Sysgroup Regulatory News (SYS)

30 September 2013

Daily Internet plc

("Daily Internet" or "the Group")

Annual Report

Daily Internet, the AIM listed web hosting provider, is pleased to announce its audited results for the year ended 31 March 2013.

Highlights

· Revenue increased by 7.3% to £1.56 million reflecting good organic growth

· Gross profit of £792,000 (2012: £756,000)

· Number of active domains increased by 10.0% to 169,486

· Number of active hosting services increased by 1.6% to 20,901

· £242,000 investment in infrastructure

· £278,000 investment in personnel to enable expansion into the next phase of development

· Two fundraisings completed amounting to £1,075,000 after expenses

· Admission to AIM completed in January 2013

Michael Edelson, Chairman of Daily Internet, commented:

"The Group has made steady progress during the financial year under review and the Daily brand continues to be well regarded in the marketplace as demonstrated by continued organic growth against a backdrop of a flat UK economy. Our customer base has continued to grow and from this we have built a recurring revenue base that will provide funding to develop and maintain the current product set for the foreseeable future."

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About Daily Internet

Daily Internet is an award-winning second generation UK web hosting provider which delivers a wide range of internet solutions to individuals as well as SME and large business users. The people behind Daily Internet have in-depth expertise and experience in the Internet hosting sector and have built some of the UK's best known web hosting brands.

Chairman's Statement

I am pleased to present the 31 March 2013 financial results for Daily Internet plc (Daily).

Performance Summary

The Group has made steady progress during the financial year under review and in-line with one of the goals set out in my Statement last year it achieved cash flow break even at the operating unit level (excluding the investment in our Phase II growth) during the second quarter of 2012.

The Daily brand continues to be well regarded in the marketplace as demonstrated by continued organic growth against a backdrop of a flat UK economy. Our continually improving renewal rates demonstrate our ability to deliver excellent customer service and value.

The Group has now developed a broad portfolio of hosting products, email and domain name registration services to provide both the small business user and consumer with all their hosting requirements. Our customer base has continued to grow and from this we have built a recurring revenue base that will provide funding to develop and maintain the current product set for the foreseeable future.

The launch and introduction of our dedicated server product in January 2013 completed Phase II of our strategic development to provide a one-stop shop for hosting products for SMEs and individuals.

Outlook

We continue to develop our existing product base and introduce new products as the market demands. Our new web design product launched after the year end has been well received and complements our existing product portfolio.

The management team at Daily will continue to work hard with enthusiasm and energy seeking out new technologies to further capture market share, increase revenue and consolidate our position; and at the same time endeavouring to target and execute accretive acquisitions to enable us to extend our reach into new markets with new brands at a much faster rate than organic growth.

Placing

The Company completed two fundraisings during the year amounting to £1,075,000 after expenses and the funds raised were utilised in completing phase II of the company's development strategy and funding the admission to AIM which was successfully completed in January 2013.

Conclusion

I take this opportunity to thank all our shareholders for their continued support and the Daily staff for their passion, dedication and commitment to the company and our customers.

Michael Edelson

Chairman

27 September 2013

Operational and Financial Review

Performance

2013 has been another year of continued revenue growth. Revenue for the Group reached nearly £1.6 million for the year to 31 March 2013, an increase of 7.3% compared to the previous year.

Daily Internet offers hosting services paid for on a variable subscription basis. Where the subscription is paid for on an annual basis, sales attributable to future periods are deferred. As such, revenue reported in the accounts is different from actual cash received. The Group's cash receipts for the year amounted to £1,550,000 compared to £1,503,000 for the previous year; an increase of 3%. The amount of cash received which has been deferred to future periods at 31 March 2013 is £307,000.

Marketing and staff costs represent the majority of our operating expenses. During 2013 we have continued to improve marketing efficiencies by using social media channels, improving our brand recognition and increasing our market reputation. Customer and other referrals are now a key driver for gaining new sales and customers; as such marketing spend for the year reduced by 16% to £187,000 and customer signups increased by 10% to a total of 67,000 by 31 March 2013.

During the year the Group invested £278,000 in its Phase II project pre-launch, adding personnel within the Sales and Marketing and Customer Service departments, and in January 2013 launched a new Dedicated Server product range.

Gross profit for the year was £792,000 (2012: £756,000) representing a gross margin of 50.9% (2012: 52.1%). EBITDA* loss for the year to 31 March 2013 is reported in the financial statements at £705,000 (2012: £139.000). Included within this figure are additional costs of £278,000 (2012: £51,000) for Phase II development and £234,000 of AIM admission costs and share based payment costs of £24,000. The underlying EBITDA loss being £169,000 (2012: £88,000).

Focus on excellent customer service and continued systems improvements within the Group's established product set have driven increased revenue per operational head. In the coming year we aim to continue to drive additional new sales and maintain our renewal base without incurring additional staff costs.

Balance Sheet and Treasury

The Group has continued to invest in its infrastructure during the year to 31 March 2013, having spent £242,000 during the year on the maintenance and expansion of its core products (2012: £124,000). The total investment at 31 March 2013 in the Group's tangible and intangible assets amounts to £1,053,000 (2012: £811,000), these are written down over time in accordance with the Company's depreciation policy and the net book value of these assets is reported at £330,000 (2012: £192,000).

Net cash outflow from operating activities during the year amounted to £680,000 (2012: £9,000). Of this amount £234,000 related to AIM listing costs and £278,000 related to pre-launch Phase II costs. Cash at bank at 31 March 2013 was ahead of plan at £373,000 (2012: £108,000). A facility of £580,000, which is available until 31 March 2015, has been arranged for working capital requirements, of which £405,000 has been utilised as at 31 March 2013. The Directors are confident that this amount is sufficient to allow the Group to continue its organic growth and to achieve an overall cashflow breakeven position in the current financial year. However, fundraising would be required should an acquisition target become available.

Payables falling due within one year are reported at £806,000 (2012: £709,000). This figure includes an amount of £307,000 (2012: £283,000) for deferred revenue which will be released to profit in future years.

Payables falling due after one year are reported at £792,000 (2012: £708,000). This includes an amount of £260,000 (2012: £269,000) representing the carrying value on convertible loan notes which were renewed on 9 January 2012 and the £405,000 loan facility referred to above.

Julie Joyce

Finance Director

27 September 2013

Consolidated Statement of Comprehensive Income for the Year Ended 31 March 2013

Consolidated Statement of Financial Position as at 31 March 2013

Consolidated Statement of Changes in Equity for the Year Ended 31 March 2013

Consolidated Statement of Cash Flows for the Year Ended 31 March 2013

Notes to the Consolidated Financial Statements

1 Accounting policies

Basis of preparation

The financial information set out in this announcement does not constitute statutory financial statements for the years ended 31 March 2013 or 31 March 2012. Statutory accounts for the years ended 31 March 2013 and 31 March 2012 have been reported on by the Independent Auditors.

The Independent Auditors' Reports on the Annual Report and Financial Statements for 2013 and 2012 were unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under s.498(2) or s.498(3) of the Companies Act 2006.

Statutory accounts for the year ended 31 March 2012 have been filed with the Registrar of Companies. The statutory accounts for the year ended 31 March 2013 will be delivered to the Registrar in due course.

Going concern

The Directors have prepared the Financial Statements on a going concern basis which assumes that the group and the company will continue to meet liabilities as they fall due.

The directors have reviewed forecasts prepared 12 months ending 30 September 2014 and considered the projected trading forecasts and resultant cash flows together with confirmed loan facilities and other sources of finance.

The group's forecasts and projections, taking account of reasonably possible changes in trading performance, show that the group can continue to operate within the current facilities available to it.

The Directors therefore have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future and thus they continue to adopt the going concern basis of accounting in preparing the financial statements.

2 Loss per share

Since the conversion of potential ordinary shares to ordinary shares would decrease the net loss per share, they are not dilutive. Accordingly diluted loss per share is the same as basic loss per share.

3 Taxation

There is no tax charge for any periods reported due to losses arising. The Directors have not provided for the potential deferred tax asset due to the uncertainty of future taxable profits. The tax losses available were approximately £3,760,000 at 31 March 2013 (2012: £3,334,000). The deferred tax asset on these tax losses at 24% (2012: 26%) of £902,000 (2012: £867,000) has not been recognised due to the uncertainty of the recovery.

4 Investments

The recoverable amounts have been determined from discounted cash flow calculations based on cash flow projections from approved budgets covering a two year period to 31 March 2015. The major assumptions can be seen in note 11. This consequently resulted in an impairment of £458,000 in the year.

Lambolle Partners PLC is a dormant Company and therefore exempt from audit.

5 Trade and other receivables

6 Trade and other payables

7 Loans and borrowings

The book value and fair value of loans and borrowings are as follows:

Loan facility

A loan facility of £580,000 has been arranged by the Group between Abby Hardoon, a director and major shareholder, John Thompson and Hawkstone Capital Limited. Interest is payable at a minimum rate of 10% and is repayable or convertible at a conversion price of 3p per share on 31st March 2015. The amount drawn down at 31 March 2013 is £405,000 (2012:£405,000).

Convertible Loan note

Fifty six £5,000 convertible loan notes were issued on 4 January 2012 which expire in 2015. The 2015 Loan Notes offer a rate of interest of 9 per cent and are convertible at a conversion price of 3p per share. The Company is able to redeem a minimum of £1,000 nominal value of each New Loan Note as cash flow allows by repaying the redeemed nominal value plus six months pro rata interest, subject to the relevant holders being entitled to convert such loan notes into ordinary shares in the capital of the Company at their election at 3p per share.

A warrant was also issued entitling the holder to subscribe for 100,000 ordinary shares at a price of 5p per share, exercisable at any time before 8 January 2022, provided that the Company may require the exercise of these warrants if its shares are traded at a price in excess of 8p per share for a period of 60 business days and an aggregate value of bargains exceeding £60,000 occurs over that period. The value of the convertible loan notes recognised in the balance sheet is calculated as follows:

8 Share Capital

During the year the Company issued 56,361,342 ordinary shares of 0.5p each. The total amount raised of £1,091,000 after costs was used to fund the Company's admission on to AIM, to fund the launch of the Group's Dedicated Server product range and to provide further working capital.

Under the terms of the EMI and unapproved share options a further 4,250,000 ordinary shares could be issued with a nominal value of £21,250.

9 Annual General Meeting and Availability of Annual Report

The Annual General Meeting of the Company will be held at the Company's registered office at Number 14 Riverview, Vale Road, Heaton Mersey, Stockport, Cheshire SK4 3GN on 25 October 2013 at 10.00 a.m.

Copies of the annual report will be available from the Company's office and also from the Company's website www.daily.co.uk.