iomart Reports Positive Half Yearly Results
GLASGOW, Scotland, December 6, 2016 /PRNewswire/ --
iomart (AIM:IOM), the cloud computing company, is pleased to report its consolidated half yearly results for the period ended 30 September 2016.
(Logo: http://photos.prnewswire.com/prnh/20121126/579634 )
FINANCIAL HIGHLIGHTS
- Revenue growth of 16% to £42.1m (H1 2016: £36.4m)
- Cloud Services organic growth of 10% (H1 2016: 10%)
- Adjusted EBITDA[1] growth of 13% to £17.6m (H1 2016: £15.5m)
- Adjusted profit before tax2 growth of 23% to £10.6m (H1 2016: £8.7m)
- Adjusted diluted earnings per share3 from operations increased by 19% to 8.03p (H1 2016: 6.75p)
- Cashflow from operations increased by 22% to £16.7m (H1 2016: £13.6m)
- Operating cash conversion rate increased to 95% of adjusted EBITDA (H1 2016: 88%)
OPERATIONAL HIGHLIGHTS
- Ongoing investment in all forms of cloud skills
- Continuing to develop relationships with major Public Cloud suppliers leading to growth in Public Cloud revenues
- Consultancy division, SystemsUp, gains AWS Public Sector Partner for Government status
Statutory Equivalents
The above highlights are based on adjusted results. A full reconciliation between adjusted and statutory results is contained within this statement. The statutory equivalents of the above results are as follows:
- Profit before tax growth of 26% to £7.1m (H1 2016: £5.7m)
- Basic earnings per share from operations increased by 19% to 5.43p (H1 2016: 4.57p)
Angus MacSween, CEO commented,
"Trading in the first half of the year has been very good and we remain focussed on building our recurring revenues in line with our business model. We are uncovering an increasing breadth of opportunities to constantly grow that recurring revenue and remain confident in our future prospects."
[1] Throughout this statement adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges and acquisition costs. Throughout this statement acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.
[2] Throughout this statement adjusted profit before tax is profit before tax, amortisation charges on acquired intangible assets, share based payment charges, mark to market adjustments in respect of interest rate swaps, interest charges in respect of contingent consideration due, acquisition costs and in the previous period the accelerated write off of arrangement fees on the restructuring of our bank borrowing facility.
[3] Throughout this statement adjusted earnings per share is earnings per share before amortisation charges on acquired intangible
assets, share based payment charges, mark to market adjustments in respect of interest rate swaps, interest charges in respect of contingent consideration due, acquisition costs and in the previous period the accelerated write off of arrangement fees on the restructuring of our bank borrowing facility including the taxation effect of these.
This interim announcement contains forward-looking statements, which have been made by the directors in good faith based on the information available to them up to the time of the approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.
For further information:
iomart Group plc
Tel: 0141 931 6400
Angus MacSween
Richard Logan
Peel Hunt LLP
Tel: 020 7418 8900
(Nominated Adviser and Broker)
Richard Kauffer
Euan Brown
Alma PR
Tel: 020 8004 4217
Caroline Forde
Hilary Buchanan
About iomart Group plc
iomart Group Plc (AIM: IOM) designs, builds and manages cloud environments. Expert in all types of managed cloud - public, private and hybrid - iomart is vendor, platform and technology agnostic and will recommend the cloud environment to meet your specific business needs.
With a global infrastructure of 10 UK and 6 Global data centres, fully certified to supply services to both the public and private sectors, and with over 200 technical experts on hand, iomart delivers Any Cloud Your Way.
For further information about the Group, please visit http://www.iomart.com
Chief Executive's Statement
Introduction
We have again enjoyed a very good trading period with Group revenue having grown by 16% to £42.1m (H1 2016: £36.4m). Our adjusted EBITDA has grown by 13% to £17.6m (H1 2016: £15.5m) and our adjusted profit before tax by 23% to £10.6m (H1 2016: £8.7m).
Market
The move to the cloud continues to be at the centre of attention within IT departments.
iomart continues to invest in the skills required to architect, migrate, manage, monitor, secure and scale public cloud, private cloud, hybrid IT and traditional IT, with a view to enabling organisations to transform, innovate, and scale their operations.
There is a long term and large market opportunity in preparing and managing enterprises for transformation and deployment to cloud platforms. The IT environment has become more complex with more choice and we see a growing requirement for the skills associated with cloud adoption.
Our ongoing challenge and opportunity is to navigate through these early days of the further evolution of cloud adoption to ensure we continue to develop the assets, skills and resources necessary to be successful in that space.
As we have broadened the scope of our services to include professional services, we have begun to see the benefits of having the skill sets around consulting and managing cloud transformation. We are entering into more strategic conversations with IT departments who are looking for 'joined up thinking' when it comes to looking at moving applications or services to the cloud.
There is a growing trend to manage IT in a more fragmented way. Gone are the days when large organisations or departments would outsource their entire IT departments and magically believe that things would somehow be better.
IT evolution now tends to be project by project, application by application, with a view to maximising value, not being locked into any one technology vendor, and being able to migrate services at will.
This plays into the strengths we have established around agility and flexibility alongside the right expertise and infrastructure, with an ability to manage the mix of public and private cloud and hybrids of both effectively.
This is a very long term market opportunity. We are only now starting to see back office workloads move to cloud environments and this is a trend that will continue for many years. It is, after all, only day 2 of the internet.
Operational review
Cloud Services
The Cloud Services operation continues to perform well, delivering an overall revenue growth rate of 13% with an encouraging 10% organic growth rate.
During the period we have continued to win new business in both the private and public cloud arenas. Our positioning as an agnostic supplier of cloud solutions together with our wide range of skills and experience makes us the ideal partner for companies that are considering moving some or all of their infrastructure into the cloud.
We have continued to develop our relationships with the main vendors in the market including Microsoft, Dell/ EMC and AWS. Our consultancy division, SystemsUp, has recently been named as an AWS Public Sector Partner for Government. The public cloud vendors led by AWS and Microsoft continue to win market share and it is clear that they require an ecosystem of organisations, such as iomart, to provide services and support to the users of these public clouds.
This has led to the generation of revenue from the provision of Public Cloud solutions. As expected this has modestly affected some of our percentage profit margins and the impact of this has been a reduction in our percentage margins at both gross profit and adjusted EBITDA level but compensated by an improvement in our adjusted and reported profit before tax percentage margins. This is due to the fact that as we provide Public Cloud solutions to our customers we incur a charge from the Public Cloud service provider which is included within our cost of sales. The increased cost of providing Public Cloud solutions has offsetting savings elsewhere within our income statement with lower charges for power, which is also included in cost of sales and depreciation. On private or hybrid cloud solutions we acquire and operate the infrastructure ourselves and thereby incur depreciation and power charges for their operation, whereas the charge from the Public Cloud service provider includes these costs.
The acquisition of Cristie Data Limited ("Cristie") towards the end of the period provides us with access to an excellent customer base many of whom are in the public sector.
Our revenues have grown to £35.6m (H1 2016: £31.5m) as a result of our acquisitive and organic activities and we continue to expect Cloud Services to be the driver of growth going forward.
Easyspace
The Easyspace segment has performed as expected and with the addition of United Communications Limited (which trades as "United Hosting") from November 2015 has recorded substantial growth in both revenue and profitability.
Easyspace provides a range of products to the small and micro business community including an ever wider range of domain names, shared hosting, emails and dedicated servers.
Our revenues have grown by 33% to £6.6m (H1 2016: £4.9m) mainly as a result of our acquisitions, although we have also seen organic growth of 3% (H1 2016: organic decline of 9.5%) during this period.
M&A Activity
On 25 August we acquired the entire share capital of Cristie on a no debt, no cash, normalised working capital basis. Cristie provides storage and backup solutions and has a significant presence in the public sector market. On completion a payment of £3.8m, including adjustments required in respect of normalised working capital, was made to acquire Cristie which at the time had £3.1m of cash resulting in a net outflow of funds of £0.7m to acquire the company.
The M&A market continues to provide opportunities and we remain committed to continuing to complement our organic growth through further acquisitions.
Financial Performance
Revenue
Overall revenues from our operations grew 16% to £42.1m (H1 2016: £36.4m).
Our Cloud Services segment grew revenues by 13% to £35.6m (H1 2016: £31.5m). This increase was largely due to organic growth of 10% (H1 2016: 10%) added to which was the contribution for the full six month period from the acquisition of SystemsUp in June 2015 and a modest contribution from the acquisition of Cristie.
Our Easyspace segment grew revenues by 33% to £6.6m (H1 2016: £4.9m). This increase was mainly due to the impact of the acquisition of United Hosting although the segment did record organic revenue growth of 3% in the period (H1 2016: 9.5% organic revenue decline).
Gross Margin
The gross profit in the period, which is calculated by deducting from revenue variable cost of sales such as domain costs, power and sales commission and the relatively fixed costs of operating our datacentres, increased by 12% to £27.7m (H1 2016: £24.7m). This substantial increase in gross profit was a direct result of the contribution from the additional revenue generated over the period, including the impact of acquisitions.
In percentage terms the gross margin was 65.8% (H1 2016: 67.7%). As explained above Cloud Services saw a reduction in gross margin percentage as we begin to provide Public Cloud solutions which incur a charge from the Public Cloud service provider with offsetting savings elsewhere within our income statement.
The gross profit margin within our traditional private and hybrid cloud solutions continues to rise due to our relatively static datacentre costs which to some extent are fixed in nature and therefore do not rise in line with revenue growth.
The Easyspace segment saw an increase in its gross margin percentage mainly due to the favourable impact of the acquisition of United Hosting in November 2015.
Whilst the provision of Public Cloud solutions into our range of services has, as expected, impacted our gross and adjusted EBITDA percentage margins, due to offsetting savings elsewhere within our income statement, it has not had an adverse effect on our adjusted profit before tax percentage margin which increased to 25.2% (H1 2016: 23.8%).
Adjusted EBITDA
The Group's adjusted EBITDA grew by 13% to £17.6m (H1 2016: £15.5m) reflecting a significantly improved performance. In percentage terms the adjusted EBITDA margin reduced to 41.8% (H1 2016: 42.6%) with the reduction arising in the Cloud Services segment whilst the Easyspace segment recorded an improved gross margin percentage.
Cloud Services increased its adjusted EBITDA by 8% to £16.3m (H1 2016: £15.0m). The continued improvement in adjusted EBITDA is largely due to the additional gross margin contribution arising from our organic sales growth offset by continued investment in staffing levels and a full period contribution from the acquisition of SystemsUp in June 2015. In percentage terms the margin reduced to 45.8% (H1 2016: 47.8%). The primary reasons for the percentage margin reduction were the reduction in the Cloud Services gross margin percentage previously described and inclusion of SystemsUp for the full six month period. Whilst we have initially included the activities of Cristie within the Cloud Services segment we intend to consider this further in due course and may not include it within this segment in the future.
The adjusted EBITDA of Easyspace increased by 38% to £3.1m (H1 2016: £2.2m) largely as a result of the impact of the acquisition of United Hosting in November 2015. In percentage terms the margin increased to 46.8% (H1 2016: 44.9%) which again was predominantly due to the impact of the acquisition of United Hosting.
Group overheads, which are not allocated to segments, include the cost of the Board, all the running costs of the headquarters in Glasgow, and Group led functions such as human resources, marketing, finance and design. Group overheads of £1.8m have increased modestly in the period (H1 2016: £1.7m).
Adjusted profit before tax
Depreciation charges of £5.4m (H1 2016: £5.6m) have slightly reduced. This is a combination of additional depreciation charges as a result of continued investment in our datacentre estate and the purchase of equipment to provide services to our new and existing customers, offset by assets bought in previous periods becoming fully depreciated in this period and therefore no longer contributing to the ongoing depreciation charge. In addition we have not incurred any capital expenditure on the provision of public cloud solutions which has had the effect of reducing our depreciation charge in absolute terms and also in it falling as a percentage of our revenue to 12.7% (H1 2016: 15.3%). In addition this percentage reduction is also due to the impact of the mix of assets which we have acquired, with differing useful lives causing reduced depreciation charges and the fact that not all of our operations require the same level of capital expenditure to generate revenue. For example, our SystemsUp consultancy operation requires no significant capital expenditure and thereby does not generate a depreciation charge related to its revenues. The charge for the amortisation of intangible assets, excluding amortisation of intangible assets resulting from acquisitions ("amortisation of acquired intangible assets") has increased to £0.9m (H1 2016: £0.6m) as a result of increased charges for software licenses and the additional development activity within the enlarged Group.
Net finance costs, excluding the mark to market adjustment on interest swaps on the Company's loans, the interest charge on contingent consideration due and in the previous period the accelerated write off of arrangement fees on restructuring of our bank borrowing facility were £0.7m (H1 2016: £0.6m).
After deducting the charges for depreciation, amortisation, excluding the amortisation of acquired intangible assets, and finance costs, excluding the interest charges in respect of contingent consideration due, the accelerated write off of arrangement fees in the previous period and the mark to market adjustment on interest rate swaps, from adjusted EBITDA the adjusted profit for the period before tax increased by 23% to £10.6m (H1 2016: £8.7m).
The adjusted profit before tax margin for the period was 25.2% (H1 2016: 23.8%). The increase in percentage margin of 1.4% is due to a combination of the reduction in the adjusted EBITDA margin over the period of 0.8% offset by the reduction in deprecation charge as a percentage of revenue of 2.6%.
Profit before tax
The measure of adjusted profit before tax is a non-statutory measure which is commonly used to analyse the performance of companies 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 6 months to 30/09/2016 6 months to 30/09/2015 Year to 31/03/2016
Adjusted profit before tax 10,632 8,677 18,970
Less: Share based payments (557) (338) (1,081)
Less: Amortisation of acquired intangible assets (2,697) (2,417) (5,354)
Less: Acquisition costs (102) (129) (116)
Less: Accelerated write off of arrangement fees on restructuring of facility - (177) (177)
Add: Mark to market adjustment on interest rate swaps 43 67 64
Less: Interest on contingent consideration (177) - (152)
Add: Gain on revaluation of contingent consideration - - 870
Profit before tax 7,142 5,683 13,024
The adjusting items are: share based payment charges in the period which increased to £0.6m (H1 2016: £0.3m) as a result of the issue of additional share options; charges for the amortisation of acquired intangible assets of £2.7m (H1 2016: £2.4m) which have increased mainly as a result of the full period effect of acquisitions made in previous periods; costs of £0.1m (H1 2016: £0.1m) as a result of acquisitions; finance charges of £nil (H1 2016: £0.2m) due to the accelerated release of arrangement fees on the bank borrowing facility which was restructured in the previous period; a finance cost credit of £0.04m (H1 2016: £0.07m) in respect of mark to market adjustments relating to interest rate swaps on the Company's loans and interest charges on contingent consideration due of £0.2m (H1 2016: £nil).
After deducting the charges for share based payments, the amortisation of acquired intangible assets, acquisition costs, the mark to market adjustment on interest rate swaps, the interest charges in respect of contingent consideration due and the accelerated write off of arrangement fees on the bank borrowing facility which was restructured during the previous period from the adjusted profit before tax, the reported profit before tax increased by 26% to £7.1m (H1 2016: £5.7m).
In percentage terms the profit before tax margin was 17.0% (H1 2016: 15.6%). This increase in percentage margin of 1.4% is similar to the increase in the adjusted profit before tax percentage margin and is due to the same reasons as the adjusted profit before tax margin increase previously explained.
Profit for the period from total operations
There is a tax charge in the period of £1.3m (H1 2016: £0.8m), which comprises a current taxation charge of £2.1m (H1 2016: £1.7m), and a deferred taxation credit of £0.8m (H1 2016: £0.9m). The tax charge for the period has increased because of the increase in profitability of the Group. This results in a profit for the period from total operations of £5.8m (H1 2016: £4.9m) an increase of 20%.
Earnings per share
Adjusted diluted earnings per share, which is based on profit for the period attributed to ordinary shareholders before share based payment charges, amortisation of acquired intangible assets, the accelerated write off of arrangement fees on the restructuring of the bank facility in the previous period, the mark to market adjustment on interest rate swaps, the interest charges in respect of contingent consideration due and acquisition costs and the tax effect of these items, was 8.03p (H1 2016: 6.75p) an increase of 19%.
The measure of adjusted earnings per share as described above is a non-statutory measure which is commonly used to analyse the performance of companies where M&A activity forms a significant part of their activities.
Basic earnings per share from continuing operations was 5.43p (H1 2016: 4.57p) an increase of 19%.
The calculation of both adjusted diluted earnings per share and basic earnings per share is included at note 3.
Cash flow
The Group generated cash from operations in the period of £16.7m (H1 2016: £13.6m), which is 95% of our adjusted EBITDA (H1 2016: 88%). Expenditure on taxation in the period was £1.2m (H1 2016: £1.8m), which was reduced due to the receipt of a tax refund relating to previous periods, resulting in net cash flow from operating activities in the period of £15.5m (H1 2016: £11.8m).
Expenditure on investing activities of £8.5m (H1 2016: £16.3m) was incurred in the period. £4.6m (H1 2016: £6.6m), net of related finance lease drawdown and trade creditors, was incurred on the acquisition of property, plant and equipment principally to provide services to our customers. We made purchases of intangible assets of £1.4m (H1 2016: £0.4m) in the period, with the increase largely due to the advance purchase of additional software licences for storage and backup purposes. In respect of M&A activity £1.2m (H1 2016: £nil) was paid out for contingent consideration due on acquisitions made in previous periods and £0.7m (H1 2016: £8.7m) was incurred on the acquisition of Cristie in the period, as described above, net of cash acquired of £3.1m. We also incurred £0.7m (H1 2016: £0.6m) in respect of the capitalisation of development costs during the period.
There was net cash used in financing activities of £6.7m (H1 2016: £4.0m net cash generated). We generated £0.6m (H1 2016: £0.1m) from the issue of shares as a result of the exercise of options by staff. We made no drawdowns under our bank facility (H1 2016: £9.0m) and we made repayments of £3.0m (H1 2016: £1.0m) during the period. We repaid £0.3m (H1 2016: £0.6m) of finance leases and incurred £0.6m (H1 2016: £0.8m) of finance charges. We also made a dividend payment of £3.4m (H1 2016: £2.7m). As a result cash and cash equivalent balances at the end of the period were £10.6m (H1 2016: £7.9m).
Net Debt
The net debt position of the Group at the end of the period was £22.2m (H1 2016: £23.2m). This represents a multiple of less than one times our annual adjusted EBITDA which we believe is a very comfortable level of debt to carry.
Current trading and outlook
Trading in the first half of the year has been very good and we remain focussed on building our recurring revenues in line with our business model. We are uncovering an increasing breadth of opportunities to constantly grow that recurring revenue and remain confident in our future prospects.
Angus MacSween
CEO
5 December 2016
Consolidated Interim Statement of Comprehensive Income
Six months ended 30 September 2016
Unaudited Unaudited Audited
6 months 6 months
to to Year to
30/09/201 30/09/201 31/03/201
6 5 6
GBP'000 GBP'000 GBP'000
Revenue 42,119 36,431 76,280
Cost of sales (14,416) (11,755) (24,650)
Gross profit 27,703 24,676 51,630
Administrative expenses (19,693) (18,217) (37,917)
Operating profit 8,010 6,459 13,713
Analysed as:
Earnings before interest, tax, depreciation, amortisation, acquisition costs
and share based payments 17,585 15,520 32,341
Share based payments (557) (338) (1,081)
Acquisition costs 4 (102) (129) (116)
Depreciation 8 (5,365) (5,570) (10,878)
Amortisation - acquired intangible assets (2,697) (2,417) (5,354)
Amortisation - other intangible assets (854) (607) (1,199)
Gain on revaluation of contingent consideration - - 870
Finance income 16 10 128
Finance costs 5 (884) (786) (1,687)
Profit before taxation 7,142 5,683 13,024
Taxation 6 (1,327) (803) (2,005)
Profit for the period from total operations 5,815 4,880 11,019
Other comprehensive income
Currency translation differences 14 1 10
Other comprehensive expense for the period 14 1 10
Total comprehensive income for the period 5,829 4,881 11,029
Attributable to equity holders of the parent 5,829 4,881 11,029
Basic and diluted earnings per share
Total operations
Basic earnings per share 3 5.43 p 4.57 p 10.32 p
Diluted earnings per share 3 5.36 p 4.52 p 10.17 p
Consolidated Interim Statement of Financial Position
As at 30 September 2016
Unaudited Unaudited Audited
30/09/2016 30/09/2015 31/03/2016
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets - goodwill 7 61,724 55,050 61,123
Intangible assets - other 7 22,497 19,366 23,065
Lease deposit 2,760 2,416 2,760
Property, plant and equipment 8 35,340 34,831 36,045
122,321 111,663 122,993
Current assets
Cash and cash equivalents 10,599 7,938 10,341
Trade and other receivables 14,092 13,123 13,718
24,691 21,061 24,059
Total assets 147,012 132,724 147,052
LIABILITIES
Non-current liabilities
Contingent consideration due on acquisitions 9 - - (2,068)
Non-current borrowings (740) (1,029) (826)
Trade and other payables (318) (593) (455)
Provisions for other liabilities and charges (2,010) (2,330) (1,879)
Deferred tax liability (1,521) (1,521) (2,075)
(4,589) (5,473) (7,303)
Current liabilities
Contingent consideration due on acquisitions 9 (2,220) (2,655) (1,135)
Trade and other payables (19,827) (17,445) (19,532)
Provisions - - (211)
Current income tax liabilities (2,506) (1,645) (1,504)
Current borrowings (32,037) (30,078) (35,098)
(56,590) (51,823) (57,480)
Total liabilities (61,179) (57,296) (64,783)
Net assets 85,833 75,428 82,269
EQUITY
Share capital 1,078 1,078 1,078
Own shares (267) (514) (489)
Capital redemption reserve 1,200 1,200 1,200
Share premium 21,067 21,067 21,067
Merger reserve 4,983 4,983 4,983
Foreign currency translation reserve (23) (46) (37)
Retained earnings 57,795 47,660 54,467
Total equity 85,833 75,428 82,269
Consolidated Interim Statement of Cash Flows
Six months ended 30 September 2016
Unaudited Unaudited Audited
6 months
to 6 months Year to
30/09/201 to 31/03/201
6 30/09/2015 6
GBP'000 GBP'000 GBP'000
Profit before tax 7,142 5,683 13,024
Gain on revaluation of contingent consideration - - (870)
Finance costs - net 868 776 1,559
Depreciation 5,365 5,570 10,878
Amortisation 3,551 3,024 6,553
Share based payments 557 338 1,081
Movement in trade receivables 186 (1,111) (1,612)
Movement in trade payables (944) (634) 298
Cash flow from operations 16,725 13,646 30,911
Taxation paid (1,222) (1,826) (4,311)
Net cash flow from operating activities 15,503 11,820 26,600
Cash flow from investing activities
Purchase of property, plant and equipment (4,634) (6,643) (12,385)
Capitalisation of development costs (667) (577) (1,123)
Purchase of intangible assets (1,384) (406) (1,207)
Payment for acquisition of subsidiary undertakings net
of cash acquired (675) (8,651) (15,924)
Contingent consideration paid (1,161) - (1,650)
Payment of deposits - - (300)
Finance income received 16 10 33
Net cash used in investing activities (8,505) (16,267) (32,556)
Cash flow from financing activities
Exercise of share options 610 54 91
Draw down of bank loans - 9,000 16,500
Repayment of finance leases (343) (577) (984)
Repayment of bank loans (3,000) (1,000) (3,500)
Finance costs paid (632) (771) (1,489)
Dividends paid (3,375) (2,668) (2,668)
Net cash (used in)/generated from financing activities (6,740) 4,038 7,950
Net increase/(decrease) in cash and cash equivalents 258 (409) 1,994
Cash and cash equivalents at the beginning of the period 10,341 8,347 8,347
Cash and cash equivalents at the end of the period 10,599 7,938 10,341
Consolidated Interim Statement of Changes in Equity
Six months ended 30 September 2016
Own
Own Foreign
currenc
y Capital
shares transla redempt Share
Share shares Treasur tion ion premium Merger Retained
Changes in equity capital EBT y reserve reserve account reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at 1 April 2015 1,078 (70) (468) (47) 1,200 21,067 4,983 44,936 72,679
Profit in the period - - - - - - - 4,880 4,880
Currency translation differences - - - 1 - - - - 1
Total comprehensive income - - - 1 - - - 4,880 4,881
Dividends
- - - - - - - (2,668) (2,668)
Share based payments - - - - - - - 338 338
Deferred tax on share based payments - - - - - - - 144 144
Issue of own shares for option redemption
- - 24 - - - - 30 54
Total transactions with owners - - 24 - - - - (2,156) (2,132)
Balance at 30 September 2015 1,078 (70) (444) (46) 1,200 21,067 4,983 47,660 75,428
Profit in the period - - - - - - - 6,139 6,139
Currency translation differences - - - 9 - - - - 9
Total comprehensive income - - - 9 - - - 6,139 6,148
Share based payments - - - - - - - 743 743
Deferred tax on share based payments
- - - - - - - (87) (87)
Issue of own shares for option redemption
- - 25 - - - - 12 37
Total transactions with owners - - 25 - - - - 668 693
Balance at 31 March 2016 1,078 (70) (419) (37) 1,200 21,067 4,983 54,467 82,269
Profit in the period - - - - - - - 5,815 5,815
Currency translation differences - - - 14 - - - - 14
Total comprehensive income - - - 14 - - - 5,815 5,829
Dividends
- - - - - - - (3,375) (3,375)
Share based payments - - - - - - - 557 557
Deferred tax on share based payments - - - - - - - (57) (57)
Issue of own shares for option redemption
- - 222 - - - - 388 610
Total transactions with owners - - 222 - - - - (2,487) (2,265)
Balance at 30 September 2016 1,078 (70) (197) (23) 1,200 21,067 4,983 57,795 85,833
Notes to the Half Yearly Financial Information
Six months ended 30 September 2016
1. Accounting policies
The financial information for the year ended 31 March 2016 set out in this half yearly report does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The figures for the year ended 31 March 2016 have been extracted from the Group financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included an independent auditor's report, which was unqualified and did not contain a statement under section 493 of the Companies Act 2006.
The half yearly financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 31 March 2017. The Group financial statements for the year ended 31 March 2016 were prepared under International Financial Reporting Standards as adopted by the European Union. These half yearly financial statements have been prepared on a consistent basis and format with the Group financial statements for the year ended 31 March 2016. The provisions of IAS 34 'Interim Financial Reporting' have not been applied in full.
2. Operating segments
Revenue by Operating Segment
6 months to 30/09/2016 6 months to 30/09/2015 Year to 31/03/2016
External Internal Total External Internal Total External Internal Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Easyspace 6,550 - 6,550 4,936 - 4,936 10,883 - 10,883
Cloud Services 35,569 846 36,415 31,495 481 31,976 65,397 1,114 66,511
42,119 846 42,965 36,431 481 36,912 76,280 1,114 77,394
Geographical Information
In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. The United Kingdom is the place of domicile of the parent company, iomart Group plc. No individual country other than the United Kingdom contributes a material amount of revenue therefore revenue from outside the United Kingdom has been shown as from Rest of the World.
Analysis of Revenue by Destination
6 months to 30/09/2016 6 months to 30/09/2015 Year to 31/03/2016
GBP'000 GBP'000 GBP'000
United Kingdom 35,062 30,072 64,218
Rest of the World 7,057 6,359 12,062
Revenue from operations 42,119 36,431 76,280
2. Operating segments (continued)
Profit by Operating Segment
6 months to 30/09/2016 6 months to 30/09/2015 Year to 31/03/2016
Share Share Share
based based based
EBITDA payments payments EBITDA payment
before , EBITDA , before s,
share acquisit before acquisit share acquisi
based ion share ion based tion
payments costs, based costs, payment costs,
and deprecia payments deprecia s and depreci
acquisit tion & Operating and tion & Operating acquisi ation & Operating
ion amortisa profit/(l acquisiti amortisa profit/(l tion amortis profit/(l
costs tion oss) on costs tion oss) costs ation oss)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Easyspace 3,067 (840) 2,227 2,215 (198) 2,017 5,094 (815) 4,279
(16,616
Cloud Services 16,287 (8,076) 8,211 15,041 (8,396) 6,645 31,084 ) 14,468
Group overheads (1,769) - (1,769) (1,736) - (1,736) (3,837) - (3,837)
Share based payments - (557) (557) - (338) (338) - (1,081) (1,081)
Acquisition costs - (102) (102) - (129) (129) - (116) (116)
(18,628
17,585 (9,575) 8,010 15,520 (9,061) 6,459 32,341 ) 13,713
Gain on revaluation of contingent consideration - - 870
Group interest and tax (2,195) (1,579) (3,564)
(18,628
Profit for the period 17,585 (9,575) 5,815 15,520 (9,061) 4,880 32,341 ) 11,019
Group overheads, share based payments, acquisition costs, interest and tax are not allocated to segments.
3. Earnings per share
The calculations of earnings per share are based on the following results and numbers:
6 months to 6 months to Year to
30/09/2016 30/09/2015 31/03/2016
Total Operations
GBP'000 GBP'000 GBP'000
Profit for the financial period and basic
earnings attributed to ordinary shareholders 5,815 4,880 11,019
No No No
Weighted average number of ordinary shares: 000 000 000
Called up, allotted and fully paid at start of
period 107,803 107,803 107,803
Own shares held in Treasury (619) (932) (898)
Shares held by Employee Benefit Trust (141) (141) (141)
Weighted average number of ordinary shares -
basic 107,043 106,730 106,764
Dilutive impact of share options 1,390 1,245 1,609
Weighted average number of ordinary shares -
diluted 108,433 107,975 108,373
Basic earnings per share 5.43 p 4.57 p 10.32 p
Diluted earnings per share 5.36 p 4.52 p 10.17 p
6 months to 6 months to Year to
Adjusted earnings per share 30/09/2016 30/09/2015 31/03/2016
GBP'000 GBP'000 GBP'000
Profit for the financial period and basic
earnings attributed to ordinary shareholders 5,815 4,880 11,019
- Amortisation of acquired intangible assets 2,697 2,417 5,354
- Acquisition costs 102 129 116
- Share based payments 557 338 1,081
- Mark to market interest adjustment (43) (67) (64)
- Accelerated finance cost due to refinancing - 177 177
- Finance charge on contingent consideration 177 - 152
- Gain on revaluation of contingent
consideration - - (870)
- Tax impact of adjusted items (597) (590) (1,311)
Adjusted profit for the financial period and
adjusted basic earnings attributed to ordinary
shareholders 8,708 7,284 15,654
Adjusted basic earnings per share 8.14 p 6.82 p 14.66 p
Adjusted diluted earnings per share 8.03 p 6.75 p 14.44 p
4. Acquisition costs
6 months 6 months
to to Year to
30/09/2016 30/09/2015 31/03/2016
GBP'000 GBP'000 GBP'000
Professional fees 98 113 263
Non-recurring integration costs
- Onerous lease provisions - - (169)
- Other 4 16 22
Total acquisition costs for the period 102 129 116
During the period costs of £98,000 (H1 2016: £113,000) were incurred in respect of professional fees on an acquisition. In addition to these professional fees, one-off costs of £4,000 (H1 2016: £16,000) directly related to the integration of acquisitions into the Group were also incurred.
5. Finance costs
6 months 6 months
to to Year to
30/09/2016 30/09/2015 31/03/2016
GBP'000 GBP'000 GBP'000
Bank loans (628) (505) (1,109)
Finance leases (99) (135) (251)
Other interest charges (23) (36) (62)
Mark to market adjustment on interest rate
swaps 43 67 64
Accelerated write off of arrangement fees on
restructuring of facility - (177) (177)
Finance charge on contingent consideration (177) - (152)
Finance costs for the period (884) (786) (1,687)
6. Taxation
6 months 6 months
to to Year to
30/09/2016 30/09/2015 31/03/2016
GBP'000 GBP'000 GBP'000
Tax charge for the period (2,126) (1,720) (3,663)
Adjustment relating to prior periods - (12) 52
Total current taxation (2,126) (1,732) (3,611)
Origination and reversal of temporary
differences 871 933 1,482
Adjustment relating to prior periods (4) - 31
Effect of different statutory tax rates
of overseas jurisdictions 12 (4) 61
Effect of changes in tax rates (80) - 32
Total deferred taxation credit 799 929 1,606
Taxation charge for the period (1,327) (803) (2,005)
The Group has no unused tax losses (H1 2016: £0.5m) available for offset against future profits and therefore no corresponding deferred tax asset has been recognised (H1 2016: £0.5m).
7. Intangible assets
Domain
names &
Customer IP
Development relations Beneficial addresse
Goodwill costs hips Software contracts s Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost:
At 1 April 2015 47,342 3,709 26,431 2,114 86 280 79,962
Additions in the
period - - - 264 - - 264
Currency
translation
differences - - (12) (2) - - (14)
Acquired on
acquisition of
subsidiary 7,708 - 2,516 - - - 10,224
Development costs
capitalised - 577 - - - - 577
At 30 September
2015 55,050 4,286 28,935 2,376 86 280 91,013
Additions in the
period - - - 756 - - 756
Currency
translation
differences - - 35 5 - - 40
Acquired on
acquisition of
subsidiary 6,073 - 5,912 - - - 11,985
Development costs
capitalised - 546 - - - - 546
At 31 March 2016 61,123 4,832 34,882 3,137 86 280 104,340
Additions in the
period 601 - - 1,315 - - 1,916
Currency
translation
differences - - 65 25 - - 90
Acquired on
acquisition of
subsidiary - - 982 - - - 982
Development costs
capitalised - 667 - - - - 667
At 30 September
2016 61,724 5,499 35,929 4,477 86 280 107,995
Accumulated
amortisation:
At 1 April 2015 - (2,496) (9,945) (1,003) (19) (116) (13,579)
Currency
translation
differences - - 5 1 - - 6
Charge for the
period - (384) (2,413) (195) (4) (28) (3,024)
At 30 September
2015 - (2,880) (12,353) (1,197) (23) (144) (16,597)
Currency
translation
differences - - (21) (5) - - (26)
Charge for the
period - (314) (2,934) (251) (3) (27) (3,529)
At 31 March 2016 - (3,194) (15,308) (1,453) (26) (171) (20,152)
Currency
translation
differences - - (51) (20) - - (71)
Charge for the
period - (442) (2,693) (385) (4) (27) (3,551)
At 30 September
2016 - (3,636) (18,052) (1,858) (30) (198) (23,774)
Carrying amount:
At 30 September
2016 61,724 1,863 17,877 2,619 56 82 84,221
At 31 March 2016 61,123 1,638 19,574 1,684 60 109 84,188
At 30 September
2015 55,050 1,406 16,582 1,179 63 136 74,416
8. Property, plant and equipment
Leasehold Computer Office Motor
Freehold improve-m Datacentre equipmen equipme vehicle
property ents equipment t nt s Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Cost:
At 1 April
2015 2,062 6,857 18,367 37,978 2,144 48 67,456
Additions in
the period - 227 444 4,773 98 - 5,542
Acquisition
of subsidiary - - - 9 - 20 29
Disposals in
the period - - - (15) - - (15)
Currency
translation
differences - - - (18) - - (18)
At 30
September
2015 2,062 7,084 18,811 42,727 2,242 68 72,994
Additions in
the period - 239 1,661 4,330 111 - 6,341
Acquisition
of subsidiary - - - 143 3 - 146
Currency
translation
differences - - - 42 - - 42
At 31 March
2016 2,062 7,323 20,472 47,242 2,356 68 79,523
Additions in
the period - 34 312 3,884 148 - 4,378
Acquisition
of subsidiary - - - 179 27 - 206
Disposals in
the period - (3) - (58) - - (61)
Currency
translation
differences - - - 134 - - 134
At 30
September
2016 2,062 7,354 20,784 51,381 2,531 68 84,180
Accumulated
depreciation:
At 1 April
2015 (150) (1,858) (6,253) (23,196) (1,112) (41) (32,610)
Charge for
the period (20) (256) (769) (4,379) (139) (7) (5,570)
Disposals in
the period - - - 15 - - 15
Currency
translation
differences - - - 2 - - 2
At 30
September
2015 (170) (2,114) (7,022) (27,558) (1,251) (48) (38,163)
Charge for
the period (21) (223) (917) (4,020) (120) (7) (5,308)
Currency
translation
differences - - - (7) - - (7)
At 31 March
2016 (191) (2,337) (7,939) (31,585) (1,371) (55) (43,478)
Charge for
the period (21) (226) (922) (4,067) (121) (8) (5,365)
Disposals in
the period - 3 - 58 - - 61
Currency
translation
differences - - - (58) - - (58)
At 30
September
2016 (212) (2,560) (8,861) (35,652) (1,492) (63) (48,840)
Carrying
amount:
At 30
September
2016 1,850 4,794 11,923 15,729 1,039 5 35,340
At 31 March
2016 1,871 4,986 12,533 15,657 985 13 36,045
At 30
September
2015 1,892 4,970 11,789 15,169 991 20 34,831
9. Contingent consideration due on acquisitions
30/09/2016 30/09/2015 31/03/2016
GBP'000 GBP'000 GBP'000
Contingent consideration due on
acquisitions
- ServerSpace Limited - (1,650) -
- Systems Up Limited - (1,005) (135)
- United Communications Limited (2,220) - (3,068)
Total contingent consideration due on
acquisitions (2,220) (2,655) (3,203)
10. Analysis of change in net debt
Bank
Cash and Finance
cash leases and
equivalent hire
s loans purchase Total
GBP'000 GBP'000 GBP'000 GBP'000
At 1 April 2015 8,347 (21,457) (2,284) (15,394)
Repayment of bank loans - 1,000 - 1,000
New bank loans - (9,000) - (9,000)
Impact of effective interest
rate - 46 - 46
Cash flow (409) - 587 178
At 30 September 2015 7,938 (29,411) (1,697) (23,170)
Repayment of bank loans - 2,500 - 2,500
New bank loans - (7,500) - (7,500)
Inception of finance leases - - (97) (97)
Impact of effective interest
rate - (114) - (114)
Acquired on acquisition of
subsidiary 4,476 - - 4,476
Currency translation
difference - - (2) (2)
Cash flow (2,073) - 397 (1,676)
At 31 March 2016 10,341 (34,525) (1,399) (25,583)
Repayment of bank loans - 3,000 - 3,000
Impact of effective interest
rate - (147) - (147)
Acquired on acquisition of
subsidiary 3,104 - (25) 3,079
Currency translation
difference - - (24) (24)
Cash flow (2,846) - 343 (2,503)
At 30 September 2016 10,599 (31,672) (1,105) (22,178)
11. Acquisitions
Cristie Data Limited
The Group acquired 100% of the issued share capital of Cristie Data Limited ("Cristie") on 25 August 2016.
Cristie is a Stroud based data storage, backup and virtualisation solutions provider, which has operated across all sectors of industry from SMEs to large enterprises, and public sector to private sector for over 40 years. Cristie is particularly active in the UK public sector especially in education and health, which offers the opportunity for the Group to increase its presence in these areas. The acquisition is in line with the Group's strategy to grow its operations both organically and by acquisition.
During the current period the Group incurred £98,000 of third party acquisition related costs in respect of this acquisition. These expenses are included in administrative expenses in the Group's consolidated statement of comprehensive income for the 6 months ended 30 September 2016.
The following table summarises the consideration to acquire Cristie and the amounts of identified assets acquired and liabilities assumed at the acquisition date:
GBP'000
Recognised amounts of assets acquired and liabilities assumed
(provisional):
Cash and cash equivalents 3,104
Trade and other receivables 571
Property, plant and equipment 206
Intangible assets 982
Trade and other payables (1,361)
Current borrowings (25)
Current income tax liabilities (99)
Deferred tax liability (200)
Identifiable net assets 3,178
Goodwill 601
Total consideration 3,779
Satisfied by:
Cash - paid on acquisition 3,779
Total consideration to be transferred 3,779
The recognised amounts of all the assets acquired and liabilities assumed are provisional.
The agreed purchase price for the shares, on a cash-free, debt-free, normalised working capital basis was £1,250,000. On the date of the acquisition a payment of £3,779,000 was made in cash, including an amount of £2,529,000 in settlement in respect of the additional debt assumed, cash acquired and normalised working capital position of Cristie at completion.
Cristie earned revenue of £388,000 and generated profits before tax of £31,000 in the period since acquisition.
United Communications Limited
The fair values of acquired assets and liabilities, including goodwill, previously disclosed as provisional for United Communications Limited have been finalised in the current period with no changes to the fair values disclosed in the Annual Report and Accounts 2016.
13. Availability of half yearly reports
Half yearly reports will be sent to all shareholders on 11 January 2017. Copies of the half yearly report will be available for collection from the offices of Peel Hunt LLP, 120 London Wall, London, EC2Y 5ET, for a period of one month from the date of despatch and in accordance with Rules 20 and 26 of the AIM Rules, available from the Company's website at http://www.iomart.com.
INDEPENDENT REVIEW REPORT TO IOMART GROUP PLC
Introduction
We have been engaged by the company to review the financial information in the half-yearly financial report for the six months ended 30 September 2016 which comprises the consolidated interim statement of comprehensive income, the consolidated interim statement of financial position, the consolidated interim statement of cash flows, the consolidated interim statement of changes in equity and the related notes 1 to 13 set out on pages 8 to 19. We have read the other information contained in the half yearly financial report which comprises only the interim results announcement and the chief executive's statement and considered whether it contains any apparent misstatements or material inconsistencies with the financial information.
This report is made solely to the company in accordance with guidance contained in Independent Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. Our review work has been undertaken so that we might state to the company those matters we are required to state to it in an independent review 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 for our review work, for this report, or for the conclusion we have formed.
Directors' Responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules for Companies of the London Stock Exchange require that the accounting policies and presentation applied to the financial information in the half-yearly report are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.
As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in Note 1.
Our Responsibility
Our responsibility is to express to the Company a conclusion on the financial information in the half-yearly financial report based on our review.
Scope of Review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 September 2016 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 1.
GRANT THORNTON UK LLP
Statutory auditor, Chartered Accountants
Glasgow
5 December 2016
SOURCE iomart Group PLC
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