9 June 2015

iomart Group plc

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

Final Results for the Year ended 31 March 2015

iomart (AIM:IOM), the cloud computing company, is pleased to report its consolidated final results for the year ended 31 March 2015.

FINANCIAL HIGHLIGHTS

·      Revenue growth of 18% to £65.8m (2014: £55.6m)

·      Adjusted EBITDA¹ growth of 23% to £29.1m (2014: £23.6m)

·      Adjusted profit before tax growth² of 14% to £16.6m (2014: £14.6m)

·      Adjusted diluted earnings per share³ from operations increased by 16% to 12.63p (2014: 10.85p)

·      Cashflow from operations increased by 13% to £27.2m (2014: £24.0m)

·      Adjusted EBITDA¹ margins increased to 44% (2014: 42%)

·      Proposed final dividend increased by 43% to 2.50p per share (2014: 1.75p per share)

OPERATIONAL HIGHLIGHTS

·      Building relationships for Hybrid Cloud opportunities with major players

·      Continued M&A activity with the acquisition of ServerSpace

·      Acquisition of SystemsUp to address the Public Cloud opportunity

Statutory Equivalents

The above highlights are based on adjusted results. A full reconciliation between adjusted and statutory results is contained within this statement. The statutory equivalents of the above results are as follows:

·      Profit before tax growth of 11% to £10.8m (2014: £9.7m)

·      Basic earnings per share from operations increased by 14% to 8.34p (2014: 7.30p)

¹  Throughout this statement adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges and acquisition costs. Throughout this statement acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

²  Throughout this statement adjusted profit before tax is profit before tax, amortisation charges on acquired intangible assets, shared based payment charges, mark to mark adjustments in respect of interest rate swaps, acquisition costs and in the previous year the accelerated write off of arrangement fees on the bank borrowing facilities which were repaid early during that year.

³  Throughout this statement adjusted diluted earnings per share is earnings per share before amortisation charges on acquired intangible assets, shared based payment charges, mark to mark adjustments in respect of interest rate swaps, acquisition costs and in the previous year the accelerated write off of arrangement fees on the bank borrowing facilities which were repaid early during that year, including the taxation effect of these.

Angus MacSween, CEO commented,

"We are working hard to ensure we remain at the leading edge in terms of the skill sets and experience to provide an ever more complex set of services to our customers and are confident of our abilities to do so, reinforced by the acquisition of SystemsUp in recent days.

We are well positioned for further significant growth."

For further information:

About iomart Group plc

Award winning cloud company iomart Group PLC (AIM:IOM) enables businesses and organisations to operate their online data and IT environments safely and securely. Headquartered in Glasgow, Scotland, iomart partners with leading vendors such as VMware, Amazon, EMC, Microsoft, Asigra, Arbor and Dell to offer customers a centrally managed, controlled and completely agnostic set of hybrid, private and public cloud platforms. By owning a global network and datacentre infrastructure, iomart can support any customer who wishes to move seamlessly between any and all of these platforms with a consultative level of knowledge and expertise, delivering cloud services to meet exact business needs.

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

CHAIRMAN'S STATEMENT

Once again it is extremely pleasing to report on another very good year for your Group. We continue to make excellent progress as we execute on our combined strategy of growing our business both organically and by acquisition. Our reputation as one of the UK's leading cloud computing companies continues to develop.

We have again enjoyed a substantial increase in profitability over the year, driven by both organic and acquisitive growth. This year we have only made the one acquisition during the year, ServerSpace, in December 2014, and we also have benefited from a full year contribution of both Redstation and Backup Technology which were acquired last year.

After the year end we completed the acquisition of Systems Up Limited, a consultancy company with a particular focus on Public Cloud.

All of this progress is a result of a great deal of hard work by our executives and staff and I thank them all on behalf of the Board and the shareholders for their efforts over the year.

The Group has pursued a progressive dividend policy for a number of years now. As a consequence of our continued strong performance we intend to adopt a dividend policy aimed at improving shareholder returns whilst maintaining a strong capital position for future acquisitions. Accordingly, our intention will be, over time, to increase the dividend pay-out to 25% of adjusted diluted earnings per share. This year the Board is proposing to pay a final dividend of 2.5p per share on 1 September 2015 to shareholders on the register on 14 August 2015, representing an increase of 43% over the dividend last year and equivalent to a pay-out ratio of 19.8% of adjusted diluted earnings per share. We continue to offer shareholders the option to participate in a Dividend Reinvestment Plan (DRIP) as an alternative to receiving cash. Details of the DRIP scheme will be distributed with the annual accounts in due course.

We have started the 2015 financial year in a strong position and I look forward to another exciting year of growth with considerable confidence.

Ian Ritchie

Chairman

8 June 2015

CHIEF EXECUTIVE'S REVIEW

Introduction

I am pleased once more to report on another excellent year for iomart. We have increased our revenues and profits both organically and through acquisition as we continue to deliver a widening range of cloud solutions.

Our revenues in the year were £65.8m, an increase of 18% over the previous year and our adjusted EBITDA of £29.1m showed a 23% increase over the previous year and our profit before tax increased by 11% to £10.8m.

The opportunity remains to continue to grow both organically and through a disciplined acquisition strategy.

Market

The market continues to grow and evolve. The number of companies offering cloud services also continues to grow alongside an ever faster consolidation of companies to achieve scale and presence.

Potential cloud customers are confronted by an ever more complex set of decisions in terms of cost, value, effectiveness, complexity, security and compliance. In response, an ecosystem of managed services providers and large infrastructure providers is growing to serve these customers. Because the cloud has disrupted the traditional IT value chain, cloud service providers (CSPs) are now forming key alliances allowing them to excel at the delivery of one or more service whether it be the delivery of infrastructure as a service (IaaS), platform as a service (PaaS) or software as a service (SaaS).

Microsoft, Amazon (AWS) and Google (Public Cloud Providers) all have their own long term strategies to capture market share and all three of them have stated that we are at the very beginning of a long journey to full cloud adoption. All of these companies will require channel partners to go to market.

iomart is well placed to strengthen its position around that very complexity as customers look to find the best way forward for their own needs, whether that be private infrastructure in a datacentre of their choice,  Public Cloud infrastructure or more likely a mixture of the two combined with legacy on-premise infrastructure. The effective management of all these is the opportunity for iomart which we would collectively term the Hybrid Cloud.

iomart is investing in the relationships and skills to help customers make an informed choice across the cloud spectrum and to help them manage these environments moving forward.

Acquisitions

We again augmented our organic growth through the acquisition of ServerSpace in December 2014. This has performed well over the period and integration is well underway.

We have just announced the acquisition of Systems Up Limited ("SystemsUp") on 5 June 2015. SystemsUp has gained a reputation in the cloud market for expertise across a wide range of cloud products and services, with an emphasis on Public Cloud consultancy. We believe the skills and experience we have acquired will accelerate our progress in becoming credible suppliers of Hybrid Cloud to ensure we can make the 'best fit' recommendation for our customers along with the subsequent deployment and management of their ever more complex cloud environments.

We continue to look for businesses that fit our acquisition criteria with a view to making further acquisitions in the coming year.

Operational Review

Whilst all of our activities involve the provision of services from common infrastructure we are organised into two operating segments.

Hosting

Our Hosting segment continued to perform well over the year, delivering an overall revenue growth rate of 23% and a satisfactory organic growth rate of 9% whilst increasing adjusted EBITDA margins from 48.6% to 50.0%.

We provide a wide range of managed hosting services to both SMEs and corporate customers.  All our solutions are delivered from our network of datacentres.

The more complex managed hosting solutions are delivered by iomart Hosting and customers typically pay for these services on a monthly basis on contracts ranging between one and three years in length. These solutions are provided to a wide range of customers, all of whom are at various stages of development and over the year we have seen some casualties amongst our base as customers experience funding difficulties, drop out of markets or become acquired and, as a result, are integrated elsewhere. All of which has resulted in some additional customer churn and some pricing pressure at contract renewal which, in turn, has adversely impacted our organic growth in the segment though we are still pleased with the level of growth achieved over the year. This area of our activity is the one which has the greatest opportunity arising out the Hybrid Cloud. However, the choice of direction to an adopter of Cloud is much more complex than before and thus we will require to become Hybrid Cloud Experts, especially in the consultation process an organisation will go through before making a final choice. We believe the acquisition of SystemsUp will provide us with a strong platform from which to attack the Hybrid Cloud opportunity.

We address the dedicated physical server market, or bare metal as it is becoming known, through our RapidSwitch and Redstation operations largely through online marketing. Melbourne delivers complex managed hosting solutions and provides us with a strong presence in the North West of England with a particular emphasis on the creative sector. Backup Technology provides enterprise class cloud backup and business continuity services. iomart Cloud Services provides a range of Cloud products, mainly through channel partners and this unit also provides Cloud services in the USA, following on from our investment in cloud infrastructure and backup assets in that region during the year. All these business units use common infrastructure and processes but there are different dynamics in each customer base.

Revenues in this segment have grown by 23% to £55.0m (2014: £44.7m) partly as a result of the continued organic growth and as a result of acquisitions.

Easyspace

The Easyspace segment has performed as expected over the year.

Our activities within this segment provide a range of products to the micro and SME markets including domain names, shared, dedicated and virtual servers and email services.

As anticipated, revenues of £10.8m (2014: £11.0m) have remained around the same level as in the previous year, and with the benefit of delivering strong levels of cash for the Group.

Trading Results

Revenue

Revenues for the year grew by 18% to £65.8m (2014: £55.6m) through the combination of continued organic growth and the impact of acquisitions.

Our Hosting segment grew revenues by 23% to £55.0m (2014: £44.7m). This growth was helped by a full year contribution from Redstation and Backup Technology both of which we acquired in September 2013 and ServerSpace which was acquired in December 2014. The growth in the Hosting segment revenues excluding the impact of acquisitions was 9%.

Revenues within the Easyspace segment of £10.8m (2014: £11.0m) were close to the level of the previous year showing a very modest 2% decrease.

We continue to have good revenue visibility and high levels of recurring revenue. With our larger customers we have multi-year contracts for the provision of complex managed hosting solutions.  Many of our smaller customers pay in advance for the provision of hosting services resulting in a substantial sum of deferred revenue which we then recognise during the period over which we provide our services.

Gross Margin

Our gross profit for the year was £44.3m (2014: £37.8m) and this increased as a result of the additional revenues we generated. In percentage terms we maintained our margin at 67.4% (2014: 68.0%) with both operating segments maintaining their respective percentage margins.

Adjusted EBITDA

The adjusted EBITDA for the year was £29.1m (2014: £23.6m) an increase of 23%. Our percentage adjusted EBITDA margin has also significantly improved to 44.2% (2014: 42.5%). The Hosting segment increased both its absolute and relative margin over the period whilst the Easyspace segment performed very much in line with the previous year.

The Hosting segment's adjusted EBITDA was £27.5m (2014: £21.7m), an increase of 26.7%. In percentage terms the adjusted EBITDA margin has improved to 50.0% (2014: 48.6%). This greatly improved performance is a direct result of the additional gross margin delivered by the increase in sales revenue from the Hosting segment offset by an increase in administrative expenses. Administrative expenses have increased principally due to the impact of the acquisitions made in the period and the full impact of the acquisitions made in the previous period. The inclusion of Redstation and Backup Technology for the full year has contributed to the improvement in the adjusted EBITDA in both absolute terms and percentage terms. The contribution from ServerSpace since its acquisition in December has contributed to the level of absolute margin improvement.

The Easyspace segment's adjusted EBITDA was £4.9m (2014: £5.0m) which was slightly less than in the previous year. In percentage terms the adjusted EBITDA margin has improved slightly to 45.5% (2014: 45.2%) due to careful control of costs.

Group overheads, which are not allocated to segments, include 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. These overhead costs have increased to £3.3m (2014: £3.0m) mainly due to increased payroll and staff related costs.

Adjusted profit before tax

Depreciation charges of £10.1m (2014: £7.2m) have increased largely as a consequence of the full year effect of acquisitions made in the previous year, the impact of the acquisition of ServerSpace in this financial year, as a result of charges for the equipment bought to provide services to the additional Hosting segment customers and charges in respect of the fit out of our Maidenhead datacentre which was completed at the start of this financial year.

The charge for amortisation of intangibles, excluding amortisation of intangible assets resulting from acquisitions ("amortisation of acquired intangible assets") of £1.0m (2014: £0.7m) has increased over the year as a consequence of the full year impact of the acquisition of Backup Technology which was acquired during the previous financial year and also due to the charge resulting from an increase in the level of capitalised development costs.

Finance income in the period was £nil (2014: £0.1m). Finance costs of £1.3m (2014: £1.2m), excluding the mark to market adjustment in respect of interest swaps on the Company's loans and in the previous year the accelerated write off of arrangement fees on the early repayment of bank facilities, remained static over the period as our level of net borrowings remained at a similar level over the period.

After deducting the charges for depreciation, amortisation, excluding the charges for the amortisation of acquired intangible assets, and finance costs, excluding mark to market adjustments on the interest rate swap and in the previous year the accelerated write off of arrangement fees on the early repayment of the bank facilities, and crediting the finance income from the adjusted EBITDA, the Group's adjusted profit before tax was £16.6m (2014: £14.6m) an increase of 14%.

The adjusted profit before tax margin for the year was 25% (2014: 26%). This modest reduction is largely due to the improvement of 1.7% in the adjusted EBITDA margin over the year offset by the increase in depreciation charges as a percentage of revenue of 2.5%. That relative increase in the depreciation charge is mainly a consequence of the mix of sales revenue within our Hosting segment over the year, including the impact of a full year contribution from both Redstation and Backup Technology, and the commencement of depreciation charges on the Maidenhead datacentre which was completed early in this financial year

Profit before tax

The measure of adjusted profit before tax 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.

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

The adjusting items are: charges for the amortisation of acquired intangible assets of £4.4m (2014: £3.1m) which have increased substantially as a result of the acquisition made in the year and the full year effect of acquisitions made in previous years; costs of £0.5m (2014: £0.4m) as a result of acquisition costs; share based payment charges in the period of £0.8m (2014: £1.3m) which have decreased substantially as the charge in respect of share options granted in previous periods comes to an end; a mark to market adjustment in respect of interest rate swaps on the Company's loans of £0.12m (2014: £0.02m) and the accelerated write off of arrangement fees on the early repayment of bank facilities during the year of £nil (2014: £0.15m).

After deducting charges for the amortisation of acquired intangible assets; acquisition costs; share based payments; mark to market adjustments in respect of interest rate swaps and in the previous year the accelerated write off of arrangement fees on the early repayment of bank facilities during the year from the adjusted profit before tax; the reported profit before tax was £10.8m (2014: £9.7m) an increase of 11%. In percentage terms the profit before tax margin was 16% (2014: 17%) with the reduction due to the same reasons as the adjusted profit before tax percentage margin reduction together with increased amortisation of acquired intangible assets charges offset by reduced shared based payment charges.

Taxation

There is a tax charge for the year of £1.9m (2014: £2.0m). The tax charge for the year is made up of a corporation tax charge of £2.7m (2014: £2.5m) with a deferred tax credit of £0.8m (2014: credit £0.5m). At the year end, the Group has unused tax losses of £1.2m (2014: £4.0m) available for offset against future profits, of which all have been provided for within deferred tax.

Profit for the year from total operations

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 £8.9m (2014: £7.7m) an increase of 15%.

Earnings per share

Adjusted diluted earnings per share is based on profit for the year attributed to ordinary shareholders before share based payment charges, amortisation charges of acquired intangible assets, mark to market adjustments in respect of interest rate swaps, the accelerated write off of arrangement fees on the early repayment of bank facilities in the previous year, acquisition costs and the tax effect of these items was 12.63p (2014: 10.85p) an increase of 16%.

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.

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

Basic earnings per share from continuing operations was 8.34p (2014: 7.30p), an increase of 14% over the year.

Acquisitions

On 3 December 2014 the Company acquired ServerSpace for a maximum consideration of £4.2m; on a no cash no debt, normalised working capital basis. At completion an initial payment of £2.6m in cash was made. No payment was due in respect of the additional debt assumed, cash acquired and normalised working capital position of the company at completion. An additional sum is due related to the profitability of ServerSpace in the period to September 2015 and the estimated amount to be paid in this regard is £1.6m, which is also the maximum amount which could be due. Payment of this sum is expected to be made before the end of the 2015 calendar year.

On 5 June 2015 the Company acquired the entire share capital of SystemsUp on a no debt, no cash, normalised working capital basis. At completion an initial payment of £9m in cash was made and in addition an amount of £0.5m was paid as an interim settlement of the expected amount due in respect of the no debt, no cash, normalised working capital adjustment. A further sum is contingent on a measure revenue for the year to 31 March 2016 which is expected to be paid in either May or June 2016. The potential contingent consideration payable has been initially estimated to be in the region of £1.0m to £3.5m.

Cash flow and net cash

Net cash flows from operating activities

The Group continued to generate high levels of operating cash over the year. Cash flow from operations was £27.2m (2014: £24.0m) with the significant increase of 13% over the previous year's level largely due to the improvement in adjusted EBITDA. After deducting payments for corporation tax of £3.2m (2014: £2.3m) the net cash flow from operating activities was £24.0m (2014: £21.7m).

Cash flow from investing activities

In line with our strategy of accelerating our growth by acquisition the Group continued to incur substantial sums on investing activities, spending a total of £15.8m (2014: £31.5m) in the period. Of this amount, £2.4m (2014: £19.0m), was incurred in relation to acquisition activities described above. In addition the Group incurred expenditure of £1.3m (2014: £0.1m) in respect of contingent consideration due on the acquisition of Redstation.

The Group continues to invest in property, plant and equipment through expenditure on datacentres and on equipment required to provide managed services to both its existing and new customers. In addition the Group invested in cloud infrastructure and backup assets in the USA during the year. As a result the Group spent £10.7m (2014: £11.7m) on assets, net of related finance lease drawdown, trade creditor movements and non-cash reinstatement provisions.

Expenditure was also incurred on development costs of £1.0m (2014: £0.6m) and on intangible assets of £0.4m (2014: £nil).

Cash flow from financing activities

There was net cash spent on financing activities of £12.9m (2014: £11.4m cash generated). The Company's borrowing facilities were restructured in the period with a term loan of £13.5m being repaid and an additional revolving credit facility of £13.5m being drawn down (2014: £37.5m drawdown). In addition further bank loan repayments of £8.5m were made resulting in total repayments of £22.0m (2014: £16.5m) in the year. We repaid borrowings on acquisitions of £nil (2014: £5.7m). We received £nil (2014: £0.2m) from the issue of shares as a result of the exercise of options by employees. We also made a dividend payment of £1.9m (2014: £1.5m) and incurred finance costs of £1.3m (2014: £1.2m).

Net cash flow

As a consequence, our overall cash expenditure during the year was £4.7m (2014: £1.6m cash generated) which resulted in cash and cash equivalent balances at the end of the year of £8.3m (2014: £13.0m). After recognising bank loans of £21.5m (2014: £30.0m) and finance lease obligations of £2.2m (2014: £2.8m) net debt balances at the end of the period stood at £15.4m (2014: £19.8m) a level the Board is comfortable with given the strong cash generation of the Group.

Financial position

The Group is now in a position where it is generating substantial amounts of operating cash. The generation of that cash flow together with the committed bank loan facility for acquisitions and finance lease facilities which are available to fund capital expenditure, means that the Group has the liquidity it requires to continue its growth through both organic and acquisitive means.

Current trading and outlook

Trading since the year end remains encouraging and in line with our expectations.

We are working hard to ensure we remain at the leading edge in terms of the skill sets and experience to provide an ever more complex set of services to our customers and are confident of our abilities to do so, reinforced by the acquisition of SystemsUp in recent days.

We are well positioned for further significant growth.

I look forward, once again, with confidence to the year ahead.

Angus MacSween

Chief Executive Officer

8 June 2015

Consolidated Statement of Comprehensive Income

Year ended 31 March 2015

Consolidated Statement of Financial Position

As at 31 March 2015

Consolidated Statement of Cash Flows

Year ended 31 March 2015

Consolidated Statement of Changes in Equity

Year ended 31 March 2015

Notes to the Yearly Financial Information  

Year ended 31 March 2015

1.         GENERAL INFORMATION

iomart Group plc is a company incorporated and domiciled in Scotland. The company has a primary listing on the AIM stock exchange. The address of its registered office is Lister Pavilion, Kelvin Campus, West of Scotland Science Park, Glasgow G20 0SP.

2.         BASIS OF PREPARATION

These financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and the Companies Act 2006 applicable to companies reporting under IFRS.

The financial statements have been prepared under the historical cost convention.

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 March 2015 and 31 March 2014 within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2014 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 2015 is derived from the statutory accounts for that year which were approved by the Directors on 8 June 2015. The statutory accounts for the year ended 31 March 2015 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.

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.

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

·      Hosting - this segment provides managed hosting facilities and services, through a network of owned datacentres, to the larger SME and corporate markets. The segment uses several routes to market and provides managed hosting services through iomart Hosting, RapidSwitch, Melbourne, iomart Cloud Services. Redstation and Backup Technology. ServerSpace was acquired during the year and has been reported as part of the Hosting segment since acquisition.

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 or costs associated with acquisitions. 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 more than 10% of external revenues. Inter-segment transactions are accounted for using an arms-length commercial basis.

Operating Segments

Revenue by Operating Segment

Geographical Information

In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. The United Kingdom is the place of domicile of the parent company, iomart Group plc. All of the Group's revenue originates from the United Kingdom.

Analysis of Revenue by Destination

Profit by Operating Segment

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

4.         TAXATION

The Group has a deferred tax asset which has been recognised in respect of tax losses within one subsidiary company, which has generated taxable profits and is expected to continue to do so.

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

5.         DEFERRED TAX

The Group recognised deferred tax assets and liabilities as follows:

At the year end, the Group has unused tax losses of £1.2m (2014: £4.0m) available for offset against future profits. A deferred tax asset has been recognised in respect of £1.2m (2014: £4.0m) of such losses as these losses are expected to be used up by taxable profits by the end of the period covered by future projections.

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

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 by an Employee Benefit Trust in a Joint Share Ownership Plan ("JSOP").  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 (JSOP), and adjusting for the dilutive potential ordinary shares relating to share options, including the dilutive effect of JSOP shares that have vested. 

7.         ACQUISITIONS

ServerSpace Limited

The Group acquired 100% of the issued share capital of ServerSpace Limited ("ServerSpace") on 3 December 2014.

ServerSpace is a London based provider of managed hosting services to over 300 customers. The acquisition is in line with the Group's strategy to grow its hosting operations both organically and by acquisition.

During the current period the Group incurred £116,000 of third party acquisition related costs in respect of this acquisition. These expenses are included in administrative expenses in the Group's consolidated statement of comprehensive income for the period ended 31 March 2015. 

The following table summarises the consideration to acquire ServerSpace and the provisional amounts of identified assets acquired and liabilities assumed at the acquisition date:

The recognised amounts of all the net assets acquired and liabilities assumed are provisional.

The share purchase agreement, in respect of the acquisition of ServerSpace, included a provision under which the total consideration payable may have been adjusted by a payment to be made either to or by the Company, depending on the level of cash, debt and working capital shown in an agreed set of accounts (the Completion Accounts) made up to, and as at, the completion date.   Following agreement of the Completion Accounts it was agreed by the Company and the former shareholders of ServerSpace that no payment was due either to or by the Company under the terms of this provision. The contingent consideration arrangements require the Company to pay the former shareholders of ServerSpace additional amounts contingent on the completion of the migration of existing customer services to an iomart datacentre ("the Migration Payment") and on the level of profitability and the mix of revenue delivered by ServerSpace in the year ending 30 September 2015 ("the Earn-out Payment").

The potential undiscounted amount of the total payments that the Company could be required to make is between £nil and £1,650,000.  The amount of contingent consideration payable which was recognised as of the acquisition date was £1,650,000.

The amount of contingent consideration payable in respect of the Migration Payment is between £nil and £125,000 and the amount of contingent consideration payable in respect of the Earn-out Payment is between £nil and £1,650,000. The total contingent consideration payable in respect of the Migration payment and the Earn-out payment is restricted to £1,650,000 and, if the total of the two payments would exceed this amount, the Earn-out payment will be reduced by the amount required to reduce the total to £1,650,000.

ServerSpace earned revenue of £1,003,375 and generated a loss before tax of £128,093 in the period since acquisition.

Redstation Limited and Backup Technology Holdings Limited

The fair values of acquired assets and liabilities, including goodwill, previously disclosed as provisional for Redstation Limited and Backup Technology Holdings Limited have been finalised in the current period with no changes to the fair values disclosed in the Annual Report and Accounts 2014.

Pro-forma full year information

The following summary presents the Group as if the business acquired during the year had been acquired on 1 April 2014.  The amounts include the results of the acquired business, a charge for interest on the additional debt incurred to finance the acquisition and depreciation and amortisation of the acquired property, plant and equipment and intangible assets recognised on acquisition.  The amounts do not include any possible synergies from the acquisition.  The information is provided for illustrative purposes only and does not necessarily reflect the actual results that would have occurred, nor is it necessarily indicative of the future results of the combined companies.

8.         INTANGIBLE ASSETS