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*              94%                         93%                    +1pp

Adjusted EBITDA**                   £17.8m                    £19.6m                 -9%

Adjusted profit before tax***  £7.4m                       £9.1m                -19%

Profit before tax                             £4.9m                      £6.0m               -18%

Adjusted diluted EPS****              5.2p                         6.5p                  -20%

Basic EPS                                             3.5p                         4.4p                  -20%

Cash generation from                 £14.5m                   £17.9m               -19%
operations 

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%* 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** and adjusted profit before tax*** 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****** 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*****
• 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.”

Notes

* 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.

** 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.

*** 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.

**** 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.

***** Annualised EBITDA is the last 12 months of EBITDA for the period ended 30 September 2022.

****** 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.

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