REG - Iomart Group PLC - Half Yearly Results
27/11/2024 07:00
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RNS Number : 7665N Iomart Group PLC 27 November 2024
27 November 2024
iomart Group plc
("iomart" or the "Group" or the "Company")
Half Yearly Results
iomart (AIM: IOM), the cloud computing company, reports its consolidated half
yearly results for the six months ended 30 September 2024 (H1 2025).
FINANCIAL HIGHLIGHTS
H1 2025 H1 2024 Change
Revenue £62.0m £62.0m -
% of recurring revenue(1) 91% 94% -3%
Adjusted EBITDA(2) £17.0m £18.6m -9%
Adjusted EBIT(3) £6.6m £9.6m -32%
Adjusted profit before tax(4) £4.3m £7.6m -44%
Adjusted diluted EPS(5) 2.6p 5.2p -50%
Profit before tax £1.0m £4.4m -77%
Basic EPS 0.3p 3.1p -90%
Cash generation from operations £11.1m £16.8m -34%
Interim dividend per share 1.3p 1.94p -33%
Net debt(9) £48.1m £48.0m -
· The financial results announced today are in line with the pre-close trading
update published on 1 October 2024, reflecting a challenging H1. The
transformational acquisition of Atech post period end has materially
strengthened iomart's offerings, credentials and capabilities and the Board
reiterates confidence in the Group's FY25 outlook and future prospects.
· Positive momentum in order bookings continued, with order bookings in the half
year at record levels, being around 30% ahead of H1 2024
· Revenue was constant half year on half year, having benefitted from £3.7m of
revenue relating to prior year acquisitions, negated by a lower level of
renewals and timing of order billings. The Atech acquisition, completed after
the period end, strengthens our ability to improve the level of renewals and
to increase new business wins
· New Broadcom license arrangement has resulted in a short-term negative impact
of £0.7m on Adjusted EBIT (being £1.4m new intangible amortisation charge,
net of the £0.7m previous opex cost). This, combined with changes in the
revenue mix, also influenced by prior period acquisitions, and the relatively
fixed infrastructure costs, had a notable impact on H1 profitability
· Cost optimisation programme mobilised, targeting over £1m of annualised gross
cost benefits by end of FY25. Further synergies and efficiencies continuing to
be identified
· Adjusted EBITDA conversion to cash ratio(7) in the period of 68% (H1 2024:
90%), reflecting the timing of several large vendor payments. The equivalent
EBITDA conversion ratio on a last 12 month basis was 87%, in line with the
Group's more typical levels
· Period-end net debt of £48.1m (H1 2024: £48.0m), increasing to £105.1m
following the post period end acquisition of Atech, a comfortable net debt to
proforma adjusted EBITDA ratio of 2.6 times. Excluding leases under IFRS 16,
net debt following the Atech acquisition, would be £86.8m
STRATEGIC HIGHLIGHTS
Key achievements under our Bigger, Better, Bolder strategy:
· Streamlining of the internal operating model is progressing to plan, with all
sales, product management, marketing and customer deployment/management under
single leaders. This combined with operational excellence programmes has led
to a significant uplift in delivery performance being achieved over the past
12 months. Cost efficiencies are also now materialising, some of which is
being reinvested in additional customer success roles such as a new Technical
Account Management team
· £57m acquisition of Atech Support Limited ("Atech") completed which
significantly widens and deepens our credentials, expertise and delivery
capability across Microsoft Azure, Modern Workplace and Security and
accelerates progress towards becoming the UK's leading secure cloud services
provider
· Significant strengthening of three Strategic Global Technology Partnerships,
namely Microsoft, Broadcom VMware and Commvault, with joint go-to-market and
innovation/R&D programmes being developed
· Strengthening of Board and governance independence completed with the
appointment of Richard Last as Chair of the Board, with effect from 12 June
2024, bringing a wealth of experience in various roles in successful
communications and technology companies
OUTLOOK
· With robust order bookings, enhanced customer service, a significantly
improved product portfolio, and the successful execution of cost efficiency
measures, we are well-positioned for a stronger second half but remains
challenging for customer retention in our core business
· Atech integration progressing to plan with growth continuing post-acquisition,
reinforcing confidence in both the value of the business and its value to the
enlarged Group
· The growing demand for cloud computing and cyber security solutions,
increasing complexity of the technical landscape, and need for a trusted and
highly accredited partner with a strong delivery track record, give the Board
confidence in the outlook for the medium-term prospects for the Group
Lucy Dimes, CEO commented,
"The Atech acquisition is a key step in delivering our Bigger, Better, Bolder
strategy. The strength of the combined business, our order bookings momentum
and the transformation and efficiency programmes we have put in place, mean we
have entered the second half of the year in a considerably strengthened
position.
Our enlarged Group and combined skills will allow us to compete more robustly
with enhanced services, greater scale and references across the growth areas
of our industry. Through the combined power of Atech and iomart, we now have
the accreditations, credentials and capabilities to convert a greater
proportion of our sales pipeline, as well as unlock increased cross-sale
opportunities.
The growing demand for cloud computing and cyber security solutions,
increasing complexity of the technical landscape, and accompanying need for a
trusted and highly accredited partner with a strong delivery track record,
give the Board confidence in the outlook for the Group and our ability to
become the UK's leading secure hybrid cloud provider."
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 in exceptional costs driven by accrued
advisory fees on the Atech acquisition.
Notes:
(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. % of recurring revenue is defined as Recurring
Revenue (as disclosed in note 2) / Revenue (as disclosed in the consolidated
interim statement of comprehensive income).
(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, acquisition costs and exceptional non-recurring costs.
Throughout this statement acquisition costs are defined as acquisition related
costs and non-recurring acquisition integration costs.
(3)Throughout this statement adjusted EBIT is earnings before interest and tax
(EBIT) before amortisation charges on acquired intangible assets, share-based
payment charges, acquisition costs and exceptional non-recurring costs.
Throughout these financial statements acquisition costs are defined as
acquisition related costs and non-recurring acquisition integration costs.
(4) Throughout this statement adjusted profit before tax, as disclosed on page
9, is profit before tax, amortisation charges on acquired intangible assets,
share based payment charges, acquisition costs and exceptional non-recurring
costs.
(5) 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,
exceptional non-recurring costs and the taxation effect of these.
(6) Annualised EBITDA is the last 12 months of EBITDA for the period ended 30
September 2024.
(7) Cash conversion ratio 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 2024 and the current 6 month reported period on the
same basis of calculation.
(8)Proforma Adjusted Atech EBITDA means earnings before interest, tax,
depreciation, amortisation, acquisition related costs, non-recurring items and
other costs particular to Atech's current ownership structure.
(9)Net debt is disclosed on page 11 and is the total of bank revolver loan,
lease liabilities and cash and cash equivalents. This includes £18.3m of
lease liabilities at 30 September 2024.
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
Lucy Dimes, Chief Executive Officer
Scott Cunningham, Chief Financial Officer
Investec Bank PLC (Nominated Adviser and Tel: 020 7597 4000
Broker)
Patrick Robb, Virginia Bull
Alma Strategic Communications Tel: 020 3405 0205
Caroline Forde, Hilary Buchanan, Kinvara Verdon
About iomart Group plc
iomart Group plc (AIM: IOM) is one of the UK's leading provider of secure
cloud managed services, simplifying the complexities of modern technology for
businesses. Our team of 650+ experts deliver cutting-edge solutions in cloud
infrastructure, modern workplace management, and managed security services
that enable our customers to innovate, protect, and scale their businesses.
We proudly hold one of the UK's most extensive sets of Microsoft credentials,
including Azure Expert MSP, five Solution Partner Designations, and membership
in Microsoft's Intelligent Security Association (MISA). As well as being a
top-tier Broadcom Pinnacle Partner for VMware Cloud. Which means we can bring
the latest technologies in hybrid cloud, data protection, and cyber resiliency
to meet the evolving needs of our customers.
For further information about the Group, please visit www.iomart.com
(http://www.iomart.com/) .
Chief Executive's Statement
Introduction
The financial results announced today are in line with our pre-close trading
update published on 1 October 2024. For the first half of the year we have
experienced flat revenue performance of £62.0m (H1 2024: £62.0m), of which
91% was recurring revenue (H1 2024: 94%). Adjusted EBITDA(2) and adjusted
profit before tax(4) decreased to £17.0m (H1 2024: £18.6m) and £4.3m (H1
FY24: £7.6m), respectively. The acquisition of Atech, being after the period
end, has no impact on the financial reporting in the first half of the year.
As previously announced, while the financial performance this year was always
expected to be H2 weighted, these results are behind our original plans, due
to lower renewal rates and the timing of order billings. We are actively
addressing these areas and implementing targeted initiatives to support
stronger retention. The acquisition of Atech will strengthen our ability to
retain customers and accelerate customer acquisitions to close in on this gap.
The programme of work to streamline our operating model, drive best practice
and improve the differentiation of our product and service offerings is
progressing well. We continue to build further momentum in order bookings and
pipeline generation, with order bookings in the first half at record levels.
We have mobilised a cost optimisation programme, targeting over £1m of
annualised gross cost benefits by end of FY25. Further synergies and
efficiencies continue to be identified.
We are confident these actions and progress achieved, alongside the
transformational acquisition of Atech post period end, set us firmly on the
path to growth.
Acquisition of Atech
The completion of the £57m acquisition of Kookaburra Topco Limited
("Kookaburra"), the holding company of Atech Support Limited ("Atech" or the
"Acquisition") is a significant milestone for iomart in our 'Bigger, Better,
Bolder' strategy. This accelerates and plays directly into our vision to be
the UK's leading secure public, private and hybrid cloud services provider.
Atech is one of the UK's most highly accredited Microsoft Solutions Partners
and the combination of the two businesses creates a powerful extended set of
offerings for mid-market customers, cementing the Group's position as a
leading 'Microsoft First' solutions provider in the UK. This means our revenue
portfolio is now more heavily weighted to the highest growth areas of the
cloud computing market: modern workplace, public cloud Azure infrastructure
and security managed services.
Atech has one of the strongest sets of Microsoft credentials in the UK market,
including Azure Expert MSP, five Solution Partner Designations (Azure
Infrastructure, Security, Data & AI, Modern Work and Digital and
Application Innovation), plus eleven Specialisations, membership of
Microsoft's exclusive Intelligent Security Association ('MISA') and
participation in Microsoft's Copilot jump-start programme. Earlier this year,
Atech was recognised as a finalist at Microsoft's Security Trailblazer's
Awards.
At the time of announcing the acquisition, we reported last 12 months
unaudited trading results to 30 June 2024 for Atech of revenues of £32.2m and
Proforma Adjusted EBITDA(8) of £3.3m. We are pleased to report that in the 3
months prior to acquisition, Atech continued to grow, resulting in an LTM to
30 September 2024 of £34.4m (unaudited), of which 73% is recurring in nature,
and Proforma Adjusted EBITDA(8) of £4.1m (unaudited), demonstrating continued
and consistent demand for their services and reinforcing our confidence in the
value of the business.
Mobilising This Powerful Combination
Cloud managed services within iomart has been our focus for development and
M&A activity over the last four years, and prior to the Atech acquisition,
accounted for 68% of Group revenue, combined recurring and non-recurring.
Following the Atech acquisition, on a proforma basis, the equivalent weighting
is increased to 75%. Importantly the enlarged offering is now more
appropriately balanced, increasing from approximately 17% to 30% of activities
of that segment now within the Microsoft product suite, the highest growth
area of the market. Non-recurring revenue on a proforma basis has increased to
14% of total revenue, reflecting the higher level of professional services
undertaken by Atech, especially within the growth area of security.
We have mobilised a 100 day plan to combine our businesses, to leverage the
'best of both' in terms of capabilities and processes. As previously
announced, the absence of an earn-out mechanism means there are no hinderances
to the immediate integration of the organisations, ensuring we start to secure
the full benefits of the combination from an early stage.
Our initial priorities have been to combine our brand and market positioning
and bring our technical and sales teams together. The launch branding has been
positioned as "Atech x iomart, a powerful combination" with a focus on
articulating our significantly enhanced capabilities across the full spectrum
of cloud services to both existing and potential customers. We are
consolidating the Atech, iomart and Extrinsica technical teams into a single
centre of excellence with deep Microsoft Azure expertise, combining the
strengths of all our highly accredited people with numerous certifications and
specialisations including the coveted Microsoft Azure Expert MSP accreditation
acquired in September 2024. And finally, we are combining our sales teams,
sales specialists, pre-sales and technical architect resources to widen and
deepen customer coverage and sector expertise.
Delivering on Bigger, Better, Bolder
The Atech acquisition is a key step in delivering our Bigger, Better, Bolder
strategy and moves us considerably closer to our goal of becoming the UK's
leading secure cloud services provider.
The Bigger, Better, Bolder mantra has also landed positively with our teams
internally. The wider iomart team has embraced the ambitious agenda we have
set and we have made excellent progress so far in FY25 in driving best
practices across the business and strengthening capabilities to establish the
best possible ingredients for success in every part of the business.
Notable H1 highlights have been:
Improving Sales Effectiveness
Our sales organisation is well established and good progress has continued in
the first half in optimising and strengthening resources, account coverage,
sales specialists and channel/partner coverage, resulting in continued order
booking growth which is now at record levels. During the period all functions
and activity from historic acquisitions of Cristie Data, Pavilion IT and
Oriium has been fully embedded into the group operating model, as one combined
team, with systems and tools integration progressing well.
Market Leading Partnerships
We have now established, and are developing, three significant strategic
partnerships for the Group: Microsoft (public cloud/modern
workplace/security), Broadcom VMware (private cloud) and Commvault (data
protection). These Partners are recognised as global technology leaders in
clearly defined areas of our product and service offerings. We now have
exceptional pedigree, engineering skills and credentials across their
associated technologies and capabilities with joint go-to-market and
innovation/R&D programmes being developed.
ITIL (Information Technology Infrastructure Library) Aligned Delivery
Excellence
With the over-riding objectives of streamlining our operating model,
significant progress has been made in implementing ITIL-aligned, best practice
customer success methodologies and an enhanced resource and training strategy,
including iomart's first ever apprenticeship programme for 1(st) Line Service.
This approach has delivered a step change improvement in our service delivery
and customer management, consolidated teams from 14 different locations,
delivered efficiency savings that we have reinvested into a larger service
management team, and led to us adding dedicated Technical Account Management
for some key accounts.
H2 focus
Looking ahead, our key areas of focus underpinning the 'Bigger, Better,
Bolder' strategy will be:
· Brand and market positioning of Atech x iomart and sales enablement to
capitalise fully on the revenue growth opportunities of the combination,
including cross selling opportunities to our significant existing customer
bases
· Continued push to a streamlined operating model to drive efficiencies and best
practise
· Identify and progress cost synergies and revenue growth opportunities
resulting from the acquisition of Atech to drive the most competitive cost
base for the business and establish compelling customer propositions into high
growth market segments such as security/cyber
We operate in a structurally growing market
With the insatiable growth in data requirements and processing power across
all industries, the demand for the three core cloud building blocks of compute
power, storage and connectivity continue to expand. The concept of Cloud
computing is now globally recognised with the complexity of available options
continuing to grow. For any digital transforming organisation, and with the
ever-increasing cyber security threat landscape, the need for full-stack
integrated services across cloud management, data protection and cyber
security is paramount. With resource and skills scarcity, SMEs are
increasingly having to outsource 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 - areas in which we excel.
We do not expect any of the above structural growth drivers to diminish over
the long-term and indeed AI is anticipated to fuel another wave of growth,
both in public and private cloud. While public cloud adoption continues to
accelerate this is balanced with a growing trend of repatriation of critical
workloads back to private cloud, driven by increased regulatory focus on
business resilience and data sovereignty governance. iomart is well positioned
to meet these hybrid cloud needs.
Board Changes
Richard Last joined the Company on 12 June 2024 as independent non-executive
Chair. Richard is a seasoned board director with extensive experience across
quoted and private companies in the technology services sector. He brings a
wealth of experience in various roles in successful communications and
technology companies and is a great asset as we drive forward the execution of
our growth strategy.
Current trading and outlook
With robust order bookings, enhanced customer service, a significantly
improved product portfolio, and the first stages of cost efficiency measures
activated, we are well positioned for a stronger second half but it remains a
challenging environment for customer retention in our core business. Atech
integration is progressing to plan, and growth has continued, reinforcing our
confidence in the value of the business and its value to the enlarged Group.
The underlying drivers for cloud computing are strong. The increasing
complexity of the technical landscape means the demand from customers looking
for a trusted and experienced service partner will continue to expand,
especially within our SME target market. Through the combined power of Atech
and iomart, we now have the accreditations, credentials and capabilities to
convert a greater proportion of these opportunities in our sales pipeline and
improve customer retention levels.
The growing demand for cloud computing and cyber security solutions,
increasing complexity of the technical landscape, and need for a trusted and
highly accredited partner with a strong delivery track record, give the Board
confidence in the outlook for the medium-term prospects for the Group.
Lucy Dimes
Chief Executive Officer
27 November 2024
Chief Financial Officer's Review
As anticipated and previously flagged, H1 figures were impacted by the new
Broadcom license arrangement which resulted in a short-term negative impact of
£0.7m on Adjusted EBIT (being £1.4m new intangible amortisation charge, net
of the £0.7m previous opex cost), and reduced levels of recurring revenue,
reflecting H2 prior year trading. Trading results were further impacted by the
timing of some order billings and the continuation of lower customer renewals
which has negated the positive contribution from recent acquisitions and an
uplift in orders. Given iomart's relatively fixed cost base in some areas,
including depreciation, amortisation, and interest expense, this has had a
notable impact on H1 profitability.
Action has been taken to address some of the profitability trends, including
cost efficiency and integration programmes which will benefit H2 and onwards.
These programmes will now be assessed within the context of the enlarged Group
following the transformational Atech acquisition, with the strengthened
product portfolio enhancing customer acquisition and retention, enabling
economies of scale and access to an established captive offshore operation in
India.
Financial impact of Atech acquisition
The acquisition of Atech has four clear financial benefits to the Group.
Firstly, the proportion of Group revenues derived from the growth areas of
cloud managed services has considerably increased. Secondly, it is anticipated
that renewal levels within our existing customer base will stabilise, as there
is now a clear pathway to remain with iomart while adopting elements of the
public cloud. Thirdly, we have gained access to a high quality offshore
operation, and finally, capex requirements as a proportion of revenue has
decreased, providing greater scalability within the Group.
In her CEO Statement, Lucy has described the increased strategic strength of
the combined business, bringing the potential to stabilise our existing
business, and for both organisations to grow faster, together.
With continued high levels of recurring revenues, strong cash generation,
healthy profit margins and a suite of in demand cloud offerings, the future
for iomart Group now looks considerably improved.
Operational Review by Segment
Cloud Services
Cloud Services revenues increased marginally to £56.0m (H1 2024: £55.8m).
This included £3.7m of additional revenue from the positive impact of our
M&A activities in the prior year; split £2.8m recurring revenue and
£0.9m non-recurring revenue. Cloud Services EBITDA (before share-based
payments, acquisition costs, exceptional non-recurring costs and central group
overheads) was £16.3m being 29.2% of cloud services revenue (H1 2024:
£18.2m, 32.6% of cloud services revenue).
The trend in margin performance over the last three years has had many moving
parts, including changes in revenue mix, timing of inflationary price
adjustments and during FY22 and FY23 the well documented energy crisis. In the
current period, revenue mix remains a feature, with lower margin revenue
associated with complex managed cloud services increasing while higher margin
self-managed infrastructure revenue decreases. This mix shift towards cloud
does come with proportionately lower capex requirements.
The following is the disaggregation of Cloud Services revenues of £56.0m (H1
2024: £55.8m). Cloud Services shares the data centre estate and fibre network
infrastructure and associated support teams as an important part of the
delivery of our recurring revenue services.
Disaggregation of Cloud Services revenue 6 months to 30 September 2024 6 months to 30 September 2023 Year to 31
£'000 £'000 March
2024
£'000
Cloud managed services 38,253 37,022 75,212
Self-managed infrastructure 12,394 14,730 28,429
Non-recurring revenue 5,312 4,026 10,937
55,959 55,778 114,578
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. We anticipate this will be the highest growth area for iomart
due to the market drivers described above and while this increasing proportion
of revenue from cloud managed services will reduce the overall group margin it
brings us higher growth and gives us a much bigger total addressable market to
serve.
Cloud managed services revenue increased by 3% to £38.3m (H1 2024: £37.0m).
This was a combination of 4% underlying organic reduction and approximately
£2.8m contribution from the two FY24 acquisitions. The underlying reduction
from the prior year is a feature of some specific timing of order billings,
with the balance from a lower starting monthly recurring value, reflecting H2
prior year trading plus a lower renewal level in the current period.
Self-managed infrastructure (recurring revenue)
We have a large customer base, who wish to source compute power and
connectivity mainly through the provision of dedicated servers and self-manage
these directly. This area of the cloud market is lower growth and the most
susceptible to a move to public cloud infrastructure as the customers have
retained their own technical IT skills and an infrastructure only service is
more transactional.
In the first half of this financial year, the self-managed infrastructure
revenue of £12.4m represented a reduction of £2.3m in comparison to the
first half of last year or a £1.3m reduction on H2. We continue to secure new
orders in this area but revenue reduction from the long tail of the customer
base, has continued without any improvement from the prior period. The largest
impact of this is within the customer base of the smaller historic
acquisitions in this area, with the larger Rapidswitch customer base proving
to be more resilient. During this year we are seeking to migrate the remaining
customers from the smaller brands to more core group platforms. This will
provide customers with a more resilient and enhanced customer service
experience, at the same time as improving our own operational efficiency.
Non-recurring revenue
Non-recurring revenue of £5.3m (H1 2024: £4.0m) relates primarily to
hardware and software reselling plus professional services. Often these
non-recurring activities provide a useful initial introduction to the wider
iomart Group and evolve customers into a higher level of recurring services.
The revenue increase in the period is a combination of around £0.9m from
acquisition, with the balance being 10% organic growth.
During the period we have completed the final steps of the full integration of
two historic acquisitions which had undertaken a higher proportion of
non-recurring activities being Cristie Data and Pavilion IT. The brands have
been retired and customers and delivery operations transferred to the core
iomart operating model.
Easyspace
The Easyspace segment has performed well during the period, delivering
reasonably stable revenues and EBITDA (before share based payments,
acquisition costs and central Group overheads) of £6.0m (H1 2024: £6.3m) and
£3.0m (H1 2024: £3.2m), respectively. This stability and predictability have
been a feature of this business unit over the last few years.
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 expenditure 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 are well-served with a good range of products and
importantly a high level of customer service. This level of attention is
ensuring strong renewal rates by customers.
Financial Review
Revenue
Overall revenue from our operations remained flat at £62.0m (H1 2024:
£62.0m) with a high level of recurring revenue at 91% (H1 2024: 94%). We
remain focused on retaining our recurring revenue business model with the
combination of multi-year contracts and payments in advance providing us with
good revenue visibility. While the Atech acquisition will reduce the
percentage somewhat going forward due to a higher proportion of consultancy
activity as they support customers in their digital migrations and security
positioning, the enlarged group's recurring revenue is anticipated to remain
at over 85% of Group revenue. In the last 12 months to 30 September 2024,
Atech reported 73% of revenues as recurring in nature.
Gross Profit
The gross profit in the period reduced to £33.4m (H1 2024: £34.5m) with the
gross profit as a percentage of revenue of 53.9%, as expected being a
reduction from prior period (H1 2024: 55.6% of revenue). Our key vendor
relationships have remained stable in the period with any cost increases
following more general inflationary trends. Our energy hedging strategy, which
we entered into around the end of the calendar year 2022, means have seen
stability in the period although at levels above current spot market rates.
New hedging arrangements will commence from April 2025 onwards. The specific
revenue mix is dilutive on gross margin, with specifically H1 this year being
impacted by the full period impact of the 5 June 2023 Extrinsica acquisition,
overall higher content of Microsoft licence consumption in our customer
solutions and also higher non-recurring reselling activity. As outlined below,
offsetting some of these factors is the change in classification on software
expenses following the new commercial arrangements with Broadcom VMware which
is favourable to gross margin.
Adjusted EBITDA
The Group's adjusted EBITDA reduced by 9% to £17.0m (H1 2024: £18.6m) which
in EBITDA margin terms translates to 27.4% (H1 2024: 30%). The lower margin
percentage is a function of the gross margin profile, the high fixed cost base
nature of our private cloud business activity and the administration expenses
(before depreciation, amortisation, share based payment charges, acquisition
costs and exceptional non-recurring costs) of £16.5m being £0.6m higher than
the previous period due to the inclusion of staff plus overhead costs from the
Extrinsica and Accesspoint acquisitions, partially mitigated by some
reductions in the core overhead base. Outside of the acquisitions, we have
seen a period of relatively stable overall headcount numbers and other
overhead costs.
A further unique feature to the current period is the change in income
statement classification on software expenses following the new commercial
arrangements with Broadcom VMware plus the overall higher cost imposed. Due to
the long-term commitments made, these software costs are capitalised and
reported as intangible asset amortisation, replacing the previous license
consumption cost of sales classification. In the first half of the year the
amortisation charge for this matter has increased by £1.4m, replacing a
consumption based cost of sales value of around £0.7m.
Cloud Services saw a 10% decrease in its adjusted EBITDA to £16.3m (H1 2024:
£18.2m), giving a margin of 29.2% (H1 2024: 32.6%). Adjusted EBITDA for
Easyspace was consistent at £3.1m (H1 2024: £3.2m) and EBITDA margin at
51.0% (H1 2024: 50.6%).
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 a reduction of £0.3m to £2.4m (H1 2024: £2.7m) with no
material individual variances on prior period.
Adjusted EBIT
The Group depreciation charge of £7.4m (H1 2024: £7.7m) fell by £0.3m in
the period which as a percentage of recurring revenue is 13.1% (H1 2024:
13.3%). This is the third year in a row in which we have seen this percentage
value drop. The Group charge for amortisation of intangibles, excluding
amortisation of intangible assets resulting from acquisitions ("amortisation
of acquired intangible assets"), of £3.0m (H1 2024: £1.3m) is higher
primarily due to Broadcom VMware software license arrangements. The Group's
adjusted EBIT decreased by £3.0m to £6.6m (H1 2024: £9.6m) which in
adjusted EBIT margin terms translates to 10.6% (H1 2024: 15.5%). The actions
taken to address some of the profitability trends experienced, including cost
efficiency and integration programmes are very much focussed on seeing
recovery of this metric in H2.
Adjusted profit before tax
Net finance costs have increased to £2.3m (H1 2024: £2.0m) reflecting the
increase in our borrowing cost from the rise in bank rates. After deducting
the charges for depreciation, amortisation, excluding the amortisation of
acquired intangible assets, and finance costs from the adjusted EBITDA, the
adjusted profit before tax for the period decreased by £3.3m to £4.3m (H1
2024: £7.6m) representing an adjusted profit before tax margin of 6.9% (H1
2024: 12.2%).
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 2024 6 months to 30 September 2023 Year to 31
£'000 £'000 March
2024
£'000
Adjusted profit before tax 4,265 7,581 14,956
Less: Share based payments (514) (206) (517)
Less: Amortisation of acquired intangible assets (1,613) (1,982) (4,226)
Less: Acquisition costs (1,151) (538) (1,010)
Less: Administrative costs - exceptional non-recurring costs - (462) (462)
Profit before tax 987 4,393 8,741
The larger adjusting items in the current period are:
· non-cash charges for the amortisation of acquired intangible assets of £1.6m
(H1 2024: £2.0m), decreasing by £0.4m due to the timing of the historic
acquisitions and profile of the amortisation of intangible assets established
for customer relationships; and
· acquisition costs of £1.2m (H1 2024: £0.5m) including accruals for
professional fees on the Atech acquisition of £0.6m paid following completion
on the 1 October 2024.
After deducting the charges for share based payments, the amortisation of
acquired intangible assets, acquisition costs and exceptional non-recurring
costs, the reported profit before tax is £1.0m (H1 2024: £4.4m).
Taxation and profit for the period
There is a tax charge in the period of £0.6m (H1 2024: £1.0m), which
comprises a current taxation charge of £0.7m (H1 2024: £1.1m), and a
deferred taxation credit of £0.1m (H1 2024: credit of £0.1m). The adjusted
effective tax rate, after adjusting for share based payments and acquisition
costs, is 28% (H1 2024: 23%). After deducting the tax charge from the profit
before tax, the Group has recorded a profit for the period from total
operations of £0.4m (H1 2024: £3.4m).
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 2.6p (H1 2024: 5.2p).
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 0.3p (H1 2024: 3.1p).
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 (before cash flow on exceptional
acquisition costs) in the period of £11.6m (H1 2024: £16.8m) with an
adjusted EBITDA conversion to cash ratio(7) in the period of 68% (H1 2024:
90%). The first half year typically has a lower conversion ratio. In the
current period this has been exaggerated due the exact timing of payments to
six larger vendors which overlapped the opening and closing period ends with
an impact of around £2.5m being 15% of H1 EBITDA. To emphasise some of this
timing aspect, the equivalent EBITDA conversion ratio on a last 12 month basis
was 87%. Cash payments for corporation tax in the period were £1.0m (H1 2024:
£0.8m), resulting in net cash flow from operating activities in the period of
£10.0m (H1 2024: £16.0m).
Expenditure on investing activities of £8.5m (H1 2024: £12.8m) was incurred
in the period. £4.0m (H1 2024: £5.3m) was incurred on the acquisition of
property, plant and equipment, principally to provide specific services to our
customers (prior period included £1.4m to upgrade fibre network equipment),
£1.2m (H1 2024: £0.9m) incurred in respect of development costs and £2.6m
(H1 2024: £1.4m) paid in relation to software license arrangements during the
period. The increase in software licenses paid being the first year instalment
on the Broadcom VMware five year partnership commitments. In the current
period, M&A related payments were limited to £0.7m being the smaller
contingent consideration payments on the Extrinsica and Accesspoint
acquisitions. The only remaining contingent consideration at 30 September 2024
was a £1.4m of earn-out payment due on the Accesspoint acquisition which was
paid in full, subsequent to the period end.
During the first half of the year, excluding any Atech timing funding only
related items, net cash used in financing activities was £7.1m (H1 2024:
£6.4m). All shares issued in the current period under share options were
issued at nominal value. In the current period we repaid £2.2m of lease
liabilities (H1 2024: £2.8m), paid £1.5m (H1 2024: £1.4m) of finance
charges and made a dividend payment of £3.4m (H1 2024: £3.9m). In the prior
period we made a £5.5m drawdown on the revolving credit facility solely to
support the acquisition related payments in that period and we repaid £3.7m
of bank debt acquired from Extrinsica on completion. As a result, cash and
cash equivalent balances at the end of the period, excluding any Atech timing
funding only related items, were at a similar level to prior period at £10.2m
(30 September 2023: £10.7m).
On the day prior to completion of the Atech acquisition (30 September 2024) we
drew down £57m from the revolving credit facility, with the cash being held
by our lawyer for the closure of the Atech acquisition on the 1 October 2024.
This one transaction was recorded within the 30 September 2024 balance sheet
with all other Atech acquisition matters, including completion, being a
subsequent event. This situation resulted in our cash balance on 30 September
2024 being £67.2m in the reported balance sheet.
Subsequent Event - Acquisition of Atech on 1 October 2024
The purchase price for the acquisition of Atech was £57m, on a cash free,
normalised working capital and debt free basis under a locked box completion
mechanism. The purchase price included £19.6m of debt repayments and working
capital adjustments at completion, with the balance paid to the previous
shareholders. The full purchase price was financed through a combination of
existing bank facilities and cash on the Company's balance sheet. There is no
deferred or contingent consideration.
Net Debt
The analysis of the net debt is shown below:
30 September 2024 30 September 2023 31 March
£'000 £'000 2024
£'000
Bank revolver loan 97,000 39,900 40,000
Lease liabilities 18,282 18,756 18,091
Less: cash and cash equivalents (67,212) (10,673) (15,755)
Net Debt 48,070 47,983 42,336
As noted earlier on 30 September 2024 we had the unusual situation of holding
£67.2m of cash and cash equivalents which included the £57m of drawn funds
for the Atech acquisition. Excluding this transaction, cash and cash
equivalents were £10.2m and bank revolver loan would have been £40m, being
the same value as at 31 March 2024. This transaction does not change the
closing net debt position of £48.1m, which represented a 1.3 times multiple
of the last 12 months of adjusted EBITDA to net debt.
Following the 1 October 2024 acquisition of Atech, the Group's net debt
position increased to £105.1m. This is around 2.6 times annualised enlarged
Group proforma Adjusted EBITDA, well within our bank facility terms and a
comfortable level, given the Group's recurring revenue business model and
strong cash generation. Excluding leases under IFRS 16, net debt following the
Atech acquisition would be £86.8m.
At the end of September 2024 we increased our Revolving Credit Bank Facility,
provided by a four-bank group consisting of HSBC, Royal Bank of Scotland, Bank
of Ireland and Clydesdale Bank, from £100m to £125m to provide additional
undrawn sums for the Group. This facility expires on 30 June 2026 and now has
a borrowing cost at the Group's current leverage levels of 250 basis points
over SONIA.
Dividend
We have a dividend policy where the maximum pay-out is 50% of adjusted diluted
earnings per share. Given the high recurring revenue nature of the Group, good
visibility on cash flow requirements and comfortable 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, the Board
has approved an interim dividend of 1.3p per share (H1 2024: 1.94p) payable on
31 January 2025 to shareholders on the register on 10 January 2025, with an
ex-dividend date of 9 January 2025.
Scott Cunningham
Chief Financial Officer
27 November 2024
Consolidated Interim Statement of Comprehensive Income
Six months ended 30 September 2024
Unaudited Unaudited Audited
6 months to 30 September 2024 6 months to 30 September 2023 Year to 31
£'000 £'000 March 2024
£'000
Revenue 61,950 62,037 127,049
Cost of sales (28,553) (27,550) (57,469)
Gross profit 33,397 34,487 69,580
Administrative expenses (30,123) (28,068) (56,552)
Operating profit 3,274 6,419 13,028
Analysed as:
Earnings before interest, tax, depreciation, amortisation, acquisition 16,952 18,598 37,728
costs, exceptional non-recurring costs and share based payments
Share based payments (514) (206) (517)
Acquisition costs 4 (1,151) (538) (1,010)
Administrative expenses - exceptional non-recurring costs 4 - (462) (462)
Depreciation 8 (7,432) (7,713) (15,715)
Amortisation - acquired intangible assets 7 (1,613) (1,982) (4,226)
Amortisation - other intangible assets 7 (2,968) (1,278) (2,770)
Finance costs (net) 5 (2,287) (2,026) (4,287)
Profit before taxation 987 4,393 8,741
Taxation 6 (603) (968) (2,300)
Profit for the period/year 384 3,425 6,441
Other comprehensive income
Currency translation differences (65) 11 (25)
Other comprehensive income for the period/year (65) 11 (25)
Total comprehensive income for the period/year attributable to 319 3, 436 6,416
equity holders of the parent
Basic and diluted earnings per share
Basic earnings per share 3 0.3 p 3.1p 5.8 p
Diluted earnings per share 3 0.3 p 3.0p 5.6 p
Consolidated Interim Statement of Financial Position
As at 30 September 2024
Unaudited Unaudited Audited
30 September 30 September 2023 31 March 2024
2024 £'000 £'000
£'000
ASSETS
Non-current assets
Intangible assets - goodwill 7 109,821 104,293 109,821
Intangible assets - other 7 28,332 15,460 15,231
Trade and other receivables 111 111 111
Property, plant and equipment 8 61,302 65,833 63,492
199,566 185,697 188,655
Current assets
Cash and cash equivalents 9 67,212 10,673 15,755
Trade and other receivables 27,615 25,381 26,460
Current tax asset - 704 -
94,827 36,758 42,215
Total assets 294,393 222,455 230,870
LIABILITIES
Non-current liabilities
Trade and other payables (13,783) (3,330) (2,834)
Non-current borrowings 10 (112,722) (56,274) (55,582)
Provisions for other liabilities and charges (2,985) (2,946) (3,052)
Deferred tax liability (4,771) (3,936) (4,884)
(134,261) (66,486) (66,352)
Current liabilities
Contingent consideration due on acquisitions (1,400) (360) (2,080)
Trade and other payables (35,058) (30,950) (35,728)
Current borrowings 10 (2,560) (2,383) (2,509)
Current tax liability (254) - (804)
(39,272) (33,693) (41,121)
Total liabilities (173,533) (100,179) (107,473)
Net assets 120,860 122,276 123,397
EQUITY
Share capital 1,126 1,122 1,124
Own shares (70) (70) (70)
Capital redemption reserve 1,200 1,200 1,200
Share premium 22,500 22,495 22,500
Merger reserve 6,967 6,967 6,967
Foreign currency translation reserve (44) 57 21
Retained earnings 89,181 90,505 91,655
Total equity 120,860 122,276 123,397
Consolidated Interim Statement of Cash Flows
Six months ended 30 September 2024
Unaudited Unaudited Audited
6 months to 30 September 2024 6 months to 30 September 2023 Year to 31 March 2024
£'000 £'000 £'000
Profit before tax 987 4,393 8,741
Finance costs - net 2,287 2,026 4,287
Depreciation 7,432 7,713 15,764
Amortisation 4,581 3,260 6,996
Share based payments 514 206 517
Exceptional acquisition costs - accrued 643 - -
Research and development tax credit (224) - (364)
Unrealised foreign exchange (gain)/loss (340) - -
Movement in trade receivables 47 1,928 1,620
Movement in trade payables (4,877) (2,702) (914)
Cash flow from operations 11,050 16,824 36,647
Taxation paid (1,036) (813) (710)
Net cash flow from operating activities 10,014 16,011 35,937
Cash flow from investing activities
Purchase of property, plant and equipment (4,049) (5,346) (9,513)
Development costs (1,217) (860) (2,178)
Purchase of intangible assets (2,559) (1,358) (113)
Payment for acquisition of subsidiary net of cash acquired - (1,225) (5,710)
Payment of contingent consideration (680) (4,000) (4,180)
Net cash used in investing activities (8,505) (12,789) (21,694)
Cash flow from financing activities
Issue of shares 2 16 7
Drawdown of bank loans 57,000 5,500 7,600
Repayment of bank loans - - (2,000)
Repayment of lease liabilities (2,189) (2,792) (5,017)
Repayment of debt acquired on acquisition - (3,728) (3,728)
Finance costs paid (net) (1,493) (1,441) (3,069)
Dividends paid (3,372) (3,922) (6,099)
Net cash generated from/(used in) financing activities 49,948 (6,367) (12,306)
Net increase/(decrease) in cash and cash equivalents 51,457 (3,145) 1,937
Cash and cash equivalents at the beginning of the period 15,755 13,818 13,818
Cash and cash equivalents at the end of the period 67,212 10,673 15,755
Consolidated Interim Statement of Changes in Equity
Six months ended 30 September 2024
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 2023 1,106 (70) 1,200 22,495 4,983 46 90,796 120,556
Profit in the period - - - - - - 3,425 3,425
Currency translation differences - - - - - 11 - 11
Total comprehensive income - - - - - 11 3,425 3,436
Dividends - - - - - - (3,922) (3,922)
Share based payments - - - - - - 206 206
Issue of share capital 16 - - - 1,984 - - 2,000
Total transactions with owners 16 - - - 1,984 - (3,716) (1,716)
Balance at 30 September 2023 (unaudited) 1,122 (70) 1,200 22,495 6,967 57 90,505 122,276
Profit in the period - - - - - - 3,016 3,016
Currency translation differences - - - - - (36) - (36)
Total comprehensive income - - - - - (36) 3,016 2,980
Dividends - - - - - - (2,177) (2,177)
Share based payments - - - - - - 311 311
Issue of share capital 2 - - 5 - - - 7
Total transactions with owners 2 - - 5 - - (1,866) (1,859)
Balance at 31 March 2024 (audited) 1,124 (70) 1,200 22,500 6,967 21 91,655 123,397
Profit in the period - - - - - - 384 384
Currency translation differences - - - - - (65) - (65)
Total comprehensive income - - - - - (65) 384 319
Dividends - - - - - - (3,372) (3,372)
Share based payments - - - - - - 514 514
Issue of share capital 2 - - - - - - 2
Total transactions with owners 2 - - - - - (2,858) (2,856)
Balance at 30 September 2024 (unaudited) 1,126 (70) 1,200 22,500 6,967 (44) 89,181 120,860
Notes to the half yearly financial information
Six months ended 30 September 2024
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 2024 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 2025. The Group financial
statements for the year ended 31 March 2024 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 2024. 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 £125m multi option revolving
credit facility that matures on 30 June 2026, which also benefits from a £25m
Accordion Facility. 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 £48.1m (H1 2024:
£48.0m). 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 6 months to 30 September Year to 31
September 2023 March
2024 2024
£'000 £'000 £'000
Easyspace 5,991 6,259 12,471
Cloud Services 55,959 55,778 114,578
61,950 62,037 127,049
Cloud Services revenue during the period/year can be further disaggregated as
follows:
6 months to 30 6 months to 30 September Year to 31
September 2023 March
2024 2024
£'000 £'000 £'000
Cloud managed services 38,253 37,022 75,212
Self-managed infrastructure 12,394 14,730 28,429
Non-recurring revenue 5,312 4,026 10,937
55,959 55,778 114,578
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 6 months to 30 September Year to 31
September 2023 March
2024 2024
£'000 £'000 £'000
United Kingdom 54,765 52,845 107,864
Rest of the World 7,185 9,192 19,185
61,950 62,037 127,049
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 6 months to 30 September Year to 31
September 2023 March
2024 2024
£'000 £'000 £'000
Recurring - over time 56,638 58,011 116,112
Non-recurring - point in time 5,312 4,026 10,937
61,950 62,037 127,049
Profit by Operating Segment
6 months to 30 September 2024 6 months to 30 September 2023 Year to 31 March 2024
EBITDA before share based payments, acquisition costs & Share based payments, acquisition costs, EBITDA before share based payments, acquisition costs & Share based payments, acquisition costs, exceptional non-recurring EBITDA before share based payments, acquisition costs & Share based payments, acquisition costs, exceptional non-recurring
exceptional exceptional-non recurring costs,
exceptional costs,
exceptional costs,
non-recurring costs depreciation & amortisation non-recurring costs depreciation & amortisation non-recurring costs depreciation & amortisation
Operating profit/(loss)
Operating profit/(loss) Operating profit/(loss)
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Easyspace 3,054 (192) 2,862 3,167 (301) 2,866 6,161 (570) 5,591
Cloud Services 16,340 (11,821) 4,519 18,167 (10,672) 7,495 36,729 (22,141) 14,588
Group overheads (2,442) - (2,442) (2,736) - (2,736) (5,162) - (5,162)
Administrative expenses - exceptional non-recurring costs - - - - (462) (462) - (462) (462)
Share based payments - (514) (514) - (206) (206) - (517) (517)
Acquisition costs - (1,151) (1,151) - (538) (538) - (1,010) (1,010)
Profit before tax and interest 16,952 (13,678) 3,274 18,598 (12,179) 6,419 37,728 (24,700) 13,028
Group interest and tax (2,890) (2,994) (6,587)
Profit for the period/year 384 3,425 6,441
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 6 months to 30
September September Year to 31 March 2024
2024 2003 £'000
£'000 £'000
Profit for the period/year and basic earnings attributed to ordinary 384 3,425 6,441
shareholders
No No No
Weighted average number of ordinary shares: 000 000 000
Called up, allotted and fully paid at start of period 112,341 110,422 110,422
Shares held by Employee Benefit Trust (141) (141) (141)
Issued share capital in the period 52 1,016 1,391
Weighted average number of ordinary shares - basic 112,252 111,297 111,672
Dilutive impact of share options 1,271 2,496 2,710
Weighted average number of ordinary shares - diluted 113,523 113,793 114,382
Basic earnings per share 0.3 p 3.1 p 5.8 p
Diluted earnings per share 0.3 p 3.0 p 5.6 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 6 months to 30 Year to 31
September September March
2024 2023 2024
£'000 £'000 £'000
Profit for the period/year and basic earnings attributed to ordinary 384 3,425 6,441
shareholders
- Amortisation of acquired intangible assets 1,613 1,982 4,226
- Acquisition costs 1,151 538 1,010
- Administrative expenses - exceptional non-recurring costs - 462 462
- Share based payments 514 206 517
- Tax impact of adjusted items (659) (716) (1,421)
Adjusted profit for the period/year and adjusted basic earnings attributed to 3,003 5,897 11,235
ordinary shareholders
Adjusted basic earnings per share 2.7 p 5.3 p 10.0 p
Adjusted diluted earnings per share 2.6 p 5.2 p 9.8 p
4. Acquisition costs and administrative expenses -
exceptional non-recurring costs
6 months to 30 6 months to 30 Year to 31
September September March
2024 2023 2024
£'000 £'000 £'000
Professional fees (643) (307) (537)
Non-recurring acquisition integration costs and restructuring costs (508) (231) (473)
Acquisition costs (1,151) (538) (1,010)
6 months to 30 6 months to 30 Year to 31
September September March
2024 2023 2024
£'000 £'000 £'000
Administrative expenses - exceptional non-recurring costs - (462) (462)
In the prior period, the Group incurred £0.5m of administrative expenses
- exceptional non-recurring costs in relation to the change of
CEO during September 2023 which we consider to be material in nature and
size.
5. Finance costs (net)
6 months to 30 September 6 months to 30 Year to 31 March
2024 September 2024
2023
£'000 £'000 £'000
Finance income:
Bank interest receivable 105 - 64
Finance costs:
Bank loans (1,761) (1,588) (3,366)
Lease finance costs (466) (379) (854)
Other interest charges (165) (59) (131)
Finance costs (2,392) (2,026) (4,351)
Finance costs (net) (2,287) (2,026) (4,287)
6. Taxation
6 months to 30 September 2024 6 months to 30 September 2023 Year to 31
£'000 £'000 March
2024
£'000
Corporation Tax:
Tax charge for the period/year (715) (1,104) (2,536)
Adjustment relating to prior years - - (130)
Total current taxation charge (715) (1,104) (2,666)
Deferred Tax:
Origination and reversal of temporary differences 112 136 380
Adjustment relating to prior periods - - (21)
Effect of different statutory tax rates of overseas jurisdictions - - 7
Total deferred taxation credit/(charge) 112 136 366
Total taxation charge for the period/year (603) (968) (2,300)
Deferred tax assets and liabilities at 30 September 2024 have been calculated
based on the rate enacted at the reporting date of 25% (H1 2024: 25%).
7. 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 2023 99,950 61,809 15,302 11,028 86 336 188,511
Acquired on acquisition of subsidiary 4,343 3,823 1,055 - - - 9,221
Additions in the period - - 860 - - - 860
Currency translation differences - 11 - 9 - - 20
Disposals - - (112) - - - (112)
At 30 September 2023 104,293 65,643 17,105 11,037 86 336 198,500
Acquired on acquisition of subsidiary 5,528 1,980 - 97 - - 7,605
Additions in the period - - 1,318 113 - - 1,431
Currency translation differences - (27) - (21) - - (48)
At 31 March 2024 109,821 67,596 18,423 11,226 86 336 207,488
Additions in the period - - 1,217 16,465 - - 17,682
Currency translation differences - (46) - (35) - - (81)
At 30 September 2024 109,821 67,550 19,640 27,656 86 336 225,089
Accumulated amortisation:
At 1 April 2023 - (53,325) (12,600) (9,274) (77) (304) (75,580)
Charge for the period - (1,982) (777) (493) (4) (4) (3,260)
Currency translation differences - (11) - (8) - - (19)
Disposals - - 112 - - - 112
At 30 September 2023 - (55,318) (13,265) (9,775) (81) (308) (78,747)
Charge for the period - (2,244) (1,115) (371) (2) (4) (3,736)
Currency translation differences - 25 - 22 - - 47
At 31 March 2024 - (57,537) (14,380) (10,124) (83) (312) (82,436)
Charge for the period - (1,613) (1,043) (1,919) (2) (4) (4,581)
Currency translation differences - 46 - 35 - - 81
At 30 September 2024 - (59,104) (15,423) (12,008) (85) (316) (86,936)
Carrying amount:
109,821 8,446 4,217 15,648 1 20 138,153
At 30 September 2024
At 31 March 2024 109,821 10,059 4,043 1,102 3 24 125,052
At 30 September 2023 104,293 10,325 3,840 1,262 5 28 119,753
Note 11 provides the movements in the period relating to IFRS 16 right-of-use
assets included in the above table.
8. 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 2023 8,236 41,516 31,843 121,238 2,986 46 205,865
Acquired on acquisition of subsidiary - 6 - 31 7 - 44
Additions in the period - 3,466 1,580 3,715 202 43 9,006
Disposals in the period - (462) - - - (5) (467)
Currency translation differences - 28 - 22 - - 50
At 30 September 2023 8,236 44,554 33,423 125,006 3,195 84 214,498
Acquired on acquisition of subsidiary - 10 - 314 18 - 342
Additions in the period - 2,850 1,044 2,161 - 5 6,060
Disposals in the period - (1,667) - - (119) - (1,786)
Currency translation differences - (77) - (189) - - (266)
At 31 March 2024 8,236 45,670 34,467 127,292 3,094 89 218,848
Additions in the period - 1,957 814 2,480 39 - 5,290
Disposals in the period - - - - (3) (4) (7)
Currency translation differences - (163) - (333) - - (496)
At 30 September 2024 8,236 47,464 35,281 129,439 3,130 85 223,635
Accumulated depreciation:
At 1 April 2023 (1,295) (20,951) (18,711) (97,403) (2,520) (26) (140,906)
Charge for the period (119) (2,262) (797) (4,428) (102) (5) (7,713)
Disposals in the period - - - - - 5 5
Currency translation differences - (31) - (20) - - (51)
At 30 September 2023 (1,414) (23,244) (19,508) (101,851) (2,622) (26) (148,665)
Charge for the period (119) (2,722) (794) (4,326) (82) (8) (8,051)
Disposals in the period - 1,117 - - - - 1,117
Currency translation differences - 72 - 171 - - 243
At 31 March 2024 (1,533) (24,777) (20,302) (106,006) (2,704) (34) (155,356)
Charge for the period (119) (2,350) (820) (4,056) (80) (7) (7,432)
Disposals in the period - - - - 1 4 5
Currency translation differences - 132 - 318 - - 450
At 30 September 2024 (1,652) (26,995) (21,122) (109,744) (2,783) (37) (162,333)
Carrying amount:
At 30 September 2024 6,584 20,469 14,159 19,695 347 48 61,302
At 31 March 2024 6,703 20,893 14,165 21,286 390 55 63,492
At 30 September 2023 6,822 21,310 13,915 23,155 573 58 65,833
Note 11 provides the movements in the period relating to IFRS 16 right-of-use
assets included in the above table.
9. Analysis of change in net debt
Lease liabilities Total net debt
Cash and cash equivalents £'000 £'000
£'000 Bank
loans
£'000
At 1 April 2023 13,818 (34,400) (19,180) (39,762)
Additions to lease liabilities - - (2,197) (2,197)
Disposals from lease liabilities - - 476 476
New bank loans - (5,500) - (5,500)
Currency translation - - 16 16
Cash and cash equivalents cash outflow (3,145) - - (3,145)
Lease liabilities cash outflow - - 2,129 2,129
At 30 September 2023 10,673 (39,900) (18,756) (47,983)
Acquired on acquisition of subsidiary - (3,728) - (3,728)
Repayment of debt acquired on acquisition - 3,728 - 3,728
Additions to lease liabilities - - (1,951) (1,951)
Disposals from lease liabilities - - 587 587
Drawdown of bank loans - (2,100) - (2,100)
Repayment of bank loans - 2,000 - 2,000
Currency translation - - (5) (5)
Cash and cash equivalents cash inflow 5,082 - - 5,082
Lease liabilities cash outflow - - 2,034 2,034
At 31 March 2024 15,755 (40,000) (18,091) (42,336)
Additions to lease liabilities - - (1,933) (1,933)
New bank loans** - (57,000) - (57,000)
Currency translation - - 19 19
Cash and cash equivalents cash inflow** 51,457 - - 51,457
Lease liabilities cash outflow* - - 1,723 1,723
At 30 September 2024 67,212 (97,000) (18,282) (48,070)
* Lease liabilities cash outflow at 30 September 2024 is reconciled as
£2,189,000 payments to lease provider as disclosed in the consolidated cash
flow statement netted with lease interest of £466,000 (note 5).
**As disclosed in the post balance sheet event note 12, to fund the
acquisition of Kookaburra Topco Limited on 1 October 2024, the Group drew down
£57.0m from its revolving credit facility on 30 September 2024. The £57.0m
cash is restricted cash and was held in trust with Pinsent Mason LLP and was
used to fund the acquisition on 1 October 2024.
10. Borrowings
30 30 31
September September March
2024 2023 2024
£'000 £'000 £'000
Current:
Lease liabilities (note 11) (2,560) (2,383) (2,509)
Total current borrowings (2,560) (2,383) (2,509)
Non-current:
Lease liabilities (note 11) (15,722) (16,374) (15,582)
Bank loans (97,000) (39,900) (40,000)
Total non-current borrowings (112,722) (56,274) (55,582)
Total borrowings (115,282) (58,657) (58,091)
At 31 March 2024, the Group had a £100m multi option revolving credit
facility which has a maturity date of 30 June 2026 and benefits from a £50m
Accordion facility. On 30 September 2024 the Group increased its revolving
credit bank facility, which expires on 30 June 2026, from £100m to £125m,
via the Accordion, to provide additional undrawn sums for the Group. The RCF
and the Accordion Facility of £25m (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 £57m (H1 2024: £5.5m).
Details of the Group's lease liabilities are included in note 11.
11. 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 2023 16,127 1,813 380 18,320
Additions 2,197 - - 2,197
Disposals (462) - - (462)
Currency translation differences - (21) - (21)
(1,078) (725) - (1,803)
Depreciation charge
Amortisation charge - - (143) (143)
16,784 1,067 237 18,088
Net book value at 30 September 2023
Additions 183 1,890 - 2,073
Disposals - (550) - (550)
Currency translation differences - (2) - (2)
Depreciation charge (1,052) (1,078) - (2,130)
Amortisation charge - - (142) (142)
Net book value at 31 March 2024
15,915 1,327 95 17,337
Additions - 1,933 - 1,933
Currency translation differences - (23) - (23)
(1,019) (805) - (1,824)
Depreciation charge
Amortisation charge - - (95) (95)
14,896 2,432 - 17,328
Net book value at 30 September 2024
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 2024 (note 8). The right-of-use
assets in relation to software are disclosed as non-current assets and are
disclosed within intangibles at 30 September 2024 (note 7).
Lease liabilities
Lease liabilities for right-of-use assets are presented in the statement of
financial position within borrowings as follows:
30 September 2024 30 September 2023 31 March
2024
£'000 £'000 £'000
(2,560) (2,383) (2,509)
Lease liabilities (current) (note 10)
Lease liabilities (non-current) (note 10) (15,722) (16,374) (15,582)
Total lease liabilities (18,282) (18,757) (18,091)
The maturity analysis of undiscounted lease liabilities is shown in the table
below:
30 September 30 September 31 March
2024 2023 2024
Amounts payable under leases: £'000 £'000 £'000
(3,539) (2,661) (3,332)
Within one year
Between two to five years (10,139) (9,532) (9,294)
After more than five years (8,433) (10,935) (9,477)
(22,111) (23,128) (22,103)
Add: unearned interest 3,829 4,371 4,012
Total lease liabilities (18,282) (18,757) (18,091)
12. Post balance sheet events
As announced on 1 October 2024, we acquired the entire issued share capital of
Kookaburra Topco Limited ("Kookaburra"), the holding company of Atech Support
Limited (together "Atech"). Atech is one the UK's most highly accredited
Microsoft Solutions Partners and the combination of the two businesses creates
a powerful extended set of offerings for mid-market customers, cementing the
Group's position as a leading 'Microsoft First' solutions provider in the UK.
The initial consideration for the acquisition is £57.0m and was paid in cash
on completion on a cash free, normalised working capital and debt free basis
under a locked box completion mechanism. The purchase price includes £19.6m
of debt repayments and working capital adjustments at completion, with the
balance paid to the Kookaburra shareholders. The full purchase price will be
financed through a combination of existing bank facilities and cash on the
Company's statement of financial position (note 9).
Due to the proximity of the acquisition date to the financial statements being
authorised for issue, IFRS 3 disclosures are not audited or presented.
13. Availability of half yearly reports
The Company's Interim Report for the six months ended 30 September 2024 will
shortly be available to view on the Company's website (www.iomart.com).
INDEPENDENT REVIEW REPORT TO IOMART GROUP PLC
Conclusion
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 2024 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.
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 2024 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.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements (UK) 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 (ISRE (UK) 2410). 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.
As disclosed in note 1, the annual financial statements of the Group are
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.
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410; however future events or conditions may cause the entity to
cease to continue as a going concern.
Responsibilities of the Directors
The directors are responsible for preparing the half-yearly financial report
in accordance with the AIM rules of the London Stock Exchange.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group's ability to continue as a going concern, disclosing
as applicable, matters related to going concern and using the going concern
basis of accounting unless the directors either intend to liquidate the
company or to cease operations, or have no realistic alternative but to do so.
Auditors' Responsibilities for the review of the financial information
In reviewing the half-yearly financial report, we are responsible for
expressing to the company a conclusion on the condensed set of financial
statements in the half-yearly financial report. Our Conclusion, including our
Conclusion Relating to Going Concern, are based on procedures that are less
extensive than audit procedures, as described in the Basis for Conclusion
paragraph of this report.
Use of our report
This report is made solely to the company in accordance with ISRE (UK) 2410.
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
27 November 2024
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