On track – Strategy implemented and progressing well

iomart (AIM: IOM), the cloud computing company, is pleased to report its consolidated half yearly results for the period ended 30 September 2021 (H1 2022).

Financial Highlights

• Revenue –  £51.9m (H1 2021: £56.3m)
• % of recurring revenue* – 93% (H1 2021:90%)
• Adjusted EBITDA** –  £19.6m (H1 2021: £20.8m)
• Adjusted profit before tax*** – £9.1m (H1 2021: £9.8m)
• Profit before tax – £6.0m (H1 2021: £6.0m)
• Adjusted diluted EPS**** – 6.5p ((H1 2021: 7.0p)
• Basic EPS – 4.4p ((H1 2021: 4.4p)
• Cash generation from operations – £17.9m (H1 2021: £23.1m)
• Interim dividend per share – 2.42p (H1 2021: 2.60p)

The Group continues to benefit from very strong levels of recurring revenues of 93%* of Group revenues

• Reduction in revenue reflects lower non-recurring equipment and consultancy sales, along with lower customer renewals. The Board is confident that this short-term impact on revenue will be reversed
• Profitability percentile remains positive and stable with adjusted EBITDA** and adjusted profit before tax*** at 37.7% (H1 2021: 36.9%) and 17.5% (H1 2021: 17.3%) of revenue, respectively with the absolute reductions of £1.2m and £0.7m, respectively a function of the revenue trend
• Strong cash generation from operations in the period of £17.9m with a consistent cash conversion****** (91%), after recognising one-off items with a value of £4m in the prior period
• Period end net debt of £49.3m, comfortable at 1.2 times annualised EBITDA*****
• Successful refinancing with an increased £100m revolving bank facility from a new group of four leading banks, underpinning the Group’s five-year growth strategy

OPERATIONAL HIGHLIGHTS

• Launch of the new iomart brand well received by all stakeholders, providing a core foundation for current and future growth initiatives
• Established a new Group product team and launched new products targeted at both new and existing customers
  • Successful Microsoft Azure campaign launched in September which resulted in securing a multi-year, six figure annual revenue managed Azure customer, alongside a well-qualified pipeline of additional opportunities
  • Secure Connectivity Services offering developed and sales campaign launched in September, and developed a well-qualified pipeline with first sales targeted within the current financial year
• Enhancements made to core operational and service-based systems and tools, with a primary focus on improved levels of service excellence
• Ongoing investment in the Group’s datacentre estate as previously announced, to strengthen this valuable strategic and operational capability
• All electricity for our UK data centres is now sourced under Renewable Energy Guarantees of Origin (“REGO”) certified renewable electricity
• M&A – positive progress in evaluating targeted opportunities to extend the Group’s technology and product capabilities, while enhancing revenue, profitability and EPS

OUTLOOK

• High degree of confidence in achieving results in line with the Board’s expectations and executing against the Group’s five-year growth strategy
• The launch of the enhanced set of product offering, coupled with a clearly defined brand and targeted go to market capability has provided for a positive sales environment to deliver future growth

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 £0.5m lower amortisation of acquired intangible assets as the amortisation periods expire on historic acquisitions.

Reece Donovan, CEO commented,

“We are energised by our refreshed strategy, new brand and clear focus. The early customer wins from the new sales campaigns are excellent signs that the strategy is on track and starting to deliver tangible results. iomart’s high level of recurring revenue remains a considerable strength, providing good visibility for the remainder of the year. Current trading is in line with the Board’s expectations for the full year.

“The journey to the cloud for many is long and complex and iomart is well positioned to support existing and new customers on the multiple paths open to them, ensuring we respond to their specific business requirements and provide exceptional service and reliability. It is the blend of our straightforward approach, owned infrastructure assets, people and relationship focus, and agile technology-agnostic solution model, along with extensive customer base and more than 20 years’ experience, that gives us confidence that we will continue to participate successfully within the wider growing Cloud sector.”

*Recurring revenue is the revenue that repeats either under long-term contractual arrangement or on a rolling basis by predictable customer habit.

** Throughout this statement adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges, acquisition costs and gain on revaluation of contingent consideration. Throughout this statement acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

*** Throughout this statement adjusted profit before tax is profit before tax, amortisation charges on acquired intangible assets, share based payment charges, acquisition costs and gain on revaluation of contingent consideration.

**** Throughout this statement adjusted diluted earnings per share is earnings per share before amortisation charges on acquired intangible assets, share based payment charges, acquisition costs, gain on revaluation of contingent consideration and the taxation effect of these.

***** Annualised EBITDA is the last 12 months of EBITDA for the period ended 30 September 2021.

****** Cash conversion is calculated as cash flow from operations divided by adjusted EBITDA.