iomart Group plc (AIM: IOM), the cloud computing company, provides its pre-close trading statement for the year ended 31 March 2021 ahead of the announcement of its full year results.

Group trading performance

iomart expects to deliver a continued stable financial performance in the second half of the year. The third, and unexpected, COVID-19 UK lock down hindered the green shoots of growth we had expected in the second half of the year, causing results to be at the lower end of expectations. However, the Group remains strongly profitable, and the Board is confident iomart has a strong basis for growth once UK business confidence returns and the strategic actions currently in progress under new CEO Reece Donovan have been fully implemented.

For the year to 31 March 2021, the Group expects to report revenue of approximately £112 million (FY20: £112.6 million), adjusted EBITDA* of approximately £41.5 million (FY20: £43.5 million) and adjusted profit before tax** of approximately £20 million (FY20: £22.8 million). We have seen revenue growth within our core area of managed cloud services, but overall the Cloud Services division experienced a contraction, primarily due to a drop in non-recurring hardware reselling activities as customers delayed investment decisions. The Group has maintained its sales team throughout the COVID-19 pandemic in order to position the Company optimally once business confidence returns and has not made use of any Government furlough support. This, combined with the specific mix in revenue in the year, has resulted in a lower adjusted EBITDA margin of approximately 37.1% (FY20: 38.6%). This margin level remains higher than the industry average and consistent with expectations.

The Group’s cash generation has been strong and ahead of the Board’s expectations, with the year-end cash position increasing to approximately £23 million at 31 March 2021 (31 March 2020: £15.5 million). The revolver loan drawn amount remains unchanged from last year and along with lease liabilities the Board expects net debt to be approximately £56 million at 31 March 2021 (31 March 2020: £57.6 million).

Outlook

The Group’s revenue profile continues to transition away from legacy self-managed infrastructure revenue to managed cloud revenue, which by its competitive nature tends to have initially lower margins which expand over time and represent a better long term growth opportunity. This trend will continue as the Group refocuses towards higher growth sectors, with managed cloud services at the heart of the iomart offering. While the success of the transition will take time to flow through into results, the Board is confident iomart’s valuable datacentre and network infrastructure, market-leading cloud expertise, highly recurring revenue and significant customer base means the business is well positioned to execute on its strategy and return to an accelerated growth trajectory over the medium term.

The Board expects to continue to use selective M&A to augment the growth strategy. The Group’s strong balance sheet allows the proactive consideration of acquisitions to broaden the Group’s skills and capabilities in new areas.

The Board remains confident in the outlook for the long-term prospects for iomart.

The Group will host a Capital Markets Day on 5 May 2021, to provide greater insight into the evolution of its strategy.

Reece Donovan, CEO of iomart Group plc, commented:

“iomart has performed resiliently during these unprecedented times, proving the strength of our recurring revenue model, the value our customers place on the services we deliver, and the commitment of our teams. We are in a period of transition for iomart, building on a strong starting position in terms of our financial strength, business model and market position. We look forward to updating investors further on our revitalised strategy at the Capital Markets Day in May. We have high confidence levels on the future success of iomart and our ability to be a leading cloud service provider, supporting customers in each step of their cloud journey.”

*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.

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

New CEO Reece Donovan outlines iomart’s forward looking strategy in its interim results recording at the end of 2020