Final Results

Solid financial results provide foundation for a bolder strategy for growth

iomart (AIM: IOM), the cloud computing company, is pleased to report its final results for the year ended 31 March 2024 (FY2024).

FY2024 FINANCIAL HIGHLIGHTS

• Revenue UP 10% to £127.0m (2023: £115.6m)
• 91% recurring revenue* DOWN 1pp (2023: 91%)
• Adjusted EBITDA** UP 4% to £37.7m (2023: £36.2m)
• Adjusted EBIT*** UP 8% to £19.2m (2023: £17.7m)
• Adjusted profit before tax**** UP 1% to £15.0m (2023: £14.8m)
• Profit before tax UP 2% to £8.7m (2023: £8.5m)
• Adjusted diluted EPS**** DOWN 10% to 9.8p (2023: 10.9p)
• Basic EPS DOWN 9% to 5.8p (2023: 6.4p)
• Cash generation from operations UP 8% to £36.6m (2023: £33.8m)
• Proposed final dividend per share DOWN 14% to 3p (2023: 3.5p)

 

• Strong revenue growth of 10%, achieving record revenues of £127.0m (FY23: £115.6m) supported by two acquisitions in the year and a further year of organic growth within cloud managed services, the area which is the key focus of our commercial and product strategy
• Cloud managed services revenue, the largest component of the Group, increased by 17% to £75.2m (FY23: £64.1m), driven by around 3% organic growth and approximately £8.9m revenue contribution from the latest three acquisitions
• Group adjusted EBITDA margin performance of 29.7% (FY23: 31.3%) reflecting the change in revenue mix and specific timing of inflationary price adjustments during the last financial year. This changing mix is less impactful at the adjusted EBIT margin level which was more stable year on year at 15.1% (FY23: 15.3%)
• £1.4m higher interest expense in the year, due to rise in bank interest rates, means adjusted profit before tax in the period of £15.0m (FY23: £14.8m) showed a more modest 1% growth
• Strong cash generation with a cash conversion ratio******* of 97% (FY23: 94%) testament to our business model and strong focus on cash
• Year-end net debt****** increased by 6% to £42.3m (FY23: £39.8m), a comfortable net debt to adjusted EBITDA ratio of 1.1 times (FY23: 1.1 times)

STRATEGIC HIGHLIGHTS

We have established a clear strategic vision and renewed sense of purpose to execute around three simple messages: Bigger, Better, Bolder.

Key achievements to date and areas of focus:

Bigger

• Double digit order bookings growth in the year, including an increase in average order values and a higher number of new customer wins
• Completed two acquisitions, Extrinsica and Accesspoint, adding significant skills and capabilities to the Group
• Selected as one of only seven UK strategic Broadcom Pinnacle Partners, reflecting the pedigree and engineering skills we have in this technology, with first new customer wins secured during March and April 2024 under the new arrangement

Better

• Appointment of Chief Technology Officer in May 2023, and Chief Portfolio Officer in November 2023 to increase our bandwidth and ensure innovation in our solutions
• Fully integrated Cristie Data into iomart and begun the integration of the more recently acquired Pavilion IT, Oriium and Extrinsica to streamline our operating model
• Relocated to a new Grade A office in Glasgow city centre and commenced working towards our goal of achieving “Great Place to Work” accreditation

Bolder

• Cristie Data brand retired and will do the same for other acquired brands over next 12 months, closing/redirecting legacy websites and social media content with the aim of bringing all customer propositions under one brand
• Looking ahead the strength of our balance sheet and cash generation, and proven expertise in acquisitions provide strong foundations to take a bolder approach in pivoting our product mix to have a greater exposure to high growth, higher value-added services segments of the hybrid cloud services market

BOARD APPOINTMENTS

• Appointment during the year of two new non-executive Directors, both with considerable technology services experience, Annette Nabavi and Adrian Chamberlain, ensuring we retained a majority of independent non-executive Directors on the Board
• In September 2023, Lucy Dimes, Chair, took over the CEO role following the departure of Reece Donovan
• Nomination of Richard Last as Chair of the Board, to take effect from 12 June 2024, bringing a wealth of experience in chair and non-executive roles in many large and successful technology companies

OUTLOOK

• The first two months of the new financial year has seen trading in line with Board expectations, consistent with our high recurring revenue business model which gives good visibility
• The industry-wide change to VMware licensing introduced by Broadcom has resulted in increased costs ahead of associated revenue enhancing opportunities and this, combined with the timing of revenue recognition from the recently secured customer contracts and inflation driven cost and salary increases, means growth is likely to be more second half weighted in FY25
• The underlying drivers for cloud computing, increasing complexity of the technical landscape and customers looking for a trusted and experienced service partner gives the Board confidence in the outlook for the long-term prospects for the Group

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, year on year, is a £0.5m exceptional non-recurring charge recorded within administration costs related to the change in CEO during the month of September.

Lucy Dimes, CEO commented,

“I am delighted to report on a year of revenue growth supported by two acquisitions and organic growth within cloud managed services, the area which is the key focus of our commercial and product strategy. We delivered good profitability and continued strong cash generation, providing us with the strong financial foundation on which to execute our growth strategy.

“Our vision is to be the UK’s leading secure cloud services provider to the SME market. We want to provide a compelling proposition to customers as cloud optimisation experts and a managed service provider that delivers the right cloud for the right workloads, which is secure by design.

“In a world where computing demands are getting ever more intense, and businesses across all sectors and size are looking at how they can harness the very latest technologies, iomart sits in an enviable position. We have a valuable data centre estate and capability connected by a fibre backbone, providing security, resilience and control, underpinned by a talented team of world class technical experts and engineers, combined with proven expertise across a range of customer segments. This and the financial firepower to rapidly expand our offering and scale through selective M&A gives us the confidence to drive for accelerated growth and achieve our vision.”

Notes:

*Recurring revenue, as disclosed in note 3, is the revenue that repeats either under long-term contractual arrangement or on a rolling basis by predictable customer habit. % of recurring revenue is defined as recurring revenue (as disclosed in note 3) / revenue (as disclosed in the consolidated statement of comprehensive income)

**Throughout this statement adjusted EBITDA, as disclosed in the consolidated statement of comprehensive income, is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges, acquisition costs and exceptional non-recurring costs. Throughout this statement acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs

***Throughout this statement adjusted EBIT is earnings before interest and tax (EBIT) before amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and exceptional non-recurring costs. Throughout these financial statements 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 12, is profit before tax, amortisation charges on acquired intangible assets, share based payment charges, acquisition costs and exceptional non-recurring costs

*****Throughout this statement adjusted diluted earnings per share, as disclosed in note 7, is earnings per share before amortisation charges on acquired intangible assets, share based payment charges, acquisition costs and exceptional non-recurring costs and the taxation effect of these /weighted average number of ordinary shares – diluted (as disclosed in note 7)

******Net debt being outstanding bank loans, lease liabilities less cash and cash equivalents (as disclosed on page 14).

******* Cash conversion is calculated as cash flow from operations, as disclosed in the consolidated statement of cash flows, divided by adjusted EBITDA defined above