11 October 2022
iomart Group plc
("iomart" or the "Group" or the "Company")
iomart Group plc (AIM:IOM), the cloud computing company, today provides a trading update for the six months ended 30 September 2022, ahead of the announcement of its half year results expected to be released in early December 2022.
Group trading performance
We are pleased to report that the Group has performed well through the first six months of the year with strong cash conversion, improved customer renewal levels, and continued momentum across all strategic areas, including the completion of our first acquisition under our new strategy.
Customer renewal levels have returned to long-term historic averages which, when combined with our high levels of recurring revenue, provides visibility over our full year financial targets and a solid foundation as we transition towards a secure hybrid cloud offering. Importantly, the recent volatility in energy markets has presented challenges for the sector, however iomart's robust business model and customer arrangements have ensured that additional energy costs have been appropriately passed through to our customer base.
Against this backdrop, the Board is pleased to report a solid set of financial results, showing revenue ahead of the prior period and an EBITDA performance that reflects both the revenue mix in the period and our continued investment in the skills and capabilities of our workforce.
For the six months to 30 September 2022, the Group expects to report revenue of approximately £52.5 million (H1 FY22: £51.9 million), adjusted EBITDA(1) of approximately £17.8 million (H1 FY22: £19.6 million) and adjusted profit before tax (2) of approximately £7.3 million (H1 FY22: £9.1 million). The mix of the business continues to be focussed on recurring cloud managed services revenue, which is in line with management expectations. Non-recurring revenue from hardware and software reselling activity has not yet recovered. Recurring revenue for the six months was 95% of the total revenue (H1 FY22: 93%).
As announced on 15 August 2022, we successfully completed the first acquisition under our new strategy, acquiring Concepta Capital Limited ("Concepta"), a holding company for the ORIIUM and Pavilion IT brands, for an initial cash consideration of £10.5m. With a long track record and strong reputation across the indirect channel, the acquisition allows iomart to broaden our market and customer reach whilst enhancing our product expertise within the data management service layer. Concepta's trading since the acquisition has been in line with management's plan.
With the acquisition of Concepta and the £1.5m repayment of the acquired bank loans just ahead of the half year, Group net debt increased as expected to approximately £48.0 million at 30 September 2022 (31 March 2022: £41.3 million). The Group's cash generation from trading continues to be strong and consistent with past performance.
As we see increases in energy costs in the market, we have demonstrated that our business model and customer arrangements allow us to flex pricing. We continue to monitor the inflationary environment very closely and will seek to respond accordingly.
Revenue and profit in the second half of the year are expected to be higher than the first half, however, in the face of potential economic headwinds, it is not expected that margins will fully recover and that profit for the full year is therefore likely to be at the lower end of the Board's original expectations.
Reece Donovan, CEO of iomart Group plc, commented:
"Our team has executed well in the first half of the year, finding the correct balance between managing both the risks and opportunities that we see in the marketplace. We have maintained our tight control on costs and have successfully tested our business model in relation to energy pricing. The strength of our recurring revenue base, strong profit margins and cash generation, give us the ability to continue carefully investing in our skills and capabilities to support the execution of our strategy.
The market for cloud computing solutions continues to offer long-term growth and our strategic actions puts us in a stronger position to benefit from this opportunity. Our team, business model and strong financial position ensure we are well prepared for the year ahead."
(1)adjusted EBITDA means earnings before interest, tax, depreciation, amortisation, share based payment charges, gains or losses on revaluation of contingent consideration, acquisition related costs and non-recurring items.
(2)adjusted profit before tax means profits before, tax, share based payment charges, amortisation of acquired intangibles, gains or losses on revaluation of contingent consideration, acquisition related costs and non-recurring items.
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 Broker)
Tel: 020 7418 8900
Paul Gillam, James Smith
Investec Bank PLC (Joint Broker)
Tel: 020 7597 4000
Patrick Robb, Virginia Bull, Nick Prowting
Tel: 020 3405 0205
Caroline Forde, Hilary Buchanan, Joe Pederzolli
About iomart Group plc
iomart Group plc (AIM: IOM) is a cloud computing and IT managed services business providing hybrid cloud infrastructure, network connectivity, security, and digital workplace capability. Our mission is simple: to make our customers unstoppable by enabling them to connect, secure and scale anywhere, anytime. From our portfolio of data centres we own and operate across the UK to connected sites around the world, our 400-strong team can design and deploy the right cloud solution for our customers.
For further information about the Group, please visit www.iomart.com