iomart: Trading Update

3rd April 2020 | iomart Group plc

iomart Group plc (AIM: IOM), the cloud computing company, provides its pre-close trading statement for the year ended 31 March 2020 ahead of the announcement of its full year results.

Group Trading Performance

The Board is pleased to report that iomart expects to deliver another year of revenue growth, strong profitability and cash generation, in line with expectations. Due to the timing of the year end, the Group has experienced minimal impact on trading in the year from the effects of COVID-19.

For the year to 31 March 2020, the Group expects to report revenue of approximately £112 million (FY19: £103.7 million), adjusted EBITDA (1) of approximately £43 million (FY19: £42.2 million) and adjusted profit before tax (2) of approximately £22.5 million (FY19: £25.5 million). The organic growth rate within the Cloud Services division increased to 6% in the year (FY19: 2%), benefiting in particular from a strong performance by our hardware reseller team. The mix in revenue in the year and increased investment mainly in the sales organisation, has resulted in a lower adjusted operating profit margin of approximately 22% (FY19: 25.7%), which remains higher than the industry average. Around 86% of Group revenue in the year was recurring in nature, providing the Group with high levels of revenue visibility as it enters FY21.

iomart is strongly cash generative, with high levels of contracted recurring revenue and low levels of debt. Net debt at year end, after recognising the funding of the two recent acquisitions outlined below, was in line with expectations at £58 million or £40 million pre IFRS 16 lease liabilities (FY19: £39 million pre IFRS lease liabilities).

Acquisitions

In line with the Group’s stated strategy to complement organic growth with acquisitions, the Group completed two acquisitions during the second half of the year. On 28 February 2020, iomart acquired the managed private cloud division of privately owned ServerChoice Limited, for an initial consideration of £2.1 million, with a further maximum consideration of £0.9 million. On 13 March 2020, iomart completed the acquisition of Memset Limited for an initial consideration of £3.3 million, with a further maximum consideration of £0.9 million. Memset is a well-established business providing dedicated and virtualised private cloud infrastructure to around 2,000 customers. Both acquisitions are expected to be immediately earnings enhancing.

Impact of COVID-19 and Outlook

Our current focus is on the wellbeing and health of our staff whilst continuing to support our customers. Our business continuity plans have been successfully implemented and remote working facilitated across our operations. Each of our datacentres remains operational to high standards of security and resilience and all customer support has been maintained.

At the time of this announcement, we have seen minimal change to our business levels, and we take great comfort from the resilience of our business model, especially the diversity and limited concentration of our customer base. We are not significantly exposed to industries that are suffering the worst effects. The vast majority of our customers are trading or operating online and may experience an increase in demand for their products and services over the coming months.

While uncertainty exists over how calendar 2020 will unfold, with some IT investment decisions likely to be delayed in the short-term, it is clear that technology and the Cloud will not lose relevance and indeed the situation we are all facing perhaps reinforces the journey to the Cloud. However, the eventual impact on our customer base remains an unknown at this time. We continue to monitor the situation closely as it develops and will provide a further update on trading at the time of the release of our audited financial results.

Angus MacSween, CEO of iomart Group plc, stated:

“At this time, our priority is to see our staff and all our customers through this emergency situation as unscathed as possible. I am proud of how the team have responded and how well our business continuity has functioned. We remain committed to doing all we can to help each other through this.

While we may potentially see an impact on our customer base and trading in the coming months, overall the Group benefits from high levels of recurring revenue, strong levels of cash generation, a strong balance sheet and a wide and large customer base.”

(1) adjusted EBITDA means earnings before interest, tax, depreciation, amortisation, share based payment charges, gains or losses on revaluation of contingent consideration, acquisition related costs and non-recurring items.

(2) adjusted profit before tax means profits before, tax, share based payment charges, amortisation of acquired intangibles, gains or losses on revaluation of contingent consideration, acquisition related costs, non-recurring items and interest charges on contingent consideration.

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