TIDMIOM
RNS Number : 8649B
Iomart Group PLC
15 June 2021
15 June 2021
iomart Group plc
("iomart", the "Group" or the "Company")
Final Results
Robust business model delivers resilient performance, with a
refreshed strategy positioning iomart for growth
iomart (AIM:IOM), the cloud computing company, is pleased to
report its consolidated final results for the year ended 31 March
2021.
FINANCIAL HIGHLIGHTS
2021 2020 Change
Revenue GBP111.9m GBP112.6m -0.6%
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% of recurring revenue (1) 90% 85% +4.9%
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Adjusted EBITDA(2) GBP41.4m GBP43.5m -4.8%
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Adjusted profit before tax(3) GBP19.6m GBP22.8m -13.8%
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Profit before tax GBP12.5m GBP16.8m -25.7%
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Operating cash generation GBP43.7m GBP41.3m +5.7%
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Adjusted diluted eps(4) 14.4p 16.3p -11.7%
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Basic eps 9.3p 12.5p -25.6%
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Proposed final dividend per
share 4.5p 3.93p +14.5%
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-- Revenue resilient through the Covid-19 pandemic at GBP111.9m
(2020: GBP112.6m), 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 EBITDA(2) of GBP41.4m (2020: GBP43.5m) with 37.0%
adjusted EBITDA margin (2020: 38.6%), higher than industry
average and in-line with expectations
-- Adjusted profit before tax(3) impacted by an increase of GBP1.3m
in the depreciation charge in the year following acquisitions
-- High levels of operating cash generated in the year at GBP43.7m
(2020: GBP41.3m) which represents a 106% conversion of adjusted
EBITDA (2020: 95%)
-- Year end cash position of GBP23.0m (2020: GBP15.5m) with net
debt of GBP54.6m (2020: GBP57.6m) 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
CURRENT TRADING AND OUTLOOK
-- The Group has traded in line with management expectations
at the start of the new financial year, in a manner consistent
with the Group's high recurring revenue business model
-- Sales pipeline provides confidence in increased new customer
wins as we move through the year, with a positive impact
on revenue anticipated from H2 FY22
-- Board increasingly confident in the long-term prospects
for the Group
STATUORY EQUIVALENTS
A full reconciliation between adjusted and statutory profit
before tax is contained within this statement on page 12. The
largest item is the consistent add back of the non-cash
amortisation of acquired intangible assets of GBP5.5m. The largest
variance, year on year, is a GBP1.8m lower gain on the revaluation
of contingent consideration relating to historic acquisitions.
Reece Donovan, CEO commented,
"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."
(1) Recurring revenue is the revenue that 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) 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.
(3) 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.
(4) Throughout these financial statements adjusted diluted
earnings per share is earnings before amortisation charges on
acquired intangible assets, share-based payment charges,
acquisition costs, gain on revaluation of contingent consideration
and the tax effect of adjusted items/weighted average number of
ordinary shares - diluted (as disclosed in note 6).
This 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
Reece Donovan, Chief Executive Officer
Scott Cunningham, Chief Financial Officer
Peel Hunt LLP (Nominated Adviser and Joint Tel: 020 7418 8900
Broker)
Edward Knight, Paul Gillam, Nick Prowting
Investec Bank PLC (Joint Broker) Tel: 020 7597 4000
Patrick Robb, Virginia Bull, Sebastian Lawrence
Alma PR Tel: 020 3405 0205
Caroline Forde, Hilary Buchanan, Joe Pederzolli
About iomart Group plc
For over 20 years iomart Group plc (AIM: IOM) has been helping
growing organisations to maximise the flexibility, cost
effectiveness and scalability of the cloud. From data centres we
own and operate in the U.K., and from connected facilities across
the globe, we can provide multiple secure infrastructure solutions
from branch office backups, to hyper cloud migrations, and
everything in between, delivered typically with a 24/7 managed
service. Our team of over 400 dedicated staff work with our
customers at the strategy stage through to delivery and ongoing
management, to implement the secure cloud solutions that deliver to
their business requirements.
For further information about the Group, please visit www.iomart.com
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 GBP100m 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 its 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. 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.
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
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 GBP111.9m (2020: GBP112.6m) with an improving mix of
recurring revenue to 90% (2020: 85%). The Group's adjusted
EBITDA(1) reduced by 4.8% to GBP41.4m (2020: GBP43.5m) 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
GBP1.3m 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 tax(2) to GBP19.6m (2020:
GBP22.8m) 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.
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 GBP200m
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 (GBP99.9m revenue) and Easyspace (GBP11.9m
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 GBP0.1m to GBP99.9m
(2020: GBP99.8m) benefitting from the acquisitions made in the
prior year. Organic Cloud Services revenue declined by 6%, or
GBP6.0m, due to a GBP5.5m 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 GBP1m 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 GBP2.3m reduction in
self-managed infrastructure revenues from smaller legacy customers
resulting in an overall GBP0.5m net reduction in recurring revenue.
Cloud Services adjusted EBITDA (before share based payments,
acquisition costs and central group overheads) was GBP40.5m being
40.5% of revenue (2020: GBP42.3m, 42.4% of revenue).
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 (GBP57.9m 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 (GBP30.3m 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 (GBP11.7m 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 GBP11.9m (2020: GBP12.8m). 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 GBP5.3m, 44.8% of
revenue (2020: GBP5.6m, 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 GBP2m 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.
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 Officer
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 12) is profit before tax, amortisation
charges on acquired intangible assets, share-based payment charges,
acquisition costs and gain on revaluation of contingent
consideration.
CHIEF FINANCIAL OFFICER'S REPORT
Financial Review
Key Performance indicators
2021 2020
----------------------------------------------- ---------- ----------
Revenue GBP111.9m GBP112.6m
% of recurring revenue (1) 90% 85%
Gross Profit % (2) 60.5% 60.8%
Adjusted EBITDA (3) GBP41.4m GBP43.5m
Adjusted EBITDA margin % (4) 37.0% 38.6%
Adjusted profit before tax (5) GBP19.6m GBP22.8m
Adjusted profit before tax margin % (6) 17.5% 20.2%
Profit before tax GBP12.5m GBP16.8m
Profit before tax margin % (7) 11.1% 14.9%
Basic earnings per share 9.3p 12.5p
Adjusted earnings per share (diluted) (8) 14.4p 16.3p
Cash flow from operations / Adjusted EBITDA %
(9) 106% 95%
Net debt / Adjusted EBITDA leverage ratio
(10) 1.3 1.3
------------------------------------------------- ---------- ----------
See page 14 for definition of alternative performance
measures
Revenue
Total revenue for the year is consistent with the prior year at
GBP111.9m (2020: GBP112.6m), 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 GBP0.9m 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 GBP0.1m.
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
GBP99.9m (2020: GBP99.8m):
2021 2020
Disaggregation of Cloud Services revenue GBP'000 GBP'000
------------------------------------------ --------- ---------
Cloud managed services 57,961 54,590
Self-managed infrastructure 30,311 28,009
Non-recurring revenue 11,672 17,190
99,944 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 (GBP1.8m) 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 GBP2.3m.
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 GBP5.5m 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 GBP0.9m (6.7%) to GBP11.9m
(2020: GBP12.8m). 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 3(rd)
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 GBP0.9m to GBP67.6m (2020: GBP68.5m). In
percentage terms, gross margin (2) 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 EBITDA (3)
The Group's adjusted EBITDA reduced by 4.8% to GBP41.4m (2020:
GBP43.5m) which in adjusted EBITDA margin (4) 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 GBP1.2m versus the previous year comparative
with a small GBP0.2m saving within the underlying business.
Cloud Services segment saw a 4.3% reduction in adjusted EBITDA
to GBP40.5m (2020: GBP42.3m). 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 GBP5.3m (2020:
GBP5.6m) 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 GBP4.4m (2020: GBP4.4m).
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 tax (5)
The depreciation charge of GBP16.9m (2020: GBP15.6m) has
increased by GBP1.3m 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 GBP2.9m (2020:
GBP2.9m) has remained stable year on year.
Finance costs of GBP2.0m (2020: GBP2.2m), has reduced due to
lower bank loan interest as LIBOR rates fell.
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 GBP19.6m (2020: GBP22.8m),
representing an adjusted profit before tax margin (6) 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 2021 2020
tax to profit before tax GBP'000 GBP'000
Adjusted profit before tax (5) 19,628 22,768
Less: Amortisation of acquired intangible
assets (5,457) (6,159)
Less: Acquisition costs (493) (438)
Less: Share-based payments (1,247) (1,243)
Add: Gain on revaluation of contingent
consideration 33 1,856
Profit before tax 12,464 16,784
--------------------------------------------- --------- ---------
The adjusting items are: charges for the amortisation of
acquired intangible assets of GBP5.5m (2020: GBP6.2m) with the
reduction being from expiry of the amortisation charge on earlier
acquisitions; acquisition costs of GBP0.5m (2020: GBP0.4m) and
share-based payment charges of GBP1.2m (2020: GBP1.2m).
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 GBP1.9m 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 GBP12.5m (2020: GBP16.8m). In
percentage terms the profit before tax margin (7) 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 GBP2.3m (2020: GBP3.1m). The tax
charge for the year is made up of a corporation tax charge of
GBP3.5m (2020: GBP3.6m) with a deferred tax credit of GBP1.2m
(2020: GBP0.5m). 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 4.
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 GBP10.2m (2020: GBP13.6m).
Earnings per share
The calculation of both adjusted earnings per share and basic
earnings per share is included at note 6.
Basic earnings per share from continuing operations was 9.3p
(2020: 12.5p), a reduction of 25.6%.
Adjusted diluted earnings per share (8) , 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%.
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 GBP43.7m (2020:
GBP41.3m) which represents a 106% conversion (9) of adjusted EBITDA
(2020: 95%). During the year the Group received GBP2.3m 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 GBP1.1m lower at GBP3.6m
(2020: GBP4.7m) and results in a net cash flow from operating
activities in the year of GBP40.1m (2020: GBP36.6m), 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 GBP19.2m (2020: GBP21.3m) 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 GBP15.2m (2020: GBP14.7m) 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 GBP0.7m 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 GBP1.3m
(2020: GBP1.4m) and on intangible assets of GBP0.6m (2020:
GBP1.1m).
We made no acquisitions in the last year (2020: GBP4.1m of
payments, net of cash acquired). During the year we incurred
GBP2.4m of expenditure in respect of contingent consideration due
on previous year acquisitions (2020: GBPnil). 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 GBP1.2m (2020: GBP6.2m) were made from the
revolving credit facility in the year to fund the payment of
contingent consideration due on acquisitions. Bank loan repayments
of GBP1.2m (2020: GBP2.0m) were made in the year thus the closing
drawn bank loan remains unchanged at GBP52.8m (2020: GBP52.8m).
Cash received in the year from issue of shares was GBP0.4m (2020:
GBP0.6m). We also made dividend payments of GBP7.1m (2020:
GBP8.3m); paid finance costs of GBP1.1m (2020: GBP1.7m); and made
lease repayments of GBP5.4m (2020: GBP4.7m).
Net cash flow
As a consequence, our overall cash generated during the year was
GBP7.5m (2020: GBP5.4m) which resulted in cash and cash equivalent
balances at the end of the year of GBP23.0m (2020: GBP15.5m).
Net Debt
The net debt position of the Group at the end of the year was
GBP54.6m (2020: GBP57.6m) as shown below. The increase in the lease
liability to GBP24.9m (2020: GBP20.3m) 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 times (10) (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.
2021 2020
GBP'000 GBP'000
Bank revolver loan 52,791 52,791
Lease liabilities 24,867 20,347
Less: cash and cash equivalents (23,038) (15,497)
Net Debt 54,620 57,641
----------------------------------- --------- ----------
The banking facility, which provides an GBP80m revolving credit
facility, matures in September 2022.
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 Officer
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 9) / Revenue (as disclosed in the consolidated
statement of comprehensive income) as a %
(5) Adjusted profit before tax (as disclosed on page 12) 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 9) / 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 6)
(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 9)
as a %
(10) Net debt / Adjusted EBIDTA level ratio is defined as Net
Debt (as disclosed on page 14) / Adjusted EBITDA (as defined on
page 9)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 MARCH 2021
2021 2020
Note GBP'000 GBP'000
Revenue 111,883 112,581
Cost of sales (44,241) (44,093)
--------- ---------
Gross profit 67,642 68,488
Administrative expenses (53,230) (51,387)
Operating profit 14,412 17,101
Analysed as:
Earnings before interest, tax, depreciation,
amortisation, acquisition costs and
share-based payments 41,408 43,510
Share-based payments (1,247) (1,243)
Acquisition costs (493) (438)
Depreciation 8 (16,882) (15,635)
Amortisation - acquired intangible
assets 7 (5,457) (6,159)
Amortisation - other intangible assets 7 (2,917) (2,934)
Gain on revaluation of contingent
consideration 33 1,856
Finance income 19 39
Finance costs (2,000) (2,212)
--------- ---------
Profit before taxation 12,464 16,784
Taxation 4 (2,260) (3,135)
--------- ---------
Profit for the year attributable
to equity holders of the parent 10,204 13,649
Other comprehensive income
Amounts which may be reclassified
to profit or loss
Currency translation differences (94) 98
------------------------------------------------ ----- --------- ---------
Other comprehensive income for the
year (94) 98
------------------------------------------------ ----- --------- ---------
Total comprehensive income for the
year attributable to equity holders
of the parent 10,110 13,747
Basic and diluted earnings per share
Basic earnings per share 6 9.3p 12.5p
Diluted earnings per share 6 9.1p 12.2p
------------------------------------------------ ----- --------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2021
2021 2020
Note GBP'000 GBP'000
------------------------------- ----- ---------- ----------
ASSETS
Non-current assets
Intangible assets - goodwill 7 86,479 86,479
Intangible assets - other 7 18,101 24,631
Trade and other receivables 502 2,760
Property, plant and equipment 8 77,012 72,344
Deferred tax 138 -
182,232 186,214
Current assets
Cash and cash equivalents 23,038 15,497
Trade and other receivables 22,979 23,237
Current tax asset 235 -
46,252 38,734
Total assets 228,484 224,948
LIABILITIES
Non-current liabilities
Trade and other payables (2,662) (2,283)
Non-current borrowings 9 (74,221) (70,109)
Provisions (2,097) (1,956)
Deferred tax 5 - (1,146)
(78,980) (75,494)
Current liabilities
Contingent consideration due
on acquisitions 11 - (2,480)
Trade and other payables (29,495) (31,948)
Current tax liabilities - (3)
Current borrowings 9 (3,437) (3,029)
(32,932) (37,460)
Total liabilities (111,912) (112,954)
Net assets 116,572 111,994
-------------------------------- ----- ---------- ----------
EQUITY
Share capital 1,097 1,092
Own shares (70) (70)
Capital redemption reserve 1,200 1,200
Share premium 22,495 22,147
Merger reserve 4,983 4,983
Foreign currency translation
reserve (44) 50
Retained earnings 86,911 82,592
-------------------------------- ----- ----------
Total equity 116,572 111,994
-------------------------------- ----- ---------- ----------
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARED 31 MARCH 2021
2021 2020
Note GBP'000 GBP'000
Profit before taxation 12,464 16,784
Gain on revaluation of contingent
consideration (33) (1,856)
Finance costs - net 1,981 2,173
Depreciation 8 16,882 15,635
Amortisation 7 8,374 9,093
Share-based payments 1,247 1,243
Movement in trade receivables 2,516 (1,107)
Movement in trade payables 268 (627)
----------------------------------------------- ------ ---------- ----------------
Cash flow from operations 43,699 41,338
Taxation paid (3,643) (4,719)
Net cash flow from operating activities 40,056 36,619
Cash flow from investing activities
Purchase of property, plant and
equipment 8 (15,192) (14,688)
Proceeds received from disposal of property,
plant and equipment 260 -
Development costs 7 (1,306) (1,405)
Purchase of intangible assets (561) (1,065)
Proceeds received from disposal
of intangible asset 73 -
Payments for current period acquisitions
net of cash acquired - (4,156)
Contingent consideration paid (2,447) -
Finance income received 19 39
Net cash used in investing activities (19,154) (21,275)
Cash flow from financing activities
Issue of shares 353 636
Drawdown of bank loans 1,150 6,150
Repayment of lease liabilities 10 (5,435) (4,686)
Repayment of bank loans (1,150) (2,000)
Finance costs paid (1,147) (1,734)
Dividends paid (7,132) (8,282)
Net cash used in financing activities (13,361) (9,916)
Net increase in cash and cash equivalents 7,541 5,428
Cash and cash equivalents at the
beginning of the year 15,497 10,069
---------------------------------------------- ------ ---------- ----------------
Cash and cash equivalents at the end of
the year 23,038 15,497
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 MARCH 2021
Foreign
Own currency Capital Share
Share shares translation redemption premium Merger Retained
capital EBT reserve reserve account reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Balance at 1
April
2019 1,085 (70) (48) 1,200 21,518 4,983 75,729 104,397
Profit for the
year - - - - - - 13,649 13,649
Currency
translation
differences - - 98 - - - - 98
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Total
comprehensive
income - - 98 - - - 13,649 13,747
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Dividends -
final
(paid) - - - - - - (5,448) (5,448)
Dividends -
interim
(paid) - - - - - - (2,834) (2,834)
Share-based
payments - - - - - - 1,243 1,243
Deferred tax on
share-based
payments - - - - - - 253 253
Issue of share
capital 7 - - - 629 - - 636
----------------
Total
transactions
with owners 7 - - - 629 - (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 - - - - - - 10,204 10,204
Currency
translation
differences - - (94) - - - - (94)
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Total
comprehensive
income - - (94) - - - 10,204 10,110
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Dividends -
final
(paid) - - - - - - (4,287) (4,287)
Dividends -
interim
(paid) - - - - - - (2,845) (2,845)
Share-based
payments - - - - - - 1,247 1,247
Issue of share
capital 5 - - - 348 - - 353
----------------
Total
transactions
with owners 5 - - - 348 - (5,885) (5,532)
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Balance at 31
March 2021 1,097 (70) (44) 1,200 22,495 4,983 86,911 116,572
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
NOTES TO THE FINANCIAL INFORMATION
YEARED 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.
2. ACCOUNTING POLICIES
Basis of preparation
The financial information set out in the announcement does not
constitute the Group's statutory accounts for the years ended 31
March 2021 and 31 March 2020 within the meaning of section 434 of
the Companies Act 2006. The financial information for the year
ended 31 March 2020 is derived from the statutory accounts for that
year which have been delivered to the Registrar of Companies. The
financial information for the year ended 31 March 2021 is derived
from the statutory accounts for that year which were approved by
the Directors on 15 June 2021. The statutory accounts for the year
ended 31 March 2021 will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The auditors
reported on those accounts; their report was unqualified and did
not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
The Group's financial statements have been prepared in
accordance with the International Financial Reporting Standards
(IFRS) in conformity with the requirements of the Companies Act
2006.
The Group's 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.
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.
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.
Operating Segments
Revenue by Operating Segment
2021 2020
GBP'000 GBP'000
---------------- -------- --------
Easyspace 11,939 12,792
Cloud Services 99,944 99,789
-------- --------
111,883 112,581
----------------- -------- --------
Cloud Services revenue during the year can be further
disaggregated as follows:
2021 2020
GBP'000 GBP'000
----------------------------- -------- --------
Cloud managed services 57,961 54,590
Self-managed infrastructure 30,311 28,009
Non-recurring revenue 11,672 17,190
99,944 99,789
------------------------------ -------- --------
The nature of these three offerings are explained within the
Chief Executive Officer report on page 7.
Recurring and Non-recurring Revenue
The amount of recurring and non-recurring revenue recognised
during the year can be summarised as follows:
2021 2020
GBP'000 GBP'000
------------------------------- -------- --------
Recurring -
over time 100,211 95,391
Non-recurring - point in time 11,672 17,190
-------- --------
111,883 112,581
-------------------------------- -------- --------
Geographical Information
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
2021 2020
GBP'000 GBP'000
------------------------- -------- --------
United Kingdom 97,113 95,333
Rest of the
World 14,770 17,248
-------- --------
Revenue from operations 111,883 112,581
-------------------------- -------- --------
Profit by Operating Segment
2021 2020
Depreciation, Depreciation,
amortisation, amortisation,
acquisition acquisition
costs and costs and
Adjusted share-based Operating Adjusted share-based Operating
EBITDA payments profit/(loss) EBITDA payments profit/(loss)
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------- --------- --------------- --------------- --------- --------------- ---------------
Easyspace 5,343 (1,165) 4,178 5,649 (1,459) 4,190
Cloud Services 40,482 (24,091) 16,391 42,307 (23,269) 19,038
Group overheads (4,417) - (4,417) (4,446) - (4,446)
Acquisition
costs - (493) (493) - (438) (438)
Share-based
payments - (1,247) (1,247) - (1,243) (1,243)
--------------------- --------- --------------- --------------- --------- --------------- ---------------
41,408 (26,996) 14,412 43,510 (26,409) 17,101
Gain on revaluation
of contingent
consideration 33 1,856
Group interest
and tax (4,241) (5,308)
--------- --------------- --------------- --------- --------------- ---------------
Profit for the
year 10,204 13,649
--------------------- --------- --------------- --------------- --------- --------------- ---------------
Group overheads, acquisition costs, share-based payments,
interest and tax are not allocated to segments.
4. TAXATION
2021 2020
GBP'000 GBP'000
------------------------------------------ -------- --------
Corporation Tax:
Tax charge for the year (3,448) (3,976)
Adjustment relating to prior years (100) 357
------------------------------------------- -------- --------
Total current taxation charge (3,548) (3,619)
Deferred Tax:
Origination and reversal of temporary
differences 1,266 367
Adjustment relating to prior years 18 266
Effect of different statutory tax rates
of overseas jurisdictions 4 (13)
Effect of changes in tax rates - (136)
------------------------------------------- -------- --------
Total deferred taxation credit 1,288 484
Total taxation charge (2,260) (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 profit before tax are as follows:
2021 2020
GBP'000 GBP'000
------------------------------------------------- --------- ---------
Profit before tax 12,464 16,784
-------------------------------------------------- --------- ---------
Tax charge @ 19% (2020: 19%) 2,368 3,189
Expenses disallowed for tax purposes 33 20
Tax effect of net (loss)/gain on revaluation
of contingent consideration (6) (353)
Adjustments in current tax relating to prior
years 100 (357)
Tax effect of different statutory tax rates
of overseas jurisdictions 10 6
Movement in deferred tax relating to changes
in tax rates - 136
Tax effect of share-based remuneration (259) 651
Movement in unprovided deferred tax related
to development costs - 40
Movement in unprovided deferred tax related to
property, plant and equipment 32 69
Movement in deferred tax relating to prior
years (18) (266)
Total taxation charge for the year 2,260 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 profit 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 financial year.
5. DEFERRED TAX
The Group recognised deferred tax assets and liabilities as
follows:
2021 2020
GBP'000 GBP'000
------------------------------------------------- -------- --------
Share-based remuneration 1,332 1,069
Capital allowances temporary
differences 1,363 1,364
Deferred tax on acquired assets with no capital
allowances (40) (88)
Deferred tax on customer relationships (2,356) (3,298)
Deferred tax on intangible
software (161) (193)
---------------------------------------------------- -------- --------
Deferred tax asset/(liability) 138 (1,146)
---------------------------------------------------- -------- --------
At the year end, the Group had no unused tax losses (2020:
GBPnil) available for offset against future profits.
The movement in the deferred tax account during the year
was:
Deferred
Capital tax on
allowances acquired
Share-based temporary Development assets Customer Intangible
remuneration differences costs with no relationships software Total
GBP'000 GBP'000 GBP'000 capital GBP'000 GBP'000 GBP'000
allowances
GBP'000
------------------- ------------- ------------- ------------- ----------- -------------- ------------ ---------
Balance at 1 April (939
2019 1,378 1,632 (422) (157) (3,173) (197) )
Acquired on
acquisition
of subsidiaries - (82) - - (875) - (957)
Charged to equity 253 - - - - - 253
Credited/(charged)
to statement of
comprehensive
income (724) (373) 472 87 1,131 27 620
Effect of different
tax rates of
overseas
jurisdictions - 7 - - 6 - 13
Effect of changes
in tax rates 162 180 (50) (18) (387) (23) (136)
Balance at 31 (1,146
March 2020 1,069 1,364 - (88) (3,298) (193) )
Credited/(charged)
to statement of
comprehensive
income 263 (8) - 48 953 32 1,288
Effect of different
tax rates of
overseas
jurisdictions - 7 - - (11) - (4)
Balance at 31
March 2021 1,332 1,363 - (40) (2,356) (161) 138
------------------- ------------- ------------- ------------- ----------- -------------- ------------ ---------
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.
6. EARNINGS PER 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 Benefit
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
2021 2020
GBP'000 GBP'000
------------------------------------------------ ---------- ----------
Profit for the financial year and basic
earnings attributed to ordinary shareholders 10,204 13,649
------------------------------------------------ ---------- ----------
Weighted average number of ordinary No No
shares: 000 000
Called up, allotted and fully paid at
start of year 109,160 108,510
Own shares held by Employee Benefit
Trust (141) (141)
Issued share capital in the year 230 436
------------------------------------------------
Weighted average number of ordinary
shares - basic 109,249 108,805
Dilutive impact of share options 2,416 2,861
Weighted average number of ordinary
shares -diluted 111,665 111,666
------------------------------------------------ ---------- ----------
Basic earnings per share 9.3 p 12.5
p
Diluted earnings per share 9.1 p 12.2
p
------------------------------------------------- ---------- ----------
2021 2020
Adjusted earnings per share GBP'000 GBP'000
------------------------------------------------ --------- ---------
Profit for the financial year and basic
earnings attributed to ordinary shareholders 10,204 13,649
- Amortisation of acquired intangible
assets 5,457 6,159
- Acquisition costs 493 438
- Share-based payments 1,247 1,243
- Gain on revaluation of contingent
consideration (33) (1,856)
- Tax impact of adjusted items (1,341) (1,406)
------------------------------------------------- --------- ---------
Adjusted profit for the financial
year and adjusted earnings attributed
to ordinary shareholders 16,027 18,227
------------------------------------------------ --------- ---------
Adjusted basic earnings per share 14.7 16.8
p p
Adjusted diluted earnings per share 14.4 16.3
p p
------------------------------------------------- --------- ---------
7. INTANGIBLE ASSETS
Acquired Domain
Goodwill Development Customer Beneficial names
costs relationships Software contracts & IP addresses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
Cost
At 1 April 2019 85,382 9,193 52,766 8,039 86 280 155,746
Additions - - - 2,490 - - 2,490
Currency
translation
differences - - 38 (33) - - 5
Acquired on
acquisition
of
subsidiaries 1,097 - 4,610 - - 56 5,763
Disposals - - - (173) - - (173)
Development
cost
capitalised - 1,405 - - - - 1,405
At 31 March
2020 86,479 10,598 57,414 10,323 86 336 165,236
Additions - - - 561 - - 561
Currency
translation
differences - - (78) (57) - - (135)
Disposals - - (73) - - - (73)
Development
cost
capitalised - 1,306 - - - - 1,306
At 31 March
2021 86,479 11,598 57,263 10,827 86 336 166,895
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
Accumulated
amortisation:
At 1 April 2019 - (6,866) (33,795) (4,164) (48) (280) (45,153)
Charge for the
year - (1,507) (6,159) (1,420) (7) - (9,093)
Currency
translation
differences - - - (53) - - (53)
Disposals - - - 173 - - 173
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
At 31 March
2020 - (8,373) (39,954) (5,464) (55) (280) (54,126)
Charge for the
year - (1,446) (5,457) (1,455) (7) (9) (8,374)
Currency
translation
differences - - 82 90 - - 172
Disposals - - 13 - - - 13
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
At 31 March
2021 - (9,819) (45,316) (6,829) (62) (289) (62,315)
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
Carrying
amount:
At 31 March
2021 86,479 2,085 11,947 3,998 24 47 104,580
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
At 31 March
2020 86,479 2,225 17,460 4,859 31 56 111,110
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
Of the total additions in the year of GBP561,000 (2020:
GBP2,490,000), no amounts related to leases under IFRS 16 (note 10)
(2020: GBP1,425,000). There were no amounts included in trade
payables at the year end (2020: GBPnil). Consequently, the
consolidated statement of cash flows discloses a figure of
GBP561,000 (2020: GBP1,065,000) 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: GBP1.9m 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 GBP1.8m with a useful life of 7 years, Bytemark Limited with a
net book value of GBP0.8m and LDeX Group Limited of GBP2.0m both
with a remaining useful life of 6 years, Sonassi Limited of
GBP2.5m, Dediserve Limited of GBP0.9m, SimpleServers Limited of
GBP0.5m all three with a remaining useful life of 5 years.
7. INTANGIBLE ASSETS (CONTINUED)
During the year, goodwill was reviewed for impairment in
accordance with IAS 36 "Impairment of Assets". No impairment
charges (2020: GBPnil) 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 2021 2020
Units (CGU) GBP'000 GBP'000
Easyspace 23,315 23,315
Cloud Services 63,164 63,164
86,479 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 31 March 31 March 31 March
2021 2020 2021 2020
Discount rate 14.0% 13.1% 14.0% 12.5%
Future perpetuity
rate 0.0% 0.0% 2.5% 2.0%
Initial period for which cash flows
are estimated (years) 5 5 5 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.
8. PROPERTY, PLANT AND EQUIPMENT
Leasehold
Freehold property Data centre Computer Office Motor
property and improve-ments equipment equipment equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- ------------------- ------------ ----------- ----------- ---------- ----------
Cost:
At 1 April 2018 8,910 7,943 23,457 81,611 2,920 31 124,872
Additions in
the year - 21,287 1,482 14,847 57 11 37,684
Acquisition
of subsidiaries - 457 1,192 1,540 - 2 3,191
Disposals in
the year - (16) (18) (622) (206) (21) (883)
Currency
translation
differences - - - 216 - - 216
At 31 March
2020 8,910 29,671 26,113 97,592 2,771 23 165,080
Additions in
the year - 9,157 1,966 10,504 40 - 21,667
Disposals in
the year (179) - - - - - (179)
Currency
translation
differences - (134) - 127 - - (7)
At 31 March
2021 8,731 38,694 28,079 108,223 2,811 23 186,561
------------------- ---------- ------------------- ------------ ----------- ----------- ---------- ----------
Accumulated
depreciation:
At 1 April 2019 (418) (3,510) (13,635) (58,372) (1,868) (24) (77,827)
Charge for the
year (279) (3,610) (1,853) (9,625) (262) (6) (15,635)
Disposals in
the year - 16 18 622 206 21 883
Currency
translation
differences - - - (157) - - (157)
At 31 March
2020 (697) (7,104) (15,470) (67,532) (1,924) (9) (92,736)
Charge for the
year (265) (4,541) (1,753) (10,089) (226) (8) (16,882)
Disposals in
the year 25 - - - - - 25
Currency
translation
differences - (30) - 74 - - 44
------------------- ---------- ------------------- ------------ ----------- ----------- ---------- ----------
At 31 March
2021 (937) (11,675) (17,223) (77,547) (2,150) (17) (109,549)
------------------- ---------- ------------------- ------------ ----------- ----------- ---------- ----------
Carrying amount:
At 31 March
2021 7,794 27,019 10,856 30,676 661 6 77,012
At 31 March
2020 8,213 22,567 10,643 30,060 847 14 72,344
------------------- ---------- ------------------- ------------ ----------- ----------- ---------- ----------
During the year there were additions of GBP63,000 (2020:
GBP824,000) in respect of reinstatement provisions and additions of
GBP8,683,000 (2020: GBP20,540,000) in respect of leases under IFRS
16 (note 10). Of the total remaining additions in the year of
GBP12,921,000 (2020: GBP16,320,000), GBP977,000 (2020:
GBP3,185,000) was included in trade payables as unpaid invoices at
the year end resulting in a net increase of GBP2,271,000 (2020: net
increase of GBP1,632,000) in trade payables. Consequently, the
consolidated statement of cash flows discloses a figure of
GBP15,192,000 (2020: GBP14,688,000) as the cash outflow in respect
of property, plant and equipment additions in the year.
Note 10 provides the movements in the year relating to IFRS 16
right-of-use assets as included in the above table.
9. BORROWINGS
2021 2020
GBP'000 GBP'000
------------------------------- -------- --------
Current:
Lease liabilities (note 10) (3,437) (3,029)
Current borrowings (3,437) (3,029)
Non-current:
Lease liabilities (note 10) (21,430) (17,318)
Bank loans (52,791) (52,791)
Total non-current borrowings (74,221) (70,109)
Total borrowings (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
10.
At the start of the year there was GBP52.8m (2020: GBP48.5m)
outstanding on the multi option revolving credit facility and
drawdowns of GBP1.1m (2020: GBP6.2m) were made from the facility
during the year. Repayments totalling GBP1.1m (2020: GBP2.0m) were
made resulting in a balance outstanding at the end of the year of
GBP52.8m (2020: GBP52.8m).
The multi option revolving credit facility of GBP80m is able to
be used by the Group to finance acquisitions, capital expenditure,
general business purposes (up to a maximum of GBP8m 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 fixed
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 GBP80m 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
classified as non-current.
9. BORROWINGS (CONTINUED)
The obligations under the multi option revolving credit facility
are repayable as follows:
2021 2020
Capital Interest Total Capital Interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- -------- -------- -------- -------- --------
Due within one year - (366) (366) - (465) (465)
Due within two to five years (52,791) - (52,791) (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 significantly different to the carrying value.
Cash and
Analysis of change in net cash equivalents Bank Total liabilities Total net
cash/(debt) GBP'000 loans Lease liabilities GBP'000 cash/(debt)
GBP'000 GBP'000 GBP'000
--------------------------------- ------------------ --------- ----------------- ------------------- ------------
At 1 April 2019 10,069 (48,536) (777) (49,313) (39,244)
Lease liabilities on transition
to IFRS 16 - - (20,421) (20,421) (20,421)
Additions to lease liabilities - - (1,544) (1,544) (1,544)
Repayment of bank loans - 2,000 - 2,000 2,000
New bank loans - (6,150) - (6,150) (6,150)
Impact of effective interest
rate - (105) - (105) (105)
Acquired on acquisition
of subsidiaries - - (1,705) (1,705) (1,705)
Cash and cash equivalent
cash inflow 5,428 - - - 5,428
Lease liabilities cash outflow - - 4,100 4,100 4,100
--------------------------------- ------------------ --------- ----------------- ------------------- ------------
At 31 March 2020 15,497 (52,791) (20,347) (73,138) (57,641)
Additions to lease liabilities - - (8,683) (8,683) (8,683)
Repayment of bank loans - 1,150 - 1,150 1,150
New bank loans - (1,150) - (1,150) (1,150)
Currency translation - - 169 169 169
Cash and cash equivalent
cash inflow 7,541 - - - 7,541
Lease liabilities cash outflow - - 3,994 3,994 3,994
-------------------
At 31 March 2021 23,038 (52,791) (24,867) (77,658) (54,620)
--------------------------------- ------------------ --------- ----------------- ------------------- ------------
10. 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 Leasehold Data centre
Property equipment Software Total
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- ----------- ---------- --------
Balance at 1 April 2020 17,494 788 1,235 19,517
Additions 3,855 4,828 - 8,683
Currency translation differences (162) - - (162)
Depreciation (2,328) (1,394) - (3,722)
Amortisation - - (285) (285)
Balance at 31 March 2021 18,859 4,222 950 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 at 31 March 2021
(note 8). The right-of-use assets in relation to software are
disclosed as non-current assets and are disclosed within
intangibles at 31 March 2021 (note 7).
Lease liabilities
Lease liabilities are presented in the balance sheet within
borrowings as follows:
2021 2020
GBP'000 GBP'000
-------------------------- -------- --------
Current:
Lease liabilities (3,437) (3,029)
Non-current:
Lease liabilities (21,430) (17,318)
Total lease liabilities (20,347) (20,347)
----------------------------- -------- --------
The maturity analysis of undiscounted lease liabilities are shown
in the table below: 2021 2020
GBP'000 GBP'000
-------------------------------- -------- --------
Amounts payable under leases:
Within one year (4,215) (3,536)
Between two to five years (11,552) (9,823)
After more than five years (13,068) (9,709)
(28,835) (23,068)
Add: unearned interest 3,968 2,721
----------------------------------- -------- --------
Total lease liabilities (24,867) (20,347)
----------------------------------- -------- --------
10. 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:
2021 2020
GBP'000 GBP'000
-------------------------------- -------------------------------- --------------------------------
Short-term and low value lease
expense (1,578) (1,662)
Depreciation charge (3,722) (3,224)
Amortisation charge (285) (190)
Interest expense (732) (649)
(6,317) (5,725)
-------------------------------- -------------------------------- --------------------------------
Amounts recognised in the consolidated statement of cash
flows:
2021 2020
GBP'000 GBP'000
--------------------------------------------------- -------- --------
Amounts payable under leases:
Short-term and low value lease expense (1,578) (1,662)
Repayment of lease liabilities within cash flows
from financing activities* (5,435) (4,686)
(7,013) (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 GBP1.0m in relation to the settlement of lease
liabilities on the acquisition of Memset Limited.
11. CONTINGENT CONSIDERATION
2021 2020
GBP'000 GBP'000
----------------------------------------------- --- -------- --------
Contingent consideration due on acquisitions
within one year:
* LDeX Group Limited - (1,153)
* Memset Limited - (500)
* ServerChoice Limited - (827)
Total contingent consideration due on
acquisitions - (2,480)
------------------------------------------------ -------- --------
Final consideration due on acquisitions of GBP2,447,000 (2020:
GBPnil) was paid in the year resulting in a gain on revaluation of
contingent consideration of GBP33,000 (2020: GBP1,856,000 gain)
recorded in the consolidated statement of comprehensive income.
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END
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June 15, 2021 02:00 ET (06:00 GMT)
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