TIDMIOM

RNS Number : 8649B

Iomart Group PLC

15 June 2021

15 June 2021

iomart Group plc

("iomart", the "Group" or the "Company")

Final Results

Robust business model delivers resilient performance, with a refreshed strategy positioning iomart for growth

iomart (AIM:IOM), the cloud computing company, is pleased to report its consolidated final results for the year ended 31 March 2021.

FINANCIAL HIGHLIGHTS

 
                                       2021        2020   Change 
 Revenue                          GBP111.9m   GBP112.6m    -0.6% 
                                 ----------  ----------  ------- 
 % of recurring revenue (1)             90%         85%    +4.9% 
                                 ----------  ----------  ------- 
 Adjusted EBITDA(2)                GBP41.4m    GBP43.5m    -4.8% 
                                 ----------  ----------  ------- 
 Adjusted profit before tax(3)     GBP19.6m    GBP22.8m   -13.8% 
                                 ----------  ----------  ------- 
 Profit before tax                 GBP12.5m    GBP16.8m   -25.7% 
                                 ----------  ----------  ------- 
 Operating cash generation         GBP43.7m    GBP41.3m    +5.7% 
                                 ----------  ----------  ------- 
 Adjusted diluted eps(4)              14.4p       16.3p   -11.7% 
                                 ----------  ----------  ------- 
 Basic eps                             9.3p       12.5p   -25.6% 
                                 ----------  ----------  ------- 
 Proposed final dividend per 
  share                                4.5p       3.93p   +14.5% 
                                 ----------  ----------  ------- 
 
 
      --        Revenue resilient through the Covid-19 pandemic at GBP111.9m 
                 (2020: GBP112.6m), with revenue mix improving as growth in 
                 core cloud managed services was offset by reduction in non-recurring 
                 revenue. Positive contribution from prior year acquisitions 
      --        Adjusted EBITDA(2) of GBP41.4m (2020: GBP43.5m) with 37.0% 
                 adjusted EBITDA margin (2020: 38.6%), higher than industry 
                 average and in-line with expectations 
      --        Adjusted profit before tax(3) impacted by an increase of GBP1.3m 
                 in the depreciation charge in the year following acquisitions 
      --        High levels of operating cash generated in the year at GBP43.7m 
                 (2020: GBP41.3m) which represents a 106% conversion of adjusted 
                 EBITDA (2020: 95%) 
      --        Year end cash position of GBP23.0m (2020: GBP15.5m) with net 
                 debt of GBP54.6m (2020: GBP57.6m) which remains at a comfortable 
                 level of 1.3 times adjusted EBITDA 
 

OPERATIONAL HIGHLIGHTS

 
      --   Appointment of Reece Donovan as Chief Executive Officer, 
            from 1 October 2020, following retirement of founder and 
            long-standing CEO, Angus MacSween 
      --   Strategic review completed and refreshed strategy launched 
            post year end, re-positioning iomart's offerings around 
            the growing hybrid cloud market 
      --   Progress achieved on greater integration to 'one-iomart'; 
            retirement of SystemsUp consultancy brand, merger of sales 
            and operational teams within Cloud Services, IaaS and consulting 
            and recent appointments for key positions in leadership 
            team 
      --   Investment in data centre infrastructure and network, which 
            continues to be a competitive differentiator, to improve 
            resilience and reduce environmental impact 
      --   Commitment to purchase Renewable Energy Guarantees of Origin 
            ("REGO") certified renewable electricity across our data 
            centre estate 
 

CURRENT TRADING AND OUTLOOK

 
      --   The Group has traded in line with management expectations 
            at the start of the new financial year, in a manner consistent 
            with the Group's high recurring revenue business model 
      --   Sales pipeline provides confidence in increased new customer 
            wins as we move through the year, with a positive impact 
            on revenue anticipated from H2 FY22 
      --   Board increasingly confident in the long-term prospects 
            for the Group 
 

STATUORY EQUIVALENTS

A full reconciliation between adjusted and statutory profit before tax is contained within this statement on page 12. The largest item is the consistent add back of the non-cash amortisation of acquired intangible assets of GBP5.5m. The largest variance, year on year, is a GBP1.8m lower gain on the revaluation of contingent consideration relating to historic acquisitions.

Reece Donovan, CEO commented,

"The year covered by this report coincided almost to the day with the onset of the pandemic in the UK. We can look back with pride on what has been achieved during this unprecedented time for all of our employees and wider stakeholders. Our focus during the year was on the protection of our people and the business and our team responded with commitment, resilience, and dedication. I would like to take this opportunity once again to thank them for their efforts and support.

"We have now begun a new chapter for iomart, and I am proud to be at the helm of this great team. We have identified a significant market opportunity, growing our propositions in hybrid cloud, security, the digital workplace and connectivity, supporting our customers as they adapt to new ways of working now and in the future.

"We have proven the robustness of our business, underpinned by high levels of recurring revenues, breadth of customer base and strong cash generation. This is now enhanced with a clear strategic vision and roadmap to re-position the Group for growth, both organically and through selective acquisitions, and the Board is increasingly confident in the positive outlook for the long-term prospects for the Group."

(1) Recurring revenue is the revenue that repeats either under long-term contractual arrangement or on a rolling basis by predictable customer habit. % of recurring revenue is defined as recurring revenue (as disclosed in note 3) / revenue (as disclosed in the consolidated statement of comprehensive income)

(2) Throughout these financial statements adjusted EBITDA (as disclosed in the consolidated statement of comprehensive income) is earnings before interest, tax, depreciation and amortisation (EBITDA) before share-based payment charges, acquisition costs and gain on the revaluation of contingent consideration. Throughout these financial statements acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

(3) Throughout these financial statements adjusted profit before tax (as disclosed in the Chief Financial Officer's report) is profit before tax, amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and gain on revaluation of contingent consideration.

(4) Throughout these financial statements adjusted diluted earnings per share is earnings before amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs, gain on revaluation of contingent consideration and the tax effect of adjusted items/weighted average number of ordinary shares - diluted (as disclosed in note 6).

This announcement contains forward-looking statements, which have been made by the Directors in good faith based on the information available to them up to the time of the approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

For further information:

 
 
   iomart Group plc                                  Tel: 0141 931 6400 
 Reece Donovan, Chief Executive Officer 
 Scott Cunningham, Chief Financial Officer 
 
 Peel Hunt LLP (Nominated Adviser and Joint        Tel: 020 7418 8900 
  Broker) 
 Edward Knight, Paul Gillam, Nick Prowting 
 
 Investec Bank PLC (Joint Broker)                  Tel: 020 7597 4000 
 Patrick Robb, Virginia Bull, Sebastian Lawrence 
 
 Alma PR                                           Tel: 020 3405 0205 
 Caroline Forde, Hilary Buchanan, Joe Pederzolli 
 

About iomart Group plc

For over 20 years iomart Group plc (AIM: IOM) has been helping growing organisations to maximise the flexibility, cost effectiveness and scalability of the cloud. From data centres we own and operate in the U.K., and from connected facilities across the globe, we can provide multiple secure infrastructure solutions from branch office backups, to hyper cloud migrations, and everything in between, delivered typically with a 24/7 managed service. Our team of over 400 dedicated staff work with our customers at the strategy stage through to delivery and ongoing management, to implement the secure cloud solutions that deliver to their business requirements.

   For further information about the Group, please visit    www.iomart.com 

CHAIRMAN'S STATEMENT

I am pleased to report that iomart (the "Group") has performed resiliently during a year over-shadowed by the impact of the Covid-19 pandemic. Our financial performance was stable throughout the year and we remain strongly profitable and cash generative.

In October 2020, following 20 years at the helm of iomart, building a GBP100m turnover business, with industry leading margins and a growing reputation in the private cloud market, the Group's founder, Angus MacSween retired as CEO to take up a Non-Executive Director position. Angus was succeeded by Reece Donovan. Over the last six months Reece has led a detailed review of our medium to long-term strategy, the output of which was presented at a Capital Markets Day on 5 May 2021. The Capital Markets Day centred around the concept of 'one iomart' and the expansion of our offering. Sector expectation is that all areas of the cloud will undoubtedly grow and that hybrid and public cloud will grow most noticeably. Our resources, including our infrastructure and in house skills, enables us to grow into the hybrid and public spaces more easily than most, all the while continuing our ongoing eminence in the private cloud. We are upscaling the business, we remain acquisitive and we remain ambitious.

I would like to thank the iomart team for their hard work and commitment during this year. One of the strengths of the Group is the quality of its fantastic workforce, investing in them and their further development and support is one of the central tenets of the refreshed strategy. The strategy also sees an increased focus on the environment and our impact on the societies around us, as detailed later in this report.

During the year we paid an interim dividend of 2.60p per share which was paid to shareholders in January 2021. In addition, after updating our dividend policy, the Board is now proposing to pay a final dividend of 4.50p per share. With this final dividend payment, the total for the year will be 7.10p representing a 9% increase on the prior year. We believe this is appropriate given our funding position, robust business model, the low level of indebtedness within the Group and the fact we have not utilised any of the government furlough schemes. Subject to shareholder approval this proposed final dividend would be payable on 3 September 2021 to shareholders on the register at close on 13 August 2021.

The Board is satisfied with the balance between Executive and independent Non-Executive Directors which operated throughout the year. Further to the announcement made last September, it is now expected that Angus MacSween will extend his Non-Executive involvement beyond the initial expected 12 months from 1 October 2020, given the value he continues to add to the Board. In addition, the Board is seeking to appoint a fourth independent Non-Executive Director to add additional sector skills to support our execution of the refreshed medium term strategic plan.

The progress we have already seen in the delivery of the new strategy and the continued solid financial performance gives me and the Board confidence in a bright future for iomart.

Ian Steele

Non-Executive Chairman

15 June 2021

CHIEF EXECUTIVE OFFICER'S REPORT

Introduction

I am delighted to be presenting the first set of full year financial results as the Group's new CEO, having joined as COO during lockdown in March 2020, before taking over from founder and long-standing CEO Angus MacSween on 1 October 2020. As I outlined in the half year report, during the year the Board requested a detailed review of our medium to long-term strategy. We performed an extensive exercise involving detailed analysis of both internal and external factors with contribution from a wide variety of stakeholders. The output was presented at a Capital Markets Day on 5 May 2021. We have identified a clear strategic vision, which is outlined below, and the iomart team are now very much focused on the execution of this plan as we enter our new financial year.

Impact of Covid-19

The year covered by this report coincided almost to the day with the onset of the pandemic in the UK. We can look back with pride on what has been achieved during this unprecedented time for all of our employees and wider stakeholders. Our focus during the year was on the protection of our people and the business and our team responded with commitment, resilience, and dedication. I would like to take this opportunity once again to thank them for their efforts and support.

The strength of our model can be seen in our resilience in the face of the Covid-19 pandemic, particularly the limited concentration of our customer base. We are not significantly exposed to industries that have suffered the worst. We did provide some financial support, in the form of extended credit, to a small number of customers during the lockdown period but have seen no change to what is a low level of bad debts during this year. However, we remain vigilant to the economic impact the ongoing situation may create, particularly on the SME segment of the market as government support schemes expire.

We did not apply for any support from the government's furlough scheme or funding loans. We continued to pay the salaries of the small number of the team whose roles were not required at various times, while encouraging them to offer their time to support their communities.

Resilient financial performance

iomart's robust business model has led to a solid financial performance across the year. Revenue for the full year was resilient at GBP111.9m (2020: GBP112.6m) with an improving mix of recurring revenue to 90% (2020: 85%). The Group's adjusted EBITDA(1) reduced by 4.8% to GBP41.4m (2020: GBP43.5m) reflecting the underlying mix of the business activity in the year. This performance still translates to a market leading adjusted EBITDA margin of 37.0% (2020: 38.6%) which importantly, as in the past, has converted to strong operating cash flow. The asset base inherited with the prior year acquisitions drove an increase of GBP1.3m in the depreciation charge in the year, which along with a stable level of intangible asset amortisation and finance costs takes the Group's adjusted profit before tax(2) to GBP19.6m (2020: GBP22.8m) for the year, representing an adjusted profit before tax margin of 17.5% (2020: 20.2%). These financial metrics, along with the strength of our balance sheet, puts us in a strong position from which to push forward with the execution of the updated strategy over the coming months and years.

Strong foundation for the next stage of growth

iomart benefits from multiple strengths in its model, offering and business make up. We have over 10,000 customers in our core cloud services segment, providing breadth and resilience and an opportunity for future expansion as we grow our offering. We have 13 data centres located across the UK, united by over 2000kms of private network infrastructure, offering outstanding resilience and connectivity for our customers, with over 25 points of presence globally, meaning we can deliver the services our customers need, whether inside the UK or out. We are financially robust, with high levels of recurring revenue and strong levels of cash generation, and importantly, as we embark on our new strategy, we do so with over 20 years' experience in our industry, having completed over 21 successful acquisitions.

Market and Strategy

The structural growth drivers for cloud computing solutions have remained consistent for a long period. This includes the greater demand to outsource, increasing complexity of IT requirements, more workloads being hosted in the cloud and ever growing demand for data and content. The current situation around Covid-19 have seen the acceleration in the adoption of digital transformation and remote working, both of which are likely to further enhance long-term drivers to the cloud.

As part of the strategic review process, we engaged consultants to provide insight into the market and our relative position. Their work reaffirmed that we are in a positive, growing market with lots of opportunity, but we do need to improve iomart's alignment to this future market and to ensure we are recognised as experts across a number of both existing and new service areas. This formed the backdrop to the review of our medium to long-term strategy.

Our strategic plans

The Capital Markets Day on 5 May 2021 provided insight into the markets we operate in, our starting position today and our future strategic plans. The presentation material, including a video recording, is available on our website at www.iomart.com . This presentation concluded with an aspiration to become a GBP200m revenue business within 5 years, and be recognised as a leading secure hybrid cloud business. To achieve this, three specific items were highlighted as important enablers:

-- Connect - connecting with our customers and employees, connecting employees with their businesses, connecting parts of their businesses to each other, connecting businesses to data centres, and providing tools to enable collaboration facilitated by the digital workplace. Hybrid working is here to stay and connectivity is the glue to make this successful;

-- Secure - keeping applications, data and business operations safe, allowing people to connect to their businesses safely, preventing cyber-attacks wherever possible, and providing the support when a recovery is needed; and

-- Scale - allowing businesses to scale their infrastructure and capabilities, when and where they need to, helping provide cost certainty, and access to the right tools at the right time. We need to ensure that iomart has the right foundations on which to scale to meet this demand, and taking a long-term skills development approach.

Our strategic value creation roadmap will focus on three main activities:

 
      --   New services and geographies - we will focus on four new 
            service areas - hybrid cloud, security, the future digital 
            workplace and connectivity; 
      --   Complementary acquisitions - to expand the customer base 
            and to acquire new skillsets; and 
      --   Protect and expand the existing base of run rate revenue 
            and EBITDA. 
 

In order to make all of this a success, we are shifting our values and culture to put our people and customers at the heart of all that we do. We will have a strong focus on delivering results, being ambitious and embedding learning in the way in which we work. We will also increase the way in which we care for our people, society and the environment. We have highly experienced staff with a broad range of technical knowledge and skills, and they will be a key area of investment over the coming years, broadening and deepening the available skill sets for the benefit of our customers.

From a structural perspective, our existing suite of underlying tooling, previously only deployed in a somewhat siloed manner, will be harnessed across the business to deliver the future product and service portfolio and deliver competitive advantages. We are also introducing a service team to work across the business and put the customer experience at the heart of everything we do.

Our customers are looking for a straightforward, trusted and expert partner to support their digital business needs and enable their long term success. iomart operates its own data centre estate and secure fibre network across the UK, with an additional 25 points of presence globally. These assets provide our customers with a single source of accountability, with full end-to-end control and knowledge of the quality of the underlying components, to deliver a secure and reliable 24/7 service. Our people provide expertise and build relationships with customers to understand both current and future requirements. We have partnerships with multiple vendors and extensive technical knowledge ensuring we can design agile solutions that deliver value for money and cost certainty, while ensuring full data sovereignty. It is this intricate blend of our straightforward brand approach, owned assets, people and relationships focus, and agile solution model, along with our extensive customer base and more than 20 years' experience, that gives us our competitive advantage and allows us to differentiate ourselves in the market.

Through these initiatives, and the reduction in the number of brands within the group, we will create a single refreshed 'one iomart' organisation over the next 12 to 24 months.

Operational Review

While all of our activities involve the provision of services from common infrastructure, we are organised into two operating segments, Cloud Services (GBP99.9m revenue) and Easyspace (GBP11.9m revenue).

Cloud Services is our core area of strategic focus, containing three offerings to which we can disaggregate revenue: iomart cloud managed services, self-managed infrastructure and non-recurring revenue. Easyspace is a highly profitable and cash generative segment, but is less of a focus area for growth.

Cloud Services

Revenues in this segment have grown by GBP0.1m to GBP99.9m (2020: GBP99.8m) benefitting from the acquisitions made in the prior year. Organic Cloud Services revenue declined by 6%, or GBP6.0m, due to a GBP5.5m reduction in non-recurring revenue, with higher reductions in on-premise project revenues, due to the impact of Covid-19 on corporate spend, being partially offset by completion of a GBP1m consultancy project for a local government customer, supporting deployment of modern workplace technology. There was continued organic growth in our core cloud managed services area, however this was offset by a GBP2.3m reduction in self-managed infrastructure revenues from smaller legacy customers resulting in an overall GBP0.5m net reduction in recurring revenue. Cloud Services adjusted EBITDA (before share based payments, acquisition costs and central group overheads) was GBP40.5m being 40.5% of revenue (2020: GBP42.3m, 42.4% of revenue).

Within our Cloud Services division, we have three core offerings, recognising the differing complexity of the solutions designed and the level of ongoing managed services we provide. This means we are able to supply products and services across the full cloud spectrum and to do so using shared resources and common platforms across the Group. For the first time we have provided additional disaggregated revenue values for each of these offerings:

 
      --   iomart cloud managed services (GBP57.9m revenue): provides 
            fully managed, complex bespoke designs, resulting in 
            resilient solutions involving various infrastructures. 
            This has a wide range of offering across the full cloud 
            spectrum from simpler colocation data centre services 
            to a full 24/7 managed service complemented by all of 
            our offering around back-up and disaster recovery. The 
            provision of a full managed service to our customers 
            is the strategic focus for the Group as discussed earlier, 
            with the strongest market outlook and gives a great opportunity 
            for us to accelerate growth by supporting customers now 
            and into the future on their cloud journey. Currently, 
            private cloud dominates the installed customer solutions 
            but as part of our strategic review, we intend to expand 
            further into specific hybrid solutions, encompassing 
            the public cloud. 
 
      --   Self-managed infrastructure (GBP30.3m revenue): delivers 
            dedicated, physical, self-service servers to customers. 
            We provide many thousands of physical severs for our 
            customers using highly automated systems and processes 
            which we continue to develop and improve. Over the last 
            few years we have been a consolidator of the UK market 
            within this area, via our M&A activity, including our 
            most recent acquisition of Memset in the prior year. 
            In line with our 'one iomart' objective, ensuring minimum 
            disruption to the customer experience, we continue to 
            consolidate legacy brands within this offering. 
 
      --   Non-recurring revenue (GBP11.7m revenue): this represents 
            point in time type revenue in the form of hardware/software 
            reselling and also consultancy projects. Cristie Data 
            which we acquired in 2017 makes up the bulk of the non-recurring 
            hardware revenue activity. 
 

Easyspace

The Easyspace segment which provides a range of products to the micro and SME markets including domain names, shared, dedicated and virtual servers and email services, saw a reduction in revenue in the year to GBP11.9m (2020: GBP12.8m). To grow Easyspace significantly would mean competing in a more commoditised market with the need for a high marketing budget. As a result, our target for Easyspace is to retain our existing presence in the UK market via selective marketing and responding to market conditions with dynamic pricing. As in the past, Easyspace delivered strong profitability with an adjusted EBITDA (before share-based payments, acquisition costs and central group overheads) of GBP5.3m, 44.8% of revenue (2020: GBP5.6m, 44.2% of revenue). The business benefits from use of the Group infrastructure meaning this profitability translates to strong cash flow for the Group.

Infrastructure investment

We believe controlling our own infrastructure is important to delivering high quality, secure and robust solutions to customers. In June 2020, we extended our London data centre property lease from June 2030 to June 2035. Following this, we commenced the upgrade to the main cooling system which was well progressed at the year end with completion expected in July 2021, with an upgrade of the electrical systems expected to commence thereafter. These data centre projects improve resilience but also reduce the environmental impact of our operations. During the year we approved the investment of nearly GBP2m in next generation core routing technology, which will provide 100GB capacity on our network with the ability to scale to 400GB. As a result, customers will benefit from faster, even more reliable connections to support their data and applications.

Commitment to ESG and sustainability

As part of our environmental, social and governance ("ESG") and wider sustainability programme, in the current year, the Board approved the commitment to purchase Renewable Energy Guarantees of Origin ("REGO") certified renewable electricity across our UK data centre estate. This will be effective from July 2021 and remain in place until the expiry of our current electricity contract in September 2022. During the year we also started working with Katrick Technology Limited, a start-up company based in Glasgow focused on innovative engineering technologies who have developed patented means to capture unharnessed energy within a data centre. We are pleased to say we signed an alliance agreement in June 2021 and will begin an exploratory project with them at our Glasgow data centre later this year.

One iomart

While the updated strategy will be fully launched in FY22, we undertook early steps in FY21 towards the 'one iomart' concept and to accelerate the greater level of integration of the group. Immediate steps within this area involves collapsing some of the legacy brands into the iomart brand and merging our teams to ensure the customer journey is consistent. This process has commenced and towards the end of the year we retired the SystemsUp consultancy brand and simplified our internal organisation to merge previously separate teams within Cloud Services, IaaS and consulting. The recent appointment of a Chief Marketing Officer and Chief Operating Officer are also important steps to ensure we have the correct structure to position the Group for success.

Implementing the strategic roadmap in FY22

We committed to completing the strategic review by the end of FY21, which was achieved. We are now focused on execution and have started a number of new initiatives:

-- Hybrid preparation: the new hybrid cloud solution framework, product and partner selections, public cloud portfolio definitions and market reviews have now started and will be completed around the mid year point of FY22. Following this, we will begin to setup and implement the new services;

-- Security maturation : while we continue to provide and mature our new security services, a full review of our expansion opportunities is underway. We plan to extend our security services during FY22;

-- Connectivity : building on our existing assets and partnerships, we will be releasing an updated connectivity portfolio in the early part of FY22 in support of hybrid working requirements;

-- Future digital workplace : we are now entering the Unified Communications market and the support for customers future digital workplace roll out has started with the formalisation of arrangements with our partner of choice, Gamma Communications now put in place. We will be building our expertise and targeting customers early in FY22;

-- Sales, operational and organisational improvements : sales and operational improvements are underway, which is an ongoing, long-term initiative. The appointment of a new COO to oversee all operational activities across the majority of brands will serve to provide customers with a more consistent and reliable customer experience, irrespective of the services being consumed. This is vital to have in place as we scale the business;

-- Brand development : in parallel with the new strategy development, we have been redesigning the iomart brand so it is more contemporary, closely aligned to what we want to achieve, and supportive of our new values and culture. We intend to release the updated brand details mid-way through FY22;

-- M&A : M&A is a core of part of our strategy, and potential targets are being compiled with the view of acquiring additional assets and skills during FY22; and

-- ESG : we will continue to put the environment and people high up on the Group's agenda, developing a more robust and long-term ESG strategy covering both areas. We have been involved in a number of charitable events, and we plan to continue and expand on these in the future.

Current trading and outlook

The start of the new financial year has seen financial results in line with our expectations, consistent with our high recurring revenue business model which gives good visibility.

While we begin the new financial year with a similar level of cloud managed services recurring revenue as 12 months ago, we do so from a stronger position due to the success of the UK vaccination programme, the resulting growing confidence across the UK business landscape and from the positive changes we have put in place through the year. We have verified that the market we operate in is growing and customers are looking for a partner who can provide a full breadth of service offering across the hybrid cloud.

We anticipate our sales pipeline will result in a stronger level of new customer wins as we move through the year as budgets for digital transformation programmes start to release. We will execute on the strategic improvement initiatives around our value proposition, branding and new service offerings, with a positive impact on revenue expected in the second half of the year and beyond, in line with expectations.

We have proven the robustness of our business, underpinned by high levels of recurring revenues, breadth of customer base and strong cash generation. This is now enhanced with a clear strategic vision and roadmap to re-position the Group for growth, both organically and through selective acquisitions, and the Board is increasingly confident in the positive outlook for the long-term prospects for the Group.

Reece Donovan

Chief Executive Officer

15 June 2021

Definition of alternative performance measures:

(1) Throughout these financial statements adjusted EBITDA (disclosed in the consolidated statement of comprehensive income) is earnings before interest, tax, depreciation and amortisation (EBITDA) before share-based payment charges, acquisition costs and gain on the revaluation of contingent consideration. Throughout these financial statements acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

(2) Throughout these financial statements adjusted profit before tax (disclosed on page 12) is profit before tax, amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and gain on revaluation of contingent consideration.

CHIEF FINANCIAL OFFICER'S REPORT

Financial Review

Key Performance indicators

 
                                                         2021        2020 
-----------------------------------------------    ----------  ---------- 
 Revenue                                            GBP111.9m   GBP112.6m 
 % of recurring revenue (1)                               90%         85% 
 Gross Profit % (2)                                     60.5%       60.8% 
 Adjusted EBITDA (3)                                 GBP41.4m    GBP43.5m 
 Adjusted EBITDA margin % (4)                           37.0%       38.6% 
 Adjusted profit before tax (5)                      GBP19.6m    GBP22.8m 
 Adjusted profit before tax margin % (6)                17.5%       20.2% 
 Profit before tax                                   GBP12.5m    GBP16.8m 
 Profit before tax margin % (7)                         11.1%       14.9% 
 Basic earnings per share                                9.3p       12.5p 
 Adjusted earnings per share (diluted) (8)              14.4p       16.3p 
 Cash flow from operations / Adjusted EBITDA % 
  (9)                                                    106%         95% 
 Net debt / Adjusted EBITDA leverage ratio 
  (10)                                                    1.3         1.3 
-------------------------------------------------  ----------  ---------- 
 

See page 14 for definition of alternative performance measures

Revenue

Total revenue for the year is consistent with the prior year at GBP111.9m (2020: GBP112.6m), with growth from the acquisitions made in the prior year offset by, to the largest extent, a reduction in non-recurring revenue as a result of the impact of Covid-19 on customers, plus a GBP0.9m reduction within Easyspace, our domain name and mass hosting business, in line with our expectations.

Cloud Services

Overall, our Cloud Services segment grew revenues by GBP0.1m. For the first time, we have provided some additional disaggregation of revenue which is relevant for the Cloud Services segment. The following is the disaggregation of the Cloud Services revenue of GBP99.9m (2020: GBP99.8m):

 
                                                   2021       2020 
 Disaggregation of Cloud Services revenue       GBP'000    GBP'000 
------------------------------------------    ---------  --------- 
 Cloud managed services                          57,961     54,590 
 Self-managed infrastructure                     30,311     28,009 
 Non-recurring revenue                           11,672     17,190 
                                                 99,944     99,789 
  ------------------------------------------  ---------  --------- 
 

Cloud managed services

Cloud managed services is the area we have focused our development and commercial efforts on and where we have consistently achieved organic growth. Growth was achieved both organically (GBP1.8m) and through the acquisition of ServerChoice on the 28 February 2020. The strongest element of new orders in the year was from our existing customer base as they required increased capacity or additional services, with a lower contribution from new client wins. We believe the growth would have been higher if Covid-19 had not delayed the larger digital transformation projects which is often the catalyst for attracting new customers to iomart. We experienced higher than normal levels of non-renewals in the final months of the year, which while not significantly impacting recognised revenue in 2021, has resulted in an opening recurring revenue level within cloud managed services going into the new year at a level similar to 12 months ago.

Self-managed infrastructure

Over the previous two years we have experienced some reduction in revenue within the self-managed infrastructure activity, predominantly from the large tail of smaller customers within some of the acquired brands. Overall, this segment grew in the year, due to the contribution from the Memset acquisition, which was made on the 12 March 2020, however organic revenue reduced by GBP2.3m.

Non-recurring revenue

The largest area of revenue reduction in the current year was in non-recurring revenue in respect of on-premise hardware and software solution sales. This represented a GBP5.5m net reduction in revenue. This activity saw the most immediate impact from Covid-19 as customers simply delayed IT expenditure.

Easyspace

Our Easyspace segment has performed in line with expectations over the year with revenues reducing by GBP0.9m (6.7%) to GBP11.9m (2020: GBP12.8m). The domain name and web hosting business is a growing market but one in which we concluded that the marketing spend to compete with the global players was not the best use of our resources. The activity remains highly profitable and cash generative.

Business model

Our business model in both segments generally involves the provision of cloud and managed hosting services from our data centres, delivering the computing power, storage, and network capability our customers require for the operation of their own businesses. We have invested in an estate of data centres, an extensive fibre network and for each customer the servers, routers, firewalls etc that are necessary to create the IT infrastructure they require. These resources, along with the associated staff, are shared across most of our revenue streams. Customers pay us for the provision of that infrastructure, with the potential to add 3(rd) party technology and various degrees of a managed services wrapper.

Larger customers tend to have multi-year contracts for complex cloud solutions, which are invoiced and paid on a monthly basis. Many of our smaller customers pay in advance for the provision of services which results in a substantial sum of deferred revenue, which is then recognised over the period of the service provision. A significant proportion of our revenue is therefore recurring and the combination of multi-year contracts and payment in advance provides us with excellent revenue visibility.

Gross Profit

Gross profit in the year, which is calculated by deducting from revenue variable cost of sales such as domain costs, public cloud costs, the cost of hardware and software sold, power, sales commission and the relatively fixed costs of operating our data centres, reduced by GBP0.9m to GBP67.6m (2020: GBP68.5m). In percentage terms, gross margin (2) was broadly stable at 60.5% (2020: 60.8%), however, the movement in the year is a combination of a reduction in on-premise hardware and software solution sales which are typically lower gross margin given the inclusion of the reselling element of their solutions, offset by initial lower contribution levels on some of the larger managed cloud solutions compared to margins from the self-managed infrastructure only deals made in previous years.

We have not seen any significant individual price change in any of the components of the purchased cost base in the last 12 months, although as more complex solutions are designed for customers we generally see more bought in recurring costs being introduced to our cost of sales.

Adjusted EBITDA (3)

The Group's adjusted EBITDA reduced by 4.8% to GBP41.4m (2020: GBP43.5m) which in adjusted EBITDA margin (4) terms translates to 37.0% (2020: 38.6%). The impact of the acquisitions is the main factor behind the increase in the administration expense (before depreciation, amortisation, share based payment charges and acquisition cost) of GBP1.2m versus the previous year comparative with a small GBP0.2m saving within the underlying business.

Cloud Services segment saw a 4.3% reduction in adjusted EBITDA to GBP40.5m (2020: GBP42.3m). In percentage terms the Cloud Services margin decreased to 40.5% (2020: 42.4%). This adjusted EBITDA profitability reflects the reducing revenue contribution from the higher margin legacy self-managed infrastructure, which cannot be fully replaced by the initial profitability of wins within the more complex managed cloud services, along with some investments in operations in the year. Although at a lower overall level, stability was achieved during the year, with the second half adjusted EBITDA margin being consistent with those achieved in the first half of the year.

The Easyspace segment's adjusted EBITDA was GBP5.3m (2020: GBP5.6m) reflecting the impact of slightly lower revenue this year offset with some improvement in gross margin due to the specific bundle of packages sold to hosting customers. In percentage terms the adjusted EBITDA margin increased to 44.8% (2020: 44.2%).

Group overheads remained stable at GBP4.4m (2020: GBP4.4m). These are costs which are not allocated to segments, including the cost of the Board, the running costs of the headquarters in Glasgow, Group marketing, human resource, finance and design functions and legal and professional fees for the year.

Adjusted profit before tax (5)

The depreciation charge of GBP16.9m (2020: GBP15.6m) has increased by GBP1.3m in the year, driven by the acquired asset base of the Memset and ServerChoice acquisitions at the end of last year. The depreciation charge as a percentage of recurring revenue is 16.8% which is broadly consistent with prior year of 16.4%.

The charge for amortisation of intangibles, excluding amortisation of intangible assets resulting from acquisitions ("amortisation of acquired intangible assets"), of GBP2.9m (2020: GBP2.9m) has remained stable year on year.

Finance costs of GBP2.0m (2020: GBP2.2m), has reduced due to lower bank loan interest as LIBOR rates fell.

After deducting the charges for depreciation, amortisation (excluding the charges for the amortisation of acquired intangible assets) and finance costs from the adjusted EBITDA, the Group's adjusted profit before tax reduced to GBP19.6m (2020: GBP22.8m), representing an adjusted profit before tax margin (6) of 17.5% (2020: 20.2%).

Profit before tax

The measure of adjusted profit before tax is an alternative profit measure which is commonly used to analyse the performance of companies particularly where M&A activity forms a significant part of their activities.

A reconciliation of adjusted profit before tax to reported profit before tax is shown below:

 
 Reconciliation of adjusted profit before           2021       2020 
  tax to profit before tax                       GBP'000    GBP'000 
 Adjusted profit before tax (5)                   19,628     22,768 
 Less: Amortisation of acquired intangible 
  assets                                         (5,457)    (6,159) 
 Less: Acquisition costs                           (493)      (438) 
 Less: Share-based payments                      (1,247)    (1,243) 
 Add: Gain on revaluation of contingent 
  consideration                                       33      1,856 
 Profit before tax                                12,464     16,784 
---------------------------------------------  ---------  --------- 
 

The adjusting items are: charges for the amortisation of acquired intangible assets of GBP5.5m (2020: GBP6.2m) with the reduction being from expiry of the amortisation charge on earlier acquisitions; acquisition costs of GBP0.5m (2020: GBP0.4m) and share-based payment charges of GBP1.2m (2020: GBP1.2m).

In addition, the adjusting items also include a minor gain on the revaluation of contingent consideration in the year on the prior year acquisitions. During the year to 31 March 2020, the equivalent value was higher at GBP1.9m which related to the reduction in the earn-out payment on the December 2019 LDeX acquisition.

After deducting these items from the adjusted profit before tax, the reported profit before tax was GBP12.5m (2020: GBP16.8m). In percentage terms the profit before tax margin (7) was a reduction to 11.1% (2020: 14.9%) with one third of the reduction coming from a one off gain on contingency consideration in prior year not repeated, with the majority of the balance driven by the trading result in the year.

Taxation

The tax charge for the year is GBP2.3m (2020: GBP3.1m). The tax charge for the year is made up of a corporation tax charge of GBP3.5m (2020: GBP3.6m) with a deferred tax credit of GBP1.2m (2020: GBP0.5m). The effective rate of tax for the year is 18.1% (2020: 18.7%). The increase to a 25% UK corporation tax rate was not substantively enacted at 31 March 2021 consequently, at the year end, the deferred tax balances have been calculated with a 19% rate. We believe the UK headline corporation tax rate, is considered a reasonable recurring effective tax rate for underlying profits. Further explanation of the tax charge for the year is given in note 4.

Profit for the year

After deducting the tax charge for the year from the profit before tax the Group has recorded a profit for the year from total operations of GBP10.2m (2020: GBP13.6m).

Earnings per share

The calculation of both adjusted earnings per share and basic earnings per share is included at note 6.

Basic earnings per share from continuing operations was 9.3p (2020: 12.5p), a reduction of 25.6%.

Adjusted diluted earnings per share (8) , based on profit for the year attributed to ordinary shareholders before amortisation charges of acquired intangible assets, acquisition costs, share-based payment charges, the gain on the revaluation of contingent consideration, and the tax effect of these items was 14.4p (2020: 16.3p), a reduction of 11.7%.

The measure of adjusted diluted earnings per share as described above is a non-statutory measure which is commonly used to analyse the performance of companies particularly where M&A activity forms a significant part of their activities.

Dividends

Our dividend policy, which has been in place for several years now, is based on the profitability of the business in the period measured with reference to the adjusted diluted earnings per share we deliver in a financial year. For the last few years we have been paying dividends at the maximum level allowed by our stated policy. We have reviewed our dividend policy in the year and with the continued strong level of cash generation in the business are increasing the maximum pay-out policy from 40% to 50% of adjusted diluted earnings per share. This amendment allows the Directors to propose a final dividend of 4.50p which is above the prior year of 3.93p and we believe is fully appropriate given the recurring revenue nature of the Group, the level of operating cash which we deliver, the low level of indebtedness within the Group and the fact we have not utilised any of the government furlough schemes. As a result, along with the interim dividend of 2.60p (2020: 2.60p), which was paid in January 2021, the total dividend for the year is 7.10p (2020: 6.53p), an increase of 8.7%.

Cash flow and net debt

Net cash flows from operating activities

The Group continued to generate high levels of operating cash over the year. Cash flow from operations was GBP43.7m (2020: GBP41.3m) which represents a 106% conversion (9) of adjusted EBITDA (2020: 95%). During the year the Group received GBP2.3m of cash deposit back from our landlord as part of the negotiation of the extension of the London data centre lease to June 2035. Adjusting for this one item takes the EBITDA conversion to cash ratio to 100% in the year. This strong level of cash flow conversion has been a constant feature over the years, recognising the strength of our business model and cash cycle.

Payments of taxation in the year was GBP1.1m lower at GBP3.6m (2020: GBP4.7m) and results in a net cash flow from operating activities in the year of GBP40.1m (2020: GBP36.6m), an increase of 9.4%.

Cash flow from investing activities

Our strategy is to continue to reinvest some of our strong operating cash flow we generate back into the business both in the form of internal investments into our global infrastructure but also in the continuation of our disciplined acquisition strategy.

The Group invested a total of GBP19.2m (2020: GBP21.3m) during the year.

The Group continues to invest in property, plant and equipment through expenditure on data centres and on equipment required to provide managed services to both its existing and new customers. As a result, the Group spent GBP15.2m (2020: GBP14.7m) on assets, net of related lease drawdowns, trade creditor movements and non-cash reinstatement provisions. Most of the spend in the year was on operational items such as servers and storage to support customer deployments. Project type capital expenditure on the infrastructure was GBP0.7m higher than last year. This included payments associated with the investment in the London data centre chiller replacement and the network upgrade in the last quarter of the year.

Expenditure was also incurred on development costs of GBP1.3m (2020: GBP1.4m) and on intangible assets of GBP0.6m (2020: GBP1.1m).

We made no acquisitions in the last year (2020: GBP4.1m of payments, net of cash acquired). During the year we incurred GBP2.4m of expenditure in respect of contingent consideration due on previous year acquisitions (2020: GBPnil). As we have outlined in our strategy we do expect M&A activity will continue to support and accelerates our organic growth ambitions over the coming five years.

Cash flow from financing activities

Drawdowns of GBP1.2m (2020: GBP6.2m) were made from the revolving credit facility in the year to fund the payment of contingent consideration due on acquisitions. Bank loan repayments of GBP1.2m (2020: GBP2.0m) were made in the year thus the closing drawn bank loan remains unchanged at GBP52.8m (2020: GBP52.8m). Cash received in the year from issue of shares was GBP0.4m (2020: GBP0.6m). We also made dividend payments of GBP7.1m (2020: GBP8.3m); paid finance costs of GBP1.1m (2020: GBP1.7m); and made lease repayments of GBP5.4m (2020: GBP4.7m).

Net cash flow

As a consequence, our overall cash generated during the year was GBP7.5m (2020: GBP5.4m) which resulted in cash and cash equivalent balances at the end of the year of GBP23.0m (2020: GBP15.5m).

Net Debt

The net debt position of the Group at the end of the year was GBP54.6m (2020: GBP57.6m) as shown below. The increase in the lease liability to GBP24.9m (2020: GBP20.3m) primarily relates to extensions to existing lease arrangements, including the five-year extension to our London data centre. The net debt position represents a multiple of 1.3 times (10) (2020: 1.3 times) our adjusted EBITDA which we believe is a comfortable level of debt to carry given the recurring revenue business model and strong cash generation in the business.

 
 
                                          2021        2020 
                                       GBP'000     GBP'000 
 Bank revolver loan                     52,791      52,791 
 Lease liabilities                      24,867      20,347 
 Less: cash and cash equivalents      (23,038)    (15,497) 
 Net Debt                               54,620      57,641 
-----------------------------------  ---------  ---------- 
 

The banking facility, which provides an GBP80m revolving credit facility, matures in September 2022.

Financial position

The strength of our business model, with high recurring revenue, low customer concentration across wide sectors and a positive cash cycle is well established and creates a very strong financial position. This resilience has been proven during the last 12 months in what has been an unprecedented period globally with the challenges caused by the Covid-19 pandemic. The Group continues to generate substantial amounts of operating cash. The generation of that cash flow, together with the committed bank loan facility for acquisitions, capital expenditure and general business purposes, means that the Group has the liquidity it requires to continue its growth through both organic and acquisitive means.

Scott Cunningham

Chief Financial Officer

15 June 2021

Definition of alternative performance measures:

(1) Recurring revenue is the revenue the repeats either under long-term contractual arrangement or on a rolling basis by predictable customer habit. % of recurring revenue is defined as Recurring Revenue (as disclosed in note 3) / Revenue (as disclosed in the consolidated statement of comprehensive income)

(2) Gross profit margin % is defined as Gross Profit / Revenue as a % (both as disclosed in the consolidated statement of comprehensive income)

(3) Adjusted EBITDA (as disclosed in the consolidated statement of comprehensive income) is earnings before interest, tax, depreciation and amortisation (EBITDA) before share-based payment charges, acquisition costs and gain on the revaluation of contingent consideration. Throughout these financial statements acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

(4) Adjusted EBITDA margin % is defined as adjusted EBITDA (as defined on page 9) / Revenue (as disclosed in the consolidated statement of comprehensive income) as a %

(5) Adjusted profit before tax (as disclosed on page 12) is profit before tax, amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and gain on revaluation of contingent consideration.

(6) Adjusted profit before tax margin % is defined as adjusted PBT (as defined on page 9) / Revenue (as disclosed in the consolidated statement of comprehensive income) as a %

(7) Profit before tax margin % is defined as Profit before Tax / Revenue (both as disclosed in the consolidated statement of comprehensive income) as a %

(8) Adjusted diluted earnings per share is earnings before amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and gain on revaluation of contingent consideration and the tax impact of adjusted items /weighted average number of ordinary shares - diluted (as disclosed in note 6)

(9) Cash flow from operations / Adjusted EBITDA % is defined as cash flow from operations (as disclosed in the consolidated statement of cash flows) / Adjusted EBITDA (as defined on page 9) as a %

(10) Net debt / Adjusted EBIDTA level ratio is defined as Net Debt (as disclosed on page 14) / Adjusted EBITDA (as defined on page 9)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEARED 31 MARCH 2021

 
                                                              2021       2020 
                                                   Note    GBP'000    GBP'000 
 Revenue                                                   111,883    112,581 
 
 Cost of sales                                            (44,241)   (44,093) 
                                                         ---------  --------- 
 
 Gross profit                                               67,642     68,488 
 
 Administrative expenses                                  (53,230)   (51,387) 
 
 
 Operating profit                                           14,412     17,101 
 
 Analysed as: 
 Earnings before interest, tax, depreciation, 
  amortisation, acquisition costs and 
  share-based payments                                      41,408     43,510 
 Share-based payments                                      (1,247)    (1,243) 
 Acquisition costs                                           (493)      (438) 
 Depreciation                                       8     (16,882)   (15,635) 
 Amortisation - acquired intangible 
  assets                                            7      (5,457)    (6,159) 
 Amortisation - other intangible assets             7      (2,917)    (2,934) 
 
 
 Gain on revaluation of contingent 
  consideration                                                 33      1,856 
 Finance income                                                 19         39 
 Finance costs                                             (2,000)    (2,212) 
                                                         ---------  --------- 
 
 Profit before taxation                                     12,464     16,784 
 
 Taxation                                           4      (2,260)    (3,135) 
                                                         ---------  --------- 
 
 Profit for the year attributable 
  to equity holders of the parent                           10,204     13,649 
 
 
 Other comprehensive income 
 
 Amounts which may be reclassified 
  to profit or loss 
 Currency translation differences                             (94)         98 
------------------------------------------------  -----  ---------  --------- 
 Other comprehensive income for the 
  year                                                        (94)         98 
------------------------------------------------  -----  ---------  --------- 
 
 Total comprehensive income for the 
  year attributable to equity holders 
  of the parent                                             10,110     13,747 
 
 
 
 Basic and diluted earnings per share 
 Basic earnings per share                           6         9.3p      12.5p 
 Diluted earnings per share                         6         9.1p      12.2p 
------------------------------------------------  -----  ---------  --------- 
 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2021

 
 
                                               2021        2020 
                                   Note     GBP'000     GBP'000 
-------------------------------   -----  ----------  ---------- 
 ASSETS 
 Non-current assets 
 Intangible assets - goodwill       7        86,479      86,479 
 Intangible assets - other          7        18,101      24,631 
 Trade and other receivables                    502       2,760 
 Property, plant and equipment      8        77,012      72,344 
 Deferred tax                                   138           - 
                                            182,232     186,214 
 Current assets 
 Cash and cash equivalents                   23,038      15,497 
 Trade and other receivables                 22,979      23,237 
 Current tax asset                              235           - 
                                             46,252      38,734 
 
 Total assets                               228,484     224,948 
 
 LIABILITIES 
 Non-current liabilities 
 Trade and other payables                   (2,662)     (2,283) 
 Non-current borrowings             9      (74,221)    (70,109) 
 Provisions                                 (2,097)     (1,956) 
 Deferred tax                       5             -     (1,146) 
                                           (78,980)    (75,494) 
 Current liabilities 
 Contingent consideration due 
  on acquisitions                   11            -     (2,480) 
 Trade and other payables                  (29,495)    (31,948) 
 Current tax liabilities                          -         (3) 
 Current borrowings                 9       (3,437)     (3,029) 
                                           (32,932)    (37,460) 
 
 Total liabilities                        (111,912)   (112,954) 
 
 Net assets                                 116,572     111,994 
--------------------------------  -----  ----------  ---------- 
 
 EQUITY 
 Share capital                                1,097       1,092 
 Own shares                                    (70)        (70) 
 Capital redemption reserve                   1,200       1,200 
 Share premium                               22,495      22,147 
 Merger reserve                               4,983       4,983 
 Foreign currency translation 
  reserve                                      (44)          50 
 Retained earnings                           86,911      82,592 
--------------------------------  -----              ---------- 
  Total equity                              116,572     111,994 
--------------------------------  -----  ----------  ---------- 
 

CONSOLIDATED STATEMENT OF CASH FLOWS

YEARED 31 MARCH 2021

 
                                                               2021              2020 
                                                   Note     GBP'000           GBP'000 
 
Profit before taxation                                       12,464            16,784 
Gain on revaluation of contingent 
 consideration                                                 (33)           (1,856) 
Finance costs - net                                           1,981             2,173 
Depreciation                                       8         16,882            15,635 
Amortisation                                       7          8,374             9,093 
Share-based payments                                          1,247             1,243 
Movement in trade receivables                                 2,516          (1,107) 
Movement in trade payables                                      268             (627) 
-----------------------------------------------  ------  ----------  ---------------- 
Cash flow from operations                                    43,699            41,338 
Taxation paid                                               (3,643)           (4,719) 
Net cash flow from operating activities                      40,056            36,619 
 
Cash flow from investing activities 
Purchase of property, plant and 
 equipment                                         8       (15,192)          (14,688) 
Proceeds received from disposal of property, 
 plant and equipment                                            260                 - 
Development costs                                  7        (1,306)           (1,405) 
Purchase of intangible assets                                 (561)           (1,065) 
Proceeds received from disposal 
 of intangible asset                                             73                 - 
Payments for current period acquisitions 
 net of cash acquired                                             -           (4,156) 
Contingent consideration paid                               (2,447)                 - 
Finance income received                                          19                39 
Net cash used in investing activities                      (19,154)          (21,275) 
 
Cash flow from financing activities 
Issue of shares                                                 353               636 
Drawdown of bank loans                                        1,150             6,150 
Repayment of lease liabilities                     10       (5,435)           (4,686) 
Repayment of bank loans                                     (1,150)           (2,000) 
Finance costs paid                                          (1,147)           (1,734) 
Dividends paid                                              (7,132)           (8,282) 
Net cash used in financing activities                      (13,361)           (9,916) 
 
Net increase in cash and cash equivalents                     7,541             5,428 
 
Cash and cash equivalents at the 
 beginning of the year                                       15,497            10,069 
----------------------------------------------   ------  ----------  ---------------- 
 
Cash and cash equivalents at the end of 
 the year                                                    23,038            15,497 
 
 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEARED 31 MARCH 2021

 
                                               Foreign 
                                     Own      currency        Capital       Share 
                        Share     shares   translation     redemption     premium      Merger     Retained 
                      capital        EBT       reserve        reserve     account     reserve     earnings     Total 
                      GBP'000    GBP'000       GBP'000        GBP'000     GBP'000     GBP'000      GBP'000   GBP'000 
 ----------------  ----------  ---------  ------------  -------------  ----------  ----------  -----------  -------- 
 
 Balance at 1 
  April 
  2019                  1,085       (70)          (48)          1,200      21,518       4,983       75,729   104,397 
 
 Profit for the 
  year                      -          -             -              -           -           -       13,649    13,649 
 Currency 
  translation 
  differences               -          -            98              -           -           -            -        98 
----------------   ----------  ---------  ------------  -------------  ----------  ----------  -----------  -------- 
 Total 
  comprehensive 
  income                    -          -            98              -           -           -       13,649    13,747 
----------------   ----------  ---------  ------------  -------------  ----------  ----------  -----------  -------- 
 
 Dividends - 
  final 
  (paid)                    -          -             -              -           -           -      (5,448)   (5,448) 
 Dividends - 
  interim 
  (paid)                    -          -             -              -           -           -      (2,834)   (2,834) 
 Share-based 
  payments                  -          -             -              -           -           -        1,243     1,243 
 Deferred tax on 
  share-based 
  payments                  -          -             -              -           -           -          253       253 
 Issue of share 
  capital                   7          -             -              -         629           -            -       636 
---------------- 
 Total 
  transactions 
  with owners               7          -             -              -         629           -      (6,786)   (6,150) 
----------------   ----------  ---------  ------------  -------------  ----------  ----------  -----------  -------- 
 
 Balance at 31 
  March 2020            1,092       (70)            50          1,200      22,147       4,983       82,592   111,994 
----------------   ----------  ---------  ------------  -------------  ----------  ----------  -----------  -------- 
 
 
 Profit for the 
  year                      -          -             -              -           -           -       10,204    10,204 
 Currency 
  translation 
  differences               -          -          (94)              -           -           -            -      (94) 
----------------   ----------  ---------  ------------  -------------  ----------  ----------  -----------  -------- 
 Total 
  comprehensive 
  income                    -          -          (94)              -           -           -       10,204    10,110 
----------------   ----------  ---------  ------------  -------------  ----------  ----------  -----------  -------- 
 
 Dividends - 
  final 
  (paid)                    -          -             -              -           -           -      (4,287)   (4,287) 
 Dividends - 
  interim 
  (paid)                    -          -             -              -           -           -      (2,845)   (2,845) 
 Share-based 
  payments                  -          -             -              -           -           -        1,247     1,247 
 Issue of share 
  capital                   5          -             -              -         348           -            -       353 
---------------- 
 Total 
  transactions 
  with owners               5          -             -              -         348           -      (5,885)   (5,532) 
----------------   ----------  ---------  ------------  -------------  ----------  ----------  -----------  -------- 
 
 
 Balance at 31 
  March 2021            1,097       (70)          (44)          1,200      22,495       4,983       86,911   116,572 
----------------   ----------  ---------  ------------  -------------  ----------  ----------  -----------  -------- 
 
 

NOTES TO THE FINANCIAL INFORMATION

YEARED 31 MARCH 2021

   1.         GENERAL INFORMATION 

iomart Group plc is a public listed company listed on the Alternative Investment Market ("AIM"), incorporated and domiciled in the United Kingdom and registered in Scotland under the Companies Act 2006. The address of the registered office is Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow, G20 0SP.

   2.         ACCOUNTING POLICIES 

Basis of preparation

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 March 2021 and 31 March 2020 within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2020 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The financial information for the year ended 31 March 2021 is derived from the statutory accounts for that year which were approved by the Directors on 15 June 2021. The statutory accounts for the year ended 31 March 2021 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors reported on those accounts; their report was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

The Group's financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) in conformity with the requirements of the Companies Act 2006.

The Group's financial statements have been prepared on the historical cost basis, except for the valuation of certain financial instruments that are measured at fair values at the end of each reporting period.

Adoption of new and revised Standards - Amendments to IFRS that are mandatorily effective for the current year

The Group applied the amendments to IAS 1 and IAS 8 Definition of Material for the first time as this is effective for annual periods beginning on or after 1 January 2020. The amendments provide a new definition of material that states, "information is material if omitting, misstating or obscuring it could reasonably be expected to influence decisions that the primary users of general purpose financial statements make on the basis of those financial statements, which provide financial information about a specific reporting entity." The amendments clarify that materiality will depend on the nature or magnitude of information, either individually or in combination with other information, in the context of the financial statements. A misstatement of information is material if it could reasonably be expected to influence decisions made by the primary users. The Directors consider that this amendment had no impact on the financial statements of the Group, nor is there expected to be any future impact to the Group.

   3.     sEGMENTAL ANALYSIS 

The Chief Operating Decision-Maker has been identified as the Chief Executive Officer ("CEO") of the Company. The Group has two operating segments and the CEO reviews the Group's internal reporting which recognises these two segments in order to assess performance and to allocate resources. The Group has determined its reportable segments which are also its operating segments based on these reports.

The Group currently has two operating and reportable segments being Easyspace and Cloud Services.

-- Easyspace - this segment provides a range of shared hosting and domain registration services to micro and SME companies.

-- Cloud Services - this segment provides managed cloud computing facilities and services, through a network of owned data centres, to the larger SME and corporate markets. The segment uses several routes to market including iomart Cloud, Infrastructure as a Service (IaaS), SystemsUp, Cristie Data, Sonassi, LDeX, Bytemark and Memset.

Information regarding the operation of the reportable segments is included below. The CEO assesses the performance of the operating segments based on revenue and a measure of earnings before interest, tax, depreciation and amortisation (EBITDA) before any allocation of Group overheads, charges for share-based payments, costs associated with acquisitions and any gain or loss on revaluation of contingent consideration and material non-recurring items. This segment EBITDA is used to measure performance as the CEO believes that such information is the most relevant in evaluating the results of the segment.

The Group's EBITDA for the year has been calculated after deducting Group overheads from the EBITDA of the two segments as reported internally. Group overheads include the cost of the Board, all the costs of running the premises in Glasgow, the Group marketing, human resource, finance and design functions and legal and professional fees.

The segment information is prepared using accounting policies consistent with those of the Group as a whole.

The assets and liabilities of the Group are not reviewed by the Chief Operating Decision-Maker on a segment basis. Therefore none of the Group's assets and liabilities are segmental assets and liabilities and are all unallocated for segmental disclosure purposes. For that reason the Group has not disclosed details of segmental assets and liabilities.

All segments are continuing operations. No customer accounts for 10% or more of external revenues. Inter-segment transactions are accounted for using an arms-length commercial basis.

Operating Segments

Revenue by Operating Segment

 
                          2021      2020 
                       GBP'000   GBP'000 
----------------      --------  -------- 
 Easyspace              11,939    12,792 
 Cloud Services         99,944    99,789 
                      --------  -------- 
                       111,883   112,581 
-----------------     --------  -------- 
 

Cloud Services revenue during the year can be further disaggregated as follows:

 
                                       2021      2020 
                                    GBP'000   GBP'000 
 -----------------------------     --------  -------- 
 Cloud managed services              57,961    54,590 
 Self-managed infrastructure         30,311    28,009 
 Non-recurring revenue               11,672    17,190 
                                     99,944    99,789 
------------------------------     --------  -------- 
 

The nature of these three offerings are explained within the Chief Executive Officer report on page 7.

Recurring and Non-recurring Revenue

The amount of recurring and non-recurring revenue recognised during the year can be summarised as follows:

 
                                         2021      2020 
                                      GBP'000   GBP'000 
-------------------------------      --------  -------- 
 Recurring - 
  over time                           100,211    95,391 
 Non-recurring - point in time         11,672    17,190 
                                     --------  -------- 
                                      111,883   112,581 
--------------------------------     --------  -------- 
 

Geographical Information

In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. There is no single country where revenues are individually material other than the United Kingdom. The United Kingdom is the place of domicile of the parent company, iomart Group plc.

Analysis of Revenue by Destination

 
                                   2021      2020 
                                GBP'000   GBP'000 
-------------------------      --------  -------- 
 United Kingdom                  97,113    95,333 
 Rest of the 
  World                          14,770    17,248 
                               --------  -------- 
 Revenue from operations        111,883   112,581 
--------------------------     --------  -------- 
 

Profit by Operating Segment

 
                                           2021                                         2020 
                                    Depreciation,                                Depreciation, 
                                    amortisation,                                amortisation, 
                                      acquisition                                  acquisition 
                                        costs and                                    costs and 
                        Adjusted      share-based        Operating   Adjusted      share-based        Operating 
                          EBITDA         payments    profit/(loss)     EBITDA         payments    profit/(loss) 
                         GBP'000          GBP'000          GBP'000    GBP'000          GBP'000          GBP'000 
---------------------  ---------  ---------------  ---------------  ---------  ---------------  --------------- 
 Easyspace                 5,343          (1,165)            4,178      5,649          (1,459)            4,190 
 Cloud Services           40,482         (24,091)           16,391     42,307         (23,269)           19,038 
 Group overheads         (4,417)                -          (4,417)    (4,446)                -          (4,446) 
 Acquisition 
  costs                        -            (493)            (493)          -            (438)            (438) 
 Share-based 
  payments                     -          (1,247)          (1,247)          -          (1,243)          (1,243) 
---------------------  ---------  ---------------  ---------------  ---------  ---------------  --------------- 
                          41,408         (26,996)           14,412     43,510         (26,409)           17,101 
 Gain on revaluation 
  of contingent 
  consideration                                                 33                                        1,856 
 Group interest 
  and tax                                                  (4,241)                                      (5,308) 
                       ---------  ---------------  ---------------  ---------  ---------------  --------------- 
 Profit for the 
  year                                                      10,204                                       13,649 
---------------------  ---------  ---------------  ---------------  ---------  ---------------  --------------- 
 

Group overheads, acquisition costs, share-based payments, interest and tax are not allocated to segments.

   4.     TAXATION 
 
                                                   2021      2020 
                                                GBP'000   GBP'000 
 ------------------------------------------    --------  -------- 
Corporation Tax: 
  Tax charge for the year                       (3,448)   (3,976) 
  Adjustment relating to prior years              (100)       357 
-------------------------------------------    --------  -------- 
  Total current taxation charge                 (3,548)   (3,619) 
 
  Deferred Tax: 
  Origination and reversal of temporary 
  differences                                     1,266       367 
  Adjustment relating to prior years                 18       266 
  Effect of different statutory tax rates 
   of overseas jurisdictions                          4      (13) 
  Effect of changes in tax rates                      -     (136) 
-------------------------------------------    --------  -------- 
  Total deferred taxation credit                  1,288       484 
 
  Total taxation charge                         (2,260)   (3,135) 
-------------------------------------------    --------  -------- 
 

The differences between the total taxation charge shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax are as follows:

 
 
 
                                                           2021       2020 
                                                        GBP'000    GBP'000 
 -------------------------------------------------    ---------  --------- 
 
  Profit before tax                                      12,464     16,784 
--------------------------------------------------    ---------  --------- 
 
  Tax charge @ 19% (2020: 19%)                            2,368      3,189 
 
  Expenses disallowed for tax purposes                       33         20 
  Tax effect of net (loss)/gain on revaluation 
  of contingent consideration                               (6)      (353) 
  Adjustments in current tax relating to prior 
  years                                                     100      (357) 
  Tax effect of different statutory tax rates 
   of overseas jurisdictions                                 10          6 
  Movement in deferred tax relating to changes 
  in tax rates                                                -        136 
  Tax effect of share-based remuneration                  (259)        651 
  Movement in unprovided deferred tax related 
   to development costs                                       -         40 
  Movement in unprovided deferred tax related to 
   property, plant and equipment                             32         69 
  Movement in deferred tax relating to prior 
   years                                                   (18)      (266) 
 
  Total taxation charge for the year                      2,260      3,135 
--------------------------------------------------    ---------  --------- 
 

The weighted average applicable tax rate for the year ended 31 March 2021 was 19% (2020: 19%). The effective rate of tax for the year, based on the taxation charge for the year as a percentage of the profit before tax is 18.1% (2020: 18.7%).

Deferred tax assets and liabilities at 31 March 2021 have been calculated based on the rate of 19% enacted at the balance sheet date (2020: 19%). It is expected that the 25% UK corporation tax rate announced by the UK government in March 2021 will be enacted in the next financial year.

   5.         DEFERRED TAX 

The Group recognised deferred tax assets and liabilities as follows:

 
                                                          2021      2020 
                                                       GBP'000   GBP'000 
-------------------------------------------------     --------  -------- 
 
 Share-based remuneration                                1,332     1,069 
 Capital allowances temporary 
  differences                                            1,363     1,364 
 Deferred tax on acquired assets with no capital 
  allowances                                              (40)      (88) 
 Deferred tax on customer relationships                (2,356)   (3,298) 
 Deferred tax on intangible 
  software                                               (161)     (193) 
----------------------------------------------------  --------  -------- 
 Deferred tax asset/(liability)                            138   (1,146) 
----------------------------------------------------  --------  -------- 
 

At the year end, the Group had no unused tax losses (2020: GBPnil) available for offset against future profits.

The movement in the deferred tax account during the year was:

 
                                                                     Deferred 
                                          Capital                      tax on 
                                       allowances                    acquired 
                       Share-based      temporary    Development       assets        Customer    Intangible 
                      remuneration    differences          costs      with no   relationships      software      Total 
                           GBP'000        GBP'000        GBP'000      capital         GBP'000       GBP'000    GBP'000 
                                                                   allowances 
                                                                      GBP'000 
-------------------  -------------  -------------  -------------  -----------  --------------  ------------  --------- 
 
Balance at 1 April                                                                                             (939 
 2019                    1,378          1,632          (422)         (157)        (3,173)         (197)          ) 
Acquired on 
 acquisition 
 of subsidiaries           -            (82)             -             -           (875)            -          (957) 
Charged to equity         253             -              -             -             -              -           253 
Credited/(charged) 
 to statement of 
 comprehensive 
 income                  (724)          (373)           472           87           1,131            27          620 
Effect of different 
 tax rates of 
 overseas 
 jurisdictions             -              7              -             -             6              -           13 
Effect of changes 
 in tax rates             162            180           (50)          (18)          (387)           (23)        (136) 
Balance at 31                                                                                                 (1,146 
 March 2020              1,069          1,364            -           (88)         (3,298)         (193)          ) 
Credited/(charged) 
 to statement of 
 comprehensive 
 income                   263            (8)             -            48            953             32         1,288 
Effect of different 
 tax rates of 
 overseas 
 jurisdictions             -              7              -             -            (11)            -           (4) 
Balance at 31 
 March 2021              1,332          1,363            -           (40)         (2,356)         (161)            138 
-------------------  -------------  -------------  -------------  -----------  --------------  ------------  --------- 
 

The deferred tax asset in relation to share-based remuneration arises from the anticipated future tax relief on the exercise of share options.

The deferred tax on capital allowances temporary differences arises mainly from plant and equipment in the Cloud Services segment where the tax written down value varies from the net book value.

The deferred tax on development costs in the prior year arose from development expenditure on which tax relief was received in advance of the amortisation charge.

The deferred tax on acquired assets arises from data centre equipment acquired through the acquisition of iomart Datacentres Limited on which depreciation is charged but on which there are no capital allowances available.

The deferred tax on customer relationships and intangible software arises from permanent differences on acquired intangible assets.

   6.         EARNINGS PER SHARE 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, after deducting any own shares held in Treasury and held by the Employee Benefit Trust. Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the total of the weighted average number of ordinary shares in issue during the year, after deducting any own shares, and adjusting for the dilutive potential ordinary shares relating to share options.

 
 Total operations 
                                                          2021        2020 
                                                       GBP'000     GBP'000 
------------------------------------------------    ----------  ---------- 
 Profit for the financial year and basic 
 earnings attributed to ordinary shareholders           10,204      13,649 
------------------------------------------------    ----------  ---------- 
 Weighted average number of ordinary                        No          No 
  shares:                                                  000         000 
 
 Called up, allotted and fully paid at 
  start of year                                        109,160     108,510 
 Own shares held by Employee Benefit 
  Trust                                                  (141)       (141) 
 Issued share capital in the year                          230         436 
------------------------------------------------ 
 Weighted average number of ordinary 
  shares - basic                                       109,249     108,805 
 
 Dilutive impact of share options                        2,416       2,861 
 
 Weighted average number of ordinary 
  shares -diluted                                      111,665     111,666 
------------------------------------------------    ----------  ---------- 
 
 Basic earnings per share                                9.3 p        12.5 
                                                                         p 
 Diluted earnings per share                              9.1 p        12.2 
                                                                         p 
-------------------------------------------------   ----------  ---------- 
 
 
 
                                                         2021       2020 
   Adjusted earnings per share                        GBP'000    GBP'000 
------------------------------------------------    ---------  --------- 
 
 Profit for the financial year and basic 
  earnings attributed to ordinary shareholders         10,204     13,649 
 - Amortisation of acquired intangible 
  assets                                                5,457      6,159 
 - Acquisition costs                                      493        438 
 - Share-based payments                                 1,247      1,243 
 - Gain on revaluation of contingent 
  consideration                                          (33)    (1,856) 
 - Tax impact of adjusted items                       (1,341)    (1,406) 
-------------------------------------------------   ---------  --------- 
 Adjusted profit for the financial 
 year and adjusted earnings attributed 
 to ordinary shareholders                              16,027     18,227 
------------------------------------------------    ---------  --------- 
 
 Adjusted basic earnings per share                       14.7       16.8 
                                                            p          p 
 Adjusted diluted earnings per share                     14.4       16.3 
                                                            p          p 
-------------------------------------------------   ---------  --------- 
 
 
   7.         INTANGIBLE ASSETS 
 
                                                      Acquired                                       Domain 
                     Goodwill     Development         Customer                 Beneficial             names 
                                        costs    relationships    Software      contracts    & IP addresses      Total 
                      GBP'000         GBP'000          GBP'000     GBP'000        GBP'000           GBP'000    GBP'000 
----------------  -----------  --------------  ---------------  ----------  -------------  ----------------  --------- 
 Cost 
 At 1 April 2019       85,382           9,193           52,766       8,039             86               280    155,746 
 Additions                  -               -                -       2,490              -                 -      2,490 
 Currency 
  translation 
  differences               -               -               38        (33)              -                 -          5 
 Acquired on 
  acquisition 
  of 
  subsidiaries          1,097               -            4,610           -              -                56      5,763 
 Disposals                  -               -                -       (173)              -                 -      (173) 
 Development 
  cost 
  capitalised               -           1,405                -           -              -                 -      1,405 
 At 31 March 
  2020                 86,479          10,598           57,414      10,323             86               336    165,236 
 Additions                  -               -                -         561              -                 -        561 
 Currency 
  translation 
  differences               -               -             (78)        (57)              -                 -      (135) 
 Disposals                  -               -             (73)           -              -                 -       (73) 
 Development 
  cost 
  capitalised               -           1,306                -           -              -                 -      1,306 
 At 31 March 
  2021                 86,479          11,598           57,263      10,827             86               336    166,895 
----------------  -----------  --------------  ---------------  ----------  -------------  ----------------  --------- 
 
 Accumulated 
 amortisation: 
 At 1 April 2019            -         (6,866)         (33,795)     (4,164)           (48)             (280)   (45,153) 
 Charge for the 
  year                      -         (1,507)          (6,159)     (1,420)            (7)                 -    (9,093) 
 Currency 
  translation 
  differences               -               -                -        (53)              -                 -       (53) 
 Disposals                  -               -                -         173              -                 -        173 
----------------  -----------  --------------  ---------------  ----------  -------------  ----------------  --------- 
 At 31 March 
  2020                      -         (8,373)         (39,954)     (5,464)           (55)             (280)   (54,126) 
 Charge for the 
  year                      -         (1,446)          (5,457)     (1,455)            (7)               (9)    (8,374) 
 Currency 
  translation 
  differences               -               -               82          90              -                 -        172 
 Disposals                  -               -               13           -              -                 -         13 
----------------  -----------  --------------  ---------------  ----------  -------------  ----------------  --------- 
 At 31 March 
  2021                      -         (9,819)         (45,316)     (6,829)           (62)             (289)   (62,315) 
----------------  -----------  --------------  ---------------  ----------  -------------  ----------------  --------- 
 
 Carrying 
 amount: 
 
 At 31 March 
  2021                 86,479           2,085           11,947       3,998             24                47    104,580 
----------------  -----------  --------------  ---------------  ----------  -------------  ----------------  --------- 
 
 At 31 March 
  2020                 86,479           2,225           17,460       4,859             31                56    111,110 
----------------  -----------  --------------  ---------------  ----------  -------------  ----------------  --------- 
 

Of the total additions in the year of GBP561,000 (2020: GBP2,490,000), no amounts related to leases under IFRS 16 (note 10) (2020: GBP1,425,000). There were no amounts included in trade payables at the year end (2020: GBPnil). Consequently, the consolidated statement of cash flows discloses a figure of GBP561,000 (2020: GBP1,065,000) as the cash outflow in respect of intangible asset additions in the year.

All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-financial assets classification, which is disclosed as administrative expenses in the statement of comprehensive income.

Included within customer relationships are the following significant net book values: GBP1.9m in relation to the acquisitions of Memset Limited with a remaining useful life of 7 years, the managed private cloud business of ServerChoice Limited of GBP1.8m with a useful life of 7 years, Bytemark Limited with a net book value of GBP0.8m and LDeX Group Limited of GBP2.0m both with a remaining useful life of 6 years, Sonassi Limited of GBP2.5m, Dediserve Limited of GBP0.9m, SimpleServers Limited of GBP0.5m all three with a remaining useful life of 5 years.

   7.         INTANGIBLE ASSETS (CONTINUED) 

During the year, goodwill was reviewed for impairment in accordance with IAS 36 "Impairment of Assets". No impairment charges (2020: GBPnil) arose as a result of this review. For this review goodwill was allocated to individual Cash Generating Units (CGU) on the basis of the Group's operations.

The carrying value of goodwill by each CGU is as follows:

 
 Cash Generating           2021       2020 
  Units (CGU)           GBP'000    GBP'000 
 Easyspace               23,315     23,315 
 Cloud Services          63,164     63,164 
                         86,479     86,479 
   -----------------  ---------  --------- 
 

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by the Board covering a five year period. These projections are the result of detailed planning and assume similar levels of organic growth as the Group has experienced in the previous years. As outlined previously, management remain confident in sustaining such levels of growth despite the on-going Covid-19 pandemic. The impact of the pandemic has been considered in great detail when finalising these projections and they are perceived to be a reliable basis upon which to base our impairment testing.

The growth rates and margins used to extrapolate estimated future performance continue to be based on past growth performance adjusted downwards to take into account the additional risk due to the passage of time. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. The growth rates used to estimate future performance beyond the periods covered by the annual and strategic planning processes do not exceed the long-term average growth rates for similar products.

In determining the value-in-use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Management continue to apply the judgement that there are two distinct CGUs within the Group, namely Cloud Services and Easyspace. These segments have been derived with due consideration to IAS 36. The assumptions used for the CGU included within the impairment reviews are as follows:

 
                                                Easyspace          Cloud Services 
                                           31 March   31 March   31 March   31 March 
                                             2021       2020       2021       2020 
 
 
 Discount rate                                14.0%      13.1%      14.0%      12.5% 
 Future perpetuity 
  rate                                         0.0%       0.0%       2.5%       2.0% 
 Initial period for which cash flows 
  are estimated (years)                           5          5          5          5 
----------------------------------------  ---------  ---------  ---------  --------- 
 

Based on an analysis of the impairment calculation's sensitivities to changes in key parameters (growth rate, discount rate and pre-tax cash flow projections) there was no reasonably possible scenario where the CGU's recoverable amount would fall below its carrying amount.

   8.      PROPERTY, PLANT AND EQUIPMENT 
 
                                           Leasehold 
                       Freehold             property   Data centre     Computer       Office       Motor 
                       property    and improve-ments     equipment    equipment    equipment    vehicles       Total 
                        GBP'000              GBP'000       GBP'000      GBP'000      GBP'000     GBP'000     GBP'000 
-------------------  ----------  -------------------  ------------  -----------  -----------  ----------  ---------- 
 
 Cost: 
 At 1 April 2018          8,910                7,943        23,457       81,611        2,920          31     124,872 
 Additions in 
  the year                    -               21,287         1,482       14,847           57          11      37,684 
 Acquisition 
  of subsidiaries             -                  457         1,192        1,540            -           2       3,191 
 Disposals in 
  the year                    -                 (16)          (18)        (622)        (206)        (21)       (883) 
 Currency 
  translation 
  differences                 -                    -             -          216            -           -         216 
 At 31 March 
  2020                    8,910               29,671        26,113       97,592        2,771          23     165,080 
 Additions in 
  the year                    -                9,157         1,966       10,504           40           -      21,667 
 Disposals in 
  the year                (179)                    -             -            -            -           -       (179) 
 Currency 
  translation 
  differences                 -                (134)             -          127            -           -         (7) 
 At 31 March 
  2021                    8,731               38,694        28,079      108,223        2,811          23     186,561 
-------------------  ----------  -------------------  ------------  -----------  -----------  ----------  ---------- 
 
 Accumulated 
 depreciation: 
 At 1 April 2019          (418)              (3,510)      (13,635)     (58,372)      (1,868)        (24)    (77,827) 
 Charge for the 
  year                    (279)              (3,610)       (1,853)      (9,625)        (262)         (6)    (15,635) 
 Disposals in 
  the year                    -                   16            18          622          206          21         883 
 Currency 
  translation 
  differences                 -                    -             -        (157)            -           -       (157) 
 At 31 March 
  2020                    (697)              (7,104)      (15,470)     (67,532)      (1,924)         (9)    (92,736) 
 Charge for the 
  year                    (265)              (4,541)       (1,753)     (10,089)        (226)         (8)    (16,882) 
 Disposals in 
  the year                   25                    -             -            -            -           -          25 
 Currency 
  translation 
  differences                 -                 (30)             -           74            -           -          44 
-------------------  ----------  -------------------  ------------  -----------  -----------  ----------  ---------- 
 At 31 March 
  2021                    (937)             (11,675)      (17,223)     (77,547)      (2,150)        (17)   (109,549) 
-------------------  ----------  -------------------  ------------  -----------  -----------  ----------  ---------- 
 
 Carrying amount: 
 At 31 March 
  2021                    7,794               27,019        10,856       30,676          661           6      77,012 
 
 At 31 March 
  2020                    8,213               22,567        10,643       30,060          847          14      72,344 
-------------------  ----------  -------------------  ------------  -----------  -----------  ----------  ---------- 
 
 

During the year there were additions of GBP63,000 (2020: GBP824,000) in respect of reinstatement provisions and additions of GBP8,683,000 (2020: GBP20,540,000) in respect of leases under IFRS 16 (note 10). Of the total remaining additions in the year of GBP12,921,000 (2020: GBP16,320,000), GBP977,000 (2020: GBP3,185,000) was included in trade payables as unpaid invoices at the year end resulting in a net increase of GBP2,271,000 (2020: net increase of GBP1,632,000) in trade payables. Consequently, the consolidated statement of cash flows discloses a figure of GBP15,192,000 (2020: GBP14,688,000) as the cash outflow in respect of property, plant and equipment additions in the year.

Note 10 provides the movements in the year relating to IFRS 16 right-of-use assets as included in the above table.

   9.         BORROWINGS 
 
                                        2021      2020 
                                     GBP'000   GBP'000 
-------------------------------     --------  -------- 
 
  Current: 
  Lease liabilities (note 10)        (3,437)   (3,029) 
  Current borrowings                 (3,437)   (3,029) 
 
  Non-current: 
  Lease liabilities (note 10)       (21,430)  (17,318) 
  Bank loans                        (52,791)  (52,791) 
  Total non-current borrowings      (74,221)  (70,109) 
 
  Total borrowings                  (77,658)  (73,138) 
----------------------------------  --------  -------- 
 

The carrying amount of borrowings approximates to their fair value.

Details of the Group's lease liabilities are included in note 10.

At the start of the year there was GBP52.8m (2020: GBP48.5m) outstanding on the multi option revolving credit facility and drawdowns of GBP1.1m (2020: GBP6.2m) were made from the facility during the year. Repayments totalling GBP1.1m (2020: GBP2.0m) were made resulting in a balance outstanding at the end of the year of GBP52.8m (2020: GBP52.8m).

The multi option revolving credit facility of GBP80m is able to be used by the Group to finance acquisitions, capital expenditure, general business purposes (up to a maximum of GBP8m each year) and for the issue of guarantees, bonds or indemnities. As at 31 March 2021, the facility is available until September 2022 at which point any advances made under the multi option revolving credit facility become immediately repayable. Each drawdown made under this facility can be for either 3 or 6 months and can either be repaid or continued at the end of the period. Interest is charged on this loan at an annual rate determined by the sum of the multi option revolving credit facility margin, LIBOR and the lender's mandatory costs. The multi option revolving credit facility margin is fixed at 1.5% (2020: 1.5%) per annum and a non-utilisation fee of 40% (2020: 40%) of the multi option revolving credit facility margin is due on any undrawn portion of the full GBP80m multi option revolving credit facility. The effective interest rate for multi option revolving credit facility in the current year was 1.61% (2020: 2.17%).

Given the terms of the revolving credit facility and the ability for any drawdowns made to be extended beyond 31 March 2021 at the discretion of the Group, the total amount outstanding has been classified as non-current.

   9.         BORROWINGS (CONTINUED) 

The obligations under the multi option revolving credit facility are repayable as follows:

 
                                            2021                          2020 
                                 Capital  Interest     Total   Capital  Interest     Total 
                                 GBP'000   GBP'000   GBP'000   GBP'000   GBP'000   GBP'000 
------------------------------  --------  --------  --------  --------  --------  -------- 
 Due within one year                   -     (366)     (366)         -     (465)     (465) 
 Due within two to five years   (52,791)         -  (52,791)  (52,791)         -  (52,791) 
------------------------------  --------  --------  --------  --------  --------  -------- 
                                (52,791)     (366)  (53,157)  (52,791)     (465)  (53,256) 
------------------------------  --------  --------  --------  --------  --------  -------- 
 

The Directors estimate that the fair value of the Group's borrowing is not significantly different to the carrying value.

 
 
                                             Cash and 
  Analysis of change in net          cash equivalents       Bank                       Total liabilities     Total net 
  cash/(debt)                                 GBP'000      loans  Lease liabilities              GBP'000   cash/(debt) 
                                                         GBP'000            GBP'000                            GBP'000 
---------------------------------  ------------------  ---------  -----------------  -------------------  ------------ 
 
  At 1 April 2019                              10,069   (48,536)              (777)             (49,313)      (39,244) 
 
  Lease liabilities on transition 
   to IFRS 16                                       -          -           (20,421)             (20,421)      (20,421) 
  Additions to lease liabilities                    -          -            (1,544)              (1,544)       (1,544) 
  Repayment of bank loans                           -      2,000                  -                2,000         2,000 
  New bank loans                                    -    (6,150)                  -              (6,150)       (6,150) 
  Impact of effective interest 
   rate                                             -      (105)                  -                (105)         (105) 
  Acquired on acquisition 
   of subsidiaries                                  -          -            (1,705)              (1,705)       (1,705) 
  Cash and cash equivalent 
   cash inflow                                  5,428          -                  -                    -         5,428 
  Lease liabilities cash outflow                    -          -              4,100                4,100         4,100 
---------------------------------  ------------------  ---------  -----------------  -------------------  ------------ 
  At 31 March 2020                             15,497   (52,791)           (20,347)             (73,138)      (57,641) 
 
  Additions to lease liabilities                    -          -            (8,683)              (8,683)       (8,683) 
  Repayment of bank loans                           -      1,150                  -                1,150         1,150 
  New bank loans                                    -    (1,150)                  -              (1,150)       (1,150) 
  Currency translation                              -          -                169                  169           169 
  Cash and cash equivalent 
   cash inflow                                  7,541          -                  -                    -         7,541 
  Lease liabilities cash outflow                    -          -              3,994                3,994         3,994 
                                                                                     ------------------- 
  At 31 March 2021                             23,038   (52,791)           (24,867)             (77,658)      (54,620) 
---------------------------------  ------------------  ---------  -----------------  -------------------  ------------ 
 
   10.        LEASES 

The Group leases assets including buildings, fibre contracts, colocation and software contracts. Information about leases for which the Group is a lessee is presented below:

 
 
  Right-of-use assets                   Leasehold  Data centre 
                                         Property    equipment    Software     Total 
                                          GBP'000      GBP'000     GBP'000   GBP'000 
-----------------------------------     ---------  -----------  ----------  -------- 
 
  Balance at 1 April 2020                  17,494          788       1,235    19,517 
  Additions                                 3,855        4,828           -     8,683 
  Currency translation differences          (162)            -           -     (162) 
  Depreciation                            (2,328)      (1,394)           -   (3,722) 
  Amortisation                                  -            -       (285)     (285) 
 
  Balance at 31 March 2021                 18,859        4,222         950    24,031 
-------------------------------------   ---------  -----------  ----------  -------- 
 
 

The right-of-use assets in relation to leasehold property and data centre equipment are disclosed as non-current assets and are disclosed within property, plant and equipment at 31 March 2021 (note 8). The right-of-use assets in relation to software are disclosed as non-current assets and are disclosed within intangibles at 31 March 2021 (note 7).

Lease liabilities

Lease liabilities are presented in the balance sheet within borrowings as follows:

 
                                   2021      2020 
                                GBP'000   GBP'000 
--------------------------     --------  -------- 
 
  Current: 
  Lease liabilities             (3,437)   (3,029) 
 
  Non-current: 
  Lease liabilities            (21,430)  (17,318) 
 
  Total lease liabilities      (20,347)  (20,347) 
-----------------------------  --------  -------- 
 
 
 The maturity analysis of undiscounted lease liabilities are shown 
  in the table below:                                         2021      2020 
                                        GBP'000   GBP'000 
  --------------------------------     --------  -------- 
 
    Amounts payable under leases: 
    Within one year                    (4,215)   (3,536) 
    Between two to five years          (11,552)  (9,823) 
    After more than five years         (13,068)  (9,709) 
 
                                       (28,835)  (23,068) 
    Add: unearned interest             3,968     2,721 
  -----------------------------------  --------  -------- 
    Total lease liabilities            (24,867)  (20,347) 
  -----------------------------------  --------  -------- 
 10. LEASES (CONTINUED) 
 
  The Group has elected not to recognise a lease liability for short-term 
  leases (leases with an expected term of 12 months or less) or for 
  leases of low value assets. Payments made under such leases are 
  expensed on a straight line basis. During the year ended 31 March 
  2021, in relation to leases under IFRS 16, the Group recognised 
  the following amounts in the consolidated statement of comprehensive 
  income: 
                                                                  2021                              2020 
                                                               GBP'000                           GBP'000 
  --------------------------------    --------------------------------  -------------------------------- 
 
   Short-term and low value lease 
    expense                                                    (1,578)                           (1,662) 
   Depreciation charge                                         (3,722)                           (3,224) 
   Amortisation charge                                           (285)                             (190) 
   Interest expense                                              (732)                             (649) 
 
                                                               (6,317)                           (5,725) 
    --------------------------------  --------------------------------  -------------------------------- 
 
 

Amounts recognised in the consolidated statement of cash flows:

 
                                                            2021      2020 
                                                         GBP'000   GBP'000 
 ---------------------------------------------------    --------  -------- 
 
  Amounts payable under leases: 
  Short-term and low value lease expense                 (1,578)   (1,662) 
  Repayment of lease liabilities within cash flows 
   from financing activities*                            (5,435)   (4,686) 
                                                         (7,013)   (6,348) 
   ---------------------------------------------------  --------  -------- 
 

*Included in repayment of lease liabilities within cash flows from financing activities in the year ended 31 March 2020 is a repayment of GBP1.0m in relation to the settlement of lease liabilities on the acquisition of Memset Limited.

   11.       CONTINGENT CONSIDERATION 
 
                                                           2021      2020 
                                                        GBP'000   GBP'000 
 -----------------------------------------------  ---  --------  -------- 
 
  Contingent consideration due on acquisitions 
  within one year: 
 
    *    LDeX Group Limited                                   -   (1,153) 
 
    *    Memset Limited                                       -     (500) 
 
    *    ServerChoice Limited                                 -     (827) 
 
  Total contingent consideration due on 
   acquisitions                                               -   (2,480) 
------------------------------------------------       --------  -------- 
 

Final consideration due on acquisitions of GBP2,447,000 (2020: GBPnil) was paid in the year resulting in a gain on revaluation of contingent consideration of GBP33,000 (2020: GBP1,856,000 gain) recorded in the consolidated statement of comprehensive income.

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June 15, 2021 02:00 ET (06:00 GMT)

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