Iomart Regulatory News (IOM)

17 May 2006 07:01

Iomart Group PLC17 May 2006 IOMART GROUP PLC Final results for the year ended 31 March 2006 Highlights • Turnover £24.3m up by 46% (2005 - £16.6m) • Operating profit pre-amortisation £5.0m up by 120% (2005 - £2.3m) • Fully diluted underlying earnings per share pre-amortisation 6.4p up by 88% (2005 - 3.4p) • Dividend proposed of 3p per share up by 140% (2005 - 1.25p) • 240,000 customer numbers grown 20% • Financial director appointed Contact: Nick Kuenssberg Non-executive Chairman 07860 635191 Angus MacSween Chief Executive Officer 0141 931 6400 REPORT AND FINANCIAL STATEMENTS 2006 CHAIRMAN'S STATEMENT The year 2005/06 has seen further significant progress by your company withsubstantial growth in sales revenue and profits on the back of an improvingoperational base. Total revenue increased by 46% to £24.3m (2005 - £16.6m) with gross profitmargins averaging 82%, operating profit pre-amortisation increased by 120% to£5.0m (2005 - £2.3m) and fully diluted underlying earnings per share, excludingthe charge for amortisation and the deferred tax charge/credit relating to taxlosses, increased by 88% to 6.4p (2005 - 3.4p). This overall improvement was fuelled by excellent performances in the webservices sector which serviced 478,000 domain names and 240,000 customers.Ufindus, with its web and directory service, opened a new sales office inChorley and continued to generate organic growth with over 46,000 businesses.Easyspace, the web-based domain name and hosting business, continued to justifythe acquisition in 2004 with very good figures. Netintelligence, the security enterprise business, fell short of expectationsbut has now been converted to a hosted model for marketing to the SME sector aswell. We remain convinced that this end-point security product will satisfy therequirements of the SME market in the short term and the ISP sector in themedium term and will therefore continue to support it with additional resource. Your board has proposed a 140% increase in dividend to 3p per share (2005 -1.25p) payable on 30 September 2006 to shareholders on the register at 25 August2006 in line with our progressive dividend policy. Your board also confirms that it is the company's intention to introduce a scripdividend scheme to enable shareholders to elect to receive new ordinary sharesof 1p each in the capital of the company instead of cash dividends payable bythe company. A circular containing full details of the proposed scheme is beingsent to shareholders along with this annual report. Shareholder approval for theintroduction of the scrip dividend scheme will be sought at the forthcomingannual general meeting (AGM) of the company, notice of which is included at theend of this report. We are pleased to announce the appointment of Richard Logan, aged 49, BA, CA asfinance director and look forward to his contribution. On your behalf I recognise the commitment shown by Angus MacSween and hisexecutive team and all the staff of the company and look forward to another yearof significant progress. Nick KuenssbergNon-executive chairman 16 May 2006 REPORT AND FINANCIAL STATEMENTS 2006 CHIEF EXECUTIVE OFFICER'S REPORT The past year has been one of continuing progress on all fronts. Revenues have risen by 46% and operating profit pre-amortisation has increasedby 120%. UfindUs, our directory service where we provide a web and directory presence tothe small and micro business sector, has continued to be our main driver ofgrowth. The growing penetration of broadband into the UK market means more andmore people are using the web to source local products and services. UfindUs isgaining users with over 2 million searches per month being carried out on thedirectory and an additional 2 million visits per month direct to our customerswebsites. More and more of our customers are extolling the amount of businessthat being on UfindUs brings them. We are also seeing a growing source ofrevenue from improving and deepening our existing 46,000 customers' web presencewith over 4,000 of them now taking advantage of our web design services. Easyspace Limited is our web based domain name and hosting business. This is amarketing led business which attracts existing and new customers to its web sitefor a self-serve range of web products. Easyspace has had a good year followinga period of integration and is now recognised as one of the UK's leading hostingcompanies. We provide services to 194,000 customers and continue to lead withnew products and services, such as dedicated servers, hosted mail and security. Netintelligence has continued to make progress although more slowly thananticipated. We have recently launched our new version which has a full suite offunctionality in a very simple to use, simple to deploy and simple to managehosted format. There is a growing acceptance that as the world goes mobile thereis a requirement to defend security at the end point, be it a desktop in a homeoffice or a laptop in a coffee shop. The ISP community has been slow to adoptsecurity products while they remain focussed on broadband land-grab at anyprice, and we have refocused on the SME market via our proven direct salesmodel. The fact that we can demonstrate the product live with potentialcustomers is increasing the number of trials significantly. We remain convinced that, with the right sales teams in place and appropriatemarketing support, Netintelligence sales will grow significantly. Our business models require further fine tuning and investment in systems,marketing and co-location facilities and we will develop additional innovativestrategies to increase average annual revenue and total customer numbers. Wewill focus on the sustainability of your company as well as consideropportunities for organic growth, acquisition and partnership in the growing andconsolidating web-services sector. Results Turnover for the year of £24.3m is 46% higher than last year and gross margin at82% overall is consistent with our expectations. Administrative expenses were £15.5m against £11.3m last year. The current year'sfigure includes a full year's charge for the Blackpool sales office opened lastyear, costs of larger premises in both Glasgow and Lancaster and the new Chorleysales office opened during the year, together with a full year's charge foramortisation of the goodwill arising on the acquisition of Easyspace Limited. Inaddition marketing expenditure, including a new television advertising campaign,was increased significantly to promote the Ufindus directory. A total of £0.6m of capital expenditure was incurred during the year, as thegroup continued the programme of replacement of older more expensive equipmentand additional servers to support the increased levels of business during theyear, together with the costs of equipping the new Chorley sales office. Group pre-tax trading profit excluding amortisation was £5.0m compared with£2.3m in the previous year, a rise of over 120%. Operating profit was £4.4m (2005 - £1.8m) and the profit for the year beforetaxation was £4.2m (2005 - £1.7m). There is no liability to corporation tax onthe results for the year and research and development tax credits totalling£0.1m are due to be refunded. A charge of £0.3m has been made for deferred taxreflecting the reduction in the amount of tax losses available within one of thesubsidiary companies for offset against future expected taxable profits. This has resulted in a profit after taxation for the year of £4.0m (2005 - £3.1mafter a tax credit of £1.7m). Basic earnings per share for the year were 5.2p compared to 4.4p per share forthe previous year and fully diluted earnings per share were 5.0p. Fully dilutedunderlying earnings per share, excluding the charge for amortisation and thedeferred tax charge/credit relating to tax losses, were 6.4p (2005 - 3.4p). The directors have proposed a dividend for the year of 3p per share payable on30 September 2006 to shareholders on the register at 25 August 2006 in line withour progressive dividend policy. The dividend will be payable in cash or as ascrip dividend. The price of each new ordinary share will be calculated based onthe average of the middle market quotation of an ordinary share on the market onwhich the ordinary shares are listed or quoted on each of the first fiveconsecutive dealing days on which the relevant shares are quoted "ex" therelevant dividend. Cash and borrowings Cash balances at 31 March 2006 were £1.3m. Borrowings under finance leasesamounted to £0.1m, bank loans totalled £2.2m and overdrafts totalled £1.3m. Thegroup had no other significant debt outstanding. Trade debtors at £4.3m (2005 - £1.9m) increased disproportionately as a resultof both increased sales and delayed receipts from credit card processingfollowing the introduction of chip and pin technology, which impacted on thegroup's collection of recurring payments. The directors do not consider this tobe an ongoing issue and measures have been put in place to address thissituation. Financial instruments The group's financial instruments comprise cash and liquid resources, bank loansand finance leases together with various items such as trade debtors and tradecreditors that arise directly from its operations. The main purpose of thesefinancial instruments is to provide finance for the group's operations. The mainrisk to the group is interest rate risk arising from floating rate interestrates. The group's borrowings at 31 March 2006 comprise a bank loan andoverdrafts of £3.5m and finance leases totalling £0.1m. The interest ratepayable on the bank loan and overdrafts is 2.5% above the base rate of Bank ofScotland plc. The interest rate at 31 March 2006 was 7.25% and the averageinterest rate since the loan was drawn was 7.25%. The interest rate on thefinance leases is fixed for the term of the lease at 8.0%. All transactions ofthe holding company and the UK subsidiaries are in UK sterling and the groupdoes not use derivative instruments. Financial Position The group's financial position remains strong with sufficient resources to fundthe current business plans. International Financial Reporting Standards The AIM Rules require all AIM companies to adopt International AccountingStandards (IAS) for financial years commencing on or after 1 January 2007 andallow for early adoption. The board propose to adopt IAS from 1 April 2007. The company has established a project team to plan for and achieve a smoothtransition to IFRS. The project team is looking at all implementation aspects,including changes to accounting policies, systems impacts and the wider businessissues that may arise from such a fundamental change and we expect that thegroup will be fully prepared for the transition. Prospects Our three lines of business are all in markets that are real, growing andchanging. They also share a technical infrastructure which provides efficienciesand synergies. We own our intellectual property in each line of business and allhave high gross margins. All our pricing is now on a recurring revenue modelproviding increasing visibility of future revenues. We look forward to continuing the growth in each of these businesses and willconsider opportunities to enhance shareholder value in each of these lines ofbusiness through organic growth, acquisition and partnership. Angus MacSweenChief executive officer 16 May 2006 CONSOLIDATED PROFIT AND LOSS ACCOUNTYear ended 31 March 2006 31 March Restated 31 March 2006 2005 £'000 £'000 TURNOVER 24,306 16,603 Cost of sales (4,361) (3,513) ------------ ----------- Gross profit 19,945 13,090 ------------ ----------- Administrative expenses (15,547) (11,176)Restructuring expenses - (113) ------------ ----------- Total administrative expenses (15,547) (11,289) ------------ ----------- OPERATING PROFIT 4,398 1,801 Net interest (214) (77) ------------ ----------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 4,184 1,724 Tax (charge)/credit on profit on ordinaryactivities (170) 1,415 ------------ ----------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATIONFOR THE YEAR 4,014 3,139Equity minority interests - (11) ------------ ----------- PROFIT FOR THE FINANCIAL YEAR 4,014 3,128 ============ =========== Earnings per ordinary share (pence)Basic 5.2p 4.4pDiluted 5.0p 4.3p There have been no recognised gains and losses attributable to the shareholdersother than the profit for the current financial year and preceding financialyear and, accordingly, no statement of total recognised gains and losses isshown. CONSOLIDATED BALANCE SHEET 31 March 2006 2006 Restated 2005 £'000 £'000 FIXED ASSETSIntangible assets 13,470 14,289Tangible assets 918 885 ------------ ----------- 14,388 15,174 ------------ ----------- CURRENT ASSETSDebtors 10,614 5,256Deferred tax asset 945 1,200Cash at bank and in hand 1,279 2,033 ------------ ----------- 12,838 8,489 ------------ -----------CREDITORS: amounts falling due (7,167) (5,933)within one year ------------ ----------- NET CURRENT ASSETS 5,671 2,556 ------------ ----------- TOTAL ASSETS LESS CURRENT LIABILITIES 20,059 17,730 CREDITORS: amounts falling due after more than one (1,373) (2,201)year ------------ ----------- NET ASSETS 18,686 15,529 ============ =========== CAPITAL AND RESERVESCalled up share capital 773 767Capital redemption reserve 1,200 1,200Share premium account 6,203 6,108Profit and loss account 10,510 7,454 ------------ ----------- TOTAL EQUITY SHAREHOLDERS' FUNDS 18,686 15,529 ============ =========== CONSOLIDATED CASH FLOW STATEMENT Year ended 31 March 2006 31 March Restated 31 March 2006 2005 £'000 £'000 Net cash inflow from operating activities 362 1,057 Returns on investments and servicing of finance (214) (94) Taxation 123 4 Capital expenditure and financial investment (478) (765) Acquisitions and disposals (34) (4,103) Equity dividends paid (958) - ------------ ----------- Cash outflow before financing (1,199) (3,901) Financing (875) 2,909 ------------ ----------- Decrease in cash in the year (2,074) (992) ============ =========== Decrease in cash in the year (2,074) (992) Cash inflows/(outflows) from debt and leasefinancing 976 (2,846) ------------ ----------- Change in net (debt) from cash flows (1,098) (3,838) Opening net (debt)/funds (1,104) 2,734Inception of finance leases (76) - ------------ ----------- Closing net (debt) (2,278) (1,104) ============ =========== NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2005 1. BASIS OF PREPARATION The financial information set out above does not constitute the company'sstatutory financial statements for the year ended 31 March 2006 or the yearended 31 March 2005 but is derived from those financial statements. Thosefinancial statements have been reported on by the Company's auditors. The reportof the auditors was unqualified and did not contain a statement under S.237 (2)or (3) Companies Act 1985. The statutory financial statements for the year ended31 March 2005 have been delivered to the Registrar of Companies. The statutoryfinancial statements for the year ended 31 March 2006 will be delivered to theRegistrar of Companies following the Company's Annual General Meeting. 2. ACCOUNTING POLICIES The financial statements are prepared in accordance with applicable UnitedKingdom accounting standards. Changes in accounting policies The financial statements have been prepared on the basis of the accountingpolicies set out in the Group's statutory financial statements for the yearended 31 March 2005 apart from the adoption of the following Financial ReportingStandards: FRS 21 'Events After the Balance Sheet Date' The adoption of FRS 21 has resulted in a change in accounting policy in respectof proposed equity dividends. If the company declares dividends to the holdersof equity instruments after the balance sheet date, the company does notrecognise those dividends as a liability at the balance sheet date. Previouslywhere these equity dividends were proposed after the balance sheet date butbefore authorisation of the financial statements they were recorded asliabilities at the balance sheet date. The aggregate amount of equity dividendsproposed before approval of the financial statements, which have not been shownas liabilities at the balance sheet date, are disclosed in the notes to thefinancial statements. FRS 22 'Earnings per Share' FRS 22 has been adopted and there has been no impact on the calculation ofearnings per share. FRS 25 'Financial Instruments -Presentation The adoption of the presentation requirements of FRS 25 has had no impact on thefinancial statements. 3. SEGMENTAL ANALYSIS The analysis of turnover by destination is as follows: Year ended Restated 31 March 2006 Year ended £'000 31 March 2005 £'000Geographical analysisUnited Kingdom 23,529 16,245European Union 214 126USA 337 140Other 226 92 ----------- ----------- 24,306 16,603 =========== =========== The analysis of profit before tax and net assets by geographical segment has notbeen disclosed as over 95% of the group's activities are undertaken in the UK. 4. OPERATING PROFIT Year Restated Year ended 31 March ended 31 March 2006 2005 £'000 £'000Operating profit is after charging/(crediting)Depreciation of tangible fixed assets: Owned assets 513 405 Leased assets 8 7Amortisation of intangible fixed assets 819 547Rentals under operating leases Land and buildings 491 256 Plant and machinery 258 437Amortised deferred grant income (48) (60)Auditors' remuneration- company audit fees 16 12- group audit fees 20 19- taxation 13 11- corporate finance transactions 2 -- interim review 3 11- preparation of financial statements of subsidiaries - 19- advice re share schemes 4 -- advice re risk management assessment 5 - =========== =========== 5. DIVIDENDS ON SHARES CLASSED AS EQUITY Year Restated Year ended 31 March ended 31 March 2006 2005 £'000 £'000 Paid during the yearEquity dividends on ordinary shares 958 - =========== =========== Proposed after the year end (not recognised as aliability)Equity dividends on ordinary shares 2,318 958 =========== =========== 6. PRIOR YEAR ADJUSTMENT As disclosed in the accounting polices section, a new accounting standard, whichimpacted on the financial results was adopted in the year. The financial effectof this has been detailed below. FRS 21 In the prior year dividends of £958,000 were proposed and these were disclosedin the profit and loss account for the prior year. In the comparative figuresthese are now no longer disclosed on the face of the profit and loss account butdisclosed as an appropriation of profit in a note to the financial statements. In respect of the year under review dividends of £2,318,000 were proposed afterthe balance sheet date. Under the previous accounting policy these would havebeen shown as a liability and deducted from the profit for the year. Under thenew accounting policy these are not accrued and are disclosed only in a note tothe financial statements. 7. TAX ON PROFIT/(LOSS) ON ORDINARY ACTIVITIES Year ended Restated 31 March 2006 Year ended £'000 31 March 2005 £'000 Research and development tax credit 85 141Tax credit - 74Deferred tax (charge)/credit (255) 1,200 ----------- ----------- (170) 1,415 =========== =========== The group has a deferred tax asset which has been recognised in respect of taxlosses within one of the subsidiary companies, which has generated taxableprofits and is expected to continue to do so. The differences between the total current tax shown above and the amountcalculated by applying the standard rate of UK corporation tax to the profitbefore tax is as follows: Restated Year ended Year ended 31 March 2006 31 March 2005 £'000 £'000 Profit on ordinary activities before tax 4,184 1,724 =========== =========== Tax charge @ 30% 1,255 517 Non qualifying depreciation - 7Disallowed expenditure 152 87Deferred tax movement - 658Movement in short term timing differences (11) 14Consolidation adjustments - 2Utilisation of tax losses (1,098) (2,291)Rate differences 44 124Capital allowances in excess of depreciation (15) (53)Statutory deductions on exercise of shareoptions (157) (480) ----------- ----------- 170 (1,415) =========== =========== There is no charge to corporation tax in the year due to the availability oflosses. Unrelieved losses of £8.0 million (2005 - £12.1 million) are carriedforward and are available to reduce the tax liability in respect of suitablefuture trading profits. Research and development tax credits have been claimed in respect of expenditureincurred on the development of the group's Netintelligence software. Thesecredits are at the rate of 16% of the amount of expenditure allowed as adeduction from taxable income, which is 150% of the development expenditureincurred. Deferred tax The group had recognised deferred tax assets and potential unrecognised deferredtax assets as follows: Restated Year ended Year ended 31 March 2006 31 March 2005 Recognised Unrecognised Recognised Unrecognised £'000 £'000 £'000 £'000 Tax lossescarriedforward 945 1,555 1,200 2,430 ========= ========= ========= ========= 8. EARNINGS PER ORDINARY SHARE Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the year. Fully diluted earnings per share is calculated by dividing theearnings attributable to ordinary shareholders by the total of the weightedaverage number of ordinary shares in issue during the year and the dilutivepotential ordinary shares relating to share options. Underlying earnings are calculated by adding back the charge for amortisation ofgoodwill to the earnings attributable to ordinary shareholders and adjusting forthe deferred tax charge/credit relating to the recognition of tax losses. Year ended Restated 31 March 2006 Year ended £'000 31 March 2005 £'000Profit for the financial period and basicearnings attributed to ordinary shareholders 4,014 3,128Amortisation 819 547Deferred tax charge/(credit) 255 (1,200) ----------- ----------- Underlying earnings 5,088 2,475 =========== =========== No No 000 000Weighted average number of ordinary shares:For basic earnings per share 76,933 70,318Exercise of share options 3,155 3,067 ----------- ----------- For diluted earnings per share 80,088 73,385 =========== =========== Basic earnings per share 5.2p 4.4p =========== =========== Fully diluted earnings per share 5.0p 4.3p =========== =========== Basic underlying earnings per share 6.6p 3.5p =========== =========== Fully diluted underlying earnings per share 6.4p 3.4p =========== =========== 9. ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT Restated Year ended Year ended 31 March 2006 31 March 2005 £'000 £'000Returns on investments and servicing of financeOther interest receivable 29 65Bank overdraft and other borrowings (241) (142)Finance leases and hire purchase contracts (2) (17) ----------- ----------- (214) (94) =========== =========== TaxationResearch and development tax credits received 123 -Corporation tax refund - 4 ----------- ----------- 123 4 =========== =========== Capital expenditure and financial investmentPayments to acquire tangible fixed assets (478) (765) =========== =========== AcquisitionsPurchase of subsidiary undertakings - (5,852)Professional fees in connection withacquisitions - (182)Payment of deferred consideration (34) (117)Net cash acquired with subsidiaries - 2,048 ----------- ----------- (34) (4,103) =========== =========== Equity dividends paidDividend paid on ordinary shares (958) - =========== =========== FinancingIssue of ordinary shares 101 327Professional fees in connection with shareexchanges - (236)Expenses of capital reduction - (28)Bank loan - 3,465Repayment of bank loan (863) (429)Capital element of finance lease rentals (113) (190) ----------- ----------- (875) 2,909 =========== =========== 10 ANALYSIS OF CHANGE IN NET (DEBT) Restated Inception of Cash flow At 31 March At 31 March finance lease 2006 2005 £'000 £'000 £'000 £'000 Cash at bankand in hand 2,033 - (754) 1,279Bank overdrafts - - (1,320) (1,320)Bank loan (3,036) - 863 (2,173)Finance leasesand hirepurchase (101) (76) 113 (64) --------- --------- --------- --------- Net (debt) (1,104) (76) (1,098) (2,278) ========= ========= ========= ========= This information is provided by RNS The company news service from the London Stock Exchange