on page 11) / Revenue (as disclosed in the consolidated statement of comprehensive income) as a %
7 Profit before tax margin % is defined as Profit before Tax / Revenue (both as disclosed in the consolidated statement of comprehensive income) as a %
8 Adjusted diluted earnings per share is earnings before amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and gain on
revaluation of contingent consideration and the tax impact of adjusted items /weighted average number of ordinary shares – diluted (as disclosed in note 11)
9 Cash flow from operations / Adjusted EBITDA % is defined as cash flow from operations (as disclosed in the consolidated statement of cash flows) / Adjusted EBITDA (as
defined on page 11) as a %
10 Net debt / Adjusted EBIDTA level ratio is defined as Net Debt (as disclosed on page 16) / Adjusted EBITDA (as defined on page 11)
17
iomart Group plc Annual Report and Accounts 2021
Strategic Report - Principal Risks and Uncertainties
The Board of Directors, who are responsible for the Group’s system of risk management and internal controls, have established systems
to ensure that an appropriate level of oversight and control is provided to manage principal risks and uncertainties identified that could
have a material impact on the Group’s performance. The Group’s systems of risk management and internal controls, which are reviewed
for effectiveness by the Audit Committee and the Board, are designed to help the Group meet its business objectives by appropriately
managing, rather than eliminating, the risks relating to those objectives.
In the current year, the Group updated its risk management framework and risk assessment to reassess and update the current
identified risks, where relevant, in order to support the execution and delivery of the Group’s strategy. 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 are
identified and appropriate action taken at an early stage. More details on the Group’s control framework is provided in the Corporate
Governance report on page 35 and details of financial risks are outlined in note 28. Through this process, we have continued to identify
similar potential material risks and uncertainties as reported in the prior year. These risks are as follows:
Covid-19
The impact of Covid-19 on our business required us to reassess the impact of the global pandemic on our risk management and internal
control environment. Our resilient business model, the diversity and limited concentration of our customer base and thus minimised
industry exposure has reduced the impact that Covid-19 had on our business during the year. We implemented remote working
across all our sites and continue to operate effectively to meet customers’ requirements. During the year, we undertook regular risk
assessments to monitor the impact of Covid-19 and the Executive team reviewed the guidance issued by the UK government on a
regular basis, and adapted accordingly, to ensure the health and safety of our employees continued to be at the forefront of our response
to the pandemic. We believe our risk assessment process still remains valid and new modes of operation, including remote working, have
not diluted the strength of our control environment.
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
or senior staff are not retained. 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. The Group also has the ability to manage and recruit resource across multiple locations which creates, to some degree,
flexibility on where we recruit and how we deploy our resources.
Data centre operation
Any downtime experienced at our data centres 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 data centres continue to operate at their optimum parameters. We also continually look at new
innovations and technology within the sector that can help to deliver operational efficiency and effectiveness in line with our ISO50001
energy management system, and our obligations within the CRC Energy Efficiency Scheme.
Network
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. The service we provide to customers is dependent on the continued operation of our diverse fibre network which
connects our data centre estate. Should the network fail there would be an adverse impact on customers and any diminution in the level
of service could have serious consequences for customer acquisition and retention. The Group has implemented a resilient network
throughout its data centre estate with no single points of failure to ensure the likelihood of network failure is minimised.
Data and Cyber Security
There has been a sharp rise in recent years in cyber and data related crime. The security of customer, commercial and personal data
presents both a reputational and financial risk to the Group. Whilst it is a challenge to completely eliminate all data and cyber security
risks, the Group continues to make substantial investment in physical and data security systems and to promote a culture within
the organisation which embeds security across all of our operations. iomart continues to develop our security portfolio to equip our
customers with the means to counter the types of security threats our clients face. We are enhancing our internal process improvement,
security awareness and training to ensure we provide solutions which customers can rely on. The Group also carries specific insurance
in relation to cyber related crime. Our contracts and associated schedules with customers make it clear where responsibilities lie in
relation to the roles and responsibilities of each party for the Security of Data and Data Protection in general.
Competition
iomart operates in a competitive and fluid marketplace and while the Directors believe the Group enjoys significant strengths and
advantages in competing for business, some of the competitors are significantly larger, allowing them to offer similar services for
lower prices than the Group would be prepared to match, or launching new product offerings with significantly enhanced features.
Consequently, these competitors could materially adversely impact the scale of the Group’s revenues and its profitability. In response to
this, we maintain a broad customer base, with currently no single customer with more than 2% of our annual revenue. We also mitigate
the risk by establishing strong relationships with our customers, developing tailor-made and value-creating solutions and delivering
excellent service performance while being cost competitive in our day to day business. Our development team are continually working
towards both enhancing, and augmenting, the services we currently offer. Our product board meets regularly to keep abreast of new
technology which could enhance the Group's service portfolio.
iomart Group plc Annual Report and Accounts 2021
18
Strategic Report - Principal Risks and Uncertainties
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.
Growth management
The Group seeks to achieve high levels of growth through a combination of 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, an 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 number of 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 relations 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 an integration and
migration plan which includes the participation of the vendor to ensure successful integration of the acquired business into
the Group’s operations; and
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 cash flow.
For each acquisition diligence and integration planning is undertaken and all potential synergies identified.
19
iomart Group plc Annual Report and Accounts 2021
Strategic Report - Stakeholder Engagement
Stakeholder engagement is critical to the long-term success and sustainability of our business and the Board recognises its responsibility
to take into consideration the needs and concerns of our key stakeholders as part of its discussion and decision-making processes.
During the year, the Board and its Directors confirm they have acted in a way that promotes the success of iomart Group for the benefit
of its members as a whole, and in doing so have had regard to the stakeholders and key matters set out in Section 172(1) (a) to (f) of the
Companies Act 2006 (“Section 172”).
The Board considers that the Group’s key stakeholders are its shareholders, employees, customers, suppliers and key partners and the
environment. The Directors recognise that they are expected to take into account the interests of those stakeholders whilst prioritising
the long-term success of the Group. This can mean that the interests of certain stakeholder groups in the short-term may need to be
balanced against such long-term success.
The Board view the key stakeholders and principal methods of engagement as shown in the table below. In all cases, the level of
engagement informs the Board, both in relation to stakeholder concerns and the likely impact on decision-making. The Board uses its
monthly board meetings as a mechanism to address and meet its obligations under Section 172.
Stakeholder
Group
Shareholders
How we engaged in 2020/2021
The Board engages with shareholders throughout the year through the annual and half year results, trading
updates, the Annual General Meeting, the investor roadshows and the investor pages on the iomart Group
website. Given the change of Chief Executive Officer (“CEO”) during the year there has been a higher level of
interaction with shareholders and investors away from annual and half year reporting as a number of one to
one meetings were undertaken as part of the CEO handover programme. In the current year, the Board has
adapted any methods of communication as required to comply with Covid-19 government guidance.
The Board receives detailed feedback reports via our various advisors, on views of shareholders and covering
analysts. Throughout the year we have maintained open and effective engagement with shareholders
and investors on key topics such as strategy, environmental, social and governance (“ESG”) and business
performance.
In the current year, we have used ‘Reach’, an investor communication service aimed at assisting companies to
deliver non-regulatory news, to announce the appointment of our Chief Marketing Officer (“CMO”) and our
investment in our fibre network.
Employees
Our culture defines the behaviours we expect from all our employees and helps drive our strategy of building
a high performance team. Our core values are:
·
People first – our people are at the heart of everything we do. We support them to anticipate our
customers’ needs and exceed their expectations;
· One team – we work together to achieve great things and treat each other with respect;
·
·
·
Be curious – we will always strive to improve and challenge the status quo;
Be accountable – we take ownership of what we do and how we do it. We will deliver on our promises
and are open to feedback; and
Be ambitious – we take pride in and are passionate about our work and we insist on the highest
standards from ourselves and others.
In the current year, we have reinvigorated the way in which we communicate with our employees through a
range of channels to ensure employees are informed about business strategy and developments in real-time.
We introduced the use of Yammer across the Group to connect leaders, communicators, and employees to
build communities, share knowledge (both formal and informal) and engage everyone. This social networking
tool has been popular for acknowledging new business wins, staff achievements and also promoting social
events such as quiz nights and virtual running clubs.
This year has seen wider communication by the Board to all employees through quarterly townhalls led by
our CEO to provide updates on strategy, organisational change and answer any questions put forward by
employees. Our Chairman attended the March 2021 townhall to give his views on strategy going forward
and respond to employee questions.
iomart Group plc Annual Report and Accounts 2021
20
Strategic Report - Stakeholder Engagement
Stakeholder
Group
Employees
(continued)
Customers
Suppliers and
key partners
How we engaged in 2020/2021 (continued)
The Board continues to receive monthly HR updates covering key employee matters and developments. By
maintaining a rotational schedule, which sees department heads present at Board meetings, and the sharing
of regular internal staff publications and newsletters sent to all employees, the Board is well connected to the
wider employee base.
The Group places customers at the heart of our business and strategy and has continued to focus on this
ethos throughout the Covid-19 pandemic to ensure we support our customers. All our teams are focused on
regular communication with customers to ensure we fulfil our customers’ product and service requirements
and to deliver excellent customer service. We ensure that our customers have the opportunity to speak
to their support team, account manager or a member of senior management throughout each stage of
their customer journey with iomart. For more details on how the Group engages with customers, see the
Directors’ report on page 46.
Open and honest engagement and relationships with our suppliers and subcontractors is critical to the
delivery of our business model and long-term strategy. The Group has a number of key strategic partners
that we engage with to support delivery of our business in a number of key areas including IT infrastructure
and communication products and services, software, provision of power and our landlords on leased property.
Our teams and employees interact with our strategic partners and all other suppliers on a regular basis to
strengthen trading relationships and to ensure that the supply chain function continues to operate well to
support the business.
The CEO and CFO continue to engage with a number of key strategic partners to ensure we monitor the
quality of our suppliers to optimise operational efficiency, ensure we receive the best level of service and
continue to contract on favourable terms to support the business. For more details on how the Group
engages with suppliers, see the Directors’ report on page 46.
Environment
The Group recognises the environmental impacts arising from our business activities and is committed to
reducing these through effective environmental management. The Group operates a number of data centres
throughout the UK and we operate our data centres in a way intended to reduce the impact on our local
environment, including the usage of energy and carbon dioxide emissions.
The Board receive updates on compliance with ISO standards, environmental and energy efficiency
management policies and updates on improvement activities through the monthly Board pack.
iomart Group plc Annual Report and Accounts 2021
21
Strategic Report - Stakeholder Engagement
The following table covers the key decisions made during the year and the stakeholder group(s) impacted by these decisions.
Key Stakeholder
Group’s
impacted
Shareholders,
Employees,
Customers,
Suppliers,
Environment
Key Impact
Key decisions made
Long term
strategy and
performance
of the Group
During the year, the Board has challenged and approved the Group’s long-term strategic
plan for the next five years. This strategic planning was led by Reece Donovan, the new
CEO, which provided a fresh view of the market opportunities and priorities for the
business. A Capital Markets Day was undertaken on 5 May 2021 in which the Group’s
strategic plans were presented to shareholders and investors. The Group Strategy is
outlined in the CEO’s report on pages 8 and 9. In reviewing the strategic plan, the Board
considered the potential impact that the Group’s growth plans might have on its key
stakeholders to ensure that there was a healthy balance between growth, shareholder
returns, internal and external factors and wider stakeholder considerations.
In addition to approving the strategic plan, the Board approved the Group’s 2021/22
financial budget and forecasts to 2026. The budget was developed by the Executive team
through a detailed bottom-up approach to set annual targets taking into consideration
the strategic plan and any specific priorities and challenges faced by the Group. The
Board considered the potential impact on our key stakeholders to ensure that the budget
achieved a responsible balance between operating performance and short and long-term
considerations that matter to our key stakeholders.
The Board reviews the Nomination Committees assessment of the current and future
composition of the Board, with a focus on diversity, skills and succession planning. The
Board approved the appointment of Reece Donovan as CEO and the previous CEO
stepping into a Non-Executive Director role. There were some changes made to the
internal organisation in the year and, in particular, the CEO direct reporting lines. These
changes included the appointment of a new CMO and COO to strengthen the Executive
team and our relationships with our key stakeholders.
The Board continues to monitor the trading performance of the Group, on a monthly
basis, through detailed Board reports provided by the CFO covering trading in the month
and year to date, with performance monitored against budget and the previous financial
year. In addition, at each Board meeting, the Board also receives detailed Board reports
covering commercial, operational and HR matters prepared by senior managers of the
business. These reports cover sales and forecast pipeline, customers and suppliers, data
centre activity and various aspects of operational performance, compliance with ISO
requirements and key employee activity.
In the current year, the Board engaged a third party to perform an external market
assessment to understand in more detail the market dynamics that iomart operates in and
the impact this may have on the strategic plan.
iomart Group plc Annual Report and Accounts 2021
22
Key
Stakeholder
Group’s
impacted
Shareholders,
Employees,
Customers,
Suppliers
Strategic Report - Stakeholder Engagement
Key Impact
Key decisions made
Response to
Covid-19
During the year, the Board has focused widely on the impact of Covid-19 to ensure that
all employees are safe and supported; to ensure that the business continues to operate to
the highest standards for the benefit of all stakeholders; and to protect and enhance the
long-term future of the business. The Board has made decisions which have responded to
the best interests of our key stakeholders whilst ensuring a balance between short-term
financial impact and longer-term business resilience.
A detailed customer risk assessment was undertaken by the CFO, supported by the
management team. Whilst that did not identify any material concerns across our
customer base, the Board sanctioned the decision to support some SME customers
through extended payment terms to help them manage the financial impact the pandemic
had on their working capital.
A review of the supply chain of the Group and our main suppliers including IT infrastructure,
communication products and services and power was conducted in the year to ensure we
can continue to deliver on our business model throughout the pandemic. The Board
made the decision to continue to pay suppliers under their normal payment cycles. No
other material decisions were made in respect of any changes needed to our supply chain
as a result of Covid-19.
There has continued to be a clear focus on monitoring of cash flow and strong cash
management with monthly reporting to the Board. The Board took the decision not to
apply for financial support through the government’s furlough scheme and to continue to
support a small number of employees whose roles are not currently required.
In addition, the Company has focused on ensuring the health and wellbeing of our
employees to ensure we support our employees throughout the Covid-19 pandemic and
the Board have supported a number of key initiatives including:
·
·
An employee assistance programme has been launched in the year with a third
party provider, Health Assured, offering free counselling support available 24/7
for all employees and their families;
All employees have been given access to Health Assured’s ‘My Healthy
Advantage’ phone app giving access to, among other things, mindfulness videos,
mini health checks, health coaching and healthy eating guidance.
· We are delighted to be working in partnership with a charity, Mindapples, as
part of our employee wellbeing programme. Mindapples help to improve mental
health and help people take better care of their minds improving resilience and
productivity. During the year Mindapples has delivered sessions to our staff
and managers including ‘feed your mind’ and ‘get motivated’ sessions to support
staff wellbeing which will continue through the coming year.
As noted in the CEO’s report on page 8, Principal Risks and Uncertainties on page 18 and
the Corporate Governance report on page 34, the Board has continued throughout the
year to formally consider the ongoing risks as a result of Covid-19 on the business and
our key stakeholders.
23
iomart Group plc Annual Report and Accounts 2021
Strategic Report - Stakeholder Engagement
Key Impact
Key decisions made
Financing
and capital
spend
The Board approves major capital expenditure in excess of £1m to support the capital
investment in our infrastructure and data centres. In the current year, the Group has
invested almost £2m in next generation core routing technology, which will provide
100GB capacity on its network with the ability to scale to 400GB. As a result, iomart
customers will benefit from faster, even more reliable connections to support their data
and applications.
The Board approves the terms and conditions of the Group’s multi revolving credit facility.
As part of the monthly Board report, the board receives monthly reporting on compliance
with bank covenants.
The Board reviews the dividend policy and approves the interim and annual dividends
taking into account the results and financial position of the Group, including the impact of
Covid-19.
Key
Stakeholder
Group’s
impacted
Shareholders,
Customers
Employees
and culture
The Board seeks to ensure that the Group’s staff policies and processes are aligned
with the Company’s core values and promote the long-term strategy of the Group. In
addition, the Board continues to make decisions that encourage improvements in systems,
processes and benefits which impact our employees.
Shareholders,
Employees
During the year, we completed an employee survey with 80% completion rate to help
understand employee views on working from home and the new mode of operations
and to obtain feedback on future ways of working. In addition, we held a number of staff
engagement workshops with various levels of staff. The purpose of both these interactions
was to encourage engagement and feedback across the organisation and drive cultural
alignment with our new core values. In addition, it ensures areas of importance highlighted
by employees are considered and reflected in future decisions and communications. The
results of our interaction with employees were reviewed by the Executive team and the
Board to develop actions and resulted in the launch of a number of initiatives which are
discussed above in our response to Covid-19 and also noted below.
In the current year, as staff continue to work at home due to Covid-19, the Board approved
the formal introduction of a flexible working hours regime to give staff greater flexibility
to suit their needs.
In addition, in the current year a new performance management system was launched to
enhance career development. The launch of this new system has been accompanied by
‘managing agile performance’ workshops held with all managers and staff to support and
encourage staff to take ownership for their careers.
During the year, the Remuneration Committee, after receiving input from professional
advisors, has continued to make recommendations to the Board on the remuneration
packages, including annual bonuses and salary review, for the Executive Directors and
long-term incentive plans.
iomart Group plc Annual Report and Accounts 2021
24
Key
Stakeholder
Group’s
impacted
Shareholders,
Employees,
Customers,
Suppliers,
Environment
Strategic Report - Stakeholder Engagement
Key Impact
Key decisions made
Governance,
regulatory
requirements
and risk
The Board reviews and approves the results announcements and trading updates, the
half year report and annual report and the AGM statement. The Board receives regular
briefings from the Chairman, CEO and CFO and the Group’s brokers and public relations
advisers.
Through the half year and annual year end results process and the investor roadshows, the
Board are in communication with analysts and advisors to help understand shareholder
views which contributes to the Group’s strategy and decision making. The CFO presents
investor feedback results from the roadshows to the Board. A range of corporate
information (including Group announcements) are available to all shareholders, investors
and the public on the Group website www.iomart.com/investors.
Following feedback from shareholders and with the benefit of an updated strategy, the
Board decided to host a Capital Markets Day on 5 May 2021.
The Board takes regulatory responsibilities seriously and is committed to ensuring
that it is open and transparent with regulators. In the current year, the Board met with
our nominated adviser to obtain an update on changes to AIM rules and market abuse
regulations to ensure iomart’s compliance with requirements. In addition, on 2 September
2020, the Board appointed Investec Bank plc as Joint Broker alongside Peel Hunt LLP to
open up an additional channel to the investment community.
The Board undertakes a formal and rigorous evaluation of its own performance annually
and that of its Committees and individual Directors. As noted in our Corporate Governance
report on page 32, an internal evaluation of the Board was completed in February 2021.
In the current year, the Group has refreshed the internal control framework and the Group
risk register and presented this to the Board for approval. This refresh involved bringing
together the Executive team to reassess the Group’s key risks and update the current
assessment of controls and improvement actions required in respect of each major risk
identified. In addition to this, the Board ensured they were fully informed on the impact of
Brexit on the Group during the year through the presentation of a detailed assessment of
key risks and implications for the Group by the CFO.
25
iomart Group plc Annual Report and Accounts 2021
Strategic Report - Stakeholder Engagement
Key Impact
Key decisions made
Key
Stakeholder
Group’s
impacted
Environment
Environmental, social and governance (“ESG”) was a topic with greater engagement when
we met with shareholders during the year. The Board is committed to demonstrating clear
environmental and social policies and to minimise the impact of our business operations on
the local environment.
Employees,
Customers,
Suppliers,
Environment
The Company participates in the Energy Saving Opportunities Scheme (ESOS) and meets
the requirements of the Streamlined Energy and Carbon Reporting (SECR) regulations
(see pages 46 and 47 for our SECR reporting and details on our energy efficiency actions
in the year). The Board receive regular management reports on energy performance and
outputs of our data centres to demonstrate our commitment to ESOS and SECR and is
committed to developing the reporting of emissions across the Group with the intention
to further improve environmental performance of our key data centre locations. In the
prior year the Board approved the replacement of the cooling system at our London data
centre to improve energy efficiency which has been substantially completed in the current
year. In addition, LED lighting has been installed in key data centres to improve energy
efficiency.
The Board approved the commitment to procurement of Renewable Energy Guarantee of
Origin (“REGO”) certificates for our green energy procurement. Schneider Electric, our
appointed energy management company, continues to support the Board in development
of an appropriate renewable energy and carbon strategy.
The Strategic Report on pages 6 to 26 has been approved by the Board and is signed on its behalf:
Scott Cunningham
Chief Financial Offi cer
15 June 2021
iomart Group plc Annual Report and Accounts 2021
26
Board of Directors
Reece
Donovan
Chief Executive Officer
Scott
Cunningham
Chief Financial Officer
Date of appointment
October 2020
Date of appointment
September 2018
Ian
Steele
Non-Executive Chairman
Date of appointment
June 2016 (appointed Chairman
August 2018)
Background and experience
Reece has over 23
years'
experience in the technology and
telecommunication industries, with
a demonstrable track record of
achievement in roles both in the UK
and internationally. Reece's most
recent position, prior to joining
iomart, was Chief Executive Officer
at Nomad Digital, a provider of IP
connectivity and digital solutions
to the global transportation sector.
Previous positions include Senior
Vice-President Global Services
for CSG International, a provider
of software solutions to over 400
customers located in 120 countries
and a number of management
and operational roles across the
technology,
communications
and consumer packaged goods
industries at Steria plc, Xansa plc
and Druid plc.
Background and experience
Scott is a chartered accountant
having trained with Arthur Andersen
where he became a senior manager
providing audit and transaction
support services to both public and
private companies. Leaving Arthur
Andersen in 2001 Scott joined
Clyde Blowers and performed a
number of roles including Group
Financial Controller for the Clyde
Bergemann Power Group from
2003 to 2006. He became Director
of Corporate Finance and Company
Secretary for AIM listed InterBulk
Group plc in February 2006 and
in April 2007 Scott became Group
Finance Director for
InterBulk
Group plc until it was successfully
sold to Den Hartogh in March 2016.
Immediately prior to joining iomart
he was an Investment Director at
Clyde Blowers Capital.
and
Remuneration
Committee Membership
Audit,
Nomination (Chair)
Background and experience
Ian is a chartered accountant with
over 35 years’ experience in the
corporate finance and advisory
sector. During a 16-year career with
Deloitte LLP, Ian undertook roles
within corporate finance and global
advisory services. In his final eight
years before leaving Deloitte LLP in
2015, Ian sat on the UK board and
fulfilled the role of senior partner
for Scotland and Northern Ireland,
as well as Head of Global Advisory
Services for the Firm.
Ian took over the Chairmanship of
iomart in August 2018.
External appointments
Ian is a Non-Executive Director of
STV Group plc and a member of the
Advisory Board of Visible Capital
Limited. He is also a member of
the Constitutional Panel of The
Institute of Chartered Accountants
of Scotland.
27
iomart Group plc Annual Report and Accounts 2021
Board of Directors
Angus
MacSween
Non-Executive Director
Date of appointment
March 2000
Executive Director October 2020)
(appointed Non-
Background and experience
Angus founded iomart in December
1998 following 15 years spent
creating and selling businesses in
the telephony and internet sector.
In 1984, after a short service
commission
in the Royal Navy,
Angus started his first business
telephone systems. He
selling
then grew and sold five profitable
businesses – including Prestel, an
online information division of BT,
which he turned into one of the
UK’s first internet service providers.
Following the sale of Teledata
Limited, the UK’s leading telephone
information services company, to
Scottish Telecom plc, Angus then
spent two years on the executive of
Scottish Telecom plc where he was
responsible for the development
of the company's internet division.
Angus was Chief Executive Officer
until he retired on 1 October
2020 and was appointed as a Non-
Executive Director on the same day.
Richard
Masters
Non-Executive Director
Karyn
Lamont
Non-Executive Director
Date of appointment
June 2017
Date of appointment
February 2019
Committee Membership
Audit, Remuneration (Chair) and
Nomination
Background and experience
Richard has over 30 years’
experience in the legal profession
and was managing partner of
McGrigors LLP until April 2012
when it merged with Pinsent Masons
LLP. He sat on the main board of
Pinsent Masons until March 2017
and has held a number of roles in
the business including corporate
finance advisory services. He served
as Head of Client Operations for
Pinsent Masons for three years
post-merger before being appointed
as Executive Chairman of Complete
Electronic Risk Compliance Limited,
a Pinsent Masons LLP subsidiary
which was sold to Dow Jones in
February 2018. Richard was Chair
of Scotland and Northern Ireland
for Pinsent Masons from September
2017 until October 2019 when he
retired.
Committee Membership
Audit (Chair), Remuneration and
Nomination
Background and experience
Karyn is a chartered accountant
and
former audit partner at
PricewaterhouseCoopers LLP. She
has over 25 years of experience,
13 years as an audit partner, and
provided audit and other services
to a range of clients across the UK's
financial services sector, including
outsourcing providers. Her specialist
knowledge
financial
reporting, audit and controls,
risk management,
regulatory
compliance and governance. Karyn
left PricewaterhouseCoopers LLP
in 2016.
External appointments
Karyn is a Non-Executive Director,
and Audit Committee Chair, for
The Scottish Investment Trust plc,
Scottish Building Society, North
American Income Trust plc and
Scottish American Investment Trust
plc.
includes
iomart Group plc Annual Report and Accounts 2021
28
Corporate Governance Report
On behalf of the Board, I am pleased to present our Corporate Governance report for the year ended 31 March 2021. As Chairman of
the Board, I am responsible for ensuring that the Board operates effectively and that it continues to uphold a high standard of corporate
governance with strong procedures and policies that are considered appropriate to the nature and size of the Group. The Board
understands the importance of ensuring that there is a strong governance framework in place which underpins the Group’s ability to
achieve its strategic goals and aims to continually improve our processes and risk management to support the continued growth of the
Company. The Board reviews governance arrangements on an ongoing basis to ensure that they remain fit for purpose and that our
governance model continues to support our business.
In FY19, the Company adopted the provisions of the Quoted Companies Alliance (“QCA”) Corporate Governance code. The Company
continues to adopt the QCA code and this report describes our approach to governance and how the principles of the QCA code have
been fully complied with during the year. Our statement of compliance, required for AIM companies, can also be found on our website
at www.iomart.com/investors/corporate-governance.
Stakeholder engagement
Engagement with our stakeholders is critical to the long-term success of the Group and it is my role to manage the Board in the
best interests of the Group’s many stakeholders and be responsible for ensuring the Board’s integrity and effectiveness. The Board
recognises its responsibility to take into consideration the needs and concerns of all our stakeholders as part of our discussion and
decision-making process and remains committed to strengthening business relationships.
The Board has iomart’s environmental, social and governance (“ESG”) performance at the forefront of its agenda. We welcome the
recent QCA Practical Guide to ESG issued in April 2021 and will use this to support continued improvement within each of the three
areas. Our reporting on ESG performance in the current year is covered in this Corporate Governance report, the Stakeholder
Engagement report on pages 20 to 26 and the Directors report (including our Streamlined Carbon Energy Reporting) on pages 46 to 48.
A culture of strong corporate governance is essential to our future growth and I am confident that our approach to governance provides
a robust framework to support the achievement of our strategic plan.
Ian Steele
Non-Executive Chairman
15 June 2021
29
iomart Group plc Annual Report and Accounts 2021
Corporate Governance Report
The Board
Role of the Board
The Board’s principal role is to provide effective leadership of the Group and establish and align the Group’s values, strategic plans and
culture. The strategic report describes the business model on page 14 and explains the basis on which the Group generates value, and
the long-term strategy of the Group is outlined on pages 8 and 9.
It is the Board’s role to ensure that the Group is managed for the long-term benefit of all its stakeholders and is responsible for
delivering shareholder value by developing the Group’s strategic plans. The Board ensures that obligations to all key stakeholders are
met and that effective and efficient decision making is made incorporating the needs of our many stakeholders to drive and deliver its
strategy in the best interest of all the Group’s stakeholders.
The Board is responsible for overseeing the Group’s external financial and other reporting and for ensuring that a robust framework of
governance and controls exist which allow for the identification, assessment and management of internal controls and risk management
to support the continued growth of the business.
There is an approved formal schedule of matters reserved for the Board which includes, but is not limited to:
·
·
·
·
·
·
approval of strategic plans, annual financial budgets and business plans;
approval of material acquisitions, contracts, acquisition of major capital expenditure and disposal of major assets;
changes relating to the Group’s structure and shares;
approval of the annual report and interim financial statements, trading statements, preliminary announcements and
accounting policies;
approving any significant funding facilities; and
approval of the dividend policy.
The Board meets regularly, usually monthly, to discuss and agree on the various matters brought before it, including the trading results.
Information of a sufficient quality is supplied to the Board in a timely manner. 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.
Board Structure and division of responsibilities
The Group is led by a strong and experienced Board of Directors which brings depth and diversity of expertise to the leadership of the
Group. The Board has an appropriate balance of skills, experience and knowledge of the Group and its market to enable it to discharge
its duties and responsibilities effectively. The Board recognises that to remain effective it must keep the composition of the Board under
review to continue to ensure the right mix of skills and business experience to support the effective functioning of the Board, helping to
ensure matters are fully debated and that no individual or group dominates the Board decision-making process.
Following the appointment of Reece Donovan as Chief Executive Officer and Angus MacSween as Non-Executive Director, the Board
now has six members, comprising two Executive Directors being the Chief Executive Officer and Chief Financial Officer, the Non-
Executive Chairman and three Non-Executive Directors. Board biographies of all Board members giving details of their experience are
included on pages 27 and 28.
The responsibilities of the roles within the Board are set out below:
Chairman
The Chairman is responsible for the leadership and effectiveness of the Board and overall running of the Board, ensuring that all
Directors receive sufficient and relevant information prior to meetings to allow independent judgement and bring effective challenge
to decision making. The Chairman sets the Board agenda and chairs the Board meetings to encourage open and honest debate,
constructive challenge of the Executive Directors and facilitate effective contribution of Non-Executive Directors. There is clear
division of responsibility between the Chairman and Chief Executive Officer. The Chairman provides challenge to the Executive
Directors and works closely with the Chief Executive Officer on key strategic decisions. The Chairman maintains and supports
appropriate communication channels with shareholders as appropriate.
iomart Group plc Annual Report and Accounts 2021
30
Corporate Governance Report
Chief Executive Officer and Chief Financial Officer
The Chief Executive Officer’s responsibility is the leadership, management and overall control of the Group. Once the Board has
approved the strategic plan and financial objectives, 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 Executive Committee which comprises the Chief Financial Officer and
senior executives who manage the day-to-day operation of the Group’s business.
The Chief Executive Officer is responsible for the running of the business and, along with the Chief Financial Officer, is responsible for
the day to day financial and operational management of the Group in addition to approving budgets, monitoring the Group’s principal
risks and maintaining close contact with all key stakeholders. The Chief Executive Officer and Chief Financial Officer are supported by
a highly committed and experienced senior management team, with the qualifications and experience necessary to run the Group and
are responsible for monitoring the performance of the senior management team.
Overall, there is a clear division of responsibilities between the running of the Board and the Executives responsible for delivering on
the Group’s strategic plan, to ensure that no one person has unrestricted powers of decision.
Independent Non-Executive Directors
The Non-Executive Directors provide independent, constructive challenge to the Executive Directors and are responsible for bringing
independent judgement and scrutiny to decisions taken by the Board. They strengthen governance through being members of the
various Board Committees and help ensure that the Group’s strategy is delivered within the Group’s risk framework and internal control
environment.
Company Secretary
The Company Secretary supports the Chairman and Chief Executive Officer on all matters of governance and is available to all Directors
for advice and support. The Company Secretary is responsible to the Board for ensuring the Board procedures are properly complied
with and that the discussions and decisions are appropriately minuted.
The Chairman and Non-Executive Directors hold other Directorships, as detailed in the Board biographies set out on pages 27 and 28.
The Board has considered the associated commitments do not detract from their ability to discharge their responsibilities effectively.
Independence
At the year end, the Board considers that all Non-Executive Directors serving are independent with the exception of Angus MacSween.
Angus MacSween was appointed as a Non-Executive Director to the Board on 1 October 2020 after resigning as CEO and was not
appointed to any of the Board’s committees. This has created a period where the Board is split equally in number terms between
independent and non-independent Directors, although the Chairman’s casting vote, if required, ensured independence, but this period
allows for an appropriate and effective handover of the executive leadership of the business.
The Board is satisfied with the balance between Executive and independent Non-Executive Directors which operated throughout
the year. Further to the announcement made last September, it is now expected that Angus MacSween will extend his Non-Executive
involvement beyond the initial expected 12 months from 1 October 2020, given the value he continues to add to the Board. In addition,
the Board is seeking to appoint a fourth independent Non-Executive Director to add additional sector skills to support our execution of
the refreshed medium term strategic plan.
31
iomart Group plc Annual Report and Accounts 2021
Corporate Governance Report
Composition of and Appointments to the Board
The composition of the Board ensures an appropriate balance of Executive and Non-Executive Directors and when appointing new
Directors to the Board there are formal, rigorous and transparent procedures in place to ensure 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
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.
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 in relation to changes in legislation and regulation
relevant to the Group’s business are provided to the Board by the Company Secretary, Chief Financial Officer and through the Board
Committees.
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 members. New Directors are provided with an induction
in order to introduce them to the operations and management of the business.
Board Evaluation
The Board, led by the Chairman, undertakes a formal and rigorous evaluation of its own performance annually and that of its
Committees and individual directors to identify areas for improvement. Each year a formal evaluation is conducted by means of a
detailed questionnaire which is completed by each Director. The results of this process are collated by the Chairman and discussed by
the Board collectively. The annual evaluation includes a review of the performance of individual Directors, including the Chairman, and
the Board Committees. The most recent evaluation during the year concluded that the Board and the relevant Committee performance
had been satisfactory. There are no outstanding actions from this year’s process. The Board intend to review the Board evaluation
process in the coming year.
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:
Reece Donovan – Chief Executive Officer*
Scott Cunningham – Chief Financial Officer
Ian Steele – Non-Executive Chairman
Richard Masters – Non-Executive Director
Karyn Lamont – Non-Executive Director
Angus MacSween – Non-Executive Director
Board
10 (10)
10 (10)
10 (10)
10 (10)
10 (10)
10 (10)
Remuneration
Committee
Audit
Committee
Nomination
Committee
-
-
4 (4)
4 (4)
4 (4)
-
-
-
3 (3)
3 (3)
3 (3)
-
-
-
3 (3)
3 (3)
3 (3)
-
*Reece Donovan joined the Board in March 2020 as COO and was appointed as CEO in October 2020.
Figures in brackets indicate the maximum number of meetings in 2020/2021 for which the individual was a Board or Committee member.
In advance of all Board meetings the Directors are supplied with detailed and comprehensive board papers covering the Group’s
financial and operational performance. Where any Board member has been unable to attend Board or Committee meetings, their input
has been provided to the Company Secretary or Chief Financial Officer ahead of the meeting. The relevant Chairman then provides a
detailed briefing along with the minutes of the meeting following its conclusion.
iomart Group plc Annual Report and Accounts 2021
32
Corporate Governance Report
Board Committees
The Board has established three committees to deal with specific aspects of the Board’s affairs: Remuneration, Nomination and Audit
Committees. Each Committee has formal terms of reference which were approved by the Board and can be found in the investor
section of the Group’s website. The effectiveness of all Committees is reviewed as part of the Board evaluation exercise.
The Remuneration Committee
The Remuneration Committee is chaired by Richard Masters. Its other members are Ian Steele and Karyn Lamont.
The Executive Directors may be invited to attend meetings, where appropriate, except where matters under review by the Committee
relate to them.
The Remuneration Committee oversees the Group’s remuneration policy, strategy and implementation and is responsible for reviewing
and making recommendations to the Board on the total remuneration packages of the Executive Directors which includes:
· making recommendations to the Board on the Group’s policy on Directors’ remuneration and 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 Group;
ensuring that remuneration is in line with current industry practice; and
reporting to the Board on all matters within its duties and responsibilities.
The Nomination Committee
The Nomination Committee is chaired by Ian Steele. Its other members are Richard Masters and Karyn Lamont.
The Nomination Committee considers the selection and re-appointment of Directors. Its terms of reference include:
·
·
·
·
·
reviewing the structure and composition of the Board;
identifying and nominating for approval candidates to fill Board vacancies;
evaluating the balance of skills, knowledge experience and diversity of the Board;
review results of the Board performance evaluation process; and
reporting to the Board on all matters within its duties and responsibilities.
In the current year, the Nomination Committee was responsible for recommending the appointment of Reece Donovan as Chief
Executive Officer and Angus MacSween as Non-Executive Director.
The Audit Committee
The Audit Committee is chaired by Karyn Lamont. Its other members are Ian Steele and Richard Masters.
The Audit Committee has recent and relevant experience and is authorised by the Board to conduct any activity within its terms of
reference and to seek any information it requires from any employee.
During the year, the Audit Committee provided oversight of the financial reporting process to ensure information gives an accurate
position of the Group’s position, performance, business model and strategy. In addition, the Committee continued to oversee the risk
management and internal control systems. The Audit Committee terms of reference include reviewing and monitoring:
·
interim and annual reports, including consideration of the appropriateness of accounting policies;
· material assumptions and estimates adopted by management;
·
·
·
·
·
·
33
developments in accounting and reporting requirements;
external auditor’s plan and scope for the year end audit of the Group and its subsidiaries;
the risk management framework and risk assessment covering the systems of internal control and their effectiveness, reporting
and making 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 auditor concluding in a recommendation to the Board on the reappointment of
the auditor by shareholders at the Annual General Meeting;
non-audit fees charged by the external auditor; and
the formal engagement terms entered into with the external auditor.
iomart Group plc Annual Report and Accounts 2021
Corporate Governance Report
The Audit Committee (continued)
In addition, the Audit Committee monitors the Group’s arrangements by which staff may, in confidence, raise concerns about possible
improprieties in matters of financial reporting and other areas including an external whistleblowing service to take calls from employees.
For more details on the Group’s whistleblowing policy, see page 36.
Significant areas considered by the Audit Committee in relation to the 2021 financial statements are set out below:
Areas of estimates
Matter Considered and Role of the Committee
Impact of Covid-19
Impairment of goodwill
The Audit Committee focused on the business response to the Covid-19 pandemic and
any key areas of management judgements to ensure that:
- there was a robust review of key customers and trade receivable provisioning;
- there were strong cash management controls in place;
- there was sufficient stress testing of the Group’s financial position through a full range of
possible scenarios as part of the Group’s going concern consideration; and
- a detailed risk assessment had been undertaken and consideration of the internal control
environment had been reviewed to ensure that existing controls were appropriate and the
risk of inappropriate management override of controls would be prevented and detected.
In addition, the Audit Committee assessed the impact of Covid-19 on the year end
audit process and the ability to deliver an effective and robust audit process respecting
social distancing guidance. No material changes were required to the audit approach or
processes to support the generation of the financial statements.
Covid-19 has also been considered in relation to stakeholder engagement during the year
(see Stakeholder Engagement report on page 23) and in respect of the going concern
statement disclosed in note 2.
The Audit Committee considered the carrying value of goodwill at 31 March 2021. The
Committee reviewed the validity of cash flow projections and the significant financial
assumptions used, including the selection of appropriate discount rate and long-term
growth rates. These projections and assumptions were further challenged through
the use of sensitivity analysis. As set out in note 12 to the consolidated financial
statements, no impairments of goodwill resulted from this exercise and the Committee
did not consider that a reasonably possible change in the assumptions would cause an
impairment to be recognised.
*In the prior year, the Audit Committee considered areas of estimates in relation to business combinations being valuation of intangible
assets, fair value adjustments on acquisition and valuation of contingent consideration to be significant areas. In the current year, there
have been no acquisitions and the value of contingent consideration is £nil at 31 March 2021. Contingent consideration from the prior
year was fully settled in the current year.
At the invitation of the Committee, meetings may be attended by the Executive Directors. As appropriate, representatives of the
external auditors also attend meetings. The Chairman of the Committee also meets separately with senior management and the
external auditors. The Company Secretary is Secretary of the Audit Committee.
The Chairman of the Audit Committee reports to the subsequent meeting of the Board on the Committee’s work.
iomart Group plc Annual Report and Accounts 2021
34
Corporate Governance Report
The Audit Committee (continued)
The Audit Committee is responsible for monitoring the independence, objectivity and performance of the external auditors and for
making a recommendation to the Board regarding the appointment of external auditors. Deloitte LLP have confirmed to the Committee
that, in relation to their services to the Group, they comply with UK regulatory and professional requirements, including Ethical
Standards issued by the Auditing Practices Board and that their objectivity is not compromised.
The auditors are required each year to confirm in writing that they have complied with the independence rules of their profession
and regulations governing independence. Before Deloitte LLP takes on any engagement for other services from the Group careful
consideration is given as to whether the project could conflict with their role as auditor or impair their independence. In the year ended
31 March 2021, the only non-audit services performed by Deloitte LLP related to the interim review which is a permitted service.
Risk management and internal control
The approach to risk management and the principal risks themselves are set out on pages 18 and 19. 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.
The Board is responsible for the Group’s system of internal control and risk management and for reviewing its effectiveness alongside
the Audit Committee. The Directors have established a risk management framework and internal control environment to ensure that
an appropriate level of oversight and control is provided. The Group’s systems of risk management and internal control are designed to
help the Group meet its business objectives by appropriately managing, rather than eliminating, the risks relating to those objectives.
The controls can by their nature only provide reasonable, not absolute, assurance against material misstatement or loss.
In the current year, the Group has updated its risk management framework and risk assessment to reassess the relevant risks to the
Group in order to execute and deliver the Group’s strategy. The process involved the Board, Executive Directors and senior management
reviewing the financial, operational, market and compliance areas to identify and document significant risks, the probability of those
risks occurring, their potential impact and the plans for managing and mitigating each of the risks identified. This is principally captured
via a Group risk register and risk map. On an on-going basis, Executive Directors and senior management review the risks facing the
business, including the impact of Covid-19 on the Group, and the controls established to minimise those risks and their effectiveness in
operation. In the current year, the Board has continued to consider the risks of Covid-19 to the Group as noted in the Chief Executive
Officer’s report on page 8, Principal Risks and Uncertainties on page 18, Stakeholder Engagement report on page 23 and the Corporate
Governance report on page 34.
The key elements of the Group’s overall control framework including:
·
·
·
·
the Group’s strategic plan and annual financial budget are reviewed and approved by the Board;
financial results with comparisons to plan and forecast results are reported on monthly to the Board alongside operational
reporting and 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; and
the Group has a robust risk framework and risk assessment processes which are regularly reviewed. The Group has
extensive internal quality assurance processes in place and appropriate ISO certifications (see page 46 in the Directors’
report for details).
The Board has concluded to establish an independent audit function in the coming twelve months to further support the assurance
programme. This is likely to be primarily an out sourced function.
Stakeholder engagement
The Group recognises that long-term success is underpinned by good relations with its key stakeholders, both internal and external, and
seeks to take into account the needs of the Group’s stakeholders as it discusses matters and makes decisions. The Board considers that
the Group’s key stakeholders are its shareholders, employees, customers, suppliers and key partners and the environment. During the
year, the Board and its Directors confi rm they have acted in a way that promotes the success of iomart Group for the benefi t of its mem-
bers as a whole, and in doing so have had regard to the stakeholders and key matters set out in Section 172 of the Companies Act 2006
as disclosed in our Stakeholder Engagement report on pages 20 to 26.
35
iomart Group plc Annual Report and Accounts 2021
Corporate Governance Report
Relations with shareholders
The Group maintains a corporate website (www.iomart.com/investors) containing a wide range of information of interest to investors
including publicly available financial information and news on the Group. As noted in our Stakeholder Engagement report on page 20,
iomart is committed to listening to and communicating openly with its shareholders to ensure that the strategy, business model and
performance are communicated. The Chief Executive Officer and Chief Financial Officer have regular dialogue with shareholders and
analysts to discuss strategic and other issues including the Company’s interim and annual financial results. Following major periods of
communications, our advisers consolidate feedback, on an anonymised basis, from the relevant parties which then forms the basis of a
briefing pack for the Board to ensure awareness of shareholder opinions.
The Group engages in full and open communication with both institutional and private investors and responds promptly to all queries
received. The Group does this via investor roadshows, attending investor conferences and regular financial reporting, through the
regulatory news service (“RNS”) announcements and, in the current year, through our Capital Markets Day held in May 2021. In
conjunction with the Group’s brokers and other financial and public relations advisers all relevant news is distributed in a timely fashion
through appropriate channels to ensure shareholders are able to access material information on the Group’s progress.
The Board recognises the AGM as an important opportunity to meet shareholders and give them the opportunity to raise questions with
the Board. Details of the resolutions being proposed at the AGM can be found on the Group’s website. Shareholders are given notice of
the AGM at least 21 days prior to the meeting. The Chairman aims to ensure that the Directors, including the Non-Executive Directors,
are available at Annual General Meetings to answer questions.
Other Matters
Workforce engagement and promoting ethical business practices
In the prior year, the Group launched new core values across the Group (see our Stakeholder Engagement report on page 20) and have
continued to roll these out in the current year to embed the values in our culture.
We define corporate responsibility as ensuring that we have, or are developing sound policies, practices or programmes that address
business transparency and ethics, workplace practices and employee relationships and customer consultation. In practice our
commitment to corporate responsibility plays out in a wide variety of ways and includes our employee engagement programme, which
is designed to foster an inclusive workplace by encouraging our people to continually improve performance in this area. Key practices
include:
·
Anti-Bribery and Corruption - The Group has a zero tolerance approach to bribery and corruption and is committed to ensuring
it has appropriate processes in place to mitigate the risk of bribery and corruption. The Group has a formal business ethics
and anti-bribery policy which is outlined in our employee handbook and on our corporate website available to all staff. Staff
are required to complete appropriate training to ensure awareness of the Group’s policies and what is acceptable business
conduct and the policy on accepting gifts. On receipt of a gift of any value, staff are required to complete a gift register form
which is submitted to the Executive team for approval.
· Modern Slavery Act - The Group is committed to conducting business responsibly and ensuring that our supply chain has
ethical employment practices, working conditions and has procedures in place to prevent modern slavery or human trafficking.
The Group has an anti-slavery and human trafficking policy in place supported by internal policies and processes to ensure the
principles are adhered to. Our Modern Slavery statement, which is updated annually, details processes in place to help manage
the risks outlined by the legislation is available on the iomart website.
· Whistleblowing - We recognise the importance of all of our employees and we respect the dignity and rights of all employees
and provide 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 is committed to maintaining high ethical standards in all
areas of work and practice and has a detailed whistleblowing policy in place, outlined in the employee handbook and available
on our corporate website, for employees to access. There are various ways employees can report their concerns including
access to the Executive team and the Audit Committee and access to third party independent advice at any stage.
·
·
Data Privacy policy – The Group has a data protection policy and information security management systems in place to ensure
we have appropriate data security systems and processes in place to protect our data and are fully accredited with ISO 27001
‘Information Security Management Systems’.
Equal Opportunities - 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 our Group. The Group does not tolerate any
sexual, physical or mental harassment of its employees and we operate an equal opportunities policy that specifically
prohibits discrimination on grounds of colour, ethnic origin, gender, age, religion, political or other opinion, disability, or sexual
orientation.
iomart Group plc Annual Report and Accounts 2021
36
Corporate Governance Report
Brexit
In December 2020, a new trading arrangement was concluded between the United Kingdom and the European Union. We have
undertaken a detailed assessment of the impact of the Group, our operations and supply chain which was presented to the Board. The
Group is not exposed to any significant risks or impact as a result of the new trading agreement in place, however, we will continue to
monitor this throughout the coming year.
Re-election
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. The Articles of Association also stipulate that any new
Directors, who were not appointed at the previous AGM, automatically retire at their first AGM and, if eligible, can seek re-appointment.
Scott Cunningham, Richard Masters and Karyn Lamont will retire from office at the Company’s forthcoming AGM and stand for
re-appointment.
Going Concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out
in the Strategic Report on pages 6 to 26 including the potential impact of Covid-19. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the Chief Financial Officer’s Report on pages 13 to 17.
Note 28 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The Group has access to a £80m multi option revolving credit facility that matures on 30 September 2022 of which £8m (annually) is
available to be drawn on for general business purposes should that be required. The Directors are of the opinion that the Group can
operate within the current facility and comply with its banking covenants.
At the end of the financial year, the Group had net debt of £54.6m (2020: £57.6m) a level which the Board is comfortable with given the
strong cash generation of the Group. The Group has considerable financial resources together with long-term contracts with a number
of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Group is
well placed to manage its business risks.
The Directors have considered the Group budgets and the cash flow forecasts for the next three financial years, and associated risks,
including the continued impact of Covid-19, and the availability of bank and leasing facilities. We have run appropriate scenario and
stress tests applying reasonable downside sensitivities and are confident we have the resources to meet our liabilities as they fall due.
After making enquiries, the Directors have a reasonable expectation that the Group will be able to meet its financial obligations and has
adequate resources to continue in operational existence for the foreseeable future (being a period extending at least twelve months
from the date of approval of these financial statements). For this reason they continue to adopt the going concern basis in preparing
the financial statements.
AIM Rule Compliance Report
iomart Group plc is quoted on AIM and as a result the Group 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 Group’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 Group 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.
37
iomart Group plc Annual Report and Accounts 2021
Report of the board to the members on directors' remuneration
Directors’ Remuneration Report for the year ended 31 March 2021
On behalf of the Board, I am pleased to present the Directors’ Remuneration Report for the year ended 31 March 2021 which sets out
our Directors’ Remuneration policy and provides details of amounts earned by Directors in respect of the year ended 31 March 2021.
In framing its remuneration policy the Remuneration Committee has adopted the Quoted Companies Alliance (“QCA”) Remuneration
Code for Small and Mid-sized Quoted Companies to ensure that our remuneration policy both reflects our strategy and is aligned with
the QCA Remuneration code and shareholders’ interests.
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 2018 (“Code”) issued by the Financial Reporting Council, however, we continue to provide disclosures in addition
to that which is required by AIM Rule 19 on a voluntary basis to enable shareholders to understand and consider our remuneration
arrangements. In line with best practice, we will also voluntarily submit this report to an advisory shareholder vote at our annual general
meeting in August 2021.
Remuneration Committee
The Committee is chaired by Richard Masters. Ian Steele, Non-Executive Chairman and Karyn Lamont, Non-Executive Director are also
members of the Committee. There were no changes to the composition of the Remuneration Committee in the year. The Executive
Directors may attend meetings from time to time at the invitation of the Committee and provide information and support as requested.
Directors are not present when their own remuneration is being discussed. The Company Secretary is secretary to the Committee.
The Committee has formal terms of reference which can be found in the investor section of the Group’s website. The Committee makes
recommendations to the Board, within its terms of reference, on the remuneration and other benefits, including bonuses and share
options, of the Executive Directors.
The Committee met four times during the current year. The attendance record for those meetings is included in our Corporate
Governance report on page 32.
The Remuneration Committee determines, on behalf of the Board, the Group’s policy for executive remuneration and the individual
remuneration packages for Executive Directors. Each year, the Remuneration Committee reviews the incentive and reward packages for
the Executive Directors to ensure that they are aligned with the Group’s strategic objectives and financial performance; are appropriate
to attract, retain and motivate executive behaviour in support of the creation of shareholder value; and drive continued commitment
of executives to the Group’s success through appropriate incentive schemes. In addition, the Remuneration Committee considers the
salaries and benefits available to Executive Directors of comparable companies. During the year the Committee took independent
professional advice to ensure that the structure of the remuneration of the Executive Directors remained in line with market.
Remuneration of Executive Directors
The remuneration packages of the Executive Directors comprise the following elements:
Element
Overview of policy and structure
Opportunity
Performance measures
Base salary
· The Remuneration Committee sets
base salaries to reflect responsibilities
and the skill, knowledge and experience
of the individual taking into account
salary levels in the wider market,
including at similar sized businesses.
· Base salaries are reviewed annually.
Where appropriate the Remuneration
Committee considers independent
expert advice when setting the level of
reward packages.
· The Executive Directors do not receive
Directors’ fees.
n/a
· The Committee generally
reviews base salaries of
the Executive Directors
with effect from 1 April in
each year. This year the
decision has been taken to
leave salaries unchanged
at 1 April 2021 being :
CEO – £300,000
CFO – £224,400
Executive Directors
salary levels were also
left unchanged at 1 April
2020.
iomart Group plc Annual Report and Accounts 2021
38
Report of the board to the members on directors' remuneration
Remuneration of executive Directors (continued)
Element
Overview of policy and structure
Opportunity
Performance measures
Annual
bonus
· The Executive Directors are
eligible to receive an annual bonus
dependent on Group and individual
performance at the discretion of the
Remuneration Committee.
· Bonuses are normally paid in cash
following the year end.
· The maximum annual
bonus opportunity is
135% of base salary.
· The level of Executive Directors’
discretionary bonus payments is
determined by a number of factors
including the Group’s financial
performance, its successful
continuation of its organic and
acquisitive strategy, its continual
internal improvement programme
and the individual’s own
performance.
· For the bonus for the financial
year ended 31 March 2021 the
performance measure was based
primarily on Group adjusted
EBITDA performance, with the
above criteria taken into account by
the Committee when determining
payments.
· For achievement of target bonus of
100% of salary is paid. Executives
only receive more than 100% of
salary for performance well in
excess of target. Bonuses reduce
significantly if targets are not
achieved with generally no bonuses
payable if less than 95% of target is
achieved.
39
iomart Group plc Annual Report and Accounts 2021
Report of the board to the members on directors' remuneration
Remuneration of executive Directors (continued)
Element
Overview of policy and structure
Opportunity
Performance measures
Performance
share plan
· The Group operates a
· The maximum award
under the performance
share plan is 100% of
base salary.
performance share plan for
Executive Directors and
managers to reward, retain and
incentivise those individuals 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.
· Awards are granted in the form
of nominal cost, 1p options.
· Share options awarded will
normally vest after the third
anniversary of the date of grant.
· Participants have 10 years from
award to exercise.
· The vesting of options is subject to
the achievement of performance
conditions. Normally vesting is also
subject to continued employment.
· Performance is currently assessed
based on the achievement of
profit targets in three years set
with reference to our organic and
acquisitive growth strategy and to
ensure continued focus on driving
profit performance.
· Options awarded to Scott
Cunningham in April 2020 will vest
based on Group adjusted EBITDA
performance for the March 2023
financial year.
· Options awarded to the Reece
Donovan in April 2020 will vest
based on Group adjusted EBITDA
performance with one third based on
the March 2021 financial year, one
third on the March 2022 financial
year and one third on the March
2023 financial year. The options due
to vest by reference to the March
2021 financial year did not vest and
have lapsed.
Pension
· The Company may make
contributions towards an
individual’s personal pension
arrangements or pay an
equivalent cash allowance.
· The maximum
n/a
contributions or
allowance payable by
the Company is 10% of
basic salary.
The CFO received a
pension contribution
and the CEO received
a cash allowance in the
year ended 31 March
2021. From 1 April
2021 both the CEO and
CFO will receive a cash
allowance.
iomart Group plc Annual Report and Accounts 2021
40
Report of the board to the members on directors' remuneration
Remuneration of executive Directors (continued)
Element
Overview of policy and structure
Opportunity
Performance measures
Benefits
· The Executive Directors are entitled
n/a
n/a
to life insurance cover, death in service
benefits and to participate in the
Group’s Private Medical Insurance
scheme. Other role-appropriate
benefits may also be provided.
· The Group operates a Sharesave
scheme for all employees
including Executive Directors.
Service contracts
Executive Directors are engaged under service contracts which require the following notice periods:
Scott Cunningham
6 months
Reece Donovan
12 months
Non-Executive Directors have a 6 month notice period.
Chairman and Non-Executive Director fees
The fees paid to the Non-Executive Directors are determined by the Board. Non-Executive Directors are paid £40,000 per annum for
Board Director duties with additional fees of £5,000 per annum paid to the Audit and Remuneration Committee Chairman to reflect
the additional time required to fulfil these roles.
Non-Executive Directors are not entitled to receive any bonus or other benefits with the exception of Angus MacSween who retains
private medical insurance. Non-Executive Directors are entitled to reasonable expenses incurred in the performance of their duties.
The Chairman receives a fee of £75,000 per annum.
41
iomart Group plc Annual Report and Accounts 2021
Report of the board to the members on directors' remuneration
Directors’ Remuneration for the year ended 31 March 2021
Details of individual Director’s remuneration for the year are as follows (this information has been audited):
Bonus ³
£
Benefits
£
Pension
£
Year ended
31 March
2021
Total
£
Year ended 31
March 2020
Total
£
189,490
100,155
-
-
-
-
-
2,872
2,500
3,512
-
-
-
-
30,000
22,440
-
-
-
-
-
524,670
349,495
186,475
75,000
45,000
45,000
20,000
379,482
582,879
75,000
45,000
45,000
-
Salary or
fees
£
302,308
224,400
182,963
75,000
45,000
45,000
20,000
Executive Directors
Reece Donovan ¹
Scott Cunningham
Angus MacSween ²
Non-Executive Directors
Ian Steele
Richard Masters
Karyn Lamont
Angus MacSween ²
¹ Reece Donovan was appointed to the Board on 30 March 2020 as COO and accordingly his salary for two days of £2,308 is excluded in the prior year
disclosure in the table above and is included in the current year. On 1 October 2020, Reece was appointed as CEO.
² Angus MacSween was CEO until 1 October 2020 and was appointed as Non-Executive Director on the same date.
³ Included in Reece Donovan’s bonus was a one-off sum of £27,243 paid on his recruitment by iomart Group plc in compensation for loss of payments
from his previous employment. Excluding this amount, the bonus payable to Reece Donovan represents 40% of the maximum payable bonus. The bonus
payable to Scott Cunningham represents 33% of the maximum payable bonus.
Directors’ interests in shares
The Directors holding office at 31 March 2021 held beneficial interests in the issued share capital of the Company as shown in the
following table:
Name of Director
Angus MacSween
Scott Cunningham ¹
Reece Donovan ²
Ian Steele ³
Richard Masters
Karyn Lamont
Number of ordinary shares
At 31 March 2021
At 1 April 2020
17,003,409
13,000
3,250
10,000
6,000
nil
17,003,409
8,000
nil
nil
6,000
nil
¹ On 10 February 2021, Scott Cunningham’s spouse purchased 5,000 shares at a price of 318.0p taking total shareholding to 13,000 shares.
² On 3 December 2020, Reece Donovan purchased 3,250 shares each at a price of 315.0p.
³ On 29 October 2020, Ian Steele purchased 10,000 shares each at a price of 309.5p
Share price
The market price of the Company’s shares at the end of the financial year was 313.0p (2020: 270.0p) and the range of prices during the
year was between 279.0p (2020: 229.0p) and 375.0p (2020: 405.0p).
iomart Group plc Annual Report and Accounts 2021
42
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 2021 in options over the ordinary shares of the Company were as follows:
Name of
Director
Reece
Donovan,
Executive
Director
Scott
Cunningham,
Executive
Director
Angus
MacSween,
Non-
Executive
Director
At 1 April
2020
Exercised
Granted
Lapsed
At 31 March
2021
Exercise
price
Date of
Grant
Date from
which
exercisable
Expiry date
-
-
-
-
-
31,687
54,321
54,321
64,669
-
-
204,998
113,334
113,333
113,333
117,480
175,575
134,281
129,848
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3,560
(3,560)
107,674
2,777
115,999
-
-
-
-
-
107,143
(107,143)
107,143
107,143
6,521
-
-
-
-
107,143
107,143
1p
1p
1p
06/04/2020
06/04/2023
06/04/2030
06/04/2020
06/04/2023
06/04/2030
06/04/2020
06/04/2023
06/04/2030
6,521
276.0p
04/09/2020
01/10/2023
31/03/2024
327,950
(107,143)
220,807
-
-
-
-
80,143
6,521
-
-
(54,321)
-
-
-
31,687
54,321
-
64,669
80,143
1p
1p
1p
1p
1p
04/09/2018
04/09/2021
04/09/2028
04/09/2018
04/09/2021
04/09/2028
04/09/2018
04/09/2021
04/09/2028
09/05/2019
09/05/2022
09/05/2029
06/04/2020
06/04/2023
06/04/2030
6,521
276.0p
04/09/2020
01/10/2023
31/03/2024
86,664
(54,321)
237,341
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
113,334
113,333
113,333
117,480
175,575
134,281
129,848
1p
1p
1p
1p
1p
1p
1p
27/03/2013
31/05/2014
27/03/2023
27/03/2013
31/05/2015
27/03/2023
27/03/2013
31/05/2016
27/03/2023
25/09/2014
25/09/2017
25/09/2024
28/08/2015
28/08/2018
28/08/2025
01/04/2016
01/04/2019
01/04/2026
12/04/2017
12/04/2020
12/04/2027
-
252.8p
18/08/2017
01/10/2020
31/03/2021
(35,532)
72,142
1p
04/04/2018
04/04/2021
04/04/2028
-
-
2,777
324.0p
01/11/2018
01/11/2021
31/03/2022
115,999
65,344
1p
1p
09/05/2019
09/05/2022
09/05/2029
06/04/2020
06/04/2023
06/04/2030
130,688
(65,344)
1,127,194
(3,560)
130,688
(100,876)
1,153,446
During the year options over 532,260 ordinary shares (2020: 180,668) were granted to Directors under the unapproved share option
performance share plan with an average exercise price of 1.0p per share (2020: 1.0p per share). Options over 13,042 ordinary shares
(2020: nil) were granted to Directors under the sharesave scheme in the current year at an average exercised price of 276.0p per share.
During the year 262,340 ordinary shares under the unapproved share option scheme lapsed (2020: nil). 3,560 options were exercised
under the sharesave scheme during the year (2020: nil).
By order of the Board
Richard Masters
Chairman, Remuneration Committee
15 June 2021
43
iomart Group plc Annual Report and Accounts 2021
Director's 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 2021.
Principal activity
The principal activity of the Group is the provision of managed cloud services. The Group’s principal subsidiary undertakings are listed in
note 14 to the fi nancial statements. The Group’s registered number is SC204560.
Financial risk management objectives and policies
The Group’s financial instruments comprise cash and liquid resources, bank loans and leases together with various items such as trade
debtors and trade creditors that arise directly from its operations. The main purpose of these financial instruments is to provide finance
for the Group’s operations.
The multi option revolving credit facility of £80m is able to be used by the Group to fi nance acquisitions, capital expenditure, general
business purposes (up to a maximum of £8m each year) and for the issue of guarantees, bonds or indemnities. The facility is available
until September 2022 at which point any advances made under the multi option revolving credit facility become immediately repayable.
Each drawdown made under this facility can be for either 3 or 6 months and can either be, at the discretion of the Company, 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 multi option revolving
credit facility margin, LIBOR and the lender’s mandatory costs. The multi option revolving credit facility margin is fi xed at 1.5% (2020:
1.5%) per annum and a non-utilisation fee of 40% (2020: 40%) of the multi option revolving credit facility margin is due on any undrawn
portion of the full £80m multi option revolving credit facility. The effective interest rate for the multi option revolving credit facility in the
current year was 1.61% (2020: 2.17%).
The Group has net debt at 31 March 2021 of £54.6m (2020: £57.6m). Net debt comprises lease liabilities totalling £24.9m (2020:
£20.3m), the Group bank facility totalling £52.8m (2020: £52.8m) and cash and cash equivalent of £23.0m (2020: £15.5m).
The Group is not exposed to material movements in interest rates on its bank borrowings.
The Group has exposure to movements in the exchange rate of the US dollar as certain domain name purchases and licences 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, the Group does not use
derivative instruments. Additional information on financial instruments is included in note 28.
Dividend
The Directors declared an interim dividend for the year ended 31 March 2021 of 2.60p per share (2020: 2.60p). The Directors
recommend a final dividend for the year ended 31 March 2021 of 4.50p per share (2020: 3.93p per share). This final dividend, together
with the interim dividend, takes the total dividend to 7.10p per ordinary share for the 2021 financial year (2020: 6.53p). Subject to
shareholder approval this proposed final dividend would be payable on 3 September 2021 to shareholders on the register at close on
13 August 2021.
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.
Future developments
The Group’s business review and activities, together with the factors likely to affect its future development, performance and position
are set out in the strategic report on pages 6 to 26.
iomart Group plc Annual Report and Accounts 2021
44
Director's Report
Directors and their interests
The present membership of the Board is set out on pages 27 and 28 and the Directors who served during the year are listed on page 42.
In accordance with the Articles of Association, Scott Cunningham, Richard Masters and Karyn Lamont offer themselves for re-election
at the forthcoming annual general meeting.
Details of Directors’ interests in the Group’s shares are set out in the Report of the Board to the Members on Directors’ Remuneration
on pages 38 to 43.
Insurance for Directors and Officers
The Group may under the Company’s Articles of Association, and subject to the provisions of the Companies Act, indemnify all Directors
or other officers against liability incurred by them in the execution or discharge of their duties or exercise of their powers, including but
not limited to any liability for the costs of legal proceedings where judgement is given in their favour. This indemnity was in place during
the financial year and is ongoing up to the date of this report. In addition, the Group has purchased and maintains appropriate insurance
cover against legal action brought against Directors and officers.
Donations
It is the Group’s policy not to make donations for political purposes.
Substantial shareholdings
At 28 May 2021 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
Liontrust Asset Management
Angus MacSween
Octopus Investments
Investec Wealth & Investment
Noble Grossart Investment Limited
Employees
Shares
18,494,106
17,003,409
16,577,474
6,690,902
3,325,000
Percentage held
16.86%
15.50%
15.11%
6.10%
3.03%
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. Information on our engagement with employees in
the current year and our regard to this stakeholder on the principal decisions taken by the Company during the financial year is included
in the Stakeholder Engagement report on pages 20 to 26.
We are committed to attracting and retaining the highest level of personnel. We seek to achieve this through, amongst other things, the
application of high standards in recruitment. We are aware of the importance of good communication in relationships with staff and we
have 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 a bonus scheme. Staff are eligible to receive share options in the Company under the
Group’s performance share plan (note 25) and it is the Board’s policy to make specifi c awards as appropriate to attract and retain the best
available people. Options in respect of Directors are detailed in the Directors Remuneration Report on page 43.
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.
The Company encourages employees to support the community. In the current year, a number of employees attended a charity day to
volunteer safely as a part of a team to make improvements to a local charity food-growing project. Employees can also donate to charity
through a payroll Give as You Earn Scheme.
45
iomart Group plc Annual Report and Accounts 2021
Director's Report
Customers and suppliers
The Group seeks to be honest and fair in all relationships with customers and encourages feedback from our customers through account
managers and engagement with individual customers through customer support teams. On a regular basis we engage with customers
to obtain feedback on our performance.
The Group treats all of its suppliers with the utmost respect and seeks to be honest and fair in all relationships with them. We seek to
honour the terms and conditions of our agreements in place with such suppliers and subcontractors.
Additionally, we recognise the importance to the Group and our suppliers of complying with all payment terms and we report on a half-
yearly basis on our payment practices, policies and performances in line with the Reporting on Payment Practices and Performance
Regulations 2017.
Information on our engagement with customers and suppliers and our regard to these stakeholders on the principal decisions taken by
the Group during the fi nancial year is included in the Stakeholder Engagement report on pages 20 to 26.
Environmental Reporting
Greenhouse Gas (“GHG”) Emissions reporting
iomart seeks to minimise the impact of our operations on the environment and is committed to reducing its greenhouse gas (“GHG”)
emissions. Key sources of energy, primarily electricity to power our data centre estate, are monitored by the Group to allow us to be
continually mindful of our energy consumption. iomart applies a set of global environmental standards to all of our activities and our
environmental and energy management systems are certified to ISO 14001 and ISO 50001 (internationally accepted environmental
standards). These certifications provide a framework against which we have developed comprehensive environmental procedures and
monitoring systems. These processes have allowed us to measure our environmental performance and focus our activities on delivering
improvements.
The table below shows total energy consumption used to calculate emissions and the total gross GHG emissions in tonnes of CO2
(“tCO2e”) in the year ended 31 March 2021:
Energy consumption used to calculate emissions (kWh)
Year ended
31 March 2021
57,956,041
Year ended
31 March 2020
54,943,145
Scope 1 - Emissions from combustion of gas
Scope 1 - Emissions from combustion of fuel for transport purposes
-
-
-
-
Scope 2 - Emissions from purchased electricity (location-based)*
13,504
14,008
Scope 2 - Emissions from purchased electricity (market-based)
Scope 3 - Emissions from business travel in rental cars or employee-
owned vehicles where the company is responsible for purchasing
fuel
Total gross emissions (tCO2e)
*The prior year scope 2 emissions were 12,549 tCO2e and have been restated to 14,008 tCO2e to include acquisitions under full operational
control at 31 March 2020.
14,037
13,508
29
4
-
-
Total gross emissions (tCO2e)
Total recurring revenue (£’000)**
Year ended
31 March 2021
Year ended
31 March 2020
13,508
100,211
14,037
96,136
Carbon Intensity ratio (tCO2e/£)
**The prior year was our first reporting under SECR and we reported our carbon intensity ratio using total revenue. In the current year, we are
reporting the current year and prior year using total recurring revenue (note 3) as we believe this is a more reflective denominator and the best
indicator of our power efficiency.
0.000135
0.000146
iomart Group plc Annual Report and Accounts 2021
46
Director's Report
Greenhouse Gas (“GHG”) Emissions reporting (continued)
Methodology
There are no scope 1 direct emissions from the combustion of gas. Scope 2, indirect emissions, include consumption of purchased
electricity in kWh. Scope 3 emissions relate to business travel in employee-owned vehicles where the Company is responsible for
purchasing the fuel.
Using an operational control approach, the Group identified its population to ensure that all activities and facilities, including data
centres, are being recorded and reported in line with the mandatory GHG Protocol Corporate Accounting and Reporting Standard.
Relevant data is prepared on a monthly basis by our external energy management supplier. The validity, accuracy and completeness
of the data was checked and used to calculate the GHG emissions for the Group. Where energy consumption data was missing, we
used accepted estimation techniques by the GHG Protocol. Emissions were calculated as activity data multiplied by emission factors
(DEFRA, 2020 for all emissions and conversion factors). During the calculation of Scope 3 transport emissions, the statistics of the
Vehicle Licensing Statistics (VEH0203) was used to divide the business mileage by fuel type. The driven miles were converted into litres
with average DEFRA 2020 conversion values used.
The Group uses total recurring revenue to calculate the intensity ratio as this allows emissions to be monitored over time taking into
accounts changes in the size of the Group. This factor provides the greatest degree of accuracy and is the metric best aligned to power
usage and business growth.
Energy efficiency
The proactive management of our GHG emissions is central to iomart operations with a clear focus on controlling and reducing our
GHG and carbon footprint. The Group aims to improve energy efficiency of its operations and ensure continued compliance with ISO
50001:2011 as the basis for its energy management arrangements and has committed to:
·
setting targets and objectives for reducing energy use and maintaining an energy efficiency programme;
· managing and reducing energy use relating to our business premises;
·
·
·
·
respecting all existing, applicable environmental regulations and meeting all new applicable regulations;
setting targets in the form of energy performance indicators for electricity and energy consumption and power usage
effectiveness targets for each of our data centres;
providing training on good energy management practices and encouraging employee involvement in energy efficiency
improvement initiatives; and
the Group participates in the Energy Saving Opportunities Scheme (ESOS) with annual ESOS audits carried out throughout the
Group and is committed to meeting the requirements of the Streamlined Energy and Carbon Reporting (SECR) regulations.
Despite the Covid-19 pandemic, the Group implemented energy efficiency actions in the current year. In the prior year, the Board
approved capital spend to install upgraded cooling and main plant systems in our central London data centre and the installation of this
upgrade is currently in progress. In the current year, we have continued with a programme of installing LED lighting in our key data
centres.
The Group engages an external partner, Schneider Electric, to support our sustainability and energy efficiency programme. Schneider
Electric continues to support the Board in development of an appropriate renewable energy and carbon strategy and provide regular
updates through reports to the Executive Board to manage ongoing performance. As part of our environmental and wider sustainability
programme, in the current year, the Board approved the commitment to purchase Renewable Energy Guarantees of Origin (“REGO”)
certified renewable electricity across our UK data centre estate, effective from July 2021 for the remaining period of our current
electrical supply agreement which expires in September 2022. We will continue to focus on our environmental programme in the
coming year including working with Schneider Electric on our carbon strategy and setting appropriate carbon reduction targets.
47
iomart Group plc Annual Report and Accounts 2021
Director's Report
Greenhouse Gas (“GHG”) Emissions reporting (continued)
Energy efficiency (continued)
During the year we also started working with Katrick Technology Limited, a start-up company based in Glasgow focused on innovative
engineering technologies who have developed patented means to capture unharnessed energy within a data centre. We are pleased to
say we signed an alliance agreement in June 2021 and will begin an exploratory project with them at our Glasgow data centre later this
year.
For more detail on how the Board have had regard to the environment in key strategic decisions in the year, see our Stakeholder
Engagement report on pages 20 to 26.
Independent Auditor and disclosure of information to auditor
The Directors confirm that each of the persons who is a Director at the date of approval of this annual report confirms 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 Company’s auditor is aware of that information.
This information is given and should be interpreted in accordance with the provisions of s418 of the Companies Act 2006.
Deloitte LLP have expressed their willingness to continue in office as auditors. A resolution to reappoint them will be proposed at the
forthcoming Annual General Meeting.
By order of the Board
Andrew McDonald
Company Secretary
15 June 2021
iomart Group plc Annual Report and Accounts 2021
48
Directors' Responsibilities Statement
Th e Directors are responsible for preparing the Annual Report and the 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 are required
to prepare the group financial statements in accordance with International Financial Reporting Standards (IFRSs) in conformity with
the requirements of the Companies Act 2006 and have elected to prepare the parent company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), including FRS
101 “Reduced Disclosure Framework”. Under company law the Directors must not approve the accounts unless they are satisfied that
they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period.
In preparing the parent company financial statements, the Directors are required to:
·
select suitable accounting policies and then apply them consistently;
· make judgments and accounting estimates that are reasonable and prudent;
·
·
state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and
explained in the financial statements; and
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will
continue in business.
In preparing the group financial statements, International Accounting Standard 1 requires that Directors:
·
·
·
properly select and apply accounting policies;
present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable
information;
provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to
understand the impact of particular transactions, other events and conditions on the entity's financial position and financial
performance; and
· make an assessment of the company's ability to continue as a going concern.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company’s
transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the
financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the company and
hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s
website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Responsibility Statement
We confirm that to the best of our knowledge:
·
·
·
the financial statements, prepared in accordance with the relevant financial reporting framework, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the company and the undertakings included in the consolidation
taken as a whole;
the strategic report includes a fair review of the development and performance of the business and the position of the
company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks
and uncertainties that they face; and
the annual report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information
necessary for shareholders to assess the company’s position and performance, business model and strategy.
This responsibility statement was approved by the Board of Directors on 15 June 2021 and is signed on its behalf by:
Reece Donovan
Chief Executive Officer
15 June 2021
Scott Cunningham
Chief Financial Officer
15 June 2021
49
iomart Group plc Annual Report and Accounts 2021
Independent Auditor's Report to the Members of iomart Group Plc
Report on the audit of the financial statements
1. OPINION
In our opinion:
·
·
·
·
the financial statements of iomart Group plc (the ‘parent company’) and its subsidiaries (the ‘group’) give a true and fair view of
the state of the group’s and of the parent company’s affairs as at 31 March 2021 and of the group’s profit for the year then ended;
the group financial statements have been properly prepared in accordance with international accounting standards in conformity
with the requirement of the Companies Act 2006;
parent company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice, including Financial Reporting Standard 101 “Reduced Disclosure Framework”; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise:
·
·
·
·
·
·
the consolidated statement of comprehensive income;
the consolidated and parent company statements of financial position;
the consolidated and parent company statements of changes in equity;
the consolidated cash flow statement;
the related notes 1 to 29 for the consolidated financial statements; and
the related notes 1 to 16 for the parent company financial statements.
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law, and
international accounting standards in conformity with the requirements of the Companies Act 2006. The financial reporting framework
that has been applied in the preparation of the parent company financial statements is applicable law and United Kingdom Accounting
Standards, including FRS 101 “Reduced Disclosure Framework” ( United Kingdom Generally Accepted Accounting Practice).
2. BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s responsibilities for the audit of the financial statements section of our
report.
We are independent of the group and the parent company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
iomart Group plc Annual Report and Accounts 2021
50
Independent Auditor's Report to the Members of iomart Group Plc
3. SUMMARY OF OUR AUDIT APPROACH
Key audit matters
The key audit matter that we identified in the current year was:
·
Completeness and valuation of deferred income.
Materiality
Scoping
Significant changes in
our approach
The materiality that we used for the group financial statements was £1,164k which
was determined on the basis of 3.0% of earnings before interest, tax, depreciation and
amortisation.
Our audit covered 84% of the Group’s revenue, 89% of the Group’s profit before tax, 96% of
the Group’s net assets and 79% of the Group’s earnings before interest, tax, depreciation and
amortisation.
Our approach is consistent with the previous year with the exception of:
-
-
Business combinations: valuation and allocation of acquired intangible assets is no
longer a key audit matter on the basis there have been no business combinations in
the current year.
The impact of the Covid-19 pandemic on going concern is no longer a key audit
matter. At the date of the prior period audit report, there was significant uncertainty
in the economy as a whole. Since then, the group has traded profitably and operated
within its debt facilities such that going concern is no longer considered to be a key
audit matter.
4. CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
O ur evaluation of the directors’ assessment of the group’s and parent company’s ability to continue to adopt the going concern basis of
accounting included:
-
-
-
-
-
Testing the arithmetical accuracy of management’s going concern model;
Challenging the reasonableness of the scenarios identified based on our understanding of the business and key assumptions
used by management in determining the impact of the Covid-19 pandemic on going concern;
Assessing the headroom in the forecasts and the sensitivity analysis performed by management;
Recalculating management’s forecast covenant compliance calculations throughout the going concern period; and
Assessing the adequacy of disclosures related to the impact of the Covid-19 pandemic on going concern made in the financial
statements.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that,
individually or collectively, may cast significant doubt on the group's and parent company’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report.
51
iomart Group plc Annual Report and Accounts 2021
Independent Auditor's Report to the Members of iomart Group Plc
5. KEY AUDIT MATTERS
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
that we identified. These matters included those which had the greatest effect on the overall audit strategy, the allocation of resources
in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
5.1 Completeness and valuation of deferred income
Key audit matter
description
The Group has deferred income of £13,519k (2020: £13,427k) split between current
(£10,857k, 2020: £11,144k) and non-current (£2,662k, 2020: £2,283k) included within
trade and other payables.
How the scope of our
audit responded to the
key audit matter
A significant proportion of the Group’s activities are invoiced in advance, resulting in a material
deferred income balance being recorded in the financial statements at year-end.
Due to the high volume of customer balances being deferred and the fact that the deferral
calculation is performed across a range of systems and by a range of staff, we have determined
there is potential for fraud through a possible manipulation of this balance.
Deferred income is included within note 18 of the financial statements.
The audit procedures we performed in respect of this matter included:
·
·
·
·
·
Gaining an understanding of the process undertaken by management to calculate
deferred income, and testing of key controls within three of the full scope components;
Testing the balance through recalculating the full deferred income balance in each
entity based on contract start and end dates;
Selecting samples from the listing, agreeing the underlying amounts to customer
contracts where applicable;
Performing cut-off testing in each entity, selecting a sample of pre and post year-end
sales and evaluating whether any deferred element was calculated correctly; and
Recalculating current and non-current liability classification based on underlying
schedules.
Key observations
We concluded that the completeness and valuation of deferred income recorded in the financial
statements is appropriately stated.
iomart Group plc Annual Report and Accounts 2021
52
Independent Auditor's Report to the Members of iomart Group Plc
6. OUR APPLICATION OF MATERIALITY
6.1 Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions
of a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work
and in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
Materiality
£1,164k (2020: £1,254k)
£582k (2020: £627k)
Basis for
determining
materiality
3.0% of earnings before interest, tax, depreciation
and amortisation (2020: 3.0% of earnings before
interest, tax, depreciation and amortisation
adjusted to exclude the gain on the revaluation of
contingent consideration). In the prior year, the gain
on the revaluation of contingent consideration had
been deemed to be non-recurring in nature.
0.6% of net assets (2020: 0.6% of net assets), capped
at 50% (2020: 50%) of Group materiality.
Rationale for
the benchmark
applied
We have used EBITDA measure as the benchmark
for our determination of materiality as we consider
this to be a critical performance measure for
the Group on the basis that it is a key metric to
analysts and investors and has equal prominence to
statutory measures in the Annual Report.
We have used net assets as the benchmark for our
determination of materiality as the parent company
is not a trading entity and instead holds the Group’s
investments in subsidiaries. We consider net assets
to be the appropriate metric for such an entity.
53
iomart Group plc Annual Report and Accounts 2021
Independent Auditor's Report to the Members of iomart Group Plc
6. OUR APPLICATION OF MATERIALITY (CONTINUED)
6.2 Performance materiality
W e set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and
undetected misstatements exceed the materiality for the financial statements as a whole.
Performance
materiality
Basis and
rationale for
determining
performance
materiality
Group financial statements
Parent company financial statements
70% (2020: 60%) of Group materiality
70% (2019: 70%) of parent company materiality
In determining performance materiality we considered the following factors:
• As this is our second year of engagement and we have developed our understanding from the prior
year, we increased the % used to determine performance materiality to 70%; ‘
• Our risk assessment, including our assessment of the Group’s overall control environment
and that we consider it appropriate to rely on controls within the revenue business process
in three of the full scope components; and
• Our past experience of the audit, which has indicated a low number of corrected and
uncorrected misstatements identified in prior period.
6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £58k (2020: £63k),
as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT
7.1 Identification and scoping of components
Our Group audit was scoped by obtaining an understanding of the Group and its environment through discussion with IT and the Group
finance teams and by performing walkthroughs of processes across each of these areas, including Group-wide controls, and assessing
the risk of material misstatement at a Group level.
For components deemed significant to the Group, full scope audit procedures were performed to materiality levels applicable to each
entity, which was lower than the Group materiality level. Components deemed significant are as follows:
·
·
·
·
iomart Hosting Limited
Easyspace Limited
iomart Cloud Services Limited
Cristie Data Limited
One further entity, Bytemark Limited, was subject to specified audit procedures based on the materiality of individual balances.
The remaining non-significant components were subject to analytical reviews. Our audit work on these components was executed at
Group materiality.
At the Group level, we also tested the consolidation process.
All work was performed by the Group engagement team.
There are a number of components that were deemed to be significant in the prior year, which are non-significant in the current year.
iomart Group plc Annual Report and Accounts 2021
54
Independent Auditor's Report to the Members of iomart Group Plc
7. AN OVERVIEW OF THE SCOPE OF OUR AUDIT (CONTINUED)
7.1 Identification and scoping of components (continued)
7.2 Our consideration of the control environment
With the involvement of our IT specialists, we obtained an understanding of the relevant IT environment by performing walkthroughs
of key processes and, in some instances, performed testing on the relevant general IT controls and business cycles. We took a controls
reliance approach on the relevant controls for three of the full scope components within the revenue business process cycle.
55
iomart Group plc Annual Report and Accounts 2021
Independent Auditor's Report to the Members of iomart Group Plc
8 . OTHER INFORMATION
T he other information comprises the information included in the annual report, o ther than the financial statements and our auditor’s
report thereon. The directors are responsible for the other information contained within the annual report.
Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise
to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is
a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
9. RESPONSIBILITIES OF DIRECTORS
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the parent company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting
unless the directors either intend to liquidate the Group or the parent company or to cease operations, or have no realistic alternative
but to do so.
10. AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our ob jectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a
high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial
statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.
uk/auditorsresponsibilities. This description forms part of our auditor’s report.
iomart Group plc Annual Report and Accounts 2021
56
Independent Auditor's Report to the Members of iomart Group Plc
11. EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
Irregular ities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
11.1 Identifying and assessing potential risks related to irregularities
In identif ying and assessing risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
·
·
·
·
the nature of the industry and sector, control environment and business performance including the design of the Group’s
r emuneration policies, key drivers for directors’ remuneration, bonus levels and performance targets;
results of our enquiries of management and the Audit Committee about their own identification and assessment of the
risks of irregularities;
any matters we identified having obtained and reviewed the Group’s documentation of their policies and procedures
relating to:
·
·
·
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of
non-compliance;
detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged
fraud;
the internal controls established to mitigate risks of fraud or non-compliance with laws and regulations;
the matters discussed among the audit engagement team and relevant internal specialists, including valuations and IT
specialists regarding how and where fraud might occur in the financial statements and any potential indicators of fraud.
As a result of these procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and
identified the greatest potential for fraud in the completeness and valuation of deferred income. In common with all audits under ISAs
(UK), we are also required to perform specific procedures to respond to the risk of management override.
We also obtained an understanding of the legal and regulatory framework that the Group operates in, focusing on provisions of those
laws and regulations that had a direct effect on the determination of material amounts and disclosures in the financial statements. The
key laws and regulations we considered in this context included the UK Companies Act and tax and pension legislation.
In addition, we considered provisions of other laws and regulations that do not have a direct effect on the financial statements
but compliance with which may be fundamental to the Group’s ability to operate or to avoid a material penalty. This includes UK
Employment, Environmental Regulations and Labour Laws.
57
iomart Group plc Annual Report and Accounts 2021
Independent Auditor's Report to the Members of iomart Group Plc
11. EXTENT TO WHICH THE AUDIT WAS CONSIDERED CAPABLE OF DETECTING IRREGULARITIES, INCLUDING FRAUD
(CONTINUED)
11.2 Audit response to risks identified
As a result of performing the above, we identified completeness and valuation of deferred income as a key audit matter related to the
potential risk of fraud. T he key audit matters section of our report explains the matter in more detail and also describes the specific
procedures we performed in response to that key audit matter.
In addition to the above, our p rocedures to respond to risks identified included the following:
·
·
·
·
·
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with
provisions of relevant laws and regulations described as having a direct effect on the financial statements;
enquiring of management, the Audit Committee and external legal counsel concerning actual and potential litigation and
claims;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material
misstatement due to fraud;
reading minutes of meetings of those charged with governance and reviewing correspondence with HMRC; and
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries
and other adjustments; assessing whether the judgements made in making accounting estimates are indicative of a
potential bias; and evaluating the business rationale of any significant transactions that are unusual or outside the normal
course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
internal specialists and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
12. OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2006
In our opinion, based on the work undertaken in the course of the audit:
·
·
the information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of
the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
iomart Group plc Annual Report and Accounts 2021
58
Independent Auditor's Report to the Members of iomart Group Plc
13. MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
13.1 Adequacy of explanations received and accounting records
Und er the Companies Act 2006 we are required to report to you if, in our opinion:
·
·
·
we have not received all the information and explanations we require for our audit; or
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.
We have nothing to report in respect of these matters.
13.2 Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of directors’ remuneration have not
been made.
We have nothing to report in respect of this matter
14. USE OF OUR REPORT
Th is 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.
David Sweeney, CA (Senior Statutory Auditor)
for and on behalf of Deloitte LLP
Statutory Auditor
Glasgow
15 June 2021
59
iomart Group plc Annual Report and Accounts 2021
Consolidated Statement of Comprehensive Income - Year ended 31 March 2021
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
Gain on revaluation of contingent consideration
Finance income
Finance costs
Profit before taxation
Taxation
Note
3
2021
£’000
111,883
2020
£’000
112,581
(44,241)
(44,093)
67,642
68,488
(53,230)
(51,387)
4
14,412
17,101
25
6
4
4
4
19
7
7
41,408
(1,247)
(493)
(16,882)
(5,457)
(2,917)
33
19
(2,000)
12,464
9
(2,260)
43,510
(1,243)
(438)
(15,635)
(6,159)
(2,934)
1,856
39
(2,212)
16,784
(3,135)
13,649
Profit for the year attributable to equity holders of the parent
10,204
Other comprehensive income
Amounts which may be reclassified to profit or loss
Currency translation differences
Other comprehensive income for the year
Total comprehensive income for the year attributable to equity
holders of the parent
(94)
(94)
98
98
10,110
13,747
Basic and diluted earnings per share
Basic earnings per share
Diluted earnings per share
11
11
9.3p
9.1p
12.5p
12.2p
All of the activities of the Group are classed as continuing. The following notes form part of the financial statements.
iomart Group plc Annual Report and Accounts 2021
60
Consolidated Statement of Financial Position - As at 31 March 2021
ASSETS
Non-current assets
Intangible assets – goodwill
Intangible assets – other
Trade and other receivables
Property, plant and equipment
Deferred tax
Current assets
Cash and cash equivalents
Trade and other receivables
Current tax asset
Total assets
LIABILITIES
Non-current liabilities
Trade and other payables
Non-current borrowings
Provisions
Deferred tax
Current liabilities
Contingent consideration due on acquisitions
Trade and other payables
Current 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
Note
12
12
13
15
10
17
16
18
20
21
10
19
18
20
23
24
2021
£’000
86,479
18,101
502
77,012
138
182,232
23,038
22,979
235
46,252
2020
£’000
86,479
24,631
2,760
72,344
-
186,214
15,497
23,237
-
38,734
228,484
224,948
(2,662)
(74,221)
(2,097)
-
(78,980)
-
(29,495)
-
(3,437)
(32,932)
(2,283)
(70,109)
(1,956)
(1,146)
(75,494)
(2,480)
(31,948)
(3)
(3,029)
(37,460)
(111,912)
(112,954)
116,572
111,994
1,097
(70)
1,200
22,495
4,983
(44)
86,911
1,092
(70)
1,200
22,147
4,983
50
82,592
Total equity
116,572
111,994
These financial statements were approved by the Board of Directors and authorised for issue on 15 June 2021.
Signed on behalf of the Board of Directors
Signed on behalf of the Board of
Reece Donovan
Director and Chief Executive Officer
iomart Group plc – Company Number: SC204560
The following notes form part of the financial statements.
61
iomart Group plc Annual Report and Accounts 2021
Consolidated Statement of Cash Flows - Year ended 31 March 2021
Profit before taxation
Gain on revaluation of contingent consideration
Finance costs – net
Depreciation
Amortisation
Share-based payments
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
Proceeds received from disposal of property, plant and equipment
Development costs
Purchase of intangible assets
Proceeds received from disposal of intangible assets
Payments for current period acquisitions net of cash acquired
Contingent consideration paid
Finance income received
Net cash used in investing activities
Cash flow from financing activities
Issue of shares
Drawdown of bank loans
Repayment of lease liabilities
Repayment of bank loans
Finance costs paid
Dividends paid
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
The following notes form part of the financial statements.
Note
19
7
15
12
25
15
12
12
19
7
23
20
22
20
8
17
2021
£’000
12,464
(33)
1,981
16,882
8,374
1,247
2,516
268
43,699
(3,643)
40,056
(15,192)
260
(1,306)
(561)
73
-
(2,447)
19
(19,154)
353
1,150
(5,435)
(1,150)
(1,147)
(7,132)
(13,361)
7,541
15,497
23,038
2020
£’000
16,784
(1,856)
2,173
15,635
9,093
1,243
(1,107)
(627)
41,338
(4,719)
36,619
(14,688)
-
(1,405)
(1,065)
-
(4,156)
-
39
(21,275)
636
6,150
(4,686)
(2,000)
(1,734)
(8,282)
(9,916)
5,428
10,069
15,497
iomart Group plc Annual Report and Accounts 2021
62
Consolidated Statement of Changes in Equity - Year ended 31 March 2021
Share
capital
£’000
Own
shares
EBT
£’000
Foreign
currency
translation
reserve
£’000
Capital
redemption
reserve
£’000
Share
premium
account
£’000
Note
Merger
reserve
£’000
Retained
earnings
£’000
Total
£’000
Balance at 1 April 2019
1,085
(70)
(48)
1,200
21,518
4,983
75,729
104,397
Profit for the year
Currency translation
differences
Total comprehensive
income
Dividends – final (paid)
Dividends – interim (paid)
Share-based payments
Deferred tax on share-based
payments
Issue of share capital
Total transactions with
owners
8
8
25
10
23
-
-
-
-
-
-
-
7
7
-
-
-
-
-
-
-
-
-
-
98
98
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
629
629
-
-
-
-
-
-
-
-
-
13,649
13,649
-
98
13,649
13,747
(5,448)
(5,448)
(2,834)
(2,834)
1,243
1,243
253
-
253
636
(6,786)
(6,150)
Balance at 31 March 2020
1,092
(70)
50
1,200
22,147
4,983
82,592
111,994
Profit for the year
Currency translation
differences
Total comprehensive
income
Dividends – final (paid)
Dividends – interim (paid)
Share-based payments
Issue of share capital
Total transactions with
owners
8
8
25
23
-
-
-
-
-
-
5
5
-
-
-
-
-
-
-
-
-
(94)
(94)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
348
348
-
-
-
-
-
-
-
-
10,204
10,204
-
(94)
10,204
10,110
(4,287)
(4,287)
(2,845)
(2,845)
1,247
1,247
-
353
(5,885)
(5,532)
Balance at 31 March 2021
1,097
(70)
(44)
1,200
22,495
4,983
86,911
116,572
The nature of equity in the statement of changes in equity is disclosed in the accounting policies (note 2).
The following notes form part of the financial statements.
63
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
1. GENERAL INFORMATION
iomart Group plc is a public listed company listed on the Alternative Investment Market (“AIM”), incorporated and domiciled in the
United Kingdom and registered in Scotland under the Companies Act 2006. The address of the registered office is Lister Pavilion, Kelvin
Campus, West of Scotland Science Park, Glasgow, G20 0SP. 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 because that is the currency of the primary economic environment in
which the Group operates.
2. ACCOUNTING POLICIES
Ba sis of preparation
The consolidated financial statements have been prepared in accordance with applicable International Financial Reporting Standards
(IFRS) in conformity with the requirements of the Companies Act 2006.
The financial statements have been prepared on the historical cost basis, except for the valuation of certain financial instruments that
are measured at fair values at the end of each reporting period, as explained in the accounting policies below.
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.
Audit exemption of subsidiaries
For the year ended 31 March 2021, the following subsidiaries of the Group were entitled to exemption from audit under s479A of the
Companies Act 2006.
Subsidiary
Registered number
Bytemark Holdings Limited
Bytemark Limited
iomart Datacentres Limited
London Data Exchange Limited
LDeX Connect Limited
LDeX Group Limited
Melbourne Server Hosting Limited
Memset Limited
Netintelligence Limited
Redstation Limited
ServerSpace Limited
SimpleServers Limited
Sonassi Holding Company Limited
Sonassi Limited
Switch Media Limited
SystemsUp Limited
Tier 9 Limited
United Communications Limited
08150076
04484629
05532548
07772407
06389332
08777552
04091836
04504980
SC325326
03590745
05958069
06813119
09248696
07715859
04510647
05212115
08903379
03651923
iomart Group plc Annual Report and Accounts 2021
64
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (CONTINUED)
New and revised IFRSs in issue but not yet effective and have not been adopted by the Group
At the date of authorisation of these financial statements, the following standards, interpretations and amendments have been issued
but are not yet effective and have no material impact on the Group’s financial statements:
·
·
·
·
·
·
·
IFRS 17 - Insurance Contracts;
IFRS 10 and IAS 28 (amendments) - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture;
Amendments to IAS 1 – Classification of Liabilities as Current or Non-Current
Amendments to IFRS 3 - Definition of a business;
Amendments to IAS 16 – Property, Plant and Equipment – Proceeds before Intended Use
Amendments to IAS 37 – Onerous Contracts – Cost of Fulfilling a Contract
Annual improvements to IFRS Standards 2018-2020 Cycle – IFRS 9 Financial Instruments, IFRS 16 Leases
The Directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of
the Group in future periods.
Adoption of new and revised Standards - amendments to IFRS that are mandatorily effective for the current year
The Group applied the amendments to IAS 1 and IAS 8 Definition of Material for the first time as this is effective for annual periods
beginning on or after 1 January 2020. The amendments provide a new definition of material that states, “information is material if
omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose
financial statements make on the basis of those financial statements, which provide financial information about a specific reporting
entity.” The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in
combination with other information, in the context of the financial statements. A misstatement of information is material if it could
reasonably be expected to influence decisions made by the primary users. The Directors consider that this amendment had no impact
on the financial statements of the Group, nor is there expected to be any future impact to the Group.
Summary of Accounting Policies
Basis of consolidation
The Group financial statements consolidate those of the Company and all of its subsidiary undertakings drawn up to 31 March 2021.
Under IFRS 10, control exists when an investor is exposed, or has rights, to variable returns from its involvement with the investee and
has the ability to affect those returns through its power over the investee. As each of the divisions within the Group are 100% wholly
owned subsidiaries, the Group has full control over each of its investees.
Unrealised gains on transactions between the Group and its subsidiaries are eliminated. Unrealised losses are eliminated on
consolidation and the underlying value of the asset transferred is tested for impairment. Amounts reported in the financial statements
of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Business Combinations
Acquisitions of subsidiaries are accounted for using 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.
65
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (continued)
Business Combinations (continued)
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 through profit or loss immediately.
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.
When the consideration transferred by the Group in a business combination includes a contingent consideration arrangement, the
contingent consideration is measured at its acquisition-date fair value and included as part of the consideration transferred in a business
combination. Changes in fair value of the contingent consideration that qualify as measurement period adjustments are adjusted
retrospectively, with corresponding adjustments against goodwill. Measurement period adjustments are adjustments that arise from
additional information obtained during the 'measurement period' (which cannot exceed one year from the acquisition date) about facts
and circumstances that existed at the acquisition date
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.
The Group will typically enter multi-element contracts where more than one service is provided such as a private cloud platform
combined with an online backup portal, and in such instances the delivery of these multi-element contracts are treated as a single
performance obligation. Revenue is then subsequently recognised over the period of service delivery when the criteria for recognition
has been met. Revenue recognised at a point in time predominantly consists of both software and hardware sales in which revenue is
recognised at the point in which the customer receives the goods (note 3). Revenue recognition policies in our operating segments are
as follows:
Cloud Services
This operating segment provides managed cloud computing infrastructure and services including consultancy. Revenue from the sale of
cloud computing infrastructure and managed services is recognised on an over time basis over the life of the agreement and only after
the service has been established. Set-up fees charged on contracts are spread over the life of the contract. Consultancy services are
generally provided on a “time and materials” basis and therefore revenue is recognised as these services are rendered. Revenue from
the supply of hardware or software, and the provision of services in respect of installation or training, is recognised when delivery and
installation of the equipment is completed on a point in time basis. Any unearned portion of revenue is included in payables as deferred
revenue.
iomart Group plc Annual Report and Accounts 2021
66
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (continued)
Revenue (continued)
Easyspace
This operating segment provides domain name registration and hosting services. Revenue from the provision of domain names is split
between the registration of the domain and the ongoing services associated with each domain registration. The registration of the
domain is recognised on a point in time basis, whilst the ongoing service associated with each domain registration is spread over the
length of the registration. Revenue from the provision of hosting services is recognised evenly over the period of the service on an over
time basis and only after the service has been established. Any unearned portion of revenue is included in payables as deferred revenue.
Exceptional costs
The Group defines exceptional items as costs incurred by the Group which relate to material non-recurring costs. These are disclosed
separately where it is considered it provides additional useful information to the users of the financial statements.
Interest
Interest is recognised on an accruals basis using the effective interest method.
Intangible assets
Goodwill
Goodwill represents the excess of the consideration of an acquisition over the fair value of the Group’s share of the net identifiable assets
of the acquired subsidiary at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill is
tested annually for impairment and carried at cost less accumulated impairment charges. Goodwill is allocated to cash-generating units
for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are
expected to benefit from the business combination in which the goodwill arose. Impairments to goodwill are charged to profit or loss
in the period in which they arise.
Intangible assets - 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 straight line 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.
Intangible assets - research and development
Expenditure on research (or the research phase of an internal project) is recognised as an expense in the period in which it is
incurred. Development costs incurred are capitalised when all the following conditions are satisfied:
·
·
·
·
·
·
completion of the intangible asset is technically feasible so that it will be available for use or sale;
the Group intends to complete the intangible asset and use or sell it;
the Group has the ability to use or sell the intangible asset;
the intangible asset will generate probable future economic benefits;
there are adequate technical, financial and other resources to complete the development and to use or sell the intangible
asset, and
the expenditure attributable to the intangible asset during its development can be measured reliably.
Development costs not meeting the criteria for capitalisation are expensed as incurred. The costs which do meet the criteria range
from new product development to the enhancement of existing services such as mail platforms. The scope of the development team’s
work continues to evolve as the Group continues to deliver business critical solutions to a growing customer base. 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 through profit or loss in the period in which
they are incurred.
67
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (continued)
Intangible assets (continued)
Intangible assets - software
Software is recognised at cost on purchase or fair value on acquisition and amortised on a straight-line basis over its useful economic
life, which does not generally exceed five years for purchased software or eight years in the case of acquired software.
Acquisition costs
In accordance with IFRS 3 Business Combinations costs incurred on professional fees and attributable internal acquisition costs
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.
Alternative performance measures
In addition to measuring financial performance of the Group based on statutory profit measures, the Group also measures
performance based on adjusted EBITDA, adjusted profit before tax and adjusted diluted earnings per share.
Adjusted EBITDA
Adjusted EBITDA is defined as earnings before interest, tax, depreciation and amortisation (EBITDA) before share-based payment
charges, acquisition costs and any gains or losses on revaluation of contingent consideration. Adjusted EBITDA is a common
measure used by investors and analysts to evaluate the operating financial performance of companies, particularly in the sector that
the Group operates.
The Group considers adjusted EBITDA to be a useful measure of operating performance because it approximates the underlying
operating cash flow by eliminating the charges mentioned above. It is not a direct measure of liquidity, which is shown in the
consolidated statement of cash flows, and needs to be considered in the context of the Group’s financial commitments.
Adjusted profi t before tax
Adjusted profit before tax is defined as profit before tax adjusted for the following:
·
·
·
amortisation charges on acquired intangible assets;
share-based payment charges;
where bank facilities are restructured during the year any accelerated write off of arrangement fees;
· M&A activity including:
o
o
o
o
professional fees;
any non-recurring integration costs;
any gain or loss on the revaluation of contingent consideration where it is material;
any interest charge on contingent consideration; and
·
Any material non-recurring costs where their removal is necessary for the proper understanding of the underlying profit
for the period.
The Group considers adjusted profit before tax to be a useful measure of performance because it eliminates the impact of certain
non-recurring items including those associated with acquisitions and other charges commonly excluded from profit before tax by
investors and analysts for valuation purposes.
Adjusted diluted earnings per share
Adjusted diluted earnings per share is calculated by taking the adjusted profit before tax as described after deducting an appropriate
taxation charge and dividing by the total weighted average number of ordinary shares in issue during the year and adjusting for the
dilutive potential ordinary shares relating to share options. The Group considers adjusted diluted earnings per share to be a useful
measure of performance for the same reasons as adjusted profit before tax. In addition, it is used as the basis for consideration to
the level of dividend payments.
iomart Group plc Annual Report and Accounts 2021
68
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (CONTINUED)
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 IFRS 16.
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
straight line rates generally applicable are:
Freehold property
Leasehold improvements
Data centre equipment
Computer equipment
Office equipment
Motor vehicles
Leases
Between 2.00% and 3.33% per annum
Between 6% and 10% per annum
Between 6% and 10% per annum
Between 20% and 50% per annum
Between 10% and 25% per annum
25% per annum
A lease is defined as a contract, or part of a contract, that conveys the right to use of an asset (the underlying asset) for a period of time
in exchange for consideration. To apply this definition the Group assesses whether the contract meets three key evaluations which are
whether the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being
identified at the time the asset is made available to the Group; the Group has the right to obtain substantially all of the economic benefits
from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and the
Group has the right to direct the use of the identified asset throughout the period of use.
At the lease commencement date, the Group recognises a right-of-use asset and a corresponding lease liability on the balance sheet. The
right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability measured at the present value
of future lease payments, any initial direct costs incurred by the Group, an estimate of any costs to dismantle and remove the asset at
the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received). The
Group depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the
useful life of the right-of-use asset or the end of the lease term. The Group assesses the right-of-use asset for impairment under IAS
36 ‘Impairment of Assets’ where such indicators exist.
Lease liabilities are presented on two separate lines in the balance sheet for amounts due within one year and amounts due after more
than one year. The lease liability is initially measured at the present value of lease payments that are not paid at the commencement
date, discounted using the rate implicit in the lease. If this rate cannot readily be determined, the Group applies an incremental
borrowing rate. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability
and by reducing the liability by payments made. The Group re-measures the lease liability (and adjusts the related right-of-use asset)
whenever the lease term has changed or a lease contract is modified and the modification is not accounted for as a separate lease.
Lease payments included in the measurement of the lease liability can be made up of fixed payments, variable payments based on
an index or rate, amounts expected to be payable under a residual guarantee and payments arising from options reasonably certain
to be exercised. Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It
is re-measured to reflect any reassessment or modification, or if there are changes in fixed payments. When the lease liability is
re-measured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already
reduced to zero.
The Group has elected to account for short-term leases and leases of low-value assets using the practical expedients available under
IFRS 16. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in
profit or loss on a straight line basis over the lease term.
69
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (continued)
Leases (continued)
Under IFRS 16, the Group recognises depreciation of the right-of-use asset and interest on lease liabilities in the consolidated statement
of comprehensive income over the period of the lease. On the balance sheet, right-of-use assets have been included in property, plant
and equipment and software and lease liabilities have been included in borrowings due within one year and after more than one year.
Under IFRS 16, the Group also separates the total amount of cash paid into a principal portion (presented within financing activities)
and interest (presented within financing activities) in the consolidated statement of cash flows. In the prior year, operating rental costs
were presented within operating activities.
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). 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 assets 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
determine a suitable interest rate to calculate 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.
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 through profit or loss 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 IFRS 9.
Trade and other receivable - 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.
iomart Group plc Annual Report and Accounts 2021
70
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (continued)
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 provision 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 event, 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.
Taxation
The income tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
Current tax is the tax currently payable based on taxable profit for the year and any adjustment to tax payable in respect of prior years.
Taxable profit differs from net profit as reported in the statement of comprehensive income because it excludes items of income or
expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s
liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.
A provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there will be a
future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable.
Deferred tax
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amount of assets and liabilities in the
financial statements and the corresponding tax bases used in the computation of taxable profit and is accounted for using the balance
sheet liability method. Deferred tax liabilities are provided in full and are generally recognised for all taxable temporary differences,
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. The carrying amount of deferred tax assets is reviewed at each
balance sheet date and reduced to the extent that is no longer probable that sufficient taxable profits will be available to allow all or part
of the asset to be recovered.
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. Where current or deferred tax arises from the initial accounting for a
business combination, the tax effect is included in the accounting for the business combination.
Current and deferred tax assets and liabilities are calculated at tax rates and laws that are expected to apply to their respective period
of realisation, provided they are enacted or substantively enacted at the balance sheet date. Deferred tax assets and liabilities arising in
the same tax jurisdiction are offset and the Group intends to settles its current tax assets and liabilities on a net basis.
71
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (continued)
Deferred tax (continued)
Changes in current and 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 instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group becomes a party
to the contractual provisions of the instrument.
Financial assets
Financial assets under IFRS 9 include trade, other receivables, prepayments and accrued income, cash and cash equivalents and lease
deposits.
Classification and measurement of financial assets
The Group classifies financial assets into three categories:
·
·
·
financial assets measured at amortised cost;
financial assets measured at fair value through other comprehensive income (“FVTOCI”); and
financial assets measured at fair value through profit or loss (“FVTPL”).
The classification of financial assets is based on the Group’s business model for managing the financial asset and the contractual cash
flow characteristics associated with the financial asset. Specifically:
·
·
·
debt instruments that are held within a business model whose objective is to collect the contractual cashflows, and that
have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are
measured subsequently at amortised cost;
debt instruments that are held within a business model whose objective is to both collect the contractual cash flows and
to sell the debt instruments, and that have contractual cash flows that are solely payments of principal and interest on the
principal amount outstanding, are measured subsequently at FVTOCI; and
all other debt investments and equity investments are measured subsequently at FVTPL.
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 ‘administrative expenses’.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less
provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents,
trade and most other receivables fall into this category of financial instruments.
Financial derivatives such as forward foreign exchange contracts and interest rate swaps are carried at fair value through profit or loss
subsequent to initial recognition.
Impairment of financial assets
IFRS 9 requires an expected credit loss (“ECL”) model which requires the Group to account for expected credit losses and changes in
those expected credit losses at each reporting date to reflect changes in credit risk since initial recognition of the financial assets. The
Group recognises an allowance for expected credit losses for all debt instruments not held at fair value through profit or loss (“FVTPL”).
The main financial asset that is subject to the new expected credit loss model is trade receivables, which consist of billed receivables
arising from contracts.
iomart Group plc Annual Report and Accounts 2021
72
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (CONTINUED)
Impairment of financial assets (continued)
While cash and cash equivalents, accrued income and lease deposits held at amortised cost are also subject to the impairment
requirements of IFRS 9, the identified impairment loss was immaterial.
The Group has applied the IFRS 9 simplified approach to measuring forward-looking expected credit losses (“ECL”) which uses a
lifetime expected loss allowance for all trade receivables. The ECL model reflects a probability weighted amount derived from a range
of possible outcomes. To measure the ECL, trade receivables and accrued income have been grouped based on shared credit risk
characteristics and the days past due. The Group has established a provision matrix based on the payment profiles of sales over a twenty
four month period and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted
to reflect current and forward-looking information that might affect the ability of customers to settle the receivables, including, in the
current year the impact of Covid-19 and other macroeconomic factors as relevant.
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 liabilities
Classification and measurement of 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 through profit or loss. 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 through profit or loss. 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 profit or loss 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.
Hedge accounting
The hedge accounting requirements of IFRS 9 do not impact the Group financial liabilities.
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 period end 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 through profit or loss.
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 through profit or loss 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 statement of financial position presented are translated at the closing rate at the date of the
statement of financial position;
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 with maturities of three months or less from inception and which are subject to an
insignificant risk of changes in value.
73
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (CONTINUED)
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 fi nancial statements until paid.
Equity
Equity comprises the following:
·
·
·
·
·
·
·
“share capital” represents the nominal value of equity 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; and
“retained earnings” represents retained profits and share-based payment reserve.
Employee benefi ts - pensions
The Group contributes to an auto-enrolment pension scheme and also 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 payments
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).
All share-based remuneration plans are ultimately recognised as an expense through profit or loss 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 three main vesting conditions that
apply to share options relate to the achievement of annual objectives, continuous employment and achievement of Group results.
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.
iomart Group plc Annual Report and Accounts 2021
74
Notes to the Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (CONTINUED)
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.
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out
in the Strategic Report on pages 6 to 26 including the potential impact of Covid-19. The financial position of the Group, its cash flows,
liquidity position and borrowing facilities are described in the Chief Financial Officer’s Report on pages 13 to 17.
Note 28 to the financial statements includes the Group’s objectives, policies and processes for managing its capital; its financial risk
management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.
The Group has access to a £80m multi option revolving credit facility that matures on 30 September 2022 of which £8m (annually) is
available to be drawn on for general business purposes should that be required. The Directors are of the opinion that the Group can
operate within the current facility and comply with its banking covenants.
At the end of the financial year, the Group had net debt of £54.6m (2020: £57.6m) a level which the Board is comfortable with given the
strong cash generation of the Group. The Group has considerable financial resources together with long(cid:31)term contracts with a number
of customers and suppliers across different geographic areas and industries. As a consequence, the Directors believe that the Group is
well placed to manage its business risks.
The Directors have considered the Group budgets and the cash flow forecasts for the next three financial years, and associated risks,
including the potential impact of Covid-19, and the availability of bank and leasing facilities. We have run appropriate scenario and
stress tests applying reasonable downside sensitivities and are confident we have the resources to meet our liabilities as they fall due.
After making enquiries, the Directors have a reasonable expectation that the Group will be able to meet its financial obligations and has
adequate resources to continue in operational existence for the foreseeable future (being a period extending at least twelve months
from the date of approval of these financial statements). For this reason they continue to adopt the going concern basis in preparing
the financial statements.
Critical accounting judgements and key sources of estimation uncertainty
The Group do not consider that there are any critical accounting judgements or key sources of estimation uncertainty in the preparation
of the financial statements for the year ended 31 March 2021 that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
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 being Easyspace and Cloud Services.
· Easyspace – this segment provides a range of shared hosting and domain registration services to micro and SME companies.
· Cloud Services – this segment provides managed cloud computing facilities and services, through a network of owned
data centres, to the larger SME and corporate markets. The segment uses several routes to market including iomart Cloud,
Infrastructure as a Service (IaaS), SystemsUp, Cristie Data, Sonassi, LDeX, Bytemark and Memset.
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, costs associated with acquisitions and any gain or loss on revaluation
of contingent consideration and material non-recurring items. 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 10% or more of external revenues. Inter-segment transactions are
accounted for using an arms-length commercial basis.
75
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
3. SEGMENTAL ANALYSIS (CONTINUED)
Operating Segments
Revenue by Operating Segment
Easyspace
Cloud Services
Cloud Services revenue during the year can be further disaggregated as follows:
Cloud managed services
Self-managed infrastructure
Non-recurring revenue
2021
£’000
11,939
99,944
111,883
2021
£’000
57,961
30,311
11,672
99,944
The nature of these three offerings are explained within the Chief Executive Offi cer report on page 9.
Recurring and Non-recurring Revenue
The amount of recurring and non-recurring revenue recognised during the year can be summarised as follows:
Recurring - over time
Non-recurring - point in time
Geographical Information
2021
£’000
100,211
11,672
111,883
2020
£’000
12,792
99,789
112,581
2020
£’000
54,590
28,009
17,190
99,789
2020
£’000
95,391
17,190
112,581
In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. There is
no single country where revenues are individually material other than the United Kingdom. The United Kingdom is the place of domicile
of the parent company, iomart Group plc.
Analysis of Revenue by Destination
United Kingdom
Rest of the World
Revenue from operations
2021
£’000
97,113
14,770
111,883
2020
£’000
95,333
17,248
112,581
iomart Group plc Annual Report and Accounts 2021
76
Notes to the Financial Statements - Year ended 31 March 2021
3. SEGMENTAL ANALYSIS (CONTINUED)
Profi t by Operating Segment
2021
Depreciation,
amortisation,
acquisition
costs and
share-based
payments
£’000
(1,165)
(24,091)
-
(493)
(1,247)
(26,996)
Adjusted
EBITDA
£’000
5,343
40,482
(4,417)
-
-
41,408
2020
Depreciation,
amortisation,
acquisition
costs and
share-based
payments
£’000
(1,459)
(23,269)
-
(438)
(1,243)
(26,409)
Operating
profit/(loss)
£’000
Adjusted
EBITDA
£’000
5,649
42,307
(4,446)
-
-
43,510
4,178
16,391
(4,417)
(493)
(1,247)
14,412
33
(4,241)
10,204
Easyspace
Cloud Services
Group overheads
Acquisition costs
Share-based payments
Gain on revaluation of
contingent consideration
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
Operating profit is stated after charging/(crediting) the following:
Staff costs excluding development costs capitalised
Depreciation of property, plant and equipment:
- Owned assets
- Right-of-use assets (note 22)
Short-term and low value lease expense (note 22)
Amortisation of intangibles:
- Acquired intangible assets
- Other intangible assets
- Right-of-use assets (note 22)
Bad debt expense
Net foreign exchange loss/(gain)
2021
£’000
22,049
13,160
3,722
1,578
5,457
2,632
285
650
211
Operating profit/
(loss)
£’000
4,190
19,038
(4,446)
(438)
(1,243)
17,101
1,856
(5,308)
13,649
2020
£’000
21,317
12,411
3,224
1,662
6,159
2,744
190
633
(99)
77
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
4. OPERATING PROFIT (CONTINUED)
Included within administrative expenses are fees paid to the Group’s auditor’s as follows:
Auditor’s remuneration
Audit services:
- Fees payable for the audit of the consolidation and the parent
company financial statements
- Fees payable for audit of subsidiaries, pursuant to legislation – UK
- Fees payable for audit of subsidiaries, pursuant to legislation – International
Total audit services fees
Non-audit services:
- Interim review
Total non-audit services fees
Total Auditor’s remuneration
5. INFORMATION REGARDING DIRECTORS AND EMPLOYEES
Directors’ emoluments
Aggregate emoluments
Share-based payments
Total Directors’ emoluments
Emoluments payable to the highest paid Director are as follows:
Aggregate emoluments
2021
£’000
2020
£’000
69
121
14
204
23
23
80
121
8
209
22
22
227
231
2021
£’000
1,246
163
2020
£’000
1,127
796
1,409
1,923
2021
£’000
2020
£’000
525
583
During the year the Company made personal pension contributions to personal pension schemes of the Directors or paid a pension
allowance of £52,440 (2020: £22,000).
The aggregate amount of gains realised by Directors, who served during the year, on the exercise of share options during the year
was £3,532 (2020: £nil).
iomart Group plc Annual Report and Accounts 2021
78
Notes to the Financial Statements - Year ended 31 March 2021
5. INFORMATION REGARDING DIRECTORS AND EMPLOYEES (CONTINUED)
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 38 to 43.
Average number of persons employed by the Group (including Directors):
Technical
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
Pension costs
Share-based payments
2021
No.
264
117
49
430
2021
£’000
18,950
2,795
363
1,247
23,355
2020
No.
244
112
49
405
2020
£’000
18,832
2,309
338
1,243
22,722
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 38 to 43. 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 acquisition integration costs
Total acquisition costs
7. NET FINANCE COSTS
Finance income:
Bank interest receivable
Finance income for the year
Finance costs:
Bank loan
Interest on lease liabilities
Other interest charges
Finance costs for the year
Net finance costs
2021
£’000
44
449
493
2021
£’000
19
19
(1,190)
(732)
(78)
(2,000)
(1,981)
2020
£’000
207
231
438
2020
£’000
39
39
(1,545)
(649)
(18)
(2,212)
(2,173)
79
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
8. DIVIDENDS PAID ON SHARES CLASSED AS EQUITY
2021
Pence per
share
2021
£’000
2020
Pence per
share
2020
£’000
3.93p
4,287
5.01p
5,448
Paid during the year:
Final dividend (proposed in the prior year)
Equity dividends on ordinary shares
Interim dividend
Equity dividends on ordinary shares
Total dividend paid in cash
7,132
2.60p
2,845
2.60p
2,834
8,282
The Directors have recommended a final dividend for the year ended 31 March 2021 of 4.50p per share (2020: 3.93p per share).
Subject to shareholder approval this proposed final dividend would be payable on 3 September 2021 to shareholders on the register at
close on 13 August 2021.
9. TAXATION
Corporation Tax:
Tax charge for the year
Adjustment relating to prior years
Total current taxation charge
Deferred Tax:
Origination and reversal of temporary differences
Adjustment relating to prior years
Effect of different statutory tax rates of overseas jurisdictions
Effect of changes in tax rates
Total deferred taxation credit
Total taxation charge
2021
£’000
(3,448)
(100)
(3,548)
1,266
18
4
-
1,288
(2,260)
2020
£’000
(3,976)
357
(3,619)
367
266
(13)
(136)
484
(3,135)
The differences between the total taxation charge shown above and the amount calculated by applying the standard rate of UK
corporation tax to the profi t before tax are as follows:
Profit before tax
Tax charge @ 19% (2020: 19%)
Expenses disallowed for tax purposes and non-taxable income
Tax effect of net gain on revaluation of contingent consideration
Adjustments in current tax relating to prior years
Tax effect of different statutory tax rates of overseas jurisdictions
Movement in deferred tax relating to changes in tax rates
Tax effect of share-based remuneration
Movement in unprovided deferred tax related to development costs
Movement in unprovided deferred tax related to property, plant and equipment
Movement in deferred tax relating to prior years
Total taxation charge for the year
2021
£’000
12,464
2,368
33
(6)
100
10
-
(259)
-
32
(18)
2,260
2020
£’000
16,784
3,189
20
(353)
(357)
6
136
651
40
69
(266)
3,135
The weighted average applicable tax rate for the year ended 31 March 2021 was 19% (2020: 19%). The effective rate of tax for the year,
based on the taxation charge for the year as a percentage of the profi t before tax is 18.1% (2020: 18.7%).
Deferred tax assets and liabilities at 31 March 2021 have been calculated based on the rate of 19% enacted at the balance sheet date
(2020: 19%). It is expected that the 25% UK corporation tax rate announced by the UK government in March 2021 will be enacted in
the next fi nancial year.
iomart Group plc Annual Report and Accounts 2021
80
2020
£’000
1,069
1,364
(88)
(3,298)
(193)
(1,146)
Total
£’000
(939)
(957)
253
620
13
Notes to the Financial Statements - Year ended 31 March 2021
10. DEFERRED TAX
The Group recognised deferred tax assets and liabilities as follows:
Share-based remuneration
Capital allowances temporary differences
Deferred tax on acquired assets with no capital allowances
Deferred tax on customer relationships
Deferred tax on intangible software
Deferred tax asset/(liability)
2021
£’000
1,332
1,363
(40)
(2,356)
(161)
138
At the year end, the Group had no unused tax losses (2020: £nil) available for offset against future profi ts.
The movement in the deferred tax account during the year was:
Capital
allowances
temporary
differences
£’000
Development
costs
£’000
Deferred tax
on acquired
assets with
no capital
allowances
£’000
Share-based
remuneration
£’000
Customer
relationships
£’000
Intangible
software
£’000
1,378
1,632
(422)
(157)
(3,173)
(197)
Balance at 1 April 2019
Acquired on acquisition of
subsidiaries
Credited to equity
(Charged)/credited to statement
of comprehensive income
Effect of different tax rates of
overseas jurisdictions
Effect of changes in tax rates
Balance at 31 March 2020
Credited/(charged) to statement
of comprehensive income
Effect of different tax rates of
overseas jurisdictions
-
253
(82)
-
(724)
(373)
-
162
1,069
263
-
7
180
1,364
(8)
7
-
-
472
-
(50)
-
-
-
-
-
-
87
-
(18)
(88)
48
-
(875)
-
1,131
6
-
-
27
-
(387)
(23)
(136)
(3,298)
(193)
(1,146)
953
(11)
32
1,288
-
(4)
138
Balance at 31 March 2021
1,332
1,363
(40)
(2,356)
(161)
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 temporary differences arises mainly from plant and equipment in the Cloud Services segment
where the tax written down value varies from the net book value.
The deferred tax on development costs in the prior year arose from development expenditure on which tax relief was received in advance
of the amortisation charge.
The deferred tax on acquired assets arises from data centre 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 and intangible software arises from permanent differences on acquired intangible assets.
81
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
11. EARNINGS PER ORDINARY SHARE
Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of
ordinary shares in issue during the year, after deducting any own shares held in Treasury and held by the Employee Benefi t Trust. 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, and adjusting for the dilutive potential ordinary
shares relating to share options.
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 by Employee Benefit Trust
Issued share capital in the year
Weighted average number of ordinary shares - basic
Dilutive impact of share options
2021
£’000
2020
£’000
10,204
13,649
No
000
No
000
109,160
108,510
(141)
230
(141)
436
109,249
108,805
2,416
2,861
Weighted average number of ordinary shares - diluted
111,665
111,666
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
Share-based payments
- Gain on revaluation of contingent consideration
-
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
9.3 p
9.1 p
12.5 p
12.2 p
2021
£’000
2020
£’000
10,204
5,457
493
1,247
(33)
(1,341)
13,649
6,159
438
1,243
(1,856)
(1,406)
16,027
18,227
14.7 p
14.4 p
16.8 p
16.3 p
iomart Group plc Annual Report and Accounts 2021
82
Notes to the Financial Statements - Year ended 31 March 2021
12. INTANGIBLE ASSETS
Cost
At 1 April 2019
Additions
Currency translation differences
Acquired on acquisition of
subsidiaries
Disposals
Development cost capitalised
At 31 March 2020
Additions
Currency translation differences
Disposals
Development cost capitalised
Goodwill
Development
costs
Acquired
customer
relationships
Software
Beneficial
contracts
Domain names &
IP addresses
Total
£’000
£’000
£’000
£’000
£’000
£’000
£’000
85,382
9,193
52,766
-
-
1,097
-
-
86,479
-
-
-
-
-
-
-
-
1,405
10,598
-
-
-
1,306
11,904
-
38
4,610
-
-
8,039
2,490
(33)
-
(173)
-
86
-
-
-
-
-
280
155,746
-
-
56
-
-
2,490
5
5,763
(173)
1,405
57,414
10,323
86
336
165,236
-
(78)
(73)
-
561
(57)
-
-
-
-
-
-
-
-
-
-
561
(135)
(73)
1,306
57,263
10,827
86
336
166,895
At 31 March 2021
86,479
Accumulated amortisation:
At 1 April 2019
Charge for the year
Currency translation differences
Disposals
At 31 March 2020
Charge for the year
Currency translation differences
Disposals
At 31 March 2021
Carrying amount:
-
-
-
-
-
-
-
-
-
(6,866)
(1,507)
(33,795)
(6,159)
-
-
-
-
(8,373)
(1,446)
(39,954)
(5,457)
-
-
82
13
(4,164)
(1,420)
(53)
173
(5,464)
(1,455)
90
-
(48)
(7)
-
-
(55)
(7)
-
-
(280)
(45,153)
-
-
-
(9,093)
(53)
173
(280)
(54,126)
(9)
(8,374)
-
-
172
13
(9,819)
(45,316)
(6,829)
(62)
(289)
(62,315)
At 31 March 2021
86,479
2,085
11,947
3,998
At 31 March 2020
86,479
2,225
17,460
4,859
24
31
47
104,580
56
111,110
Of the total additions in the year of £561,000 (2020: £2,490,000), no amounts related to leases under IFRS 16 (note 22) (2020:
£1,425,000). There were no amounts included in trade payables at the year end (2020: £nil). Consequently, the consolidated statement
of cash flows discloses a figure of £561,000 (2020: £1,065,000) as the cash outflow in respect of intangible asset additions in the year.
All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-financial assets
classification, which is disclosed as administrative expenses in the statement of comprehensive income.
Included within customer relationships are the following significant net book values: £1.9m in relation to the acquisitions of Memset
Limited with a remaining useful life of 7 years, the managed private cloud business of ServerChoice Limited of £1.8m with a useful life of
7 years, Bytemark Limited with a net book value of £0.8m and LDeX Group Limited of £2.0m both with a remaining useful life of 6 years,
Sonassi Limited of £2.5m, Dediserve Limited of £0.9m, SimpleServers Limited of £0.5m all three with a remaining useful life of 5 years.
83
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
12. INTANGIBLE ASSETS (CONTINUED)
During the year, goodwill was reviewed for impairment in accordance with IAS 36 “Impairment of Assets”. No impairment charges
(2020: £nil) arose as a result of this review. For this review goodwill was allocated to individual Cash Generating Units (CGU) on the
basis of the Group’s operations.
The carrying value of goodwill by each CGU is as follows:
Cash Generating Units (CGU)
Easyspace
Cloud Services
2021
£’000
23,315
63,164
86,479
2020
£’000
23,315
63,164
86,479
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 five 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 years. As outlined previously, management remain
confident in sustaining such levels of growth despite the on-going Covid-19 pandemic. The impact of the pandemic has been considered
in great detail when finalising these projections and they are perceived to be a reliable basis upon which to base our impairment testing.
The growth rates and margins used to extrapolate estimated future performance 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.
In determining the value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset.
Management continue to apply the judgement that there are two distinct CGUs within the Group, namely Cloud Services and
Easyspace. These segments have been derived with due consideration to IAS 36. The assumptions used for the CGU included within
the impairment reviews are as follows:
Easyspace
Cloud Services
31 March
2021
31 March
2020
31 March
2021
31 March
2020
Discount rate
Future perpetuity rate
Initial period for which cash flows are estimated (years)
14.0%
0.0%
5
13.1%
0.0%
5
14.0%
2.5%
5
12.5%
2.0%
5
Based on an analysis of the impairment calculation’s sensitivities to changes in key parameters (growth rate, discount rate and pre-tax
cash flow projections) there was no reasonably possible scenario where the CGU’s recoverable amount would fall below its carrying
amount.
13. TRADE AND OTHER RECEIVABLES – NON-CURRENT
Non-current trade and other receivables relates to lease deposits of £502,000 (2020: £2,760,000) which are made up of a rental deposit
of £502,000 (2020: £784,000) and a reinstatement deposit of £nil (2020: £1,976,000). On 23 June 2020, the lease of our London data
centre was extended by fi ve years to June 2035 and, as part of this extension, £2,340,000 was returned to the Group. The remaining
rental deposit is due to be repaid at the end of the lease which at the earliest is June 2035.
The Group is due to receive interest on the lease deposits at the prevailing market rate and therefore they have not been discounted.
iomart Group plc Annual Report and Accounts 2021
84
Notes to the Financial Statements - Year ended 31 March 2021
14. SUBSIDIARIES
The following are subsidiaries and have all been consolidated in the Group fi nancial statements:
Country of
registration
and operation*
Activity
Owned by the
company
%
Owned by
subsidiary
undertakings
%
Backup Technology Limited
Bytemark Holdings Limited
Bytemark Limited
Cristie Data Limited
Dediserve Limited
Easyspace Limited
iomart Cloud Inc
iomart Cloud Services Limited
iomart Datacentres Limited
iomart Hosting Limited
iomart Limited
LDeX Connect Limited
LDeX Group Limited
London Data Exchange Limited
Melbourne Server Hosting Limited
Memset Limited
Netintelligence Limited
Rapidswitch Limited
Redstation Limited
ServerSpace Limited
SimpleServers Limited
Sonassi Holding Company Limited
Sonassi Limited
Switch Media Limited
Systems Up Limited
Tier 9 Limited
United Communications Limited
England
England
England
England
Republic of
Ireland
England
USA
Scotland
England
Scotland
Scotland
England
England
England
England
England
Scotland
England
England
England
England
England
England
England
England
England
England
Dormant
Non-trading
Managed hosting services
Provision of data storage,
backup and virtualisation
solutions
Managed hosting services
Webservices
Managed hosting services
Managed hosting services
Non-trading
Managed hosting services
Dormant
Connectivity services
Non-trading
Colocation services
Non-trading
Managed hosting services
Dormant
Dormant
Non-trading
Non-trading
Managed hosting services
Non-trading
Managed hosting services
Non-trading
Consultancy services
Non-trading
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
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
*All subsidiaries with a country of registration in England have a registered offi ce of 3rd Floor, 11-21 Paul Street, London, EC2A 4JU. All
subsidiaries with a country of registration in Scotland have a registered offi ce of Lister Pavilion, Kelvin Campus, West of Scotland Science
Park, Glasgow, G20 0SP. The registered offi ce of Dediserve Limited is 13-18 City Quay, Dublin 2. The registered offi ce of iomart Cloud
Inc is Miracle Mile Plaza, 601 21st Street, Suite 300, Vero Beach, FL 32960.
All of the above subsidiaries are wholly owned by iomart Group plc or one of its subsidiary companies and operate in the country of
registration. The Group controls 100% of the ordinary share capital of each subsidiary.
85
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
15. PROPERTY, PLANT AND EQUIPMENT
Freehold
property
£’000
Leasehold
property
and
improve-
ments
£’000
Data
centre
equipment
Computer
equipment
Office
equipment
Motor
vehicles
Total
£’000
£’000
£’000
£’000
£’000
8,910
-
7,943
21,287
-
-
-
8,910
-
(179)
-
457
(16)
-
29,671
9,157
-
(134)
23,457
1,482
1,192
(18)
-
26,113
1,966
-
-
81,611
14,847
1,540
(622)
216
97,592
10,504
-
127
8,731
38,694
28,079
108,223
(418)
(279)
-
-
(697)
(265)
25
-
(3,510)
(3,610)
16
-
(7,104)
(4,541)
-
(30)
(13,635)
(1,853)
18
-
(15,470)
(1,753)
-
-
(58,372)
(9,625)
622
(157)
(67,532)
(10,089)
-
74
2,920
57
-
(206)
-
2,771
40
-
-
2,811
(1,868)
(262)
206
-
(1,924)
(226)
-
-
31
11
2
(21)
-
23
-
-
-
23
(24)
(6)
21
-
(9)
(8)
-
-
124,872
37,684
3,191
(883)
216
165,080
21,667
(179)
(7)
186,561
(77,827)
(15,635)
883
(157)
(92,736)
(16,882)
25
44
(937)
(11,675)
(17,223)
(77,547)
(2,150)
(17)
(109,549)
Cost:
At 1 April 2019
Additions in the year
Acquisition of
subsidiaries
Disposals in the year
Currency translation
differences
At 31 March 2020
Additions in the year
Disposals in the year
Currency translation
differences
At 31 March 2021
Accumulated depreciation:
At 1 April 2019
Charge for the year
Disposals in the year
Currency translation
differences
At 31 March 2020
Charge for the year
Disposals in the year
Currency translation
differences
At 31 March 2021
Carrying amount:
At 31 March 2021
7,794
27,019
10,856
30,676
At 31 March 2020
8,213
22,567
10,643
30,060
661
847
6
77,012
14
72,344
During the year there were additions of £63,000 (2020: £824,000) in respect of reinstatement provisions (note 21) and additions
of £8,683,000 (2020: £20,540,000) in respect of leases under IFRS 16 (note 22). Of the total remaining additions in the year of
£12,921,000 (2020: £16,320,000), £977,000 (2020: £3,185,000) was included in trade payables as unpaid invoices at the year
end resulting in a net increase of £2,271,000 (2020: net increase of £1,632,000) in trade payables. Consequently, the consolidated
statement of cash flows discloses a figure of £15,192,000 (2020: £14,688,000) as the cash outflow in respect of property, plant and
equipment additions in the year.
Note 22 provides the movements in the year relating to IFRS 16 right-of-use assets as included in the above table.
iomart Group plc Annual Report and Accounts 2021
86
Notes to the Financial Statements - Year ended 31 March 2021
16. TRADE AND OTHER RECEIVABLES - CURRENT
Trade receivables
Less: expected credit loss
Trade receivables (net)
Other receivables
Prepayments
Accrued income
Trade and other receivables
2021
£’000
8,631
(316)
8,315
519
12,614
1,531
22,979
2020
£’000
9,112
(421)
8,691
591
13,106
849
23,237
The Directors consider that the carrying amount of trade and other receivables is approximately equal to their fair value.
The Group applies the simplified approach to providing for expected credit losses prescribed, which permits the use of lifetime expected
loss provision for all trade receivables. The expected credit losses on trade receivables are estimated using a provision matrix by
reference to past default experience of the debtor and an analysis of the debtor’s current financial position, adjusted for factors that
are specific to the debtors, general economic conditions of the industry in which the debtors operate and an assessment of both the
current as well as the forecast direction of economic conditions at the reporting date, including consideration of the impact of Covid-19.
The following table details the risk profile of trade receivables based on the Group’s provision matrix. As the Group’s historical credit
loss experience does not show significantly different loss patterns for different customer segments, the provision for loss allowance
based on past due status is not further distinguished between the Group’s different customer segments.
Risk profile category (ageing)
Current
Current
0-30 days
30-60 days
60-90 days
Over 90 days
Total
2021
£’000
6,402
1,692
321
134
82
8,631
ECL
rate
%
2021 ECL
allowance
£’000
2020
£’000
ECL rate
%
2020 ECL
allowance
£’000
0.31%
5.31%
14.01%
59.70%
98.78%
(20)
(90)
(45)
(80)
(81)
(316)
6,165
2,221
254
104
368
9,112
0.21%
2.39%
23.42%
38.02%
69.53%
(13)
(53)
(59)
(40)
(256)
(421)
To consider the total exposure to credit risks, the Group uses figures net of VAT. At 31 March 2021, £6,402,000 (2020: £6,165,000) of
net trade receivables were fully performing. Net trade receivables of £1,912,000 (2020: £2,526,000) 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.
17. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Cash and cash equivalents
2021
£’000
23,038
23,038
2020
£’000
15,497
15,497
The credit risk on cash and cash equivalents is considered to be negligible because the counter parties are largely UK banking
institutions. The effective interest rate earned on short-term deposits was 0.5% (2020: 0.5%).
87
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
18. TRADE AND OTHER PAYABLES
Trade payables
Other taxation and social security
Accruals
Deferred income
Other creditors
Trade and other payables - Current
2021
£’000
(7,368)
(2,048)
(8,681)
2020
£’000
(11,311)
(2,335)
(7,137)
(10,857)
(11,144)
(541)
(21)
(29,495)
(31,948)
The carrying amount of trade and other payables approximates to their fair value. Current trade payables and accruals are non-interest
bearing and generally mature within three months.
Deferred income
Trade and other payables – Non-current
Non-current deferred income in the year predominantly relates to support contracts that span over one year.
19. CONTINGENT CONSIDERATION DUE ON ACQUISITIONS
Contingent consideration due on acquisitions within one year:
-
LDeX Group Limited
- Memset Limited
-
ServerChoice Limited
Total contingent consideration due on acquisitions
2021
£’000
(2,662)
(2,662)
2020
£’000
(2,283)
(2,283)
2021
£’000
2020
£’000
-
-
-
-
(1,153)
(500)
(827)
(2,480)
Final consideration due on acquisitions of £2,447,000 (2020: £nil) was paid in the year resulting in a gain on revaluation of contingent
consideration of £33,000 (2020: £1,856,000 gain) recorded in the consolidated statement of comprehensive income.
iomart Group plc Annual Report and Accounts 2021
88
Notes to the Financial Statements - Year ended 31 March 2021
20. BORROWINGS
Current:
Lease liabilities (note 22)
Current borrowings
Non-current:
Lease liabilities (note 22)
Bank loans
Total non-current borrowings
Total borrowings
2021
£’000
(3,437)
(3,437)
(21,430)
(52,791)
(74,221)
2020
£’000
(3,029)
(3,029)
(17,318)
(52,791)
(70,109)
(77,658)
(73,138)
The carrying amount of borrowings approximates to their fair value.
Details of the Group’s lease liabilities are included in note 22.
At the start of the year there was £52.8m (2020: £48.5m) outstanding on the multi option revolving credit facility and drawdowns of
£1.2m (2020: £6.2m) were made from the facility during the year. Repayments totalling £1.2m (2020: £2.0m) were made resulting in a
balance outstanding at the end of the year of £52.8m (2020: £52.8m).
The multi option revolving credit facility of £80m is able to be used by the Group to fi nance acquisitions, capital expenditure, general
business purposes (up to a maximum of £8m each year) and for the issue of guarantees, bonds or indemnities. As at 31 March 2021,
the facility is available until September 2022 at which point any advances made under the multi option revolving credit facility become
immediately repayable. Each drawdown 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 multi option revolving credit
facility margin, LIBOR and the lender’s mandatory costs. The multi option revolving credit facility margin is fi xed at 1.5% (2020: 1.5%) per
annum and a non-utilisation fee of 40% (2020: 40%) of the multi option revolving credit facility margin is due on any undrawn portion of
the full £80m multi option revolving credit facility. The effective interest rate for multi option revolving credit facility in the current year
was 1.61% (2020: 2.17%).
Given the terms of the revolving credit facility and the ability for any drawdowns made to be extended beyond 31 March 2021 at the
discretion of the Group, the total amount outstanding has been classifi ed as non-current.
89
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
20. BORROWINGS (CONTINUED)
The obligations under the multi option revolving credit facility are repayable as follows:
Due within one year
Due within two to five years
2021
Capital
Interest
£’000
-
(52,791)
(52,791)
£’000
(366)
-
(366)
Total
£’000
(366)
(52,791)
(53,157)
2020
Capital
Interest
£’000
-
(52,791)
(52,791)
£’000
(465)
Total
£’000
(465)
-
(52,791)
(465)
(53,256)
The Directors estimate that the fair value of the Group’s borrowing is not signifi cantly different to the carrying value.
Analysis of change in net cash/(debt)
Cash
and cash
equivalents
£’000
Bank
loans
£’000
Lease
liabilities
£’000
Total liabilities
£’000
Total net cash/
(debt)
£’000
At 1 April 2019
10,069
(48,536)
(777)
(49,313)
(39,244)
Lease liabilities on transition to IFRS 16
Additions to lease liabilities
Repayment of bank loans
New bank loans
Impact of effective interest rate
Acquired on acquisition of subsidiaries
Cash and cash equivalent cash inflow
Lease liabilities cash outflow
At 31 March 2020
Additions to lease liabilities
Repayment of bank loans
New bank loans
Currency translation
Cash and cash equivalent cash inflow
Lease liabilities cash outflow
-
-
-
-
-
-
5,428
-
15,497
-
-
-
-
7,541
-
-
-
2,000
(6,150)
(105)
-
-
-
(52,791)
-
1,150
(1,150)
-
-
-
(20,421)
(1,544)
-
-
-
(1,705)
-
4,100
(20,347)
(8,683)
-
-
169
-
3,994
(20,421)
(1,544)
2,000
(6,150)
(105)
(1,705)
-
4,100
(73,138)
(8,683)
1,150
(1,150)
169
-
3,994
(20,421)
(1,544)
2,000
(6,150)
(105)
(1,705)
5,428
4,100
(57,641)
(8,683)
1,150
(1,150)
169
7,541
3,994
At 31 March 2021
23,038
(52,791)
(24,867)
(77,658)
(54,620)
iomart Group plc Annual Report and Accounts 2021
90
Notes to the Financial Statements - Year ended 31 March 2021
21. 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. As at 31 March 2021, the total reinstatement provision of the Group is
£2,097,000 (2020: £1,956,000). The utilisation of the reinstatement provision will be in line with the end of the leasehold properties
lease terms to which the provisions relate.
The Directors consider the carrying values of the provisions to approximate to their fair values as they have been discounted.
Non-current:
Reinstatement provision
Total non-current provisions
The movement in the reinstatement provision during the year was as follows:
Balance at the start of the year
Increase in provision
Unwinding of discount
2021
£’000
2020
£’000
(2,097)
(2,097)
(1,956)
(1,956)
2021
£’000
(1,956)
(63)
(78)
(2,097)
2020
£’000
(1,115)
(824)
(17)
(1,956)
91
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
22. LEASES
The Group leases assets including buildings, fibre contracts, colocation and software contracts. Information about leases for which the
Group is a lessee is presented below:
Right-of-use assets
Balance at 1 April 2020
Additions
Currency translation differences
Depreciation
Amortisation
Balance at 31 March 2021
Leasehold
Property
£’000
Data centre
equipment
£’000
Software
£’000
17,494
3,855
(162)
(2,328)
-
18,859
788
4,828
-
(1,394)
-
4,222
Total
£’000
19,517
8,683
(162)
(3,722)
(285)
1,235
-
-
-
(285)
950
24,031
The right-of-use assets in relation to leasehold property and data centre equipment are disclosed as non-current assets and are
disclosed within property, plant and equipment (note 15). The right-of-use assets in relation to software are disclosed as non-current
assets and are disclosed within intangibles (note 12).
Lease liabilities
Lease liabilities are presented in the balance sheet within borrowings as follows:
Current:
Lease liabilities (note 20)
Non-current:
Lease liabilities (note 20)
Total lease liabilities
The maturity analysis of undiscounted lease liabilities are shown in the table below:
Amounts payable under leases:
Within one year
Between two to five years
After more than five years
Add: unearned interest
Total lease liabilities
2021
£’000
(3,437)
(21,430)
(24,867)
2021
£’000
(4,215)
(11,552)
(13,068)
(28,835)
3,968
(24,867)
2020
£’000
(3,029)
(17,318)
(20,347)
2020
£’000
(3,536)
(9,823)
(9,709)
(23,068)
2,721
(20,347)
iomart Group plc Annual Report and Accounts 2021
92
Notes to the Financial Statements - Year ended 31 March 2021
22. LEASES (CONTINUED)
The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12 months or less) or for
leases of low value assets. Payments made under such leases are expensed on a straight line basis. During the year ended 31 March
2021, in relation to leases under IFRS 16, the Group recognised the following amounts in the consolidated statement of comprehensive
income:
Short-term and low value lease expense
Depreciation charge
Amortisation charge
Interest expense
Amounts recognised in the consolidated statement of cash fl ows:
Amounts payable under leases:
Short-term and low value lease expense
Repayment of lease liabilities within cash flows from financing activities*
2021
£’000
(1,578)
(3,722)
(285)
(732)
(6,317)
2021
£’000
(1,578)
(5,435)
(7,013)
2020
£’000
(1,662)
(3,224)
(190)
(649)
(5,725)
2020
£’000
(1,662)
(4,686)
(6,348)
*Included in repayment of lease liabilities within cash flows from financing activities in the year ended 31 March 2020 is a repayment
of £1.0m in relation to the settlement of lease liabilities on the acquisition of Memset Limited.
23. SHARE CAPITAL
Authorised
At 31 March 2020 and 2021
Called up, allotted and fully paid
At 1 April 2019
Share capital issued in the year
At 31 March 2020
Share capital issued in the year
At 31 March 2021
Ordinary shares of 1p each
Number of shares
£’000
200,000,000
2,000
108,509,748
650,180
109,159,928
511,179
109,671,107
1,085
7
1,092
5
1,097
During the year, 511,179 (2020: 650,180) ordinary shares were issued for a total consideration of £353,113 (2020: £635,502), resulting
in a premium over the nominal value of £348,022 (2020: £629,000).
93
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
23. SHARE CAPITAL (CONTINUED)
At 31 March 2021 the Company held 140,773 shares (2020: 140,773) as own shares in the iomart Group plc Employee Benefi t Trust
(“EBT”) which were accounted for in the Own Shares EBT reserve and had a nominal value of £1,408 (2020: £1,408) and a market value
of £440,619 (2020: £380,087). This represents 0.1% (2020: 0.1%) of the issued share capital as at 31 March 2021 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 2021 are fully paid.
24. OWN SHARES
At 31 March 2021 and 31 March 2020
Own shares
EBT
£’000
Own shares
Total
£’000
(70)
(70)
At 31 March 2021 the Company held 140,773 shares (2020: 140,773) in the EBT with a carrying value of £69,982 (2020: £69,982)
which were accounted for in the Own Shares EBT reserve.
25. SHARE-BASED PAYMENTS
The Group operated the following share-based payment employee share option schemes during the year; an 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 509,103 ordinary shares (2020: 650,180) were exercised and the average market price at the exercise
dates was 324.59p (2020: 351.87p). Options over 1,040,174 ordinary shares (2020: 760,371) were granted under the unapproved
share option scheme with an average exercise price of 1.0p (2020: 1.0p) and 271,993 options over ordinary shares (2020: nil) were
granted under the sharesave scheme with an average exercise price of 276.0p (2020: £nil). Options over 352,256 ordinary shares
(2020: 21,388) were forfeited under the unapproved share option scheme with an average exercise price of 1.0p (2020: 1.0p) and
options over 62,219 (2020: 33,655) were forfeited under the sharesave scheme with an average exercise price of 314.2p (2020:
299.4p). Options over 270,242 ordinary shares (2020: 75,295) expired under the unapproved share option scheme with an average
exercise price of 26.7p (2020: 1.0p) and options over 6,510 (2020: nil) expired under the EMI scheme with an average exercise price of
46.5p (2020: £nil).
iomart Group plc Annual Report and Accounts 2021
94
Notes to the Financial Statements - Year ended 31 March 2021
25. SHARE-BASED PAYMENTS (CONTINUED)
As disclosed in note 5, a share-based payment charge of £1,247,000 (2020: £1,243,000) 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 current year:
Grant Date
Vesting Date
04-Apr-20 04-Apr-20
31-Mar-21 31-Mar-22
04-Apr-20 15-May-20 04-Sep-20 01-Oct-20 18-Dec-20
31-Mar-23 31-Mar-23 31-Mar-21 01-Oct-23 30-Jun-21
Share price at grant date (p)
Volatility
Dividend yield
Number of employees holding options/
units
Expected life (years)
2.85
72.5%
2.67%
2.85
72.5%
2.67%
1
1
2.85
72.5%
2.67%
3
3.30
73.4%
2.31%
3.40
74.7%
1.92%
3.45
75.9%
1.90%
3.32
76.0%
1.97%
1
20
107
1
3
3
3
3
3
3
3
Option/award life (years)
10
10
10
10
10
3
10
Risk free rate
Expectations of meeting performance
criteria
Fair value (p)
0.34%
0.34%
0%
100%
0.34%
100%
0.25%
100%
0.29%
0.27%
0.28%
50%
100%
100%
261.57
261.57
261.57
306.95
319.97
324.46
311.49
Exercise price per share (p)
1.0
1.0
1.0
1.0
1.0
1.0
1.0
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
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
2021
2020
Weighted
average exercise
price per share
(p)
Number of
share options
Weighted
average
exercise price
per share (p)
Number of
share options
32.02
58.00
48.01
27.13
90.74
31.71
1.00
3,260,171
1,312,167
(414,575)
(276,752)
(509,103)
3,371,908
1,386,573
54.05
3,280,318
1.0
183.4
1.0
97.63
31.96
19.25
760,371
(55,043)
(75,295)
(650,180)
3,260,171
1,608,793
95
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
25. SHARE-BASED PAYMENTS (CONTINUED)
Summary of share options that were outstanding at the year end:
Share options – outstanding
Share options – exercisable
Range of
exercise
prices per
share (p)
Outstanding
shares
Weighted
average
exercise
price per
share (p)
Weighted
average
remaining
contractual
life (years)
Outstanding
shares
Weighted
average
exercise
price per
share (p)
Weighted
average
remaining
contractual
life (years)
Unapproved schemes
1.0 – 1.0
3,012,814
Sharesave scheme
276.0 -324.0
359,094
As at 31 March 2021
3,371,908
Enterprise
management
incentive scheme
Unapproved schemes
46.5 – 87.5
136,510
1.0 – 146.1
2,880,786
Sharesave scheme
252.8 -324.0
242,875
As at 31 March 2020
3,260,171
1.0
289.3
31.7
85.5
7.1
296.9
32.0
3.6
2.0
3.5
0.6
6.3
1.2
5.7
1,386,573
-
1,386,573
136,510
1,472,283
-
1,608,793
1.0
-
1.0
85.5
13.1
-
19.2
4.2
-
4.2
0.6
4.0
-
3.7
26. RELATED PARTY TRANSACTIONS
Compensation paid to key management (only Directors are deemed to fall into this category) during the year was as follows:
Salaries and other short-term employee benefits
Share-based payments
2021
£’000
1,246
163
1,409
2020
£’000
1,127
796
1,923
Directors’ bonuses, as disclosed in the Directors’ Remuneration Report on pages 38 to 43, were paid post year end.
Dividends paid to key management during the year were as follows:
Angus MacSween
Total dividends paid to Directors
2021
£’000
1,110
1,110
2020
£’000
1,294
1,294
Dividends paid to Scott Cunningham of £522 (2020: £401), Richard Masters of £392 (2020: £156), Ian Steele £260 (2020: £nil) and
Reece Donovan £85 (2020: £nil) were below £1,000 which includes amounts in respect of spouses’ shareholding.
iomart Group plc Annual Report and Accounts 2021
96
Notes to the Financial Statements - Year ended 31 March 2021
27. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
There are no contingent assets or contingent liabilities as at 31 March 2021 (2020: nil).
(b) Commitments
Capital expenditure on property, plant and equipment committed by the Group at 31 March 2021 was £1,018,822 (2020: £1,128,800).
28. RISK MANAGEMENT
The Group fi nances its operations by raising fi nance through equity, bank borrowings and fi nance leases. No speculative treasury
transactions are undertaken however the Group does from time to time enter into forward foreign exchange contracts to hedge currency
exposures. Financial assets and liabilities include those assets and liabilities of a fi nancial nature, namely cash, short-term receivables/
payables and borrowings.
The carrying amounts of fi nancial assets presented in the statement of fi nancial position relate to the following measurement categories
as defi ned in IFRS 9:
2021
Non-current:
Trade and other receivables
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Total for category
2020
Non-current:
Trade and other receivables
Current:
Trade receivables
Cash and cash equivalents
Other receivables
Total for category
Amortised
cost
£’000
502
8,315
23,038
519
32,374
2,760
8,691
15,497
591
27,539
97
iomart Group plc Annual Report and Accounts 2021
Notes to the Financial Statements - Year ended 31 March 2021
28. 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 IFRS 9:
2021
Non-current:
Lease liabilities
Bank loan
Current:
Trade payables
Accruals
Lease liabilities
Total for category
2020
Non-current:
Lease liabilities
Bank loan
Current:
Trade payables
Accruals
Contingent consideration due on acquisitions
Lease liabilities
Total for category
Liquidity risk
At fair value
through profit or
loss
£’000
Financial
liabilities
measured at
amortised cost
£’000
Total
£’000
-
-
-
-
-
-
-
-
-
-
(2,480)
-
(2,480)
(21,430)
(52,791)
(21,430)
(52,791)
(7,368)
(8,681)
(3,437)
(7,368)
(8,681)
(3,437)
(93,707)
(93,707)
(17,318)
(52,791)
(17,318)
(52,791)
(11,311)
(11,311)
(7,137)
-
(3,029)
(7,137)
(2,480)
(3,029)
(91,586)
(94,066)
The Group seeks to manage financial risk to ensure sufficient liquidity is available to meet foreseeable needs and to invest cash safely
and profitably. In note 20, the contractual maturity analysis of the Group’s multi option revolving credit facility of £52.8m (2020:
£52.8m) is shown. The Group has £27.2m (2020: £27.2m) available to drawdown on the £80m (2020: £80m) multi option revolving
credit facility and reviews its cash flow requirements on a monthly basis. The Group was in compliance with all covenants under its
banking facility arrangements throughout the reporting period.
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 loan facilities is based on LIBOR plus a margin. For the year ended 31 March 2021, if interest rates on the multi option revolving
credit facility at that date had been 50 basis points higher/lower, with all other variables held constant, there would have been an
immaterial change in the post-tax profi t for the year (2020: immaterial impact on post-tax profi t).
Currency risk
During the year the Group made payments totalling US$6.2m (2020: US$8.9m) and EUR€1.5m (2020: EUR€1.2m) to acquire domain
names for its Easyspace segment and licences for its Cloud Services segment. In addition, the Group received US$4.4m (2020: US$5.8m)
and EUR€1.2m (2020: EUR€1.1m) from Cloud Services customers billed in foreign currency. During the year, the Group entered into
forward exchange contracts to hedge its net exposure to the US Dollar arising on these purchases but at the year end the Group had no
outstanding forward contracts in place (2020: none). Consequently, the fair value of currency contracts at the year end was £nil (2020:
£nil). The level of non-monetary and monetary assets and liabilities denominated in foreign currencies in the Group are minimal.
iomart Group plc Annual Report and Accounts 2021
98
Notes to the Financial Statements - Year ended 31 March 2021
28. RISK MANAGEMENT (CONTINUED)
Capital risk
The capital structure of the Group consists of net debt, which includes borrowings (note 20) and cash and cash equivalents, and equity
attributable to owners of the parent, comprising issued share capital (note 23), other reserves and retained earnings. The Group seeks
to maintain a level of gross cash which the Board considers to be adequate for the size of the Group’s operations. Consequently, the
Group makes use of both banking facilities and lease arrangements to help fund the acquisition of companies and capital expenditure
in order to maintain that level of gross cash. The Group’s current policy is to pay interim and final dividends depending on the level of
adjusted diluted earnings per share.
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in fi nancial losses to the Group. The
Group provides standard credit terms (normally 30 days) to some of its customers which has resulted in trade receivables of £8,315,000
(2020: £8,691,000) which are stated net of applicable provisions and which represent the total amount exposed to credit risk. The
Group manages trade receivable balances vigilantly and takes prompt action on overdue accounts. The lease deposits of £502,000
(2020: £2,760,000) are held in escrow accounts with the landlord’s main UK bankers. The Group’s cash at bank £23,038,000 (2020:
£15,497,000) is held within clearing banks in the UK, Republic of Ireland and United States of America with good credit ratings.
In respect of trade receivables, lease deposits and cash at bank the Directors consider the risk of exposure to credit is minimal due to the
reasons given above.
29. ULTIMATE CONTROLLING PARTY
The Directors have assessed that there is no ultimate controlling party.
99
iomart Group plc Annual Report and Accounts 2021
Parent Company Financial Statements - Year ended 31 March 2021
STATEMENT OF FINANCIAL POSITION
As at 31 March 2021
Note
2021
£’000
2020
£’000
ASSETS
Non-current assets
Investments
Deferred tax
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
LIABILITIES
Non-current liabilities
Non-current borrowings
Current liabilities
Trade and other payables
Total liabilities
NET ASSETS
EQUITY
Called up share capital
Own shares
Capital redemption reserve
Share premium account
Merger reserve
Retained earnings
TOTAL EQUITY
3
5
4
8
6
9
10
155,886
1,332
157,218
18,582
20,422
39,004
155,502
1,069
156,571
7,334
12,991
20,325
196,222
176,896
(52,791)
(52,791)
(32,379)
(32,379)
(85,170)
111,052
1,097
(70)
1,200
22,495
4,983
81,347
(52,791)
(52,791)
(21,958)
(21,958)
(74,749)
102,147
1,092
(70)
1,200
22,147
4,983
72,795
111,052
102,147
As permitted by section 408(3) of the Companies Act 2006, no profit and loss account of the company is presented. The profit for the
financial year of the Company was £14,437,000 (2020: £52,496,000).
These financial statements were approved by the Board of Directors and authorised for issue on 15 June 2021.
Signed on behalf of the Board of Directors
Reece Donovan
Director and Chief Executive Officer
iomart Group plc – Company Number: SC204560
The following notes form part of the financial statements
iomart Group plc Annual Report and Accounts 2021
100
Parent Company Financial Statements - Year ended 31 March 2021
STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2021
Share
capital
£’000
Own
shares
EBT
£’000
Capital
redemption
reserve
£’000
Share
premium
account
£’000
Merger
reserve
£’000
Retained
earnings
£’000
Total
£’000
Note
Balance at 1 April 2019
1,085
(70)
1,200
21,518
4,983
27,276
55,992
Profit for the year
Total comprehensive income
Dividends – final (paid)
Dividends – interim (paid)
Share-based payments
Deferred tax on share-based
payments
Issue of share capital
Total transactions with
owners
13
13
11
5
9
-
-
-
-
-
-
7
7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
629
629
-
-
-
-
-
-
-
-
52,496
52,496
52,496
52,496
(5,448)
(5,448)
(2,834)
(2,834)
1,052
1,052
253
-
253
636
(6,977)
(6,341)
Balance at 31 March 2020
1,092
(70)
1,200
22,147
4,983
72,795
102,147
Profit for the year
Total comprehensive income
Dividends – final (paid)
Dividends – interim (paid)
Share-based payments
Issue of share capital
Total transactions with
owners
13
13
11
9
-
-
-
-
-
5
5
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
348
348
-
-
-
-
-
-
-
14,437
14,437
14,437
14,437
(4,287)
(2,845)
(4,287)
(2,845)
1,247
1,247
-
353
(5,885)
(5,532)
Balance at 31 March 2021
1,097
(70)
1,200
22,495
4,983
81,347
111,052
The nature of equity in the statement of changes in equity is disclosed in the accounting policies (note 2).
The following notes form part of the financial statements.
101
iomart Group plc Annual Report and Accounts 2021
Parent Company Financial Statements - Year ended 31 March 2021
1. COMPANY INFORMATION
iomart Group plc is a public listed company listed on the Alternative Investment Market (“AIM”), incorporated and domiciled in the
United Kingdom and registered in Scotland. The address of the registered office is Lister Pavilion, Kelvin Campus, West of Scotland
Science Park, Glasgow, G20 0SP. The nature of the Company’s operations and its principal activity is that of a holding company.
2. ACCOUNTING POLICIES
St atement of compliance
These separate fi nancial statements of the Company are presented as required by the Companies Act 2006. The Company meets the
defi nition of a qualifying entity under FRS 100 ‘Application of Financial Reporting Requirements’ issued by the Financial Reporting
Council (FRC). Accordingly, these fi nancial statements have been prepared in accordance with applicable accounting standards and in
accordance with Financial Reporting Standard 101 – ‘The Reduced Disclosure Framework’ (FRS 101). The principal accounting policies
adopted in the preparation of these fi nancial statements are set out below. These policies have all been applied consistently throughout
the year unless otherwise stated.
The financial statements have been prepared on the historical cost basis, except for the valuation of certain financial instruments that
are measured at fair values at the end of each reporting period, as explained in the accounting policies below. The financial statements
are presented in Sterling (£).
Adoption of new and revised Standards - amendments to IFRS that are mandatorily effective for the current year
The Company applied the amendments to IAS 1 and IAS 8 Definition of Material for the first time as this is effective for annual periods
beginning on or after 1 January 2020. The amendments provide a new definition of material that states, “information is material if
omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose
financial statements make on the basis of those financial statements, which provide financial information about a specific reporting
entity.” The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in
combination with other information, in the context of the financial statements. A misstatement of information is material if it could
reasonably be expected to influence decisions made by the primary users. The Directors consider that this amendment had no impact
on the financial statements of the Company, nor is there expected to be any future impact to the Company.
Disclosure exemptions adopted
The principal accounting policies adopted are the same as those set out in note 2 to the consolidated fi nancial statements, however, in
preparing these fi nancial statements the Company has taken advantage of all disclosure exemptions conferred by FRS 101. Therefore,
these fi nancial statements do not include:
·
·
·
·
·
·
·
·
·
a statement of cash flows and related notes;
the requirement to produce a statement of financial position at the beginning of the earliest comparative period;
the requirement of IAS 24 related party disclosures to disclose related party transactions entered into between two or
more members of the iomart Group as they are wholly owned within the iomart Group;
disclosure of key management personnel compensation;
capital management disclosures;
certain share-based payments disclosures;
business combination disclosures;
disclosures in respect of financial instruments; and
the effect of future accounting standards not adopted.
iomart Group plc Annual Report and Accounts 2021
102
Parent Company Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (CONTINUED)
Investments
Investments held as fi xed 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. On an annual basis, 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 fl ows and net asset position of those companies which received
the trade and net assets.
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 refl ect 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 profi t or loss.
Income taxes
The tax expense recognised in profi t 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 profi t 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 profi t. Deferred tax on temporary
differences associated with shares in subsidiaries is not provided if reversal of these temporary differences can be controlled by the
Company 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 Company 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 and laws that are expected to apply to their respective period of realisation, provided they are
enacted or substantively enacted at the period end.
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
Classifi cation and measurement of fi nancial assets
The Company classifi es fi nancial assets into three categories:
·
·
·
financial assets measured at amortised cost
financial assets measured at fair value through other comprehensive income (“FVTOCI”)
financial assets measured at fair value through profit or loss (“FVTPL”).
103
iomart Group plc Annual Report and Accounts 2021
Parent Company Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (CONTINUED)
Financial assets (continued)
Classification and measurement of financial assets (continued)
The classification of financial assets is based on the Company’s business model for managing the financial asset and the contractual cash
flow characteristics associated with the financial asset. Specifically:
·
·
·
debt instruments that are held within a business model whose objective is to collect the contractual cashflows, and that
have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding, are
measured subsequently at amortised cost;
debt instruments that are held within a business model whose objective is to both collect the contractual cash flows and
to sell the debt instruments, and that have contractual cash flows that are solely payments of principal and interest on the
principal amount outstanding, are measured subsequently at FVTOCI; and
all other debt investments and equity investments are measured subsequently at FVTPL.
All financial assets are recognised when the Company 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 ‘administrative expenses’.
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market.
Loans and receivables are measured subsequent to initial recognition at amortised cost using the effective interest method, less
provision for impairment. Discounting is omitted where the effect of discounting is immaterial. The Group’s cash and cash equivalents,
trade and most other receivables fall into this category of financial instruments.
Financial derivatives such as forward foreign exchange contracts and interest rate swaps are carried at fair value through profit or loss
subsequent to initial recognition.
Impairment of financial assets
Provision against other receivables is made when there is objective evidence that the Company 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 liabilities
Classification and measurement of financial liabilities
Financial liabilities are obligations to pay cash or other financial assets and are recognised when the Company 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 through profit or loss. 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 through profit or loss. 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 profit or loss 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.
iomart Group plc Annual Report and Accounts 2021
104
Parent Company Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (CONTINUED)
Borrowings
Borrowings are initially stated at fair value after deduction of any issue costs. The carrying amount is increased by the fi nance 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 through profi t or loss 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 signifi cantly different from those of the previous
borrowings, the previous borrowings are treated as extinguished rather than modifi ed as prescribed under IFRS 9.
Pension scheme arrangements
The Company contributes to an auto-enrolment pension scheme and also to a number of personal pension schemes on behalf of executive
Directors and some senior employees. The pension costs charged against operating profi t are the contributions payable to the schemes
in respect of the accounting period.
Share-based payment
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, profi tability and sales
growth targets).
All equity-settled share-based payments are ultimately recognised as an expense through profi t or loss with a corresponding credit to
“profi t and loss reserve” unless the share-based payment arrangement relates to an employee of a subsidiary company where in such
instances the share-based payment is added to the cost of investment in that subsidiary as a capital contribution.
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.
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 with maturities of three months or less from inception and which are subject to an
insignifi cant risk of changes in value.
Dividends
Dividend distributions payable to equity shareholders are included in the fi nancial statements within ‘other short-term fi nancial liabilities’
when a fi nal dividend is approved in a general meeting. Interim dividend distributions to equity shareholders approved by the Board are
not included in the fi nancial statements until paid.
Equity
Equity comprises the following:
·
·
·
·
·
·
“share capital” represents the nominal value of equity 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; and
“retained earnings” represents retained profits and share-based payment reserve.
105
iomart Group plc Annual Report and Accounts 2021
Parent Company Financial Statements - Year ended 31 March 2021
2. ACCOUNTING POLICIES (CONTINUED)
Employee Benefi t Trust
The assets and liabilities of the Employee Benefi t Trust (EBT) have been included in the Group and Company fi nancial statements. The
cost of purchasing own shares held by the EBT are shown as a deduction within shareholders’ equity. The proceeds from the sale of own
shares are recognised in shareholders’ equity. Neither the purchase or sale of own shares leads to a gain or loss being recognised in the
income statement.
Going Concern
The Group has an undrawn multi-option revolving credit facility of £27.2m at 31 March 2021. After making enquiries, the Directors
have a reasonable expectation that the Company will be able to meet its financial obligations and has adequate resources to continue
in operational existence for the foreseeable future (being a period extending at least twelve months from the date of approval of these
financial statements). For this reason they continue to adopt the going concern basis in preparing the financial statements.
Key judgements and sources of estimation uncertainty
There were no critical accounting judgements that would have a signifi cant effect on the amounts recognised in the
parent company fi nancial statements or key sources of estimation uncertainty at the balance sheet date that would have
a signifi cant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next
fi nancial year.
3. INVESTMENTS HELD AS FIXED ASSETS
Cost
At 1 April 2020
Share-based payments (note 11)
Disposals
Cost at 31 March 2021
Net book value of Investments at 31 March 2021
Net book value of Investments at 31 March 2020
All of the above investments are unlisted.
Shares in subsidiary undertakings
£’000
155,502
847
(463)
155,886
155,886
155,502
Disposals in the year relate to the redemption of preferences shares held by iomart Group plc in Memset Limited.
Details of subsidiary undertakings are included in note 14 of the Group fi nancial statements.
iomart Group plc Annual Report and Accounts 2021
106
Parent Company Financial Statements - Year ended 31 March 2021
4. TRADE AND OTHER RECEIVABLES
Prepayments
Other debtors
Current income tax
Other taxation and social security
Amounts owed by subsidiary undertakings
5. DEFERRED TAXATION
The Company had recognised deferred tax assets as follows:
Share-based remuneration
The movement in the deferred tax account during the year was:
Balance brought forward
Profit and loss account movement arising during the year
Effect of deferred tax rate change in the year
Profit and loss account reserve movement during the year
Balance carried forward
2021
£’000
454
282
372
444
17,030
18,582
2020
£’000
517
190
3,623
464
2,540
7,334
2021
£’000
1,332
2020
£’000
1,069
2021
£’000
1,069
263
-
-
1,332
2020
£’000
1,378
(724)
162
253
1,069
The deferred tax asset in relation to share-based remuneration arises from the anticipated future tax relief on the exercise of share
options.
6. TRADE AND OTHER PAYABLES
Trade creditors
Other taxation and social security
Other creditors
Accruals
Contingent consideration due on acquisitions (note 7)
Amounts owed to subsidiary undertakings
Amounts owed to subsidiary undertakings are repayable on demand and carry no interest.
2021
£’000
2020
£’000
(35)
-
(281)
(1,788)
-
(30,275)
(32,379)
(470)
(89)
(32)
(1,542)
(1,653)
(18,172)
(21,958)
107
iomart Group plc Annual Report and Accounts 2021
Parent Company Financial Statements - Year ended 31 March 2021
7. CONTINGENT CONSIDERATION
Contingent consideration due on acquisitions within one year:
-
LDeX Group Limited
- Memset Limited
Total contingent consideration due on acquisitions
8. BORROWINGS
Non-current:
Bank loans
Non-current borrowings
Total borrowings
2021
£’000
2020
£’000
-
-
-
(1,153)
(500)
(1,653)
2021
£’000
2020
£’000
(52,791)
(52,791)
(52,791)
(52,791)
(52,791)
(52,791)
Given the terms of the revolving credit facility and the ability for any drawdowns made to be extended well beyond 31 March 2021 at
the discretion of the Company, the total amount outstanding has been classifi ed as non-current. The obligations under the multi option
revolving credit facility and term loan facility are repayable as follows:
Due within one year
Due within two to five years
£’000
-
(52,791)
(52,791)
2021
Capital
Interest
£’000
(366)
2020
Total
£’000
(366)
Capital
Interest
£’000
-
£’000
(465)
Total
£’000
(465)
-
(52,791)
(52,791)
-
(52,791)
(366)
(53,157)
(52,791)
(465)
(53,256)
The Directors estimate that the fair value of the Group’s borrowing is not signifi cantly different to the carrying value. For details of the
terms of repayment and rates of interest payable see note 20 in the Group fi nancial statements.
iomart Group plc Annual Report and Accounts 2021
108
Parent Company Financial Statements - Year ended 31 March 2021
9. SHARE CAPITAL
Authorised
At 31 March 2020 and 2021
Called up, allotted and fully paid
At 1 April 2019
Share capital issued in the year
At 31 March 2020
Share capital issued in the year
At 31 March 2021
Ordinary shares of 1p each
Number of shares
£’000
200,000,000
2,000
108,509,748
650,180
109,159,928
511,179
109,671,107
1,085
7
1,092
5
1,097
During the year, 511,179 (2020: 650,180) ordinary shares were issued for a total consideration of £353,113 (2020: £635,502), resulting
in a premium over the nominal value of £348,022 (2020: £629,000).
At 31 March 2021 the Company held 140,773 shares (2020: 140,773) as own shares in the iomart Group plc Employee Benefi t Trust
(“EBT”) which were accounted for in the Own Shares EBT reserve and had a nominal value of £1,408 (2020: £1,408) and a market value
of £440,619 (2020: £380,087). This represents 0.1% (2020: 0.1%) of the issued share capital as at 31 March 2021 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 2021 are fully paid.
10. OWN SHARES RESERVES
At 31 March 2021 and 31 March 2020
Own shares
EBT
£’000
Own shares
Total
£’000
(70)
(70)
At 31 March 2021 the Company held 140,773 shares (2020: 140,773) in the EBT with a carrying value of £69,982 (2020: £69,982)
which were accounted for in the Own Shares EBT reserve.
11. SHARE-BASED PAYMENTS
For details of share-based payment awards and fair values see note 26 to the Group financial statements. The Company financial
statements recognise the charge for share-based payments for the year of £1,247,000 (2020: £1,243,000) by:
1)
2)
taking the charge in relation to employees of the parent company through the parent company statement of comprehensive
income £400,000 (2020: £1,052,000),
recording an increase to its investment in subsidiaries for the amounts attributable to employees of subsidiaries and recording
a corresponding entry to retained earnings of £847,000 (2020: £191,000).
109
iomart Group plc Annual Report and Accounts 2021
Parent Company Financial Statements - Year ended 31 March 2021
12. INFORMATION REGARDING PARENT COMPANY EMPLOYEES
Average number of persons employed by the Company (including Directors):
Technical
Sales and marketing
Administration
Staff costs of the Company during the year in respect of
employees and Directors were:
Wages and salaries
Social security costs
Pension costs
Share-based payments
2021
No.
2020
No.
5
9
31
45
2021
£’000
1,580
814
57
400
2,851
8
9
31
48
2020
£’000
1,939
735
38
1,052
3,764
The company 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 38 to 43. 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. Details of Directors’ emoluments are disclosed
within note 5 of the Group financial statements.
13. DIVIDENDS PAID ON SHARES CLASSED AS EQUITY
Paid during the year:
Final dividend (proposed in the prior year)
Equity dividends on ordinary shares
Interim dividend
Equity dividends on ordinary shares
2021
Pence per
share
2021
£’000
2020
Pence per
share
2020
£’000
3.93p
4,287
5.01p
5,448
2.60p
2,845
2.60p
2,834
Total dividend paid in cash
7,132
8,282
The Directors have recommended a final dividend for the year ended 31 March 2021 of 4.50p per share (2020: 3,93p per share).
Subject to shareholder approval this proposed final dividend would be payable on 3 September 2021 to shareholders on the register at
close on 13 August 2021.
14. RELATED PARTY TRANSACTIONS
As permitted by FRS 101 related party transactions with wholly owned members of the Group have not been disclosed. Related party
transactions regarding remuneration and dividends paid to key management (only Directors are deemed to fall into this category) of the
Company have been disclosed in note 26 of the Group financial statements.
iomart Group plc Annual Report and Accounts 2021
110
Parent Company Financial Statements - Year ended 31 March 2021
15. CONTINGENCIES AND COMMITMENTS
(a) Contingencies
There are no contingent assets or contingent liabilities as at 31 March 2021 (2020: nil).
(b) Commitments
There are no capital commitments present as at 31 March 2021 (2020: nil).
16. ULTIMATE CONTROLLING PARTY
The Directors have assessed that there is no ultimate controlling party.
111
iomart Group plc Annual Report and Accounts 2021
Notice of 2021 Annual General Meeting
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to what action to
take, you should consult your stockbroker, solicitor, accountant or other appropriate independent professional adviser authorised under
the Financial Services and Markets Act 2000, as amended. If you have sold or otherwise transferred all your shares in iomart Group plc,
please forward this document and the accompanying form of proxy to the person through whom the sale or transfer was effected, for
transmission to the purchaser or transferee.
IMPORTANT INFORMATION: IMPACT OF THE COVID-19 PANDEMIC ON THE MEETING
The Board is closely monitoring the ongoing Coronavirus (Covid-19) pandemic and public health concerns in the United Kingdom,
including the related social distancing requirements, public health guidance and legislation issued by both the UK and Scottish
Governments. At the time of publication of this notice, indoor public gatherings in Scotland remain subject to a number of restrictions.
The Board recognises that the annual general meeting represents an opportunity to engage with members, and provides a forum
that enables members to ask questions of, and speak directly with, the Board. However, in light of current restrictions, the continued
unpredictability caused by the Covid-19 pandemic and the uncertainty relating to the lifting of restrictions, the Board is strongly
discouraging shareholders from attending (or seeking to attend) this year’s annual general meeting in person. We will ensure that the
minimum quorum requirement is met such that the meeting comprises a legally compliant meeting. Shareholders can be represented by
the chair of the meeting, acting as their proxy. The deadline for submitting proxies is by 10.00 a.m. on 27 August 2021. The chair of the
meeting will direct that voting on all resolutions set out in the notice of annual general meeting of the Company will take place by way
of a poll. In line with current restrictions, shareholders are strongly discouraged from attending the annual general meeting in person
and, if they attempt to do so, may be refused entry to the meeting. No update on trading or other management statements will be given
at the annual general meeting, which will instead be an entirely functional meeting to consider the resolutions (and with voting thereon
being taken by poll). In order to reduce the risk of infection, the annual general meeting will end immediately following the business of
the meeting. The Company is taking these measures to comply with current rules, regulations and guidance in relation to the Covid-19
pandemic, to safeguard its shareholders’ and employees’ health and to make the annual general meeting as safe as possible.
Members are therefore strongly encouraged to submit a proxy vote in advance of the meeting. A form of proxy for use at this meeting
accompanies this notice. To be valid, the form of proxy must be completed and returned to Link Group in accordance with paragraphs 1
and 2 of the Notes appended to this notice (or otherwise submitted electronically in accordance with paragraph 3 of the Notes). Given
the restrictions on attendance, members are strongly encouraged to appoint the 'Chair of the Meeting' as their proxy rather than a
named person who may not be permitted to attend the meeting.
Shareholders are also invited to submit questions in advance of the meeting via email at agm2021@iomart.com by no later than
10.00am on Friday 27 August 2021. Responses to the questions will be provided following the conclusion of the AGM.
This situation is ever changing, and the UK and/or Scottish Governments may change current restrictions or implement further
measures relating to the holding of general meetings during the affected period. Any changes to the arrangements for the annual
general meeting (including, without limitation, as to proxy appointments, attendance, venue, format, the business to be considered or
timing, as the case may be) will be communicated to members before the meeting through our website (www.iomart.com) and, where
appropriate, via the Regulatory News Service.
NOTICE IS HEREBY GIVEN that the 2021 annual general meeting of iomart Group plc (the “Company”) will be held at Lister Pavilion,
Kelvin Campus, West of Scotland Science Park, Glasgow G20 0SP on 31 August 2021 at 10.00 am for the purpose of considering and,
if thought fit, passing the following resolutions, of which resolutions 1 to 10 (inclusive) will be proposed as ordinary resolutions and
resolutions 11 to 13 (inclusive) will be proposed as special resolutions:-
1
2
3
4
5
6
7
8
9
To receive and adopt the financial statements of the Company and the directors' and auditors' reports thereon for the year ended
31 March 2021.
To approve the report of the board to the members on directors' remuneration for the year ended 31 March 2021.
To reappoint Mr Scott Cunningham (who retires by rotation and, being eligible, offers himself for re-election) as a director of the
Company.
To reappoint Mr Richard Masters (who retires by rotation and, being eligible, offers himself for re-election) as a director of the
Company.
To reappoint Ms Karyn Lamont (who retires by rotation and, being eligible, offers herself for re-election) as a director of the
Company.
To reappoint Mr Angus MacSween, who was appointed since the last annual general meeting, as a director of the Company.
To reappoint Mr Andrew Taylor, who was appointed since the last annual general meeting, as a director of the Company.
To declare a final dividend for the year ended 31 March 2021 of 4.50p per share payable on 3 September 2021 to shareholders
on the register of members at the close of business on 13 August 2021.
To reappoint Deloitte LLP, Chartered Accountants, as auditors of the Company from the conclusion of this meeting until the
conclusion of the next general meeting at which accounts are laid before shareholders and to authorise the directors to fix the
auditors’ remuneration.
iomart Group plc Annual Report and Accounts 2021
112
Notice of 2021 Annual General Meeting
10
THAT the directors of the Company are generally and unconditionally authorised pursuant to section 551 of the Companies Act
2006 to exercise all powers to allot shares in the Company and to grant rights to subscribe for or to convert any security into
shares in the Company:
(a)
comprising equity securities (as defined in section 560(1) of the Companies Act 2006) up to an aggregate nominal amount
of £731,433.92 (including within such limit any shares issued or rights granted under paragraph (b) below) in connection
with an offer by way of rights issue:
(i)
(ii)
to ordinary shareholders in proportion (as nearly as may be practicable) to their existing holdings;
to the holders of other equity securities as required by the rights of those securities or as the directors otherwise
consider necessary,
and subject to such exclusions or other arrangements as the directors consider expedient in relation to fractional entitlements,
legal, regulatory or practical problems under the laws of, or the requirements of any regulatory body or stock exchange in, any
territory, or any other matter; and
(b)
in any other case up to an aggregate nominal amount of £365,716.96 (such amount to be reduced by the nominal amount
of any equity securities allotted pursuant to the authority in paragraph (a) above in excess of £365,716.96),
provided that such authority, unless renewed, varied or revoked by the Company, shall expire on 30 November 2022 or, if earlier,
the date of the next annual general meeting of the Company after the passing of this resolution 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 such an offer or agreement as if the authority conferred hereby had
not expired.
This resolution revokes and replaces all unexercised authorities previously granted to the directors to allot shares in the
Company and to grant rights to subscribe for, or to convert any security into, shares in the Company but is without prejudice to
any allotment of shares or grant of rights already made, offered or agreed to be made pursuant to such authorities.
11
THAT, subject to the passing of resolution 10, the directors of the Company are authorised pursuant to section 570 of the
Companies Act 2006 to allot equity securities (as defined in section 560(1) of the Companies Act 2006) for cash under the
authority given by resolution 10 and/or to sell ordinary shares held by the Company as treasury shares for cash in each case as if
section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such authority to be limited:
(a)
to the allotment of equity securities in connection with an offer of equity securities (but, in the case of the authority
granted under resolution 10(b), by way of a rights issue only) to:
(i)
(ii)
the ordinary shareholders made in proportion (as nearly as may be practicable) to their existing respective holdings;
and
to the holders of other equity securities as required by the rights of those securities or as the directors otherwise
consider necessary,
and subject to such exclusions or other arrangements as the directors may deem necessary or expedient in relation to treasury
shares, fractional entitlements, record dates, legal or practical problems in or under the laws of any territory or the requirements
of any regulatory body or stock exchange; and
(b)
(c)
to 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
to the allotment of equity securities or sale of treasury shares (otherwise than pursuant to paragraphs (a) and (b) above)
up to an aggregate nominal amount of £54,857.54,
such authority to expire at the end of the next annual general meeting of the Company (or, if earlier, at the close of business on
30 November 2022) but, in each case, prior to its expiry the Company may make offers, and enter into agreements, which would,
or might, require equity securities to be allotted (and treasury shares to be sold) after the authority expires and the board of
directors may allot equity securities (and sell treasury shares) under any such offer or agreement as if the authority had not
expired.
12
THAT, subject to the passing of resolution 10, the directors of the Company are authorised in addition to any authority granted
under resolution 11 to allot equity securities (as defined in section 560(1) of the Companies Act 2006) for cash under the
authority given by resolution 10 and/or to sell ordinary shares held by the Company as treasury shares for cash in each case as if
section 561 of the Companies Act 2006 did not apply to any such allotment or sale, such authority to be:
(a)
(b)
limited to the allotment of equity securities up to a nominal amount of £54,857.54; and
used only for the purposes of financing (or refinancing, if the authority is to be used within six months after the original
transaction) a transaction which the board of directors of the Company determines to be an acquisition or other capital
investment of a kind contemplated by the Statement of Principles on Disapplying Pre-Emption Rights most recently
published by the Pre-Emption Group prior to the date of this notice,
such authority to expire at the end of the next annual general meeting of the Company (or, if earlier, at the close of business on
30 November 2022) but, in each case, prior to its expiry the Company may make offers, and enter into agreements, which would,
iomart Group plc Annual Report and Accounts 2021
113
Notice of 2021 Annual General Meeting
or might, require equity securities to be allotted (and treasury shares to be sold) after the authority expires and the board of
directors may allot equity securities (and sell treasury shares) under any such offer or agreement as if the authority had not
expired.
13
That the Company be and is hereby generally and unconditionally authorised for the purposes of section 701 of the Companies
Act 2006 to make one or more market purchases (within the meaning of section 693(4) of that Act) of ordinary shares of 1 pence
each in the Company provided that:
(a)
(b)
(c)
(d)
(e)
the maximum number of ordinary shares hereby authorised to be purchased is 10,971,509, representing 10% of the
Company's issued ordinary share capital as at the latest practicable date prior to the publication of this notice of annual
general meeting);
the minimum price (exclusive of any expenses) which may be paid for each ordinary share is 1 pence;
the maximum price (exclusive of any expenses) which may be paid for each 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;
unless previously revoked or varied, the authority hereby conferred shall expire at the end of the next annual general
meeting of the Company (or, if earlier, at the close of business on 30 November 2022); and
the Company may make a contract or contracts for the purchase of ordinary shares under this authority before the expiry
of this authority which would or might be executed wholly or partly after the expiry of such authority, and may make
purchases of ordinary shares in pursuance of such a contract or contracts, as if such authority had not expired.
By order of the Board
Andrew McDonald
Company Secretary
6 August 2021
Lister Pavilion, Kelvin Campus,
West of Scotland Science Park,
Glasgow G20 0SP
iomart Group plc Annual Report and Accounts 2021
114
Notice of 2021 Annual General Meeting
NOTES:
Appointment of Proxy
1
2
3
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. However, in light of the
ongoing Covid-19 pandemic and related restrictions, all shareholders are strongly encouraged and requested to only appoint the
Chairman as their proxy or representative as any other persons so appointed may be refused entry to the meeting.
To be effective (subject to paragraph 3 below), 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,
Link Group, Central Square, 29 Wellington Street, Leeds, LS1 4DL, not less than 48 hours (excluding weekends and bank holidays)
before the time for holding the meeting (i.e. by 10.00am on Friday 27 August 2021) and if not so deposited shall be invalid.
Alternatively, you may instead submit your proxy vote electronically by accessing the shareholder portal at www.signalshares.
com, logging in and selecting the ‘Vote Online Now’ link. You will require your username and password in order to log in and
vote. If you have forgotten your username or password you can request a reminder via the shareholder portal. If you have not
previously registered to use the portal you will require your investor code (‘IVC’) which can be found on your share certificate.
Proxy votes should be submitted as early as possible and, in any event, not less than 48 hours (excluding weekends and bank
holidays) before the time for holding the meeting (i.e. by 10.00am on Friday 27 August 2021) and if not so submitted shall be
invalid.
Entitlement to attend and vote
4
Pursuant to Regulation 41 of the Uncertificated Securities Regulations 2001, only those members entered in the Company's
register of members at:
• close of business on 27 August 2021; or
• if this meeting is adjourned, at close of business on the day two days prior to the adjourned meeting,
shall be entitled to attend and vote at the meeting.
References in these Notes to 'attend' should however be construed in light of the Covid-19 restrictions, as summarised in
the notice of meeting, which may restrict physical attendance at the meeting in this case.
Documents on Display
5
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
6
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
iomart Group plc Annual Report and Accounts 2021
115
Notice of 2021 Annual General Meeting
EXPLANATORY NOTES TO THE NOTICE OF ANNUAL GENERAL MEETING
IOMART GROUP PLC
Ordinary Resolutions
Resolutions 1 to 10 are all to be proposed as ordinary resolutions. This means that for each of those resolutions to be passed, more than
half of the votes cast must be in favour of the resolution.
Resolution 1 – To receive and adopt the financial statements for the year ended 31 March 2021 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 fi nancial 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 38 to 43. This
resolution is an advisory one and no entitlement to remuneration is conditional on the resolution being passed.
Resolutions 3, 4, 5, 6 and 7 – Re-election of directors
Under article 24 of the Company's articles of association one third of the directors are required to retire by rotation at each annual
general meeting. Pursuant to those articles, Mr Scott Cunningham, Mr Richard Masters and Ms Karyn Lamont are required to retire
by rotation at this annual general meeting and, being eligible, offer themselves for reappointment. In addition, the articles also stipulate
that any director appointed by the Board during the year must offer themselves for reappointment at the next available annual general
meeting. Mr Angus MacSween retired as Chief Executive Offi cer of the Company on 1 October 2020 and resigned as a director on that
date but was then appointed as a Non-Executive Director, also on 1 October 2020, and accordingly offers himself for reappointment. Mr
Andrew Taylor was appointed as a Non-Executive Director with effect from 1 August 2021 and accordingly is required to retire at the
fi rst annual general meeting following his appointment but, being eligible, offers himself for reappointment.
The board of directors is satisfi ed that the performance of Mr Scott Cunningham, Mr Richard Masters, Ms Karyn Lamont, Mr Angus
MacSween and Mr Andrew Taylor continues to be effective and demonstrates commitment to their roles with the Company including
commitment of time for board meetings and other duties required of them. Accordingly, resolutions 3, 4, 5, 6 and 7 propose the
reappointment of Mr Scott Cunningham, Mr Richard Masters, Ms Karyn Lamont, Mr Angus MacSween and Mr Andrew Taylor.
Brief biographical details of Mr Scott Cunningham, Mr Richard Masters, Ms Karyn Lamont, Mr Angus MacSween and Mr Andrew Taylor
are given below.
Mr Scott Cunningham, appointed 2018: Scott is a chartered accountant having trained with Arthur Andersen where he became a senior
manager providing audit and transaction support services to both public and private companies. Leaving Arthur Andersen in 2001 Scott
joined Clyde Blowers and performed a number of roles including Group Financial Controller for the Clyde Bergemann Power Group from
2003 to 2006. He became Director of Corporate Finance and Company Secretary for AIM listed InterBulk Group plc in February 2006
and in April 2007 Scott became Group Finance Director for InterBulk Group plc until it was successfully sold to Den Hartogh in March
2016. Immediately prior to joining iomart he was an Investment Director at Clyde Blowers Capital.
Mr Richard Masters, appointed 2017: Richard has over 30 years’ experience in the legal profession and was managing partner of
McGrigors LLP until April 2012 when it merged with Pinsent Masons LLP. He sat on the main board of Pinsent Masons until March 2017
and has held a number of roles in the business including corporate fi nance advisory services. He served as Head of Client Operations for
Pinsent Masons for three years post-merger before being appointed as Executive Chairman of Complete Electronic Risk Compliance
Limited, a Pinsent Masons LLP subsidiary which was sold to Dow Jones in February 2018. Richard was Chair of Scotland and Northern
Ireland for Pinsent Masons from September 2017 until October 2019 when he retired.
Ms Karyn Lamont, appointed 2019: Karyn is a chartered accountant and former audit partner at PricewaterhouseCoopers LLP. She
has over 25 years of experience, 13 years as an audit partner, and provided audit and other services to a range of clients across the
UK's fi nancial services sector, including outsourcing providers. Her specialist knowledge includes fi nancial reporting, audit and controls,
risk management, regulatory compliance and governance. Karyn left PricewaterhouseCoopers LLP in 2016. Karyn is a Non-Executive
Director, and Audit Committee Chair, for The Scottish Investment Trust plc, Scottish Building Society, North American Income Trust plc
and Scottish American Investment Trust plc.
Mr Angus MacSween, appointed 2020: Angus founded iomart in December 1998 following 15 years spent creating and selling
businesses in the telephony and internet sector. In 1984, after a short service commission in the Royal Navy, Angus started his fi rst
business selling telephone systems. He then grew and sold fi ve profi table businesses – including Prestel, an online information division
of BT, which he turned into one of the UK’s fi rst internet service providers. Following the sale of Teledata Limited, the UK’s leading
telephone information services company, to Scottish Telecom plc, Angus then spent two years on the executive of Scottish Telecom plc
where he was responsible for the development of the company's internet division. Angus was Chief Executive Offi cer until he retired on
1 October 2020. He resigned as a director on that day but was appointed as a Non-Executive Director on the same day.
Mr Andrew Taylor, appointed 2021: Andrew has over 22 years’ experience in the telecommunications industry and is currently Chief
Executive Offi cer of Gamma Communications Plc, a leading technology-based provider of communication services to the business market
iomart Group plc Annual Report and Accounts 2021
116
Notice of 2021 Annual General Meeting
in Western Europe. Prior to joining Gamma in 2017, Andrew was Chief Executive Offi cer of Nomad Digital, a provider of IP connectivity
and digital solutions to the global transportation sector, establishing Nomad Digital as a leader in the sector. Before joining Nomad
Digital, Andrew was Digicel’s Regional Chief Executive Offi cer, with responsibility for all fi xed and mobile operations across the Northern
Caribbean and had responsibility for all fi xed network services and business/ ICT solutions across 26 international markets. From 2008
to 2010, Andrew was Chief Executive of Intec Telecom PLC, a provider of software solutions.
Resolution 8 – To declare a dividend of 4.50p per ordinary share
Subject to the provisions of the Companies Act 2006, the Company may by ordinary resolution declare dividends, but no dividend shall
exceed the amount recommended by the board of directors. The board of directors recommends the payment of a fi nal dividend of 4.50p
per ordinary share, to be payable to shareholders registered at close of business on 13 August 2021.
Resolution 9 – Re-appointment and remuneration of auditors
The Company is required at each general meeting at which fi nancial statements are presented to shareholders to appoint auditors who
will remain in offi ce until the next such meeting. Deloitte LLP have expressed their willingness to continue in offi ce for a further year.
In accordance with company law and corporate governance best practice, shareholders are also asked to authorise the directors to
determine the auditors’ remuneration.
Resolution 10 – Authority to allot shares
Under section 551 of the Companies Act 2006, the directors of a company may only allot shares or grant rights to subscribe for, or to
convert any security into, shares in the company if authorised to do so.
In line with guidance issued by the Investment Management Association (now the Investment Association), the authority contained in
paragraph (a) of this resolution will (if passed) give the directors authority to allot ordinary shares in connection with a rights issue in
favour of ordinary shareholders up to an aggregate nominal amount equal to £731,433.92 (representing 73,143,392 ordinary shares
of 1p each) as reduced by the nominal amount of any shares issued under paragraph (b) of this resolution. This amount (before any
reduction) represents approximately two-thirds of the issued ordinary share capital (excluding treasury shares) of the Company as at the
latest practicable date prior to publication of the notice of the meeting.
The authority contained in paragraph (b) of this resolution will (if passed) give the directors the authority to allot ordinary shares up to an
aggregate nominal value of £365,716.96 (representing 36,571,696 ordinary shares of 1p each). This amount represents approximately
one-third of the issued ordinary share capital (excluding treasury shares) of the Company as at the latest practicable date prior to the
publication of the notice of the meeting.
This authority will expire on 30 November 2022 or, if earlier, at the conclusion of the next annual general meeting.
Special Resolutions
Resolutions 11, 12 and 13 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.
Resolutions 11 and 12 - Disapplication of statutory pre-emption rights
The Companies Act 2006 gives holders of ordinary shares, with limited but important exceptions, certain rights of pre-emption on the
issue for cash of new ordinary shares or on the sale of any shares which the Company may hold in treasury following a purchase of its
own shares. The directors of the Company believe that it is in the best interests of the Company that, as in previous years, the board of
directors of the Company should have limited authority to allot some shares for cash or sell treasury shares without fi rst having to offer
such shares to existing shareholders. The directors' current authority expires at the close of the forthcoming annual general meeting.
The authority sought by way of resolution 11 would expire at the earlier of the close of the next annual general meeting or 30 November
2022. The authority, if granted, will relate to the allotment of new ordinary shares or the sale of treasury shares in respect of (a) rights
issues and similar offerings, where diffi culties arise in offering shares to certain overseas shareholders, and in relation to fractional
entitlements and certain other technical matters, (b) 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 directors) of such cash dividend or dividends (if the Company offers shareholders
the option of making an election of that nature and if relevant shareholders make such an election), and (c) generally to allotments
(other than in respect of pre-emptive offerings) of ordinary shares or the sale of treasury shares having an aggregate nominal value not
exceeding £54,857.54 (being equal to 5% of the issued ordinary share capital (excluding treasury shares) of the Company as at the latest
practicable date prior to the publication of the notice of the meeting).
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117
Notice of 2021 Annual General Meeting
Resolution 12, if approved, would give the directors of the Company an additional authority to issue ordinary shares, or sell treasury
shares, for cash in connection with an acquisition or capital investment of a kind contemplated by the Pre-Emption Group's Statement of
Principles up to an additional aggregate nominal amount of £54,857.54 (being equal to 5% of the issued ordinary share capital (excluding
treasury shares) of the Company as at the latest practicable date prior to the publication of the notice of the meeting). The directors
confi rm that they will only allot shares pursuant to this authority where the allotment is in connection with an acquisition or specifi ed
capital investment (as defi ned in the Pre-Emption Group's Statement of Principles) which is announced contemporaneously with the
allotment or sale, or which has taken place in the preceding six-month period and is disclosed in the announcement of the allotment or
sale.
The powers given by resolutions 11 and 12 will, unless sooner revoked or renewed by the Company in a general meeting, last until the
earlier of the close of the next annual general meeting or 30 November 2022.
Resolution 13 – Authority to purchase the Company's own shares
This resolution grants authority to the Company to make purchases of up to a maximum of 10% of the issued ordinary share capital of
the Company as at the latest practicable date prior to the publication of the notice of this meeting.
In certain circumstances it may be advantageous for the Company to purchase its ordinary shares. The directors would use the share
purchase authority with discretion and purchases would only made from funds not required for other purposes and in light of market
conditions prevailing at the time. In reaching a decision to purchase ordinary shares, your directors would take account of the Company's
cash resources and capital, the effect of such purchases on the Company's business and on earnings per ordinary share.
The directors have no present intention of using the authority. However, the directors consider that it is in the best interests of the
Company and its shareholders as a whole that the Company should have fl exibility 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 13 to effect
that buy back is 5% above the average middle market price of an ordinary share for the fi ve 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.
iomart Group plc Annual Report and Accounts 2021
118
Officers and Professional Advisers
Directors
Reece Donovan MSc, BSc
Scott Cunningham BAcc, CA
Ian Steele BAcc, CA
Angus MacSween
Richard Masters LLB, DipLP
Karyn Lamont BAcc, CA
Secretary
Andrew McDonald BA, CA
Registered office
Chief Executive Officer
Chief Financial Officer
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow G20 0SP
Nominated adviser and joint broker
Peel Hunt LLP, 100 Liverpool Street, London EC2M 2AT
Joint broker
Investec Bank Plc, 30 Gresham Street, London EC2V 7QP
Principal Bankers
Bank of Scotland Plc, 110 St Vincent Street, Glasgow G2 5ER
Solicitors
Pinsent Masons LLP, 141 Bothwell Street, Glasgow G2 7EQ
Independent auditor
Deloitte LLP, Level 5, 110 Queen Street, Glasgow G1 3BX
Registrars
Link Group, Central Square, 29 Wellington Street, Leeds, LS1 4DL
Company Registration Number
SC204560
iomart Group plc Annual Report and Accounts 2021
119
iomart Group plc Annual Report and Accounts 2021
120
www.iomart.com
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