iomart Group plc (AIM:IOM), the cloud computing company, is today providing a trading update for the six months ended 30 September 2021, ahead of the announcement of its half year results expected to be released in early December 2021.

Strategically, the Group has continued to make positive progress in the period against the key milestones announced in May, as part of the refreshed strategy to re-position iomart’s offering around the growing hybrid cloud market. This includes the launch of a new brand, the release of new products and the Group’s first hybrid customer win during the period. Being only a few months into the execution of the refreshed strategy the expected success of the transition of the business will take time to flow through into results, however the progress being made provides the Board with confidence that the Group will return to growth in the medium term.

While the majority of the customer base has remained stable (with recurring revenues in the period accounting for 93% of revenue), the slightly higher than usual customer churn seen in the final months of FY21 continued into the first half of this current financial year. In addition, non-recurring revenue, principally hardware reselling and one-off consultancy activity was £2.0m lower than the equivalent period last year and we do not expect this revenue to be recovered during H2. As a consequence, the Board anticipates results for the full year to 31 March 2022 being below current expectations.

For the six months to 30 September 2021, the Group expects to report revenue of approximately £52.0 million (H1 FY21: £56.3 million), adjusted EBITDA* of approximately £19.5 million (H1 FY21: £20.8 million) and adjusted profit before tax** of approximately £9.0 million (H1 FY21: £9.8 million).

Profit margins have remained strong in the period, at 37% for adjusted EBITDA and 17% for adjusted PBT. The Group’s cash generation has been good and ahead of the Board’s expectations, with the cash position increasing to approximately £26.0 million at 30 September 2021 (31 March 2021: £23.0 million). The revolver loan drawn amount remains unchanged from last year and along with lease liabilities the Board expects net debt to be approximately £50.0 million at 30 September 2021 (31 March 2021: £54.6 million).

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 from a strong and stable foundation and return to growth over the medium term.

Strategic Update

The Group has focused on specific initiatives around the execution of the strategic plan and has made good progress.

• Brand development: We delivered a successful launch of our new iomart brand in early September, which has been well received by all stakeholders and provides a strong foundation for ensuring our value proposition and marketing collateral are impactful for both existing and potential new customers.
• New product development: we have established a new product team and have redefined and launched a number of new product initiatives. These are targeted at both new customers and upselling and cross-selling to our existing customers. They include specific campaigns around the growth areas of Digital Workplace, Secure Connectivity and Managed Microsoft Azure.
• The iomart team: demand for talent is high and in an effort to both retain and attract the best possible talent, we have updated our benefits package, formalised flexible working options and delivered a number of technical and management training programmes across the business.
• Business development: we plan to use selective M&A to strengthen our technology and product capabilities, while adding important people skills and competencies in order to support our growth strategy. During the period we have started to evaluate potential targets and although the timing of M&A closure is hard to predict, we are pleased with the positive progress made so far.

Reece Donovan, CEO of iomart Group plc, commented:

“We are on track to achieve the key milestones of our strategic refresh which we laid out in May for delivery in FY22. Our team is energised behind a new brand and vision to attract and retain quality customers. Sales, operational and organisational improvements continue to be made which are vital to scale the business. We are starting to see early signs that the market is responding to our newly launched offerings. While these successes will take time to flow through into our financial results, they provide solid foundations to support future growth.”

*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.