TIDMIOM
RNS Number : 7235O
Iomart Group PLC
14 June 2022
14 June 2022
iomart Group plc
("iomart" or the "Group" or the "Company")
Final Results
Successful delivery of first year of strategic plan provides
strengthened basis for future growth
iomart (AIM: IOM), the cloud computing company, is pleased to
report its consolidated final results for the year ended 31 March
2022 (FY22).
FINANCIAL HIGHLIGHTS
2022 2021 Change
Revenue GBP103.0m GBP111.9m -8%
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% of recurring revenue(1) 93% 90% +3pp
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Adjusted EBITDA(2) GBP38.0m GBP41.4m -8%
---------- ---------- -------
Adjusted profit before tax(3) GBP17.1m GBP19.6m -13%
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Profit before tax GBP12.2m GBP12.5m -2%
---------- ---------- -------
Adjusted diluted EPS(4) 12.0p 14.4p -17%
---------- ---------- -------
Basic EPS 8.6p 9.3p -8%
---------- ---------- -------
Cash generation from operations GBP37.9m GBP43.7m -13%
---------- ---------- -------
Proposed final dividend per share 3.6p 4.5p -20%
---------- ---------- -------
-- The Group continues to benefit from a robust business model
delivering very strong levels of recurring revenues, amounting to
93%(1) of Group revenues
-- The reduction in Group revenue reflects lower non-recurring
equipment and consultancy sales, along with lower customer renewal
levels at the start of the year, which have since returned to
normal levels
-- Margins remain stable with adjusted EBITDA(2) margin and
adjusted profit before tax(3) margin at 36.9% (2021: 37%) and 16.6%
(2021: 17.5%), respectively. Absolute profit reductions simply
follow the revenue profile in the year
-- Strong cash generation from operations in the period of
GBP37.9m with a consistent cash conversion(6) of 100% (2021:
106%)
-- Year-end net debt(5) reduced to GBP41.3m, comfortable at 1.1 times adjusted EBITDA
-- Successful refinancing with an increased GBP100m revolving
bank facility from a new group of four leading banks, underpinning
the Group's five-year growth strategy
OPERATIONAL HIGHLIGHTS
-- Launch of new brand and successful restructuring of the
organisation to create a "one iomart" team
-- Established a new product team and launched new solutions
targeting new and existing customers in areas of Digital Workplace,
Secure Connectivity and Managed Microsoft Azure
-- New security alliance with cyber security specialists,
e2e-assure, to deliver proactive 24/7 security operations centre
services
-- Enhancements made to core operational and service-based
systems and tools, with a primary focus on improved levels of
customer service excellence
-- Strengthened commercial leadership with appointment of a new Chief Commercial Officer
-- M&A - positive progress in evaluating targeted
opportunities to further extend the Group's technology, product
capabilities and routes to market, while enhancing revenue,
profitability and EPS
-- Continued delivery against our ESG programme
OUTLOOK
-- The first two months of the new financial year has seen
performance in line with the Board's expectations, consistent with
our high recurring revenue business model
-- Inflation in energy prices is being proactively managed via
price increases to our customers while we are using hedging options
to provide some certainty for customers and our own planning
-- The launch of the enhanced set of product offerings, coupled
with a clearly defined brand and targeted go to market capability
provide for a positive environment to deliver future growth
STATUTORY EQUIVALENTS
A full reconciliation between adjusted and statutory profit
before tax is contained within this statement. The largest item is
the consistent add back of the non-cash amortisation of acquired
intangible assets. The largest variance, year on year, is a GBP1.5m
lower amortisation of acquired intangible assets as the
amortisation periods expire on certain historic acquisitions.
Reece Donovan, CEO commented,
"We have made good progress on all aspects of our strategic
growth plan and start the second year of this plan in an improved
position. With an expanded offering and strengthened team, as well
as an established reputation within the UK's cloud computing market
place, we have a strong platform from which to return to a growth
phase of the business.
"We are mindful that the wider business environment continues to
be challenging. As iomart has shown in the past, during periods of
uncertainty, we have a robust business model and strong financial
position to manage such short-term pressures. This is especially
the case as the market for cloud computing solutions continues to
offer long term growth and our strategic actions taken, together
with our M&A plans, puts us in a stronger position to benefit
from this over the coming year and beyond."
(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, accelerated
write off of arrangement fee on bank facility 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, accelerated write off of arrangement fee on bank
facility, 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).
(5) Net debt being outstanding bank loans, lease liabilities
less cash and cash equivalents (as disclosed on page 13)
(6) Cash conversion is calculated as cash generation from
operations (as disclosed in the consolidated statement of
cashflows) divided by adjusted EBITDA.
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
Broker) 8900
Edward Knight, Paul Gillam, James Smith
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
iomart Group plc (AIM: IOM) is a cloud computing and IT managed
services business providing hybrid cloud infrastructure, network
connectivity, security, and digital workplace capability. Our
mission is simple: to make our customers unstoppable by enabling
them to connect, secure and scale anywhere, anytime. From our
portfolio of data centres we own and operate across the UK to
connected sites around the world, our 400-strong team can design
and deploy the right cloud solution for our customers.
For further information about the Group, please visit www.iomart.com
CHAIRMAN'S STATEMENT
I am pleased to report that iomart (the "Group") has delivered a
robust trading performance while executing on the first phase of
its strategic growth plan. Whilst experiencing some revenue
reductions, mainly in the first half of the year, we continue to
deliver high levels of profitability and cash generation with many
of our key financial metrics remaining stable throughout the
year.
The start of the year saw the Board embark on a refreshed growth
strategy to achieve an ambitious vision. The central pillars of
this plan include the concept of 'one iomart' and the expansion of
our offering to cover a wider portfolio of services to include
hybrid cloud offerings. We are upscaling the business, we remain
acquisitive and we remain ambitious. The full team are now very
much focused on execution and it is pleasing to see good progress
on the key milestones for the first year of the plan.
I would like to thank the iomart team for their hard work and
commitment during the year. One of the strengths of the Group is
the quality of its fantastic workforce. Investing in the workforce
and their further development and support is one of the central
tenets of our strategy.
I believe strongly that a culture of strong corporate governance
is essential to our future growth. To enhance the balance and
experience of the Board, we were delighted to announce in July the
appointment of Andrew Taylor as a Non-Executive Director of the
Company. Andrew adds additional sector skills to support our growth
plans. We have also made good progress in strengthening iomart's
environmental, social and governance ("ESG") credentials, recently
completing a carbon neutral roadmap which will support our efforts
to reduce further our overall emissions as we work towards
achieving carbon neutrality. This roadmap and other ESG activities
are detailed later in this report.
During the year we paid an interim dividend of 2.42p per share
which was paid to shareholders in January 2022. In addition, the
Board is now proposing to pay a final dividend of 3.60p per share
taking the total for the year to 6.02p being at the maximum pay-out
ratio under our stated dividend policy of paying up to 50% of
adjusted diluted earnings per share. 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 during the Covid-19 pandemic.
Subject to shareholder approval this proposed final dividend would
be payable on 2 September 2022 to shareholders on the register at
close on 12 August 2022.
I was appointed to the Board of iomart in 2016 and took over as
Chairman in August 2018. It has been both a privilege and a
pleasure to serve as iomart's Chairman. With iomart now well
progressed on a clear path to growth, I have decided not to stand
for re-election at the forthcoming Annual General Meeting and will
leave the Board at that time. I thank you for your support during
my years on the Board. The search for my successor is progressing
and the Board aim is to announce that appointment by the time of
the AGM. I look forward to hearing of the continued success of the
Group in future years.
Ian Steele
Non-Executive Chairman
14 June 2022
CHIEF EXECUTIVE OFFICER'S REPORT
Introduction
I am encouraged by the progress we have made during the year and
pleased to be reporting financial results in line with current
market expectations, delivering revenue of GBP103.0m (2021:
GBP111.9m), adjusted EBITDA(1) of GBP38.0m (2021: GBP41.4m)
adjusted profit before tax(2) of GBP17.1m (2021: GBP19.6m) and
profit before tax of GBP12.2m (2021: GBP12.5m) . We continue to
benefit from the highly recurring nature of our business model,
with 93% of revenue in the year recurring and remain strongly
cash-generative.
The 8% year on year reduction in revenue reflects lower
non-recurring revenue and consultancy sales, along with the impact
of lower customer renewals we experienced in the first half of the
year which have subsequently returned to normal levels. Our
profitability metrics have remained stable with adjusted EBITDA
margins at 36.9% (2021: 37.0%) and adjusted profit before tax at
16.6% (2021: 17.5%) of group revenue meaning the absolute
reductions simply follow the revenue profile in the year. The net
debt position of the Group at the end of the year was GBP41.3m
(2021: GBP54.6m) being a reduction of GBP13.3m following strong
cash generation in the year, including a 100% EBITDA to operating
cash flow conversion ratio.
Our team has been very focused on the execution of our strategic
plan achieving all the key objectives outlined at the start of the
year. We have launched a number of new solutions, entered into an
exciting alliance to accelerate our managed cyber security
offering, reshaped the commercial team, and invested in our
customer service tools, resources and people.
The successful refinancing of our revolving bank facility in
December 2021 with four new banks underpins our five-year plan and
M&A ambitions, and this ongoing support from top tier global
financial institutions is a clear endorsement of our strategy.
After more than six years of first class commitment and service,
the latter four years as Chairman, Ian Steele has decided not to
stand for re-election at our forthcoming Annual General Meeting.
Both personally and on behalf of everyone connected with the Group,
I want to thank him for his valuable contribution to the
development of iomart over the years.
With an expanded offering and strengthened team, as well as an
established reputation within the UK's cloud computing market
place, we have a strong position from which to return to a growth
phase of the business.
Strategy
At the start of the year we announced our vision to position
iomart for the next phase of its growth as a recognised leading
secure hybrid cloud business. We were bold by stating our
aspiration to become a GBP200m revenue business within five years.
Underpinning this was a roadmap with a focus on three main
activities:
-- New services and geographies - focused 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 which is underpinned by our existing core private cloud
infrastructure and services.
We have made good progress on all aspects of our strategic
growth plan and start the second year of this plan in an improved
position as noted in each of the areas detailed below.
Team and brand
We started the year with a focus on brand development, new
product launches and restructuring the organisation to create a
"one iomart" team. Our new strapline "welcome to straightforward"
encapsulates our mission to deliver a customer-focused service
which makes the complicated world of secure hybrid cloud simple for
our customers, gives them peace of mind, and allows them to focus
on what's important to them.
Around "one iomart" we have included updates to our benefits
package, formalised flexible working options and delivered a number
of wellbeing, leadership, technical and management training
programmes across the business and established a People Forum.
New services and partnerships
We have established a new product team and have redefined and
launched a number of new solution initiatives. These are targeted
at both new customers and upselling and cross-selling to our
existing customers. They include specific campaigns around the
growth areas of Digital Workplace, Secure Connectivity and Managed
Microsoft Azure. Pipelines are being developed from each of these
campaigns and we are confident our refined approach will give a
greater success rate. Further product releases will be made over
the coming year.
During the year we were delighted to secure our first six figure
annual recurring revenue customer for Managed Microsoft Azure
following our successful sales campaign. The customer's IT workload
will be deployed on Azure infrastructure on a managed basis over
the next 4 years. A well-qualified pipeline of additional sales
opportunities is building. We are now working closely with
Microsoft and anticipate this relationship will continue to
strengthen.
In March 2022 we announced a new security partnership with cyber
security specialists, e2e-assure, to deliver proactive 24/7
security operations centre services. The move into the security
market has been a long-standing ambition of iomart and is a key
part of the growth strategy. This partnership enables us to enter
the market in an appropriate manner.
These new initiatives complement and enhance our well
established Private Cloud infrastructure, 24/7 service capability
and deep expertise which remains at the heart of our Hybrid
offering.
Commercial
We have strengthened our commercial leadership with the
appointment of our new Chief Commercial Officer, in February 2022,
who brings a fresh perspective and experience to drive our organic
growth. We continue to believe that our existing large customer
base represents a fertile sales ground for the Group and the
widening of our solutions offering increases our relevance to a
wider pool of new customers.
M&A
We plan to use selective M&A to augment our organic growth.
As well as acquiring new customer bases operating in recurring
revenue business models we also plan to strengthen our technology,
solution offerings and route to market capabilities. We remain
active in evaluating potential targets but the timing of M&A
closure is hard to predict, and we will at all times maintain a
structured and disciplined approach.
Market
The Covid-19 pandemic has created a challenging business
environment but we have again proven during the last year a
robustness to our business model and our team's adaptability.
Covid-19 has seen the acceleration in the adoption of digital
transformation and remote working, both of which are likely to
enhance long-term drivers to the cloud but short-term we have seen
a lack of larger-scale IT projects. It appears clear that the UK
economy will experience some negative factors in the short-term,
from intensifying inflationary pressures, supply chain challenges
combined with geo-political uncertainties. While iomart will not be
completely immune to this economic backdrop, the requirement for
organisations to be supported with their hybrid cloud challenges
will continue to grow for the foreseeable future.
The concept of "Cloud" computing is now globally recognised. The
"public cloud" giants such as Amazon, Microsoft and Google have
vastly contributed to this general awareness and consequently, as
is well documented, have seen high growth globally as many
organisations look for Cloud infrastructure and capabilities. The
reality of the situation is that a vast majority of the world's IT
infrastructure is complex and untidy in nature which means hybrid
cloud models will remain a key market feature for many use cases.
Even if businesses want to use Public Cloud infrastructure fully,
many lack the detailed know-how, skills and resources required to
manage all the elements. iomart is well positioned to meet this
demand given our long established capability in designing and
running private clouds and supporting on-premise solutions along
with our plans to continue to complement this with skills and
capabilities for public cloud provisioning and management.
With the insatiable growth in data requirements from across all
industries, the demand for the three core building blocks of
compute power, storage and connectivity continues to expand.
Organisations are increasingly outsourcing these requirements to
experts, who can help them navigate a constantly evolving and
complex technical landscape, providing high levels of reliability,
customer support, flexibility and technical knowledge. These
requirements increasingly come with greater security and compliance
needs.
No two organisations are the same, and therefore the cloud
solution mix in the future will be unique and reflect the needs of
an organisation at that time, especially for those organisations
that are running established applications that are not public cloud
compatible. Many customers are looking for a single point of
accountability for all their cloud needs and iomart is well
positioned to provide this service going forward, particularly for
medium to large enterprises.
Commitment to ESG and sustainability
iomart believes that integrating environmental, social and
governance ("ESG") considerations across our business enables us to
accelerate our customers' success whilst looking after the
environment and society. During the year, we partnered with
Schneider Electric to establish carbon reduction targets and
identify ways to reduce further our overall emissions as we work
towards achieving carbon neutrality. This concluded with an
alignment with the UK Government targets and a commitment to
achieve Net Zero by 2050, and earlier, if possible.
We also made progress in other areas of ESG, which will enable
us to better protect stakeholder interests and strengthen our
business resilience.
Environmental
-- Purchased Renewable Energy Guarantees of Origin ("REGO")
certified renewable electricity across our UK data centre estate
which reduces significantly our carbon emissions
-- Improved our data centres efficiency by replacing older equipment with modern technology
-- Installed Katrick Technologies' heat removal system' at our
Glasgow data centre, with initial results showing a potential for
up to 50% reduction in electrical power consumption
Social
-- Revamped our brand values, with "People First" at the core
-- Enhanced our employee benefits package
-- Partnered with local charities that align with our brand
focus and employees' interests, such as SmartSTEMs and Scotland's
Empowering Women to Lead Digital Transformation leadership
program
-- Hosted Volunteer Days to serve the Glasgow and Manchester
communities to deliver food and prep meals
-- Roll-out of Leadership Programme across the Group
-- Implemented a "People Forum" of cross group staff representatives, a first for the Group
Governance
-- Added a fourth Non-Executive Director to the Board to support our growth strategy
-- Engaged an external third party to lead an outsourced internal audit function
Operational Review
While all of our activities involve the provision of services
from common infrastructure, we are organised into two operating
segments, Cloud Services (GBP91.2m revenue) and Easyspace (GBP11.8m
revenue).
Cloud Services
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
being: iomart cloud managed services, self-managed infrastructure
and non-recurring revenue. 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.
-- iomart cloud managed services: GBP55.7m revenue (2021:
GBP57.9m): 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. Over the long-term we anticipate this will be
the highest growth area for iomart, supported by the market drivers
described above. This is the part of the business on which new
product service launches are focused because we believe "IT as a
service" is what organisations are looking for to support their
business objectives and that we are well placed to offer.
-- Self-managed infrastructure: GBP28.4m revenue (2021:
GBP30.3m): provides dedicated, physical, self-service servers to
customers. We deliver many thousands of physical servers for our
customers using highly automated systems and processes which we
continue to develop and improve. Over the last three years we have
seen reduction in revenues within this area especially from a long
tail of smaller customers many of whom were within legacy brands.
We will continue to allocate resources to ensure we provide this
customer base with resilient, cost effective and increasingly
automated solutions.
-- Non-recurring revenue: GBP7.1m (2021: GBP11.7m): relates
primarily to on premise equipment and software reselling via our
Cristie Data brand, plus consultancy projects. By their nature this
activity is lower margin but we believe it to be relevant to our
ability to offer support to our existing customer base and new
customer wins. It is often these non-recurring activities that
provide an interesting initial introduction to the wider iomart
Group and evolve customers into a higher level of recurring
services.
During the year ended 31 March 2022, Cloud Services revenues
decreased by GBP8.7m (9%) to GBP91.2m (2021: GBP99.9m).
A fall in non-recurring activities accounted for a GBP4.6m drop
in non-recurring revenue from lower equipment reselling which,
coupled with a large scale consultancy project coming to an end
which had contributed GBP1.3m of revenue in the prior year, had a
disproportionate impact. However, we are pleased to report that we
have commenced the new financial year with an increased order book
and a sales team back at full strength.
Recurring revenue (3) reduced by GBP4.2m in the financial year,
split equally between our core cloud managed services areas and
self-managed infrastructure revenues, largely as a result of lower
levels of renewals than usual at the start of the year as a result
of, corporate ownership changes, lack of breadth in public cloud
solutions and customer service. Renewals rates have subsequently
returned to normal levels and we are confident the investments we
have made into our customer support processes and the broadening of
our solutions offering in the year will continue to bring positive
results in this regard.
Cloud Services EBITDA (before share based payments, acquisition
costs and central group overheads) was GBP36.6m being 40.2% of
cloud services revenue (2021: GBP40.5m (40.5% of cloud services
revenue)). The underlying profitability has been reasonably stable
in the year with the reduction in absolute EBITDA reflecting the
revenue trend in the year.
Easyspace
The global domain name and mass market hosting sector continues
to grow, supported by the increasing importance of an internet
presence and ecommerce for all areas of the economy, including the
small and micro business community represented within our Easyspace
division. This sector is increasingly dominated by a smaller number
of large global operators and we recognised a long time ago that
the marketing spends required to compete for new business in this
specific area was not the best use of iomart's resources. The
Easyspace segment has performed well during the year, delivering
revenues and EBITDA (before share based payments, acquisition costs
and central group overheads) of GBP11.8m (2021: GBP11.9m) and
GBP5.7m (2021: GBP5.3m), respectively.
Infrastructure investment and energy pricing
Our UK owned infrastructure is an important part of the delivery
of our recurring revenue services, an important differentiator in
the market and allows more of the value add to be retained by
iomart. We have a well maintained data centre estate as this is
core to ensuring a resilient service.
In the year we concluded investments in a number of projects
that overlapped the prior year end, including the replacement of
the cooling system in our second largest data centre in London, and
investment into next generation core routing technology which
provides 100GB capacity on our network, with the ability to scale
to 400GB. In the year the only other larger project initiated was
the upgrade to our uninterruptible power systems ("UPS") in our
core sites, which will be steadily rolled out over the next two
years as part of our standard infrastructure spend, plus the
electrical system upgrade in our London site. Given some of the
lower revenue trends experienced we have also seen a lower level of
spend in servers and storage systems linked to customer projects.
In combination these factors have resulted in an overall equipment
CAPEX spend at a lower level: GBP9.5m versus GBP15.2m in prior
year.
We are proactively managing the inflation in energy prices.
Although the current volatility of the energy markets may cause us
to have to absorb some of the price fluctuations through the year,
the core of our existing customer agreements, to varying degrees
allow us to increase pricing, and some of this has already been
invoked. In addition, any new business, contract renewals or
shorter-term arrangements will be price adjusted at the appropriate
time. We have various options to put in place hedging type
arrangements within our electricity procurement to provide some
certainty for our customers and our own planning.
Current trading and outlook
The first two months of the new financial year has seen
financial results in line with internal expectations, consistent
with our high recurring revenue business model which gives good
visibility.
The focus for the coming year is the continued development of
our sales pipeline, timely conversion of the opportunities created
by new solution launches and the cyber security partnership,
improvements made in our customer services, and our refreshed
commercial leadership team.
We are mindful that the wider business environment continues to
be challenging. As iomart has shown in the past, during periods of
uncertainty, we have a robust business model and strong financial
position to manage such short-term pressures. This is especially
the case as the market for cloud computing solutions continue to
offer long-term growth and our strategic actions taken, together
with our M&A plans, puts us in a stronger position to benefit
from this over the coming year and beyond.
Reece Donovan
Chief Executive Officer
14 June 2022
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 11) is profit before tax, amortisation
charges on acquired intangible assets, share-based payment charges,
acquisition costs, accelerated write off of arrangement fee on bank
facility and gain on revaluation of contingent consideration
(3) 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)
CHIEF FINANCIAL OFFICER'S REPORT
Financial Review
Key Performance Indicators
2022 2021
----------------------------------------------- ---------- ----------
Revenue GBP103.0m GBP111.9m
% of recurring revenue (1) 93% 90%
Gross profit % (2) 59.5% 60.5%
Adjusted EBITDA (3) GBP38.0m GBP41.4m
Adjusted EBITDA margin % (4) 36.9% 37.0%
Adjusted profit before tax (5) GBP17.1m GBP19.6m
Adjusted profit before tax margin % (6) 16.6% 17.5%
Profit before tax GBP12.2m GBP12.5m
Profit before tax margin % (7) 11.8% 11.1%
Basic earnings per share 8.6p 9.3p
Adjusted earnings per share (diluted) (8) 12.0p 14.4p
Cash flow from operations / Adjusted EBITDA %
(9) 100% 106%
Net debt / Adjusted EBITDA leverage ratio
(10) 1.1 1.3
------------------------------------------------- ---------- ----------
See page 14 for definition of alternative performance
measures
Revenue
Overall revenue from our operations reduced by 8% to GBP103.0m
(2021: GBP111.9m). We saw a greater share of recurring revenue at
93% (2021: 90%) compared to prior years as non-recurring activity
levels reduced by a disproportionate level. We remain focussed on
retaining our recurring revenue business model with the combination
of multi-year contracts and payments in advance providing us with
good revenue visibility.
Cloud Services
The following is the disaggregation of Cloud Services revenues
of GBP91.2m (2021: GBP99.9m):
2022 2021
Disaggregation of Cloud Services revenue GBP'000 GBP'000
------------------------------------------ ---------------- ---------
Cloud managed services 55,745 57,961
Self-managed infrastructure 28,363 30,311
Non-recurring revenue 7,128 11,672
91,236 99,944
------------------------------------------ ---------------- ---------
Cloud managed services (recurring revenue)
The main driver for the GBP2.2m (4%) lower revenue experienced
in the year was a lower level of customer renewals, primarily in
the first half. We saw an improvement in the renewals in the second
half of the year but by then the cumulative revenue impact had
heavily influenced the full year result. This does however ensure a
more normalised renewal level as we start our new financial year
and a more solid revenue base as we await the layering on from
forecasted higher order bookings from pipeline opportunities
generated by additional product launch already underway and the
refreshed commercial team.
Self-managed infrastructure (recurring revenue)
In the year the self-managed infrastructure revenue reduction
was GBP1.9m (6%), largely attributable to a reduction in number of
our long tail of smaller customers. While still a reduction in
organic revenue, the pace has slowed from the previous two years
which is somewhat encouraging especially given this area of the
business typically has above average profitability.
Non-recurring revenue
Of the lower revenue contribution in this year GBP1.8m comes
from lower consultancy income, including the impact of one large
consultancy project which came to an end in December 2020 and was
not repeated. In addition, GBP2.7m can be attributed to lower
one-off hardware and software reselling. This area of our activity
continued to see slower decision making on larger hardware refresh
projects than normal, longer lead times for equipment components,
and also to some degree we were impacted by reduced sales heads in
the Cristie Data sales force at the start of the year which only
returned to full strength in the second half. Some of these factors
are timing related and we start the new financial year with a
non-recurring order book GBP0.7m higher than last year.
Easyspace
Our Easyspace segment has performed well over the year with
revenues reducing by only GBP0.1m to GBP11.8m (2021: GBP11.9m). The
domain name and web hosting business is an area in which we do not
invest heavily but it was pleasing to see a solid performance with
high level of renewals from our base of 65,000 customers. 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 and other assets 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 strong revenue visibility.
Gross Profit
Gross profit in the year, which is calculated by deducting from
revenue variable cost of sales such as power, software licences,
connectivity charges, domain costs, public cloud costs, sales
commission, the relatively fixed costs of operating our data
centres plus, for non-recurring revenue, the cost of hardware and
software sold, reduced by GBP6.3m to GBP61.3m (2021: GBP67.6m). In
percentage terms, gross margin (2) was broadly stable at 59.5%
(2021: 60.5%), 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 new business won compared to
margins from some of the self-managed infrastructure only deal of
earlier 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 including consumption of public cloud
resources.
Adjusted EBITDA (3)
The Group's adjusted EBITDA reduced by 8% to GBP38.0m (2021:
GBP41.4m) which in adjusted EBITDA margin (4) terms translates to
36.9% (2021: 37.0%). The administration expense (before
depreciation, amortisation, share based payment charges and
acquisition cost) of GBP23.3m is GBP2.9m lower than the previous
year comparative. An element of this reflects the secured synergy
savings achieved from the two bolt on acquisitions in February and
March 2020 and some relates to the specific timings of staff
adjustments in our team as, like the wider sector, we saw a period
of higher staff attrition and recruitment activity in the first
half of the year.
The Cloud Services segment saw a 9% reduction in adjusted EBITDA
to GBP36.6m (2021: GBP40.5m). In percentage terms the Cloud
Services margin decreased slightly to 40.2% (2021: 40.5%). The
Easyspace segment's adjusted EBITDA was GBP5.7m (2021: GBP5.3m)
reflecting the stable revenue performance in the year with the
increase in profitability reflecting the specific bundle of
packages sold to hosting customers. In percentage terms the
adjusted EBITDA margin increased to 48.2% (2021: 44.8%).
Group overheads remained stable at GBP4.3m (2021: 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 GBP16.3m (2021: GBP16.9m) has reduced
by GBP0.6m in the year but as a percentage of recurring revenue is
17.0% which is broadly consistent with prior year of 16.8%.
The charge for amortisation of intangibles, excluding
amortisation of intangible assets resulting from acquisitions
("amortisation of acquired intangible assets"), of GBP2.6m (2021:
GBP2.9m) has dropped slightly year on year.
Finance costs (including accelerated write off of arrangements
fee on bank facility) of GBP2.1m (2021: GBP2.0m), has been stable.
This includes 4 months from the new revolving loan facility which
has a slightly higher bank margin but overall small savings was
achieved because of the lower overall debt levels. Our revolving
credit facility has a borrowing cost at the Group's current
leverage levels of 180 basis points over SONIA.
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 GBP17.1m (2021: GBP19.6m),
representing an adjusted profit before tax margin (6) of 16.6%
(2021: 17.5%).
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 2022 2021
tax to profit before tax GBP'000 GBP'000
Adjusted profit before tax (5) 17,109 19,628
Less: Amortisation of acquired intangible
assets (4,044) (5,457)
Less: Acquisition costs (315) (493)
Less: Share-based payments (480) (1,247)
Less: Accelerated write off of arrangement
fee on bank facility (102) -
Add: Gain on revaluation of contingent
consideration - 33
Profit before tax 12,168 12,464
---------------------------------------------- --------- ---------
The adjusting items are: charges for the amortisation of
acquired intangible assets of GBP4.0m (2021 GBP5.5m) with the
reduction being from expiry of the amortisation charge on earlier
acquisitions; acquisition costs of GBP0.3m (2021: GBP0.5m) and
share-based payment charges of GBP0.5m (2021: GBP1.2m) with the
reduction due to options lapsed in the period and the lower closing
share price.
In addition, in the current year the successful refinancing
required GBP0.1m of previously deferred arrangement fees to be
written off early. During the year to 31 March 2021 there was a
very small gain on contingent consideration for previous
acquisitions.
After deducting these items from the adjusted profit before tax,
the reported profit before tax was fairly stable at GBP12.2m (2021:
GBP12.5m). In percentage terms the profit before tax margin (7) was
an increase to 11.8% (2021: 11.1%) fully driven by the continued
reduction in the amortisation of acquired intangible assets and
lower share based payment charge, offsetting fully the impact of
the lower trading result in the year.
Taxation
The tax charge for the year is GBP2.8m (2021: GBP2.3m). The tax
charge for the year is made up of a corporation tax charge of
GBP1.1m (2021: GBP3.5m) with a deferred tax charge of GBP1.7m
(2021: GBP1.2m credit). The effective rate of tax for the year is
22.8% (2021: 18.1%). The future increase to a 25% UK corporation
tax rate has been reflected, for this first time, on the deferred
tax balances. In prior year the change in tax rate was not
substantively enacted meaning the deferred tax balances were
calculated with a 19% rate. The increase in the effective tax rate
in the year to above the current UK headline corporation tax rate
is a function of the greater impact from the tax accounting on
share based payments offset partially by the positive effect of the
higher "super deduction" available for capital investments. Given
iomart is very much a UK business then the UK headline corporate
tax is still 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 GBP9.4m (2021: GBP10.2m).
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 8.6p
(2021: 9.3p), a reduction of 7.5%.
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, accelerated write off of arrangement
fee on bank facility, the gain on the revaluation of contingent
consideration, and the tax effect of these items was 12.0p (2021:
14.4p), a reduction of 16.7%.
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.
The current policy is a maximum pay-out policy of 50% of adjusted
diluted earnings per share. The Directors are proposing a final
dividend of 3.60p (2021:4.50p) which is at maximum level set by the
dividend policy which 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 2.42p
(2021: 2.60p), which was paid in January 2022, the total dividend
for the year is 6.02p (2021: 7.10p), a reduction reflecting the
movement in the adjusted diluted earnings per share.
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 GBP37.9m (2021:
GBP43.7m) which represents a 100% conversion (9) of adjusted EBITDA
(2021: 106%). The higher headline conversion ratio in prior year
was augmented by a GBP2.3m cash deposit returned by our landlord as
part of the negotiation of the extension of the London data centre
lease. Normalising for this item takes the EBITDA conversion to
cash ratio to 100% in the prior year.
Cash payments for corporation taxation in the year fell to
GBP2.5m (2021: GBP3.6m), resulting in net cash flow from operating
activities in the year of GBP35.4m (2021: GBP40.1m).
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 UK infrastructure but also in
the continuation of our disciplined acquisition strategy. The Group
invested a total of GBP10.2m (2021: GBP19.2m) during the year. This
was a relatively low level as there was no M&A type payments
and generally our CAPEX was lower reflecting some of the activity
levels.
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 GBP9.5m (2021: GBP15.2m) on assets, net
of related lease drawdowns, trade creditor movements and non-cash
reinstatement provisions. Most of the expenditure in the year was
on operational items such as servers and storage to support
customer deployments. Project type capital expenditure on the
infrastructure was at a similar level to last year at around
GBP4.0m. This included the final payments associated with the
investment in the London data centre chiller replacement and the
initial works on the electrical systems at the same site.
Expenditure was also incurred on development costs of GBP1.4m
(2021: GBP1.3m) and on intangible assets of GBP0.1m (2021:
GBP0.6m). We sold our Leeds office during the year which created
GBP0.7m of sales proceeds (2021: GBPnil).
We made no acquisitions in the last year and had no M&A
related payment. In prior year we incurred GBP2.4m of expenditure
in respect of contingent consideration due on previous year
acquisitions. As we have outlined in our strategy we do expect
M&A activity will continue to support and accelerate our
organic growth ambitions over the coming five years.
Cash flow from financing activities
In the prior year loan drawdowns of GBP1.2m were made from the
revolving credit facility to fund the payment of contingent
consideration due on acquisitions. In the current year there was no
such loan drawdowns other than the initial drawdown on our new bank
facility to repay the Bank of Scotland revolving loan which was
refinanced (see below).
Bank loan repayments of GBP18.8m (2021: GBP1.2m) were made in
the year reducing significantly the closing drawn bank loan to
GBP34.0m (2021: GBP52.8m). Cash received in the year from issue of
shares was only GBP4k (2021: GBP0.4m). We also made dividend
payments of GBP7.6m (2021: GBP7.1m); paid finance costs of GBP2.1m
(2021: GBP1.1m) which included GBP1.0m of arrangement and
professional fees associated with the new bank facility and made
lease repayments of GBP4.4.m (2021: GBP5.4m).
Net cash flow
As a consequence of the above component elements and especially
our high bank loan repayment in the year, our overall cash position
was an outflow of GBP7.7m (2021: GBP7.5m inflow) which resulted in
cash and cash equivalent balances at the end of the year of
GBP15.3m (2021: GBP23.0m).
Net Debt
The net debt position of the Group at the end of the year was
GBP41.3m (2021: GBP54.6m) as shown below. The net debt position
represents a multiple of 1.1 times (10) our adjusted EBITDA (2021:
1.3 times) which we believe is a comfortable level of debt to carry
given the recurring revenue business model and strong cash
generation in the business.
2022 2021
GBP'000 GBP'000
Bank revolver loan 34,000 52,791
Lease liabilities 22,623 24,867
Less: cash and cash equivalents (15,332) (23,038)
Net Debt 41,291 54,620
----------------------------------- --------- ----------
On 2 December 2021, we successfully refinanced and increased the
Group's existing single bank Revolving Credit Facility of GBP80m
that was due to mature on 30 September 2022. The new GBP100m
Revolving Credit Facility ("RCF") was provided by a new four bank
group consisting of HSBC, Royal Bank of Scotland, Bank of Ireland
and Clydesdale Bank.
The new facility has an initial maturity date of 30 June 2025,
with a 12-month extension option and benefits from a GBP50m
Accordion Facility. The RCF has a borrowing cost at the Group's
current leverage levels of 180 basis points over SONIA, compared to
150 basis points over LIBOR on the prior facility. An arrangement
fee was paid upfront in addition to a commitment fee on the undrawn
portion of the new RCF on equivalent terms to the previous
facility. The RCF and the Accordion Facility (if exercised) provide
the Group with additional liquidity which will be used for general
business purposes and to fund investments, in accordance with the
Group's five-year strategic plan.
The decrease in the lease liability to GBP22.6m (2021: GBP24.9m)
reflected expected payments on property arrangements and that there
were no material revisions to existing leases.
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. 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
14 June 2022
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
disclosed in the consolidated statement of comprehensive income) /
Revenue (as disclosed in the consolidated statement of
comprehensive income) as a %
(5) Adjusted profit before tax (as disclosed on page 11) is
profit before tax, amortisation charges on acquired intangible
assets, share-based payment charges, acquisition costs, accelerated
write off of arrangements fee on bank facility and gain on
revaluation of contingent consideration.
(6) Adjusted profit before tax margin % is defined as adjusted
profit before tax (as disclosed on page 11) / Revenue (as disclosed
in the consolidated statement of comprehensive income) as a %
(7) Profit before tax margin % is defined as Profit before Tax /
Revenue (both as disclosed in the consolidated statement of
comprehensive income) as a %
(8) Adjusted diluted earnings per share is earnings before
amortisation charges on acquired intangible assets, share-based
payment charges, acquisition costs, accelerated write off of
arrangement fee on bank facility 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 8)
as a %
(10) Net debt / Adjusted EBIDTA level ratio is defined as Net
Debt (as disclosed on page 13) / Adjusted EBITDA (as disclosed in
the consolidated statement of comprehensive income)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 MARCH 2022
2022 2021
Note GBP'000 GBP'000
Revenue 103,018 111,883
Cost of sales (41,712) (44,241)
--------- ---------
Gross profit 61,306 67,642
Administrative expenses (47,076) (53,230)
Operating profit 14,230 14,412
Analysed as:
Earnings before interest, tax, depreciation,
amortisation, acquisition costs and
share-based payments 38,009 41,408
Share-based payments (480) (1,247)
Acquisition costs (315) (493)
Depreciation 8 (16,296) (16,882)
Amortisation - acquired intangible
assets 7 (4,044) (5,457)
Amortisation - other intangible assets 7 (2,644) (2,917)
Gain on revaluation of contingent
consideration - 33
Finance income - 19
Finance costs (2,062) (2,000)
--------- ---------
Profit before taxation 12,168 12,464
Taxation 4 (2,772) (2,260)
--------- ---------
Profit for the year attributable
to equity holders of the parent 9,396 10,204
Other comprehensive income
Amounts which may be reclassified
to profit or loss
Currency translation differences 30 (94)
------------------------------------------------ ----- --------- ---------
Other comprehensive income for the
year 30 (94)
------------------------------------------------ ----- --------- ---------
Total comprehensive income for the
year attributable to equity holders
of the parent 9,426 10,110
Basic and diluted earnings per share
Basic earnings per share 6 8.6p 9.3p
Diluted earnings per share 6 8.4p 9.1p
------------------------------------------------ ----- --------- ---------
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2022
2021
Note GBP'000 GBP'000
------------------------------- ----- --------- ----------
ASSETS
Non-current assets
Intangible assets - goodwill 7 86,479 86,479
Intangible assets - other 7 12,852 18,101
Trade and other receivables 531 502
Property, plant and equipment 8 70,893 77,012
Deferred tax 5 - 138
170,755 182,232
Current assets
Cash and cash equivalents 17 15,332 23,038
Trade and other receivables 16 20,592 22,979
Current tax asset 1,658 235
37,582 46,252
Total assets 208,337 228,484
LIABILITIES
Non-current liabilities
Trade and other payables (2,643) (2,662)
Non-current borrowings 9 (53,063) (74,221)
Provisions (2,438) (2,097)
Deferred tax 5 (1,510) -
(59,654) (78,980)
Current liabilities
Trade and other payables (26,232) (29,495)
Current borrowings 9 (3,560) (3,437)
(29,792) (32,932)
Total liabilities (89,446) (111,912)
Net assets 118,891 116,572
-------------------------------- ----- --------- ----------
EQUITY
Share capital 1,101 1,097
Own shares (70) (70)
Capital redemption reserve 1,200 1,200
Share premium 22,495 22,495
Merger reserve 4,983 4,983
Foreign currency translation
reserve (14) (44)
Retained earnings 89,196 86,911
Total equity 118,891 116,572
-------------------------------- ----- --------- ----------
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARED 31 MARCH 2022
2022 2021
Note GBP'000 GBP'000
Profit before taxation 12,168 12,464
Gain on revaluation of contingent
consideration - (33)
Finance costs - net 2,062 1,981
Depreciation 8 16,296 16,882
Amortisation 7 6,688 8,374
Share-based payments 480 1,247
Gain on disposal of property (338) -
Movement in trade receivables 3,257 2,516
Movement in trade payables (2,702) 268
----------------------------------------------- ------ ---------- --------------
Cash flow from operations 37,911 43,699
Taxation paid (2,455) (3,643)
Net cash flow from operating
activities 35,456 40,056
Cash flow from investing activities
Purchase of property, plant and
equipment 8 (9,492) (15,192)
Proceeds received from disposal of property,
plant and equipment 700 260
Development costs 7 (1,352) (1,306)
Purchase of intangible assets 7 (91) (561)
Proceeds received from disposal
of intangible assets - 73
Contingent consideration paid - (2,447)
Finance income received - 19
Net cash used in investing activities (10,235) (19,154)
Cash flow from financing activities
Issue of shares 4 353
Drawdown of bank loans - 1,150
Payments under lease liabilities 10 (4,410) (5,435)
Repayment of bank loans (18,840) (1,150)
Finance costs paid (1,100) (1,147)
Refinancing costs paid (990) -
Dividends paid (7,591) (7,132)
Net cash used in financing activities (32,927) (13,361)
Net (decrease)/increase in cash
and cash equivalents (7,706) 7,541
Cash and cash equivalents at the
beginning of the year 23,038 15,497
---------------------------------------------- ------ ---------- --------------
Cash and cash equivalents at the end of
the year 15,332 23,038
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 MARCH 2022
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 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
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Profit for the
year - - - - - - 9,396 9,396
Currency
translation
differences - - 30 - - - - 30
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Total
comprehensive
income - - 30 - - - 9,396 9,426
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Dividends -
final
(paid) - - - - - - (4,931) (4,931)
Dividends -
interim
(paid) - - - - - - (2,660) (2,660)
Share-based
payments - - - - - - 480 480
Issue of share
capital 4 - - - - - - 4
----------------
Total
transactions
with owners 4 - - - - - (7,111) (7,107)
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
Balance at 31
March 2022 1,101 (70) (14) 1,200 22,495 4,983 89,196 118,891
---------------- ---------- --------- ------------ ------------- ---------- ---------- ----------- --------
NOTES TO THE FINANCIAL INFORMATION
YEARED 31 MARCH 2022
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 2022 and 31 March 2021 within the meaning of section 434 of
the Companies Act 2006. The financial information for the year
ended 31 March 2021 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 2022 is derived
from the statutory accounts for that year which were approved by
the Directors on 14 June 2022. The statutory accounts for the year
ended 31 March 2022 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
There are no new accounting policies applied in the year ended
31 March 2022 which have had a material effect on these accounts.
In addition, the Directors do not consider that the adoption of new
and revised standards and interpretations issued by the IASB in
2021 has had any material impact on the financial statements of 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), 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
2022 2021
GBP'000 GBP'000
---------------- -------- --------
Easyspace 11,782 11,939
Cloud Services 91,236 99,944
-------- --------
103,018 111,883
----------------- -------- --------
Cloud Services revenue can be further disaggregated as
follows:
2022 2021
GBP'000 GBP'000
----------------------------- -------- --------
Cloud managed services 55,745 57,961
Self-managed infrastructure 28,363 30,311
Non-recurring revenue 7,128 11,672
91,236 99,944
------------------------------ -------- --------
The nature of these three offerings are explained within the
Chief Executive Officer report on pages 9 and 10.
Recurring and Non-recurring Revenue
The amount of recurring and non-recurring revenue recognised
during the year can be summarised as follows:
2022 2021
GBP'000 GBP'000
------------------------------- -------- --------
Recurring -
over time 95,890 100,211
Non-recurring - point in time 7,128 11,672
-------- --------
103,018 111,883
-------------------------------- -------- --------
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
2022 2021
GBP'000 GBP'000
------------------------- -------- --------
United Kingdom 88,692 97,113
Rest of the
World 14,326 14,770
-------- --------
Revenue from operations 103,018 111,883
-------------------------- -------- --------
Profit by Operating Segment
2022 2021
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 5,674 (665) 5,009 5,343 (1,165) 4,178
Cloud Services 36,641 (22,319) 14,322 40,482 (24,091) 16,391
Group overheads (4,306) - (4,306) (4,417) - (4,417)
Acquisition
costs - (315) (315) - (493) (493)
Share-based
payments - (480) (480) - (1,247) (1,247)
--------------------- --------- --------------- --------------- --------- --------------- ---------------
38,009 (23,779) 14,230 41,408 (26,996) 14,412
Gain on revaluation
of contingent
consideration - 33
Group interest
and tax (4,834) (4,241)
--------- --------------- --------------- --------- --------------- ---------------
Profit for
the year 9,396 10,204
--------------------- --------- --------------- --------------- --------- --------------- ---------------
Group overheads, acquisition costs, share-based payments,
interest and tax are not allocated to segments.
4. TAXATION
2022 2021
GBP'000 GBP'000
------------------------------------------ --------- --------
Corporation Tax:
Tax charge for the year (1,333) (3,448)
Adjustment relating to prior years 209 (100)
------------------------------------------- --------- --------
Total current taxation charge (1,124) (3,548)
Deferred Tax:
Origination and reversal of temporary
differences (1,517) 1,266
Adjustment relating to prior years (137) 18
Effect of different statutory tax rates
of overseas jurisdictions (4) 4
Effect of changes in tax rates 10 -
------------------------------------------- --------- --------
Total deferred taxation (charge)/credit (1,648) 1,288
Total taxation charge (2,772) (2,260)
------------------------------------------- --------- --------
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:
2022 2021
GBP'000 GBP'000
------------------------------------------------------ --------- ---------
Profit before tax 12,168 12,464
------------------------------------------------------- --------- ---------
Tax charge @ 19% (2021: 19%) 2,312 2,368
Expenses disallowed for tax purposes and
non-taxable income 4 33
Tax effect of net gain on revaluation of
contingent consideration - (6)
Adjustments in current tax relating to prior
years (209) 100
Tax effect of different statutory tax rates
of overseas jurisdictions 4 10
Movement in deferred tax relating to changes
in tax rates (10) -
Tax effect of share-based remuneration 833 (259)
Effect of super-deduction (377) -
Movement in deferred tax related to development
costs 72 -
Movement in deferred tax related to property, plant
and equipment 6 32
Movement in deferred tax relating to prior
years 137 (18)
------------------------------------------------------- --------- ---------
Total taxation charge for the year 2,772 2,260
------------------------------------------------------- --------- ---------
The weighted average applicable tax rate for the year ended 31
March 2022 was 19% (2021: 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 22.8% (2021: 18.1%). The effective rate of
tax has increased in the year due to the movement in the tax effect
of share-based remuneration driving a GBP0.8m charge in the
consolidated statement of comprehensive income largely driven by
the movement in the share price and the rate change impact. This
has been offset by the effect of super-deduction in the current
year driving a GBP0.4m credit recognised in the consolidated
statement of comprehensive income.
Deferred tax assets and liabilities at 31 March 2022 have been
calculated based on the rate of 25% enacted at the balance sheet
date (2021: 19%).
5. DEFERRED TAX
The Group recognised deferred tax assets and liabilities as
follows:
2022 2021
GBP'000 GBP'000
------------------------------------------------- -------- --------
Share-based remuneration 884 1,332
Capital allowances temporary
differences 843 1,363
Deferred tax on acquired assets with no capital
allowances (19) (40)
Deferred tax on development costs (542) -
Deferred tax on customer relationships (2,499) (2,356)
Deferred tax on intangible
software (177) (161)
---------------------------------------------------- -------- --------
Deferred tax (liability)/asset (1,510) 138
---------------------------------------------------- -------- --------
At the year end, the Group had no unused tax losses (2021:
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 (1,146
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
(Charged)/credited
to statement of
comprehensive
income (869) (947) (542) 34 635 35 (1,654)
Effect of different
tax rates of
overseas
jurisdictions - - - - (4) - (4)
Effect of changes
in tax rates 421 427 - (13) (774) (51) 10
Balance at 31
March 2022 884 843 (542) (19) (2,499) (177) (1,510)
-------------------- ------------- ------------ ------------- ----------- -------------- ------------ ---------
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 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.
2022 2021
GBP'000 GBP'000
-------------------------------------------- --------- ---------
Profit for the financial year and
basic earnings attributed to ordinary
shareholders 9,396 10,204
--------------------------------------------- --------- ---------
No No
Weighted average number of ordinary
shares: 000 000
Called up, allotted and fully paid
at start of year 109,671 109,160
Own shares held by Employee Benefit
Trust (141) (141)
Issued share capital in the year 181 230
Weighted average number of ordinary
shares - basic 109,711 109,249
Dilutive impact of share options 2,210 2,416
Weighted average number of ordinary shares
- diluted 111,921 111,665
---------------------------------------------- --------- ---------
Basic earnings per share 8.6 p 9.3 p
Diluted earnings per share 8.4 p 9.1 p
---------------------------------------------- --------- ---------
Adjusted earnings per share 2022 2021
GBP'000 GBP'000
--------------------------------------------------------- -------- --------
Profit for the financial year and
basic earnings attributed to ordinary
shareholders 9,396 10,204
* Amortisation of acquired intangible assets 4,044 5,457
* Acquisition costs 315 493
* Share-based payments 480 1,247
* Gain on revaluation of contingent consideration - (33)
* Accelerated write off of arrangement fee on bank
facility 102 -
* Tax impact of adjusted items (879) (1,341)
Adjusted profit for the financial
year and adjusted earnings attributed
to ordinary shareholders 13,458 16,027
---------------------------------------------------------- -------- --------
Adjusted basic earnings per share 12.3 p 14.7 p
Adjusted diluted earnings per share 12.0 p 14.4 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 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 11,904 57,263 10,827 86 336 166,895
Additions - - - 91 - - 91
Currency
translation
differences - - 36 27 - - 63
Development
cost
capitalised - 1,352 - - - - 1,352
At 31 March
2022 86,479 13,256 57,299 10,945 86 336 168,401
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
Accumulated
amortisation:
At 1 April 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)
Charge for the
year - (1,347) (4,044) (1,282) (7) (8) (6,688)
Currency
translation
differences - - (36) (31) - - (67)
At 31 March
2022 - (11,166) (49,396) (8,142) (69) (297) (69,070)
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
Carrying
amount:
At 31 March
2022 86,479 2,090 7,903 2,803 17 39 99,331
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
At 31 March
2021 86,479 2,085 11,947 3,998 24 47 104,580
---------------- ----------- -------------- --------------- ---------- ------------- ---------------- ---------
Of the total additions in the year of GBP91,000 (2021:
GBP561,000), no amounts related to leases under IFRS 16 (note 10)
(2021: GBPnil). There were no amounts included in trade payables at
the year end (2021: GBPnil). Consequently, the consolidated
statement of cash flows discloses a figure of GBP91,000 (2021:
GBP561,000) as the cash outflow in respect of the purchase of
intangible asset 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: GBP1.4m in relation to the
acquisitions of Memset Limited with a remaining useful life of 6
years, the managed private cloud business of ServerChoice Limited
of GBP1.1m with a useful life of 6 years, Bytemark Limited with a
net book value of GBP0.4m and LDeX Group Limited of GBP1.4m both
with a remaining useful life of 5 years, Sonassi Limited of
GBP2.0m, Dediserve Limited of GBP0.6m, SimpleServers Limited of
GBP0.3m all three with a remaining useful life of 4 years.
During the year, goodwill was reviewed for impairment in
accordance with IAS 36 "Impairment of Assets". No impairment
charges (2021: 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 2022 2021
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.
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
2022 2021 2022 2021
Discount rate 14.4% 14.0% 14.4% 14.0%
Future perpetuity
rate 0.0% 0.0% 2.5% 2.5%
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 Data
Freehold property 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 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
Additions in
the year - 1,834 2,890 5,907 43 - 10,674
Disposals in
the year (495) (203) (445) (20) (14) - (1,177)
Currency
translation
differences - 99 - 158 - - 257
At 31 March
2022 8,236 40,424 30,524 114,268 2,840 23 196,315
-------------------- ---------- ------------------- ----------- ----------- ----------- ---------- ----------
Accumulated
depreciation:
At 1 April 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)
Charge for the
year (255) (4,481) (1,263) (10,101) (190) (6) (16,296)
Disposals in
the year 138 - 445 20 - - 603
Currency
translation
differences - (58) - (122) - - (180)
-------------------- ---------- ------------------- ----------- ----------- ----------- ---------- ----------
At 31 March
2022 (1,054) (16,214) (18,041) (87,750) (2,340) (23) (125,422)
-------------------- ---------- ------------------- ----------- ----------- ----------- ---------- ----------
Carrying amount:
At 31 March
2022 7,182 24,210 12,483 26,518 500 - 70,893
At 31 March
2021 7,794 27,019 10,856 30,676 661 6 77,012
-------------------- ---------- ------------------- ----------- ----------- ----------- ---------- ----------
During the year there were additions of GBP249,000 (2021:
GBP63,000) in respect of reinstatement provisions and additions of
GBP1,491,000 (2021: GBP8,683,000) in respect of leases under IFRS
16 (note 10). Of the total remaining additions in the year of
GBP8,934,000 (2021: GBP12,921,000), GBP420,000 (2021: GBP977,000)
was included in trade payables as unpaid invoices at the year end
resulting in a net decrease of GBP558,000 (2021: net increase of
GBP2,271,000) in trade payables. Consequently, the consolidated
statement of cash flows discloses a figure of GBP9,492,000 (2021:
GBP15,192,000) 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
2022 2021
GBP'000 GBP'000
------------------------------- -------- --------
Current:
Lease liabilities (note 10) (3,560) (3,437)
Current borrowings (3,560) (3,437)
Non-current:
Lease liabilities (note 10) (19,063) (21,430)
Bank loans (34,000) (52,791)
Total non-current borrowings (53,063) (74,221)
Total borrowings (56,623) (77,658)
---------------------------------- -------- --------
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 (2021: GBP52.8m)
outstanding on the multi option revolving credit facility and
drawdowns of GBPnil (2021: GBP1.2m) were made from the facility
during the year. Repayments totalling GBP18.8m (2021: GBP1.2m) were
made in the year resulting in a balance outstanding at the end of
the year of GBP34.0m (2021: GBP52.8m).
On 2 December 2021, the Group successfully refinanced and
increased the Group's existing single bank Revolving Credit
Facility of GBP80m that was due to mature on 30 September 2022. The
new GBP100m Revolving Credit Facility ("RCF") was provided by a new
four bank group consisting of HSBC, Royal Bank of Scotland, Bank of
Ireland and Clydesdale Bank. The new facility has an initial
maturity date of 30 June 2025, with a 12-month extension option and
benefits from a GBP50m Accordion Facility. The RCF has a borrowing
cost at the Group's current leverage levels of 1.8% margin over
SONIA, compared to 1.5% margin over LIBOR on the prior facility.
The revolving credit facility incurs a commitment fee of 35% of the
1.8% margin. The effective interest rate for the multi option
revolving credit facility in the current year was 1.78% (2021:
1.61%).
Under IFRS 9, the refinancing does not constitute a substantial
modification and therefore there has been no extinguishment of the
previous bank loan.
Given the terms of the revolving credit facility and the ability
for any drawdowns made to be extended beyond 31 March 2023 at the
discretion of the Group, the total amount outstanding has been
classified as non-current.
The obligations under the multi option revolving credit facility
are repayable as follows:
2022 2021
Capital Interest Total Capital Interest Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- -------- -------- -------- -------- --------
Due within one year - (192) (192) - (366) (366)
Due within two to five years (34,000) - (34,000) (52,791) - (52,791)
------------------------------ -------- -------- -------- -------- -------- --------
(34,000) (192) (34,192) (52,791) (366) (53,157)
------------------------------ -------- -------- -------- -------- -------- --------
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 Lease Total Total
debt GBP'000 loans liabilities liabilities net debt
GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- ------------------ --------- ------------ ------------- ---------
At 1 April 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)
Additions to lease liabilities - - (1,491) (1,491) (1,491)
Disposals from lease liabilities - - 179 179 179
Settlement of commitment
fee on loan - (49) - (49) (49)
Repayment of bank loans - 18,840 - 18,840 18,840
Currency translation - - (49) (49) (49)
Cash and cash equivalent
cash outflow (7,706) - - - (7,706)
Lease liabilities cash outflow - - 3,605 3,605 3,605
-------------
At 31 March 2022 15,332 (34,000) (22,623) (56,623) (41,291)
----------------------------------- ------------------ --------- ------------ ------------- ---------
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 2021 18,859 4,222 950 24,031
Additions 1,412 79 - 1,491
Disposals - (179) - (179)
Currency translation differences - 36 - 36
Depreciation (2,084) (1,349) - (3,433)
Amortisation - - (285) (285)
Balance at 31 March 2022 18,187 2,809 665 21,661
------------------------------------- --------- ----------- ---------- --------
The right-of-use assets in relation to leasehold property and
data centre equipment are disclosed as non-current assets and are
disclosed within property, plant and equipment (note 8). The
right-of-use assets in relation to software are disclosed as
non-current assets and are disclosed within intangibles (note
7).
Lease liabilities
Lease liabilities are presented in the balance sheet within
borrowings as follows:
2022 2021
GBP'000 GBP'000
----------------------------------------------- -------------- --------------
Current:
Lease liabilities (note 9) (3,560) (3,437)
Non-current:
Lease liabilities (note 9) (19,063) (21,430)
Total lease liabilities (22,623) (24,867)
-------------------------------------------------- -------------- --------------
The maturity analysis of undiscounted lease liabilities are shown in
the table below: 2022 2021
GBP'000 GBP'000
-------------------------------- -------- --------
Amounts payable under leases:
Within one year (4,127) (4,215)
Between two to five years (10,244) (11,552)
After more than five years (11,585) (13,068)
(25,956) (28,835)
Add: unearned interest 3,333 3,968
----------------------------------- -------- --------
Total lease liabilities (22,623) (24,867)
----------------------------------- -------- --------
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, in
relation to leases under IFRS 16, the Group recognised the
following amounts in the consolidated statement of comprehensive
income:
2022 2021
GBP'000 GBP'000
----------------------------------------- -------- --------
Short-term and low value lease expense (1,784) (1,578)
Depreciation charge (3,433) (3,722)
Amortisation charge (285) (285)
Interest expense (646) (732)
(6,148) (6,317)
----------------------------------------- -------- --------
Amounts recognised in the consolidated statement of cash
flows:
2022 2021
GBP'000 GBP'000
----------------------------------------------------- -------- --------
Amounts payable under leases:
Short-term and low value lease expense (1,784) (1,578)
Payments under lease liabilities within cash flows
from financing activities (4,410) (5,435)
(6,194) (7,013)
----------------------------------------------------- -------- --------
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