REG - Iomart Group PLC - Half Yearly Results
06/12/2022 07:00
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RNS Number : 6746I Iomart Group PLC 06 December 2022
6 December 2022
iomart Group plc
("iomart" or the "Group" or the "Company")
Half Yearly Results
Proven recurring revenue, cash generation and expanding offering provides
foundation for growth
iomart (AIM: IOM), the cloud computing company, is pleased to report its
consolidated half yearly results for the period ended 30 September 2022 (H1
2023).
FINANCIAL HIGHLIGHTS
H1 2023 H1 2022 Change
Revenue £52.6m £51.9m +1%
% of recurring revenue(1) 94% 93% +1pp
Adjusted EBITDA(2) £17.8m £19.6m -9%
Adjusted profit before tax(3) £7.4m £9.1m -19%
Profit before tax £4.9m £6.0m -18%
Adjusted diluted EPS(4) 5.2p 6.5p -20%
Basic EPS 3.5p 4.4p -20%
Cash generation from operations £14.5m £17.9m -19%
Interim dividend per share 1.94p 2.42p -20%
· Results in line with the pre-close trading update published in
early October 2022
· Revenue grew 1% YoY, with the Group continuing to benefit from
very strong levels of recurring revenues (94%(1) of Group revenues)
· Concepta acquisition, completed on 15 August 2022, provided
£1.3m of revenue and a small positive profit contribution in the final 6
weeks of the period and is performing well
· Stronger customer retention levels in the period provides an
improved backdrop as we see pipeline growth from our wider product offering
· Reduction in adjusted EBITDA(2) and adjusted profit before tax(3)
reflects the revenue mix and higher staff costs in the period necessary to
retain the skills and capabilities that are important for our growth strategy
· Profitability margins, as expected, reflect the changes in
revenue mix and the inflationary environment with adjusted EBITDA margin and
adjusted profit before tax margin at 33.8% (H1 2022: 37.7%) and 14.1% (H1
2022: 17.5%), respectively
· Cash conversion ratio(6) of 81% is lower than prior period (H1
2022: 91%) due to the specific timing of some vendor payments overlapping
period ends, it remains at 95% on a 12-month basis
· Period end net debt of £47.8m, comfortable at 1.3 times
annualised EBITDA(5)
· 12-month extension option within the existing £100m revolving
bank facility taking expiry to 30 June 2026 agreed post period end,
underpinning the Group's five-year growth strategy
OPERATIONAL HIGHLIGHTS
· New security partnership with cyber security specialist
e2e-assure in operation with two live customers and a healthy pipeline
established
· Acquisition of Concepta was an important step in strengthening
our indirect routes to market, while extending the Group's products, skills
and capabilities
· Business model and customer arrangements have ensured that
wholesale energy price rises have been appropriately passed to our customer
base and included in our pricing plans for renewals and new business
· New regional sales leadership team has reshaped the sales
structure to align resources with the market opportunities
· New iomart group website launched to support improved online
presence and opportunity capture
· Product management team expanded to support portfolio
development. In final stages of completing iomart's new multi-tenant cloud
platform based on the latest industry leading technology
· Re-contracted our core UK fibre network, refreshing the resilient
network that securely connects our data centres, and we have accelerated the
upgrade to UPS battery power systems, providing for greater energy efficiency
in the future
· Launched a full learning management system internally to support
our skills development programmes
· Lucy Dimes appointed as new independent Chair of the Board,
bringing a wealth of industry experience
OUTLOOK
· H2 will include the full extent of the energy price uplifts
passed onto customers
· As a consequence, the Board expects revenues for the year ending
31 March 2023 will be ahead of their original expectations
· Full year profits are expected to be in line with expectations,
with the second half profit showing progress on H1
STATUTORY EQUIVALENTS
A full reconciliation between adjusted and statutory profit before tax is
contained within this statement. The largest item is the consistent add back
of the non-cash amortisation of acquired intangible assets. The largest
variance, period on period, is a £0.6m lower amortisation of acquired
intangible assets as the amortisation periods expire on historic acquisitions.
Reece Donovan, CEO commented,
"This has been another period of considerable operational activity, against
the backdrop of ongoing macro-economic challenges. The steps we have taken to
strengthen our capabilities and offering, increase effectiveness of our sales
activities and our clear focus on execution gives us a stronger foundation to
accelerate growth.
We believe the diversity and limited concentration of our customer base, high
level of recurring revenue, and strong cash flow generation should shelter us
from the worst of the expected economic pressures as the UK enters a
recessionary period. The critical nature of the infrastructure and digital
services we provide in a growing cloud market will allow us to support
businesses well into the future.
Our stronger customer retention levels provide an improved backdrop as we see
pipeline growth from our wider product offering, and the Board remains
confident in the outlook for the long-term prospects for the Group."
(1 ) Recurring revenue, as disclosed in note 2, is the revenue that repeats
either under long-term contractual arrangement or on a rolling basis by
predictable customer habit.
(2 ) Throughout this statement adjusted EBITDA, as disclosed in the
consolidated interim statement of comprehensive income, 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.
(3 ) Throughout this statement adjusted profit before tax, as disclosed on
page 8, is profit before tax, amortisation charges on acquired intangible
assets, share based payment charges and acquisition costs.
(4 ) Throughout this statement adjusted diluted earnings per share, as
disclosed in note 3, is earnings per share before amortisation charges on
acquired intangible assets, share based payment charges, acquisition costs and
the taxation effect of these.
(5) Annualised EBITDA is the last 12 months of EBITDA for the period ended
30 September 2022.
(6 ) Cash conversion is calculated as cash flow from operations, as
disclosed in the consolidated interim statement of cash flows, divided by
adjusted EBITDA defined above. The 12-month basis aggregates the second half
of the year to 31 March 2022 and the current 6 month reported period on the
same basis of calculation.
This interim 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 Broker) Tel: 020 7418 8900
Paul Gillam, James Smith
Investec Bank PLC (Joint Tel: 020 7597 4000
Broker)
Patrick Robb, Virginia Bull, Nick Prowting
Alma PR Tel: 020 3405 0205
Caroline Forde, Hilary Buchanan, Joe Pederzolli
About iomart Group plc
iomart Group plc (AIM: IOM) is a cloud computing and IT managed services
business providing hybrid cloud infrastructure, network connectivity,
security, and digital workplace capability. Our mission is simple: to make our
customers unstoppable by enabling them to connect, secure and scale anywhere,
anytime. From our portfolio of data centres we own and operate across the UK
to connected sites around the world, our 400-strong team can design and deploy
the right cloud solution for our customers.
For further information about the Group, please visit www.iomart.com
(http://www.iomart.com/)
Chief Executive's Statement
Introduction
We have continued to make positive progress against our strategy to build on
our existing strong position in the private cloud space, at the same time as
re-positioning our offering around the growing hybrid cloud market. We are
confident in our strategy and our teams are firmly in execution mode, with a
wider product offering and increasing skill set.
The economic outlook represents a period of uncertainty for all, but as we
have historically shown, iomart's high levels of recurring revenue, sticky
customer base and strong levels of cash generation mean the Group is well
positioned to successfully navigate through such turbulences.
Continuing the good progress from the second half of last year, we have seen
customer renewal levels return 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.
Inflationary challenges are impacting all businesses and we have seen this
across most of our cost areas to varying degrees. In particular, the
volatility in the wholesale energy market has required significant management
focus over the past months to protect the business. iomart's robust business
model and customer arrangements have ensured price uplifts have been
appropriately passed to our customer base and the framework is now well
tested in ensuring pricing can be flexed to match the energy cost base.
The results for the period are in line with our pre-close statement, with
revenues up 1% on the prior period to £52.6m, and an adjusted EBITDA of
£17.8m reflecting both the revenue mix in the period and our continued
investment in upskilling our workforce. We achieved continued strong cash
flow, which even after the acquisition, sees us close the period with £17.8m
of cash and a comfortable level of leverage with net debt of £47.8m.
We were pleased to resume M&A activity, in line with our strategic plans,
with the completion of the Concepta acquisition on 15 August 2022. This fits
within our growth plan by extending the Group's product, skills and
capabilities, strengthening our direct and indirect routes to market, and
complementing the Group's strong financial model.
There have been some changes to the Board in the period with Lucy Dimes
joining us on 30 August 2022 as our new Chair. Lucy is an
accomplished business leader having operated in senior executive positions in
FTSE 100, FTSE 250 and private equity owned companies spanning telecoms,
technology, business services and financial services. Her considerable
experience and insight will be invaluable to us as we continue to pursue a
successful growth strategy. Andrew Taylor, independent Non-Executive Director,
will be leaving us on 31 December 2022. The Nomination Committee is
undertaking a search for a replacement independent Non-Executive Director,
with the intention for the search to be completed by the Company's financial
year end.
Strategy
We have a clearly communicated vision which is to position iomart for the next
phase of its growth as a recognised leading secure hybrid cloud business. We
have been bold by stating in 2021 our aspiration to become a £200m revenue
business within five years. Underpinning this was a roadmap with a focus on
three main activities:
· New services - focusing on four new service areas - hybrid
cloud, security, the future digital workplace and connectivity;
· Complementary acquisitions - to expand the customer base, to
acquire new skillsets, and to extend our go-to-market channels; and
· Protect and expand the existing base of run rate revenue and
EBITDA, which is underpinned by our existing core private cloud
infrastructure.
We have made good progress in each area of the business improvement areas
necessary to support growth and realising the milestones that we laid out for
delivery in FY23.
Our marketing efforts under the revised branding and simplified value
proposition have continued to support iomart brand awareness and improved the
level of engagement with new and existing customers. In the period a new
iomart group website was launched to support improved online presence and
opportunity capture. The last six months has seen an improvement in marketing
metrics and a larger pipeline of prospects generating a stronger sales
pipeline.
By the end of last year, our newly established product team had fully
supported specific campaigns around the growth areas of Digital Workplace,
Secure Connectivity and Managed Microsoft Azure. In the last six months,
following the signing of our e2e-assure partnership a significant effort has
been made in the productisation of our offering for managed cyber security.
This has involved full product documentation, sales enablement training plus
supporting our marketing efforts with events and publications. Following a few
months of up front internal enablement efforts, it is pleasing to see we now
have two live customers taking this new service and have developed a healthy
pipeline of opportunities. We commissioned an independent research report on
the State of UK Cyber and the resulting published report has supported a
significant amount of recent business development activities. Globally, cyber
instances are on the rise and we now have a highly credible offering for
customers to address this everyday threat. We will continue to look to expand
this cyber portfolio with a strong focus on Microsoft. During the last six
months we have put a large amount of effort into finalisation of the
development of iomart's new multi-tenant cloud platform based on the latest
industry leading technology. This will provide customers with a cost
effective, easy-to-use and resilient cloud solution.
As previously reported, we strengthened our commercial leadership with the
appointment in February 2022 of a new Chief Commercial Officer. Since then,
the commercial team has seen new regional sales leaders join the business,
investment made into a sales operations support team and revised account
allocation structure to allow a recently established inside sales team to
focus on the long tail of smaller customers. We have made incremental
investments in these changes but all within an agreed cost envelope, which we
believe is sensible to support our growth strategy by releasing commercial
teams to focus on selling.
During the period, we invested in a Learning Management System ("LMS") which
will support our skills development programmes and employee engagement. This
is an important step, as we strongly believe a continuous learning culture
will underpin our future success. In a period of skills shortages, we
believe, attracting, developing and retaining our young talent is critical.
Acquisition of Concepta
As announced on 15 August 2022, we successfully completed the first
acquisition under our refreshed strategy, acquiring Concepta Capital Limited,
a holding company for the ORIIUM and Pavilion IT brands, for an initial cash
consideration of £10.5m with the potential of a further £4.0m contingent
earn-out payment based on profitability for the 12-months ending 30 June 2023.
We also repaid £1.5m of bank debt acquired on completion. This acquisition
provides complementary solution capabilities and deep technical expertise in
line with iomart's hybrid cloud strategy and a significant new channel partner
network, strengthening iomart's indirect route to market.
ORIIUM, established in 2007, is a channel-only organisation working with value
added resellers and managed service providers to deliver best in class data
and application management solutions to end users. With this acquisition,
iomart gains an independent wholesale operation that understands the UK IT
channel deeply and has built trust through long-standing strategic partner
relationships. Data management is a core element of the Group's hybrid cloud
proposition, and ORIIUM materially strengthens iomart's indirect sales channel
capabilities, while extending the Group's product and technical skills and
capabilities, with an additional 45 technical engineers joining the Group.
Concepta acquired Pavilion IT, a business established for over 30 years, in
2018 and subsequently in 2021 acquired P2 Technologies, a business focussed on
the legal & accounting professional services sector to add vertical
specialisation. This created a strong direct sales organisation with over 250
customers under one unified operational delivery team offering a range of
hybrid and cloud infrastructure technology solutions plus professional
services and on-going customer support arrangements. This customer base will
have access to iomart's hybrid cloud solutions and services.
Concepta's trading since the acquisition has been in line with management's
plan and we continue to stay focussed on our active M&A programme and the
identification of appropriate bolt-on acquisitions.
Market
With the insatiable growth in data requirements from across all industries,
the demand for the three core cloud building blocks of compute power, storage
and connectivity continues to expand. The concept of "Cloud" computing is now
globally recognised although the complexity of available options continues to
grow. The "public cloud" giants such as Amazon, Microsoft and Google have
vastly contributed to this general awareness and consequently, as is well
documented, have seen high growth globally as many organisations look for
cloud infrastructure, connectivity and enhanced capabilities.
The reality of the situation is that the vast majority of the world's IT
infrastructure is complex and untidy in nature which means a hybrid cloud
model, using the best combination of on premise, private and public cloud
infrastructure will remain a key market feature for businesses. Even if
businesses want to use Public Cloud infrastructure fully, many lack the
detailed expertise, skills and resources required to manage all the elements.
iomart is well positioned to meet this demand given a long-established
capability in designing and running private clouds and supporting on premise
solutions along with the steps we have taken to continue to complement this
with skills and capabilities for public cloud provisioning and management.
Many organisations are increasingly outsourcing these requirements to experts,
who can help them navigate a constantly evolving and complex technical
landscape, providing high levels of reliability, customer support, flexibility
and technical knowledge. These requirements increasingly come with greater
security and compliance needs especially as government regulations grow. Many
customers are looking for a single point of accountability for all their cloud
needs and iomart is well positioned to provide this service going forward
particularly for medium to large enterprises.
Operational Review
Cloud Services
Cloud Services revenues increased by £0.6m (1%) to £46.7m (H1 2022:
£46.1m). This included £1.3m of revenue for the 6 weeks of trading from the
Concepta acquisition. Cloud Services EBITDA (before share-based payments,
acquisition costs and central group overheads) was £17.3m being 37.0% of
cloud services revenue (H1 2022: £18.9m (40.9% of cloud services revenue)).
The reduction of £1.6m in absolute Cloud Services EBITDA is a combination of
many moving parts, including timing aspects associated with the inflationary
environment, the lower margin of some of our new offerings in comparison to
the self-managed infrastructure only deals of earlier years plus greater
stability in our team numbers than in the prior period.
The volatility and increases to electricity wholesale prices is a significant
challenge for our whole sector. Our business model and customer arrangements
have ensured that wholesale energy price rises have been appropriately passed
on to our customer base and included in our pricing plans for renewals and new
business. The specific timing of price changes means that such increases will
have a significantly larger impact in the second half of the year in terms of
the related revenue uplift. The government support for businesses, along with
hedging put in place, gives certainty for both us and our customers for the
next six months. Supported by our energy procurement advisors, we have
commenced an appropriate hedging strategy for 2023/24 and onwards. Ensuring
pricing is flexed to match the energy cost base remains a high priority and
one we see as best practice amongst our competitors.
The following is the disaggregation of Cloud Services revenues of £46.7m (H1
2022: £46.1m):
Disaggregation of Cloud Services revenue 6 months to 30 September 2022 6 months to 30 September 2021 Year to 31
£'000 £'000 March
2022
£'000
Cloud managed services 29,220 28,037 55,745
Self-managed infrastructure 14,308 14,408 28,363
Non-recurring revenue 3,219 3,703 7,128
46,747 46,148 91,236
Cloud managed services (recurring revenue)
Cloud managed services includes the provision of fully managed, complex,
bespoke and resilient solutions involving private, public and hybrid cloud
infrastructure. Over the long-term, we anticipate this will be the highest
growth area for iomart due to the market drivers described above.
Customer renewal levels have returned to long-term historic averages which was
very positive for the 6-month period and provides a solid foundation as we
transition towards a secure hybrid cloud offering. New order bookings remain
flat versus the prior period, with the largest contribution continuing to be
from our existing customer base. New customer wins have longer sales cycles
and we do see caution on commencing large data transformation projects in the
current environment. Our pipeline is growing at a reasonable pace giving
confidence that our new product launches and marketing approach is paying
dividends and the pillars of our growth strategy remain sound.
The Concepta acquisition (mainly the ORIIUM brand) contributed £0.6m of cloud
managed services revenue in the 6-week period following the acquisition. We
are very pleased to add ORIIUM's strong indirect channel as an additional
route to market.
Self-managed infrastructure (recurring revenue)
We have a large customer base of around 6,000 customers, across a number of
brands, who wish to source compute power and connectivity mainly through the
provision of dedicated servers and manage these directly. Our own regional
data centre estate and fibre network positions us well to offer such
infrastructure as a service. It is generally recognised that this activity is
a lower growth area within the cloud market but continues to offer a cost
competitive solution for many use cases and for customers who have retained
their own IT skills.
In the first half of this financial year, the self-managed infrastructure
revenue of £14.3m represented a small reduction of £0.1m in comparison to
the first half of last year. This is a combination of a reduction in the
number of our long tail of smaller customers, partially offset by energy price
rises passed onto customers, which are more intensive within this area, plus
higher new order bookings from an inside sales team established to retain
dedicated focus on this area. We will continue to allocate resources to ensure
we provide this customer base with resilient, cost effective and increasingly
automated solutions.
Our UK owned infrastructure is an important part of the delivery of our
recurring revenue services, a differentiator in the market and allows more of
the value add to be retained by iomart. During the period we re-contracted our
core UK fibre network. This refreshes the resilient network that securely
connects our data centres together, with the implementation to be undertaken
during the course of 2023. We had already commenced the upgrade to our
uninterruptible power systems ("UPS") in our core data centres last year.
However, given the increase in energy costs we have accelerated this as the
new systems offer improved energy efficiencies. This programme is around
£3.5m of spend and will be part of a rolling programme over the coming 18
months.
Non-recurring revenue
Non-recurring revenue of £3.2m (H1 2022: £3.7m) relates primarily to on
premise product reselling via our Cristie Data brand plus consultancy
projects. Often these non-recurring activities provide an interesting
initial introduction to the wider iomart Group and evolve customers into a
higher level of recurring services. The Concepta acquisition in August 2022
included the Pavilion IT brand, which primarily undertakes similar reselling
and professional services activity. This added £0.7m of non-recurring revenue
post acquisition, meaning excluding acquisition impact, the underlying
reduction in non-recurring revenue was £1.2m. The economic situation in some
of our customer base has slowed down hardware refresh activity but we are also
reviewing our specific product proposition to ensure it avoids the more
commoditised areas, matches our deeper skills, for example in data management,
and at the same time will allow facilitation over time to iomart's core
recurring revenues.
Easyspace
The Easyspace segment has performed well during the period, delivering stable
revenues and improved EBITDA (before share based payments, acquisition costs
and central group overheads) of £5.8m (H1 2022: £5.8m) and £2.9m (H1 2022:
£2.6m), respectively.
The global domain name and mass market hosting sector continues to grow,
supported by the increasing importance of an internet presence and ecommerce
for all areas of the economy, including the small and micro business community
represented within our Easyspace division. A smaller number of large global
operators increasingly dominates this sector, and we recognised a long time
ago that the marketing spends required to compete for new business in this
specific area was not the best use of iomart's resources. However, we do
ensure our customer base of around 60,000 customers are well served with a
good range of products and importantly a high level of customer service. This
level of attention is ensuring a strong level of renewal rates with customers.
Financial Performance
Revenue
Overall revenue from our operations increased by 1% to £52.6m (H1 2022:
£51.9m). We saw a greater share of recurring revenue at 94% (H1 2022: 93%)
compared to prior periods as non-recurring activity levels reduced. We remain
focussed on retaining our recurring revenue business model with the
combination of multi-year contracts and payments in advance providing us with
good revenue visibility. Our Cloud Services segment revenues increased by 1%
to £46.7m (H1 2022: £46.1m). Our Easyspace segment has performed well over
the period, with revenues for the first half stable at £5.8m (H1 2022:
£5.8m).
Gross Profit
The gross profit in the period was relatively flat at £31.2m (H1 2022:
£31.3m) with the gross profit as a percentage of revenue of 59.3% being only
a small reduction from prior period (H1 2022: 60.3% of revenue). Our key
vendor relationships have remained stable in the period and we are seeking to
consolidate and enhance these where possible. As would be expected in the
current inflationary environment, we have seen general cost increases across
most areas of our supply chain. As noted earlier, the volatility in the
wholesale energy market has dominated our attention in terms of ensuring we
have an appropriate response.
Adjusted EBITDA
The Group's adjusted EBITDA reduced by £1.8m (9%) to £17.8m (H1 2022:
£19.6m) which in EBITDA margin terms translates to 33.8% (H1 2022: 37.7%).
Administration expenses (before depreciation, amortisation, share based
payment charges and acquisition costs) of £13.4m are £1.6m higher than the
previous period. This includes £0.5m from the addition of the c.70 staff plus
overhead costs from the Concepta acquisition. As highlighted in prior
reporting, financial year 2022 saw an unusual profile of staff costs. Like the
wider sector, we saw a period of higher staff attrition during the mid-part of
the prior financial year with subsequent recruitment activity building the
team back up to the required level. The last 6 months has been more stable on
headcount, which accounts for a large element of the overall increase
(£0.6m). Other factors include a salary award/NI levy increase (£0.5m). All
other overhead costs categories are broadly in line with the prior period.
Cloud Services saw an 8% reduction in its adjusted EBITDA to £17.3m (H1 2022:
£18.9m), giving a margin of 37.0% (H1 2022: 40.9%). Adjusted EBITDA for
Easyspace improved slightly to £2.9m (H1 2022: £2.6m) and EBITDA margin
increased to 49.5% (H1 2022: 45.8%).
Group overheads, which are not allocated to segments, include the cost of the
Board, all the running costs of the headquarters in Glasgow, and Group led
functions such as human resources, marketing, finance and design. Group
overheads saw an increase of £0.5m to £2.4m (H1 2022: £1.9m) driven by some
increases in professional fees and by the staff related increases for central
functions, for the same reasons noted above.
Adjusted profit before tax
Depreciation charges of £8.0m (H1 2022: £8.2m) have decreased slightly in
absolute terms which also means it is slightly down as a percentage of our
recurring revenue in the period to 16.2% (H1 2022: 17.1%). The charge for the
amortisation of intangible assets, excluding amortisation of intangible assets
resulting from acquisitions ("amortisation of acquired intangible assets") has
decreased to £1.2m (H1 2022: £1.3m) simply due to the specific historic
timing of investments made.
Net finance costs have increased by £0.3m to £1.2m (H1 2022: £0.9m)
reflecting the increase in the SONIA interest rate.
After deducting the charges for depreciation, amortisation, excluding the
amortisation of acquired intangible assets, and finance costs from the
adjusted EBITDA, the adjusted profit for the period before tax decreased by
£1.7m to £7.4m (H1 2022: £9.1m) representing an adjusted profit before tax
margin of 14.1% (H1 2022: 17.5%).
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 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 tax to profit before tax 6 months to 30 September 2022 6 months to 30 September 2021 Year to 31
£'000 £'000 March
2022
£'000
Adjusted profit before tax 7,360 9,104 17,109
Less: Share based payments (418) (620) (480)
Less: Amortisation of acquired intangible assets (1,748) (2,312) (4,044)
Less: Acquisition costs (252) (136) (315)
Less: Accelerated write off of arrangement fee on bank facility - - (102)
Profit before tax 4,942 6,036 12,168
The larger adjusting items in the current period are:
· share based payment charges in the period which decreased
slightly to £0.4m (H1 2022: £0.6m) as a result of the timing of share
options vesting; and
· charges for the amortisation of acquired intangible assets of
£1.7m (H1 2022: £2.3m) which have decreased by £0.6m reflecting the expiry
of the amortisation period from older historic acquisitions.
After deducting the charges for share based payments, the amortisation of
acquired intangible assets and acquisition costs, the reported profit before
tax is £4.9m (H1 2022: £6.0m).
Taxation and profit for the period
There is a tax charge in the period of £1.1m (H1 2022: £1.2m), which
comprises a current taxation charge of £1.0m (H1 2022: £1.9m), and a
deferred taxation charge of £0.1m (H1 2022: credit of £0.6m). The headline
effective tax rate is 22.6% (H1 2022: 20.3%). The future increase to a 25% UK
corporation tax rate has been reflected at 30 September 2022 on the deferred
tax balances. In the prior period, the deferred tax balances were calculated
with a 19% rate.
The lower tax charge in the year is a result of the positive effect of the
higher "super deduction" available for capital investments and lower taxable
income and results in a profit for the period from total operations of £3.8m
(H1 2022: £4.8m).
Earnings per share
Adjusted diluted earnings per share, which is based on profit for the period
attributed to ordinary shareholders before share based payment charges,
amortisation of acquired intangible assets, acquisition costs and the tax
effect of these items, was 5.2p (H1 2022: 6.5p).
The measure of adjusted diluted earnings per share as described above is a
non-statutory measure that is commonly used to analyse the performance of
companies where M&A activity forms a significant part of their activities.
Basic earnings per share from continuing operations was 3.5p (H1 2022: 4.4p).
The calculation of both adjusted diluted earnings per share and basic earnings
per share is included at note 3.
Cash flow
The Group generated cash from operations in the period of £14.5m (H1 2022:
£17.9m) with an adjusted EBITDA conversion to cash ratio in the period of 81%
(H1 2022: 91%). The first half year typically has a lower conversion ratio but
in addition, in this specific 6-month period we had a small number of larger
vendor payments, which overlapped the period ends causing the ratio in this
period to be below 90%. At 30 September 2022, the conversion ratio over the
last 12 months remains at 95%. Cash payments for corporation taxation in the
period were limited (H1 2022: £1.4m), due to overpayments from prior years
which could be offset against the first two quarterly instalments, resulting
in net cash flow from operating activities in the period of £14.5m (H1 2022:
£16.4m).
Expenditure on investing activities of £13.8m (H1 2022: £5.3m) was incurred
in the period. £3.1m (H1 2022: £4.7m) was incurred on the acquisition of
property, plant and equipment, principally to provide specific services to our
customers. We incurred £0.6m (H1 2022: £0.6m) in respect of development
costs during the period. In August we paid the initial equity consideration on
the Concepta acquisition and paid professional services fees which combined
with the cash acquired, resulted in a £10.0m net outflow. There were no
payments made concerning M&A activity in the prior period.
During the first half of the year, net cash generated from financing
activities was £1.7m (H1 2022: (£7.9m) used). All shares issued in the
current period under share options were issued at nominal value. In the
current period we made a £10.4m drawdown on the revolving credit facility to
support the initial equity consideration for the Concepta acquisition. We
repaid £1.5m of bank debt acquired from Concepta on completion. In the
current period we repaid £2.5m of lease liabilities (H1 2022: £2.5m), paid
£0.7m (H1 2022: £0.5m) of finance charges and made a dividend payment of
£4.0m (H1 2022: £4.9m). As a result, cash and cash equivalent balances at
the end of the period were £17.8m (H1 2022: £26.3m).
Net Debt
The net debt position of the Group at the end of the period was £47.8m,
compared to £41.3m at 31 March 2022, with the increase driven by the payment
of the initial consideration for the Concepta acquisition. Our multiple of the
last 12 months of adjusted EBITDA to net debt is 1.3 times which remains a
comfortable level of leverage. The analysis of the net debt is shown below:
30 September 2022 30 September 2021 31 March
£'000 £'000 2022
£'000
Bank revolver loan 44,400 52,791 34,000
Lease liabilities 21,196 22,792 22,623
Less: cash and cash equivalents (17,770) (26,273) (15,332)
Net Debt 47,826 49,310 41,291
We have a £100m Revolving Credit Facility ("RCF") provided by a four-bank
group consisting of HSBC, Royal Bank of Scotland, Bank of Ireland and
Clydesdale Bank. The facility had an initial maturity date of 30 June 2025,
but subsequent to the period end we have executed an option which was approved
by the banks to see this extended by 12 months to 30 June 2026. The facility
also benefits from a £50m Accordion Facility. The RCF has a borrowing cost at
the Group's current leverage levels of 180 basis points over SONIA.
Dividend
We have a dividend policy to a maximum pay-out of 50% of adjusted diluted
earnings per share. Given the high recurring revenue nature of the Group,
the level of operating cash that we have delivered and low level of
indebtedness within the Group we have applied the maximum pay-out ratio in our
assessment of the appropriate level of interim dividend to be made. Therefore,
we will pay an interim dividend of 1.94p per share (H1 2022: 2.42p) on 27
January 2023 to shareholders on the register on 6 January 2023, with an
ex-dividend date of 5 January 2023. This interim dividend represents a pay-out
ratio of 37% (H1 2022: 37%) of the adjusted diluted earnings per share for the
period.
Current trading and outlook
The second half of the year has started well, with underlying trading for the
first two months in line with expectations. We expect to see an increase in
revenue in the second half as the full extent of energy price increases passed
on to customers flows into our financial reporting. While this will not affect
profitability expectations for the year end, it will see revenues being ahead
of the Board's original expectations.
We believe the diversity and limited concentration of our customer base, high
level of recurring revenue, and strong cash flow generation should shelter us
from the worst of the expected economic pressures as the UK enters a
recessionary period. The critical nature of the infrastructure and digital
services we provide in a growing cloud market will allow us to support
businesses well into the future.
The steps we have taken to strengthen our capabilities and offering, increase
effectiveness of our sales activities and our clear focus on execution gives
us a stronger foundation to accelerate growth. Our stronger customer retention
levels provide an improved backdrop as we see pipeline growth from our wider
product offering, and the Board remains confident in the outlook for the
long-term prospects for the Group.
Reece Donovan
Chief Executive Officer
6 December 2022
Consolidated Interim Statement of Comprehensive Income
Six months ended 30 September 2022
Unaudited Unaudited Audited
6 months to 30 September 2022 6 months to 30 September 2021 Year to 31 March 2022
£'000 £'000 £'000
Revenue 52,557 51,930 103,018
Cost of sales (21,355) (20,591) (41,712)
Gross profit 31,202 31,339 61,306
Administrative expenses (25,047) (24,401) (47,076)
Operating profit 6,155 6,938 14,230
Analysed as:
Earnings before interest, tax, depreciation, amortisation, acquisition costs 17,794 19,568 38,009
and share based payments
Share based payments (418) (620) (480)
Acquisition costs 4 (252) (136) (315)
Depreciation 9 (7,980) (8,227) (16,296)
Amortisation - acquired intangible assets 8 (1,748) (2,312) (4,044)
Amortisation - other intangible assets 8 (1,241) (1,335) (2,644)
Finance costs 5 (1,213) (902) (2,062)
Profit before taxation 4,942 6,036 12,168
Taxation 6 (1,119) (1,224) (2,772)
Profit for the period/year 3,823 4,812 9,396
Other comprehensive income
Currency translation differences 166 59 30
Other comprehensive income for the period/year 166 59 30
Total comprehensive income for the period/year attributable to 3,989 4,871 9,426
equity holders of the parent
Basic and diluted earnings per share
Basic earnings per share 3 3.5p 4.4 p 8.6 p
Diluted earnings per share 3 3.4p 4.3 p 8.4 p
Consolidated Interim Statement of Financial Position
As at 30 September 2022
Unaudited Unaudited Audited
30 September 30 September 2021 31 March 2022
2022 £'000 £'000
£'000
ASSETS
Non-current assets
Intangible assets - goodwill 8 99,710 86,479 86,479
Intangible assets - other 8 15,153 15,052 12,852
Trade and other receivables 597 194 531
Property, plant and equipment 9 67,790 73,494 70,893
Deferred tax asset - 721 -
183,250 175,940 170,755
Current assets
Cash and cash equivalents 17,770 26,273 15,332
Trade and other receivables 23,708 23,161 20,592
Current tax asset 789 - 1,658
42,267 49,434 37,582
Total assets 225,517 225,374 208,337
LIABILITIES
Non-current liabilities
Trade and other payables (2,978) (1,882) (2,643)
Non-current borrowings 11 (62,030) (19,420) (53,063)
Provisions for other liabilities and charges (2,626) (2,335) (2,438)
Deferred tax liability (2,694) - (1,510)
(70,328) (23,637) (59,654)
Current liabilities
Contingent consideration due on acquisitions 7 (4,000) - -
Trade and other payables (28,282) (28,392) (26,232)
Current tax liabilities - (51) -
Current borrowings 11 (3,566) (56,163) (3,560)
(35,848) (84,606) (29,792)
Total liabilities (106,176) (108,243) (89,446)
Net assets 119,341 117,131 118,891
EQUITY
Share capital 1,101 1,097 1,101
Own shares (70) (70) (70)
Capital redemption reserve 1,200 1,200 1,200
Share premium 22,495 22,495 22,495
Merger reserve 4,983 4,983 4,983
Foreign currency translation reserve 152 15 (14)
Retained earnings 89,480 87,411 89,196
Total equity 119,341 117,131 118,891
Consolidated Interim Statement of Cash Flows
Six months ended 30 September 2022
Unaudited Unaudited Audited
6 months to 30 September 2022 6 months to 30 September 2021 Year to 31 March 2022
£'000 £'000 £'000
Profit before tax 4,942 6,036 12,168
Finance costs - net 1,213 902 2,062
Depreciation 7,980 8,227 16,296
Amortisation 2,989 3,647 6,688
Share based payments 418 620 480
Professional fees on acquisition 232 - -
Gain on disposal of property - - (338)
Movement in trade receivables (1,579) 126 3,257
Movement in trade payables (1,722) (1,710) (2,702)
Cash flow from operations 14,473 17,848 37,911
Taxation paid (6) (1,434) (2,455)
Net cash flow from operating activities 14,467 16,414 35,456
Cash flow from investing activities
Purchase of property, plant and equipment (3,130) (4,673) (9,492)
Proceeds received from disposal of property, plant and equipment - - 700
Development costs (627) (601) (1,352)
Purchase of intangible assets (31) (1) (91)
Payment for acquisition of subsidiary net of cash acquired (9,963) - -
Net cash used in investing activities (13,751) (5,275) (10,235)
Cash flow from financing activities
Issue of shares - - 4
Drawdown of bank loans 10,400 - -
Repayment of bank loans - - (4,410)
Repayment of lease liabilities (2,509) (2,466) (18,840)
Repayment of debt acquired on acquisition (1,508) - -
Finance costs paid (704) (506) (1,100)
Refinancing costs paid - - (990)
Dividends paid (3,957) (4,932) (7,591)
Net cash generated from/(used in) financing activities 1,722 (7,904) (32,927)
Net increase in cash and cash equivalents 2,438 3,235 (7,706)
Cash and cash equivalents at the beginning of the period 15,332 23,038 23,038
Cash and cash equivalents at the end of the period 17,770 26,273 15,332
Consolidated Interim Statement of Changes in Equity
Six months ended 30 September 2022
Foreign currency translation reserve
Capital redemption reserve Share premium account
Share capital Own Merger reserve Retained earnings
shares Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2021 1,097 (70) 1,200 22,495 4,983 (44) 86,911 116,572
Profit in the period - - - - - - 4,812 4,812
Currency translation differences - - - - - 59 - 59
Total comprehensive income - - - - - 59 4,812 4,871
Dividends - - - - - - (4,932) (4,932)
Share based payments - - - - - - 620 620
Total transactions with owners - - - - - - (4,312) (4,312)
Balance at 30 September 2021 (unaudited) 1,097 (70) 1,200 22,495 4,983 15 87,411 117,131
Profit in the period - - - - - - 4,584 4,584
Currency translation differences - - - - - (29) - (29)
Total comprehensive income - - - - - (29) 4,584 4,555
Dividends - - - - - - (2,659) (2,659)
Share based payments - - - - - - (140) (140)
Issue of share capital 4 - - - - - - 4
Total transactions with owners 4 - - - - - (2,799) (2,795)
Balance at 31 March 2022 (audited) 1,101 (70) 1,200 22,495 4,983 (14) 89,196 118,891
Profit in the period - - - - - - 3,823 3,823
Currency translation differences - - - - - 166 - 166
Total comprehensive income - - - - - 166 3,823 3,989
Dividends - - - - - - (3,957) (3,957)
Share based payments - - - - - - 418 418
Total transactions with owners - - - - - - (3,539) (3,539)
Balance at 30 September 2022 (unaudited) 1,101 (70) 1,200 22,495 4,983 152 89,480 119,341
Notes to the Half Yearly Financial Information
Six months ended 30 September 2022
1. Basis of preparation
The half yearly financial information does not constitute statutory financial
statements as defined in section 434 of the Companies Act 2006. The
statutory accounts for the year ended 31 March 2022 have been delivered to the
Registrar of Companies and included an independent auditor's report, which was
unqualified and did not contain a statement under section 493 of the Companies
Act 2006.
The half yearly financial information has been prepared using the same
accounting policies and estimation techniques as will be adopted in the Group
financial statements for the year ending 31 March 2023. The Group financial
statements for the year ended 31 March 2022 were prepared in accordance with
the international accounting standards in conformity with the requirements of
the Companies Act 2006. These half yearly financial statements have been
prepared on a consistent basis and format with the Group financial statements
for the year ended 31 March 2022. The provisions of IAS 34 'Interim
Financial Reporting' have not been applied in full.
Going concern
The Group's business activities, together with the factors likely to affect
its future development, performance and position are set out in the Chief
Executive's Statement.
At the period end, the Group has access to a £100m multi option revolving
credit facility that matures on 30 June 2025, which also benefits from a £50m
Accordion Facility. On 17 November 2022, the Group enacted the extension
option which was approved by the lenders. This extends the termination date
of the RCF facility to 30 June 2026. The directors are of the opinion that the
Group can operate within the current facility and comply with its banking
covenants.
At the end of the half year, the Group had net debt of £47.8m (H1 2022:
£49.3m). The Board is comfortable with the net debt position given the
strong cash generation and considerable financial resources of the Group,
together with long‐term contracts with a number of customers and suppliers
across different geographic areas and industries. As a consequence, the
directors believe that the Group is well placed to manage its business risks.
After making enquiries, the directors have a reasonable expectation that the
Group will be able to meet its financial obligations and has adequate
resources to continue in operational existence for the foreseeable future.
For this reason, they continue to adopt the going concern basis in preparing
the financial statements.
2. Operating segments
Revenue by Operating Segment
6 months to 30 September 2022 6 months to 30 September Year to 31 March 2022
2021
£'000 £'000 £'000
Easyspace 5,810 5,782 11,782
Cloud Services 46,747 46,148 91,236
52,557 51,930 103,018
Cloud Services revenue during the period/year can be further disaggregated as
follows:
6 months to 30 September 2022 6 months to 30 September Year to 31 March 2022
2021
£'000 £'000 £'000
Cloud managed services 29,220 28,037 55,745
Self-managed infrastructure 14,308 14,408 28,363
Non-recurring revenue 3,219 3,703 7,128
46,747 46,148 91,236
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. No individual
country other than the United Kingdom contributes a material amount of revenue
therefore revenue from outside the United Kingdom has been shown as from Rest
of the World.
Analysis of Revenue by Destination
6 months to 30 September 2022 6 months to 30 September Year to 31 March 2022
2021
£'000 £'000 £'000
United Kingdom 45,147 44,202 88,692
Rest of the World 7,410 7,728 14,326
52,557 51,930 103,018
Recurring and Non-Recurring Revenue
The amount of recurring and non-recurring revenue recognised during the year
can be summarised as follows:
6 months to 30 September 2022 6 months to 30 September Year to 31 March 2022
2021
£'000 £'000 £'000
Recurring - over time 49,338 48,227 95,890
Non-recurring - point in time 3,219 3,703 7,128
52,557 51,930 103,018
Profit by Operating Segment
6 months to 30 September 2022 6 months to 30 September 2021 Year to 31 March 2022
EBITDA before share based payments and acquisition costs Share based payments, acquisition costs, depreciation & amortisation EBITDA before share based payments and acquisition costs Share based payments, acquisition costs, depreciation & amortisation EBITDA before share based payments and acquisition costs Share based payments, acquisition costs, depreciation & amortisation
Operating profit/(loss)
Operating profit/(loss) Operating profit/(loss)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Easyspace 2,876 (177) 2,699 2,647 (453) 2,194 5,674 (665) 5,009
Cloud Services 17,276 (10,792) 6,484 18,854 (11,421) 7,433 36,641 (22,319) 14,322
Group overheads (2,358) - (2,358) (1,933) - (1,933) (4,306) - (4,306)
Share based payments - (418) (418) - (620) (620) - (315) (315)
Acquisition costs - (252) (252) - (136) (136) - (480) (480)
Profit before tax and interest 17,794 (11,639) 6,155 19,568 (12,630) 6,938 38,009 (23,779) 14,230
Gain on revaluation of contingent consideration - - -
Group interest and tax (2,332) (2,126) (4,834)
Profit for the period/year 3,823 4,812 9,396
Group overheads, share based payments, acquisition costs, interest and tax are
not allocated to segments.
3. 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 shares 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 adjusting for the
dilutive potential ordinary shares relating to share options. The
calculations of earnings per share are based on the following results:
6 months to 30 September 6 months to 30September Year to 31 March 2022
2022 2021 £'000
£'000 £'000
Profit for the period/year and basic earnings attributed to ordinary 3,823 4,812 9,396
shareholders
No No No
Weighted average number of ordinary shares: 000 000 000
Called up, allotted and fully paid at start of period 110,065 109,671 109,671
Shares held by Employee Benefit Trust (141) (141) (141)
Issued share capital in the period 4 29 181
Weighted average number of ordinary shares - basic 109,928 109,559 109,711
Dilutive impact of share options 2,686 3,086 2,210
Weighted average number of ordinary shares - diluted 112,614 112,645 111,921
Basic earnings per share 3.5 p 4.4 p 8.6 p
Diluted earnings per share 3.4 p 4.3 p 8.4 p
iomart Group plc assess the performance of the Group by adjusting earnings per
share, calculated in accordance with IAS 33, to exclude certain non-trading
items. The calculation of the earnings per ordinary share on a basis which
excludes such items is based on the following adjusted earnings:
Adjusted earnings per share
6 months to 30 September 6 months to 30 Year to 31 March
2022 September 2022
£'000 2021 £'000
£'000
Profit for the period/year and basic earnings attributed to ordinary 3,823 4,812 9,396
shareholders
- Amortisation of acquired intangible assets 1,748 2,312 4,044
- Acquisition costs 252 136 315
- Share based payments 418 620 480
- Accelerated write off of arrangement fee on bank facility - - 102
- Tax impact of adjusted items (412) (557) (879)
Adjusted profit for the period/year and adjusted basic earnings attributed to 5,829 7,323 13,458
ordinary shareholders
Adjusted basic earnings per share 5.3 p 6.7 p 12.2 p
Adjusted diluted earnings per share 5.2 p 6.5 p 12.0 p
4. Acquisition costs
6 months to 30 September 2022 6 months to 30 September Year to 31 March 2022
2021
£'000 £'000 £'000
Professional fees (232) - -
Non-recurring acquisition integration costs (20) (136) (315)
(252) (136) (315)
5. Finance costs
6 months to 30 September 2022 6 months to 30 September Year to 31 March 2022
2021
£'000 £'000 £'000
Bank loans (855) (526) (1,222)
Accelerated write off of arrangement fee on bank facility - - (102)
Lease finance costs (304) (332) (646)
Other interest charges (54) (44) (92)
(1,213) (902) (2,062)
6. Taxation
6 months to 30 September 2022 6 months to 30 September 2021 Year to 31
£'000 £'000 March
2022
£'000
Corporation Tax:
Tax charge for the period/year (1,050) (1,802) (1,333)
Adjustment relating to prior periods - - 209
Total current taxation charge (1,050) (1,802) (1,124)
Deferred Tax:
Origination and reversal of temporary differences (58) 379 (1,517)
Adjustment relating to prior periods - - (137)
Effect of different statutory tax rates of overseas jurisdictions (11) 20 (4)
Effect of changes in tax rates - 179 10
Total deferred taxation (charge)/credit (69) 578 (1,648)
Total taxation charge for the period/year (1,119) (1,224) (2,772)
Deferred tax assets and liabilities at 30 September 2022 have been calculated
based on the rate enacted at the balance sheet date of 25% (2021: 19%).
7. Acquisitions
Concepta Capital Limited
On 15 August 2022, the Group acquired the entire issued share capital of
Concepta Capital Limited ("Concepta"). Concepta is principally a holding
company which owns 100% of the issued share capital of Oriium Consulting
Limited ("ORIIUM"), PAV I.T. Services Limited ("Pavilion IT"), P2 Technologies
Limited ("P2") Datanics Limited ("Datanics") and Add3 Limited ("Add3").
ORIIUM is a channel only IT service provider specialising in data management
solutions, and Pavilion IT is a provider of cloud and hybrid infrastructure
solutions and support services.
During the current period, the Group incurred £233,000 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 and in cash flow from investing activities for the period
ended 30 September 2022.
The following table summarises the consideration to acquire Concepta, the
amounts of identified assets acquired, and liabilities assumed at the
acquisition date, which are provisional.
£'000
Recognised amounts of net assets acquired and liabilities assumed:
Cash and cash equivalents 1,017
Trade and other receivables 1,603
Property, plant and equipment 1,203
Intangible assets 4,621
Borrowings (1,742)
Trade and other payables (4,323)
Corporation tax asset 77
Deferred tax liability (1,139)
Identifiable net assets 1,317
Goodwill 13,231
Total consideration 14,548
Satisfied by:
Cash - paid on acquisition 10,548
Contingent consideration - payable 4,000
Total consideration to be transferred 14,548
The acquisition of Concepta was completed using a "completion accounts"
mechanism, on a no cash, no debt, and normalised working capital basis. An
initial payment of £10,548,000 was made at completion. This initial payment
was net of a £422,000 inflow from the vendors being an estimate of the
adjustment needed for the completion account mechanism. This value will be
subject to a final amendment in due course when completion accounts are
prepared. At the date of acquisition, Concepta had bank debt of £1,508,000
which was taken on by iomart and settled as part of the completion process.
The share purchase agreement (SPA) included a provision requiring the Company
to pay the former shareholders of Concepta an additional amount contingent on
the level of profitability delivered by Concepta in the twelve months ended 30
June 2023 ("the earn-out payment").
The potential undiscounted amount of the earn-out payment that the Company
could be required to pay is between £nil and £4,000,000. The amount of
contingent consideration payable, which was recognised as of the acquisition
date, was £4,000,000. The level of profitability for the earn-out payment was
estimated based on management's estimates of the profitability of Concepta for
the twelve months ended June 2023, taking into account actual performance to
date.
The goodwill arising on the acquisition of Concepta is attributable to the
premium payable for a pre-existing, well positioned business and the
specialised, industry specific knowledge, including the indirect channel, of
the management and staff, together with the benefits to the Group in merging
the business with its existing infrastructure and the anticipated future
revenue synergies from the combination. The goodwill is not expected to be
deductible for tax purposes.
The trading names "ORIIUM", "Pavilion IT" and "P2" are not actively advertised
or promoted. The Concepta group's standard terms and conditions restrict the
ability of the Concepta Group to sell, distribute or lease any personal
information it holds on customers. As a consequence, there is no significant
value in either the trade name/brand or customer lists acquired at the
acquisition date and therefore no value has been attributed to either
intangible asset.
Included in intangible assets is the fair value included in respect of the
acquired customer relationships intangible asset of £4,462,000. To estimate
the fair value of the customer relationships intangible asset, a discounted
cash flow method, specifically the income approach, was used with reference to
the directors' estimates of the level of revenue, which will be generated from
them. A pre-tax discount rate of 13.06% was used for the valuation. Customer
relationships are being amortised over an estimated useful life of 8 years.
The Concepta group earned revenue of £1,286,000 and generated profits, before
allocation of group overheads, share based payments and tax, of £121,000 in
the period since acquisition.
8. Intangible assets
Goodwill Acquired customer relationships Development costs Software Acquired beneficial contract Domain names & IP addresses Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost:
At 1 April 2021 86,479 57,263 11,904 10,827 86 336 166,895
Additions in the period - - 601 1 - - 602
Currency translation differences - 18 - 13 - - 31
At 30 September 2021 86,479 57,281 12,505 10,841 86 336 167,528
Additions in the period - - 751 90 - - 841
Currency translation differences - 18 - 14 - - 32
At 31 March 2022 86,479 57,299 13,256 10,945 86 336 168,401
Acquired on acquisition of subsidiary 13,231 4,462 159 - - - 17,852
Additions in the period - - 627 31 - - 658
Currency translation differences - 137 - 105 - - 242
At 30 September 2022 99,710 61,898 14,042 11,081 86 336 187,153
Accumulated amortisation:
At 1 April 2021 - (45,316) (9,819) (6,829) (62) (289) (62,315)
Charge for the period - (2,312) (667) (660) (4) (4) (3,647)
Currency translation differences - (18) - (17) - - (35)
At 30 September 2021 - (47,646) (10,486) (7,506) (66) (293) (65,997)
Charge for the period - (1,732) (680) (622) (3) (4) (3,041)
Currency translation differences - (18) - (14) - - (32)
At 31 March 2022 - (49,396) (11,166) (8,142) (69) (297) (69,070)
Charge for the period - (1,748) (655) (578) (4) (4) (2,989)
Currency translation differences - (138) - (93) - - (231)
At 30 September 2022 - (51,282) (11,821) (8,813) (73) (301) (72,290)
Carrying amount:
99,710 10,616 2,221 2,268 13 35 114,863
At 30 September 2022
At 31 March 2022 86,479 7,903 2,090 2,803 17 39 99,331
At 30 September 2021 86,479 9,635 2,019 3,335 20 43 101,531
Note 12 provides the movements in the period relating to IFRS 16 right-of-use
assets included in the above table.
9. Property, plant and equipment
Freehold property Leasehold property and improve-ments Datacentre equipment Computer equipment Office equipment Motor vehicles Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost:
At 1 April 2021 8,731 38,694 28,079 108,223 2,811 23 186,561
Additions in the period - 307 1,321 3,250 37 - 4,915
Disposals in the period - (201) - (48) (13) - (262)
Currency translation differences - 48 - 119 - - 167
At 30 September 2021 8,731 38,848 29,400 111,544 2,835 23 191,381
Additions in the period - 1,527 1,569 2,657 6 - 5,759
Disposals in the period (495) (2) (445) - (1) - (943)
Currency translation differences - 51 - 67 - - 118
At 31 March 2022 8,236 40,424 30,524 114,268 2,840 23 196,315
Acquired on acquisition of subsidiary - 300 872 1 30 - 1,203
Additions in the period - 481 468 2,456 40 - 3,445
Currency translation differences - 350 - 861 - - 1,211
At 30 September 2022 8,236 41,555 31,864 117,586 2,910 23 202,174
Accumulated depreciation:
At 1 April 2021 (937) (11,675) (17,223) (77,547) (2,150) (17) (109,549)
Charge for the period (128) (2,218) (616) (5,160) (101) (4) (8,227)
Disposals in the period - - - 15 - - 15
Currency translation differences - (28) - (98) - - (126)
At 30 September 2021 (1,065) (13,921) (17,839) (82,790) (2,251) (21) (117,887)
Charge for the period (127) (2,263) (647) (4,941) (89) (2) (8,069)
Disposals in the period 138 - 445 - - - 583
Currency translation differences - (30) - (19) - - (49)
At 31 March 2022 (1,054) (16,214) (18,041) (87,750) (2,340) (23) (125,422)
Charge for the period (121) (2,252) (723) (4,796) (88) - (7,980)
Currency translation differences - (260) - (722) - - (982)
At 30 September 2022 (1,175) (18,726) (18,764) (93,268) (2,428) (23) (134,384)
Carrying amount:
At 30 September 2022 7,061 22,829 13,100 24,318 482 - 67,790
At 31 March 2022 7,182 24,210 12,483 26,518 500 - 70,893
At 30 September 2021 7,666 24,927 11,561 28,754 584 2 73,494
Note 12 provides the movements in the period relating to IFRS 16 right-of-use
assets included in the above table.
10. Analysis of change in net debt
Lease liabilities Total net debt
Cash and cash equivalents £'000 £'000
£'000 Bank
loans
£'000
At 1 April 2021 23,038 (52,791) (24,867) (54,620)
Additions to lease liabilities - - (33) (33)
Disposal of lease liabilities - - 179 179
Currency translation - - (22) (22)
Cash and cash equivalents cash inflow 3,235 - - 3,235
Lease liabilities cash outflow - - 1,951 1,951
At 30 September 2021 26,273 (52,791) (22,792) (49,310)
Additions to lease liabilities - - (1,458) (1,458)
Settlement of commitment fee on loan - (49) - (49)
Repayment of bank loans - 18,840 - 18,840
Currency translation - - (27) (27)
Cash and cash equivalents cash outflow (10,941) - - (10,941)
Lease liabilities cash outflow - - 1,654 1,654
At 31 March 2022 15,332 (34,000) (22,623) (41,291)
Acquired on acquisition of subsidiary - - (235) (235)
Additions to lease liabilities - - (269) (269)
New bank loans - (10,400) - (10,400)
Currency translation - - (104) (104)
Cash and cash equivalents cash inflow 2,438 - - 2,438
Lease liabilities cash outflow - - 2,035 2,035
At 30 September 2022 17,770 (44,400) (21,196) (47,826)
11. Borrowings
30 30 31
September September March
2022 2021 2022
£'000 £'000 £'000
Current:
Lease liabilities (note 12) (3,566) (3,372) (3,560)
Bank loans - (52,791) -
Total current borrowings (3,566) (56,163) (3,560)
Non-current:
Lease liabilities (note 12) (17,630) (19,420) (19,063)
Bank loans (44,400) - (34,000)
Total non-current borrowings (62,030) (19,420) (53,063)
Total borrowings (65,596) (75,583) (56,623)
At 30 September 2022, the Group has a £100m multi option revolving credit
facility which has an initial maturity date of 30 June 2025, with a 12 month
extension option and benefits from a £50m Accordion facility. The RCF and
the Accordion Facility (if exercised) provide the Group with additional
liquidity which will be used for general business purposes and to fund
investments, in accordance with the Group's five-year strategic plan. Each
draw down 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. During the year, the
Group made a drawdown of £10.4m (H1 2022: £nil).
On 17 November 2022, the Group enacted the extension option which was approved
by the lenders. This extends the termination date of the RCF facility to 30
June 2026.
Details of the Group's lease liabilities are included in note 12.
12. 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 property Datacentre Software Total
equipment
£'000 £'000 £'000 £'000
Cost at 1 April 2021 18,859 4,222 950 24,031
Additions - 33 - 33
Disposals - (179) - (179)
Depreciation charge (1,024) (703) - (1,727)
Amortisation charge - - (143) (143)
Net book value at 30 September 2021 17,835 3,373 807 22,015
Additions 1,412 46 - 1,458
Currency translation differences - 36 - 36
Depreciation charge (1,060) (646) - (1,706)
Amortisation charge - - (142) (142)
Net book value at 31 March 2022
18,187 2,809 665 21,661
123 112 - 235
Acquired on acquisition of subsidiary
- 269 - 269
Additions
- 106 - 106
Currency translation differences
(1,052) (740) - (1,792)
Depreciation charge
Amortisation charge - - (143) (143)
17,258 2,556 522 20,336
Net book value at 30 September 2022
The right-of-use assets in relation to leasehold property and datacentre
equipment are disclosed as non-current assets and are disclosed within
property, plant and equipment at 30 September 2022 (note 9). The
right-of-use assets in relation to software are disclosed as non-current
assets and are disclosed within intangibles at 30 September 2022 (note 8).
Lease liabilities
Lease liabilities for right-of-use assets are presented in the balance sheet
within borrowings as follows:
30 September 2022 30 September 31 March
2021 2022
£'000 £'000 £'000
(3,566) (3,372) (3,560)
Lease liabilities (current) (note 11)
Lease liabilities (non-current) (note 11) (17,630) (19,420) (19,063)
Total lease liabilities (21,196) (22,792) (22,623)
The maturity analysis of undiscounted lease liabilities is shown in the table
below:
30 September 30 September 31 March
2022 2021 2022
Amounts payable under leases: £'000 £'000 £'000
(4,252) (3,945) (4,127)
Within one year
Between two to five years (9,330) (10,166) (10,244)
After more than five years (10,685) (12,193) (11,585)
(24,267) (26,304) (25,956)
Add: unearned interest 3,071 3,512 3,333
Total lease liabilities (21,196) (22,792) (22,623)
13. Availability of half yearly reports
The Company's Interim Report for the six months ended 30 September 2022 will
shortly be available to view on the Company's website (www.iomart.com).
INDEPENDENT REVIEW REPORT TO iomart Group plc
We have been engaged by the company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2022 which comprises the Consolidated Interim Statement of
Comprehensive Income, the Consolidated Interim Statement of Financial
Position, the Consolidated Interim Statement of Cash Flows, the Consolidated
Interim Statement of Changes in Equity and related notes 1 to 13. We have read
the other information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or material
inconsistencies with the information in the condensed set of financial
statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
half-yearly financial report in accordance with the AIM Rules of the London
Stock Exchange.
As disclosed in note 1, the annual financial statements of the group will be
prepared in accordance with United Kingdom adopted international accounting
standards. The condensed set of financial statements included in this
half-yearly financial report have been prepared in accordance with the
accounting policies the group intends to use in preparing its next annual
financial statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on the set of
financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK and Ireland) 2410 "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" issued by the Financial
Reporting Council for use in the United Kingdom. A review of interim financial
information consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and consequently does
not enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2022 is not prepared,
in all material respects, in accordance with the accounting policies the group
intends to use in preparing its next annual financial statements and the AIM
Rules of the London Stock Exchange.
Use of our report
This report is made solely to the company in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of Interim
Financial Information Performed by the Independent Auditor of the Entity"
issued by the Financial Reporting Council. Our work has been undertaken so
that we might state to the company those matters we are required to state to
it in an independent review report and for no other purpose. To the fullest
extent permitted by law, we do not accept or assume responsibility to anyone
other than the company, for our review work, for this report, or for the
conclusions we have formed.
Deloitte LLP
Statutory Auditor
Glasgow, United Kingdom
6 December 2022
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