REG - Iomart Group PLC - Final Results
11/06/2024 07:15
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RNS Number : 8830R Iomart Group PLC 11 June 2024
11 June 2024
iomart Group plc
("iomart" or the "Group" or the "Company")
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).
FINANCIAL HIGHLIGHTS
FY2024 FY2023 Change
Revenue £127.0m £115.6m +10%
% of recurring revenue(1) 91% 92% -1pp
Adjusted EBITDA(2) £37.7m £36.2m +4%
Adjusted EBIT(3) £19.2m £17.7m +8%
Adjusted profit before tax(4) £15.0m £14.8m +1%
Profit before tax £8.7m £8.5m +2%
Adjusted diluted EPS(5) 9.8p 10.9p -10%
Basic EPS 5.8p 6.4p -9%
Cash generation from operations £36.6m £33.8m +8%
Proposed final dividend per share 3.0p 3.5p -14%
· 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(7) of 97% (FY23: 94%)
testament to our business model and strong focus on cash
· Year-end net debt(6) 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:
(1 ) 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)
(2 ) 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
(3 ) 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.
(4 ) 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
(5 ) 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)
(6) Net debt being outstanding bank loans, lease liabilities less cash and
cash equivalents (as disclosed on page 14).
(7 ) Cash conversion is calculated as cash flow from operations, as
disclosed in the consolidated statement of cash flows, divided by adjusted
EBITDA defined above
This announcement contains forward-looking statements, which have been made by
the Directors in good faith based on the information available to them up to
the time of the approval of this report and such information should be treated
with caution due to the inherent uncertainties, including both economic and
business risk factors, underlying such forward-looking information.
For further information:
iomart Group plc Tel: 0141 931 6400
Lucy Dimes, Chief Executive Officer
Scott Cunningham, Chief Financial Officer
Investec Bank PLC (Nominated Adviser and Tel: 020 7597 4000
Broker)
Patrick Robb, Virginia Bull,
Alma Strategic Communications Tel: 020 3405 0205
Caroline Forde, Hilary Buchanan, Kinvara Verdon
About iomart Group plc
iomart Group plc (AIM: IOM) is a cloud computing and IT managed services
business providing hybrid cloud infrastructure, data management, protection
and cyber security services, and digital workplace capability. Our mission is
simple: to make our customers unstoppable by enabling them to connect, secure
and scale anywhere, anytime. From our portfolio of data centres we own and
operate across the UK to connected sites around the world, our 500-strong team
can design and deploy the right cloud solution for our customers.
For further information about the Group, please visit www.iomart.com
(http://www.iomart.com/) .
CHAIR'S STATEMENT
Financial year 2024 has been busy for iomart. During the year our previous CEO
stepped down and the Board asked me to perform the dual role of Chair and CEO
from September 2023, which allowed time for us to perform a diligent external
search process for a new Chair. I am delighted, as announced on 11 June 2024,
that we were able to nominate Richard Last, to take over as the new
independent non-executive chair from 12 June 2024. Richard has a wealth of
experience in chair and non-executive roles in many large and successful
technology companies. We are very excited to have attracted such an
experienced and knowledgeable individual to help guide us through this
important period of our strategy's development and implementation.
Overview and financial results
Our results demonstrate the resilience of the Group in the face of the ongoing
challenging economic backdrop for UK businesses. For the year ended 31 March
2024, the Group delivered revenue growth of 10% to £127.0 m (2023: £115.6
m), adjusted EBITDA growth of 4% to £37.7 m (2023: £36.2 m) and adjusted
profit before tax of £15.0 m (2023: £14.8 m). The statutory profit before
tax in the year was £8.7m (2023: £8.5m). These solid financial results
provide the foundation and confidence for us to pursue a bolder strategy for
growth, which is set out in detail below.
It is clear to me that iomart has the necessary ingredients to establish
itself as the UK's leading secure cloud services provider to the SME
marketplace. In my first 9 months as CEO, I have been focused on sharpening
our corporate vision and customer propositions and streamlining our internal
operating model. Good progress has been made in these areas, demonstrated by
continued growth in our managed services order bookings, two successful
acquisitions completed in the year, the strengthening of our senior management
team with the recruitment of a Chief Technology Officer and Chief Portfolio
Officer, and ultimately delivering full year profits in line with consensus.
Our iomart team is at the heart of the Group's success. I would like to
thank them all for their hard work and commitment during the year. One of the
strengths of the Group is the quality of its fantastic workforce and each
member's further development and support is one of the central tenets of our
strategy. To underpin the importance of our people and the high performance
culture we are nurturing, we have signed up to the Great Place to Work
programme and will start the journey of accreditation over the coming year.
Additional Board changes
We were pleased to welcome two new independent non-executive Directors to the
Board in the year, Annette Nabavi on 25 May 2023 and Adrian Chamberlain on 1
June 2023 ensuring we retained a majority of independent non-executive
Directors on the Board. Adrian has been appointed as the Senior Independent
Director and Annette as Chair of the Remuneration Committee. Annette and
Adrian both bring considerable experience in the technology services sector.
Following six years on the Board, Richard Masters, non-executive Director did
not stand for re-election and left the Board following the AGM in September.
Dividend
We paid an interim dividend of 1.94p per share to shareholders in January 2024
and the Board is now proposing to pay a final dividend of 3.00p per share
taking the total for the year to 4.94p. This would represent the maximum
pay-out ratio under our stated dividend policy of paying up to 50% of adjusted
diluted earnings per share. We believe this is appropriate given our funding
position, robust business model and strength of our balance sheet. Subject to
shareholder approval this proposed final dividend would be payable on 9
September 2024 to shareholders on the register at close on 16 August 2024.
Lucy Dimes
Executive Chair
11 June 2024
CHIEF EXECUTIVE OFFICER'S REPORT
Robust financial performance
I am delighted that we delivered a strong revenue growth of 10% and achieved a
record revenues of £127.0m (2023: £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.
We have delivered good profitability and strong cash generation in the year.
Adjusted EBITDA(1) grew by 4% to £37.7m (2023: £36.2 m) with adjusted
profit before tax(2) of £15.0 m (2023: £14.8 m) being flatter due to a
£1.4m increase in finance costs due to the higher base rates. Given the
strategic focus of growth within hybrid cloud we will, over time, see the
Group deploy more public cloud infrastructure in customer solutions. As a
result of this changing mix, the Board is increasingly focused on adjusted
EBIT(3) which in year increased by 9% to £19.2m (2023: £17.7m).
The Group's cash generation continued to be strong with an adjusted EBITDA to
operating cash flow conversion ratio of 97% (2023:94%). This is a real
strength of the business as has been demonstrated for more than a decade and
is testament to our business model and strong focus on cash. In the year we
invested £21.7m of cash (2023: £21.2m) into our datacentre estate, network
and selected acquisitions. Despite this, our year-end net debt, only increased
by 6% to £42.3m (2023: £39.8m). This represents a comfortable net debt to
adjusted EBITDA ratio of 1.1 times (2023: 1.1 times).
A clear strategic vision
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.
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. We can support our
customers through every aspect of their digital transformation journey,
provide true digital mobility, resilience and scalability, and become a
trusted partner to them and their customers.
While we have many of the ingredients required to achieve this vision, we know
we also have some key activities to undertake. These include extending our
product offering (organically and through M&A), increasing our brand
awareness, and improving our underlying operating model to ensure we deliver
outstanding customer service and are a streamlined, commercially minded
organisation able to execute at pace.
A renewed and sharpened sense of purpose to execute
Since I took over as CEO in September 2023 I have worked with our people and
teams across the business to sharpen and strengthen our vision, strategy,
purpose and values. Taking their feedback, we have honed in on three simple
messages to align our execution to our strategic vision: Bigger, Better,
Bolder.
These three watch words encapsulate the programme of activities we are driving
internally, all of which are focused on increasing iomart's ability to drive
growth within its cloud managed services segment.
Over the last year good progress has been made in key areas with the
highlights noted in each of the areas detailed below:
Bigger
Order growth
We previously reported that we started FY24 with a well-inducted and skilled
commercial team established after the appointment of a new Chief Sales Officer
in February 2022. The commercial team delivered double digit order bookings
growth in the year, including an increase in average order values and a higher
number of new customer wins.
Acquisitive growth
We completed two acquisitions in the year which add significant skills and
capabilities to the Group. The Extrinsica acquisition accelerated our
capabilities and customer references within the Microsoft public cloud domain.
We have seen positive trends in this area, including our first +£1m annual
order value booking within the Microsoft practice being secured in the final
month of the year for a new customer.
Market positioning & partnerships
Following the acquisition of VMware by Broadcom, iomart has been selected as
one of only seven UK strategic Broadcom Pinnacle Partners. This reflects the
pedigree and engineering skills we have in this market leading technology and
our strong position within the cloud market in the UK. Initial sales
engagement with customers under this new arrangement has been encouraging with
several new logos signing contracts during March and April 2024.
We have recently invested in additional resource to lead our strategic
partnership programme which will ensure we have clearer criteria for
designation of our strategic vendor partners and achieve greater leverage from
the combined strengths of key relationships.
Better
Increasing our bandwidth to ensure innovation in our offering
We appointed an experienced Chief Technology Officer in late May 2023 to bring
focus on the two discrete areas of technology and customer experience. This
has proven to be successful in adding greater bandwidth on execution. We
concluded the reshaping of our senior management team with the recruitment of
a Chief Portfolio Officer in November 2023. Since then, we have invested in
the product team who work in a collaborative manner across the business,
ensuring increased attention to innovating our managed service solutions,
leveraging vendor technologies, to meet customer needs and to more closely
align iomart's solutions portfolio and positioning with market trends.
Streamlining our operating model
We made the decision earlier this year to accelerate the streamlining of our
operating model which had been started under the previous "one iomart"
initiative. During the year we fully integrated Cristie Data into iomart and
in the last 3 months have used a similar blueprint to start integration for
the more recently acquired businesses of Pavilion IT, Oriium and Extrinsica.
These integrations will be fully concluded in the first half of the new
financial year and will mean all of our managed services activity will be
fully aligned to the same functional model of sales, product, service and
technology. Our mass domain and hosting services division looking after the
Easyspace and Hosting UK brands remain separate, supported by our technology
services team and central support functions.
Improved working environment
As the near 500 strong skilled iomart workforce continues to grow, we are
increasingly focused on the recruitment, engagement, motivation, productivity,
and retention of our people. Recognising the importance of the working
environment, we relocated to a new Grade A office in Glasgow city centre in
September 2023. Over the next 12 months, we plan to refurbish our key offices
in London and Manchester to replicate the modern and welcoming atmosphere of
our Glasgow location. The Board has also approved our goal to achieve the
Great Place to Work accreditation, committing to continuous investment in
fostering an environment where our employees can learn, grow, and thrive. We
will continue to focus on strengthening the employee proposition and culture
inside iomart and recently rolled out our new values - Purpose, Passion and
Pride - which will provide guiding principles underpinning our renewed
aspirations.
Bolder
Bringing all our customer propositions under one brand
As well as one singular operating model, we will also move forward with one
brand for our secure cloud services activities. In the past we have been
hesitant in retiring acquired brands due to concerns around specific customer
reactions. While clearly this is a consideration, our belief is that, while we
have varying product solutions, we are fundamentally supporting customers with
their critical digital transformations and critical operational infrastructure
underpinning their businesses and this is best served by an integrated,
interoperable and optimised portfolio of solutions under a single brand and
aligned organisation. We retired the Cristie Data brand in January 2024 and
will do the same with Pavilion IT, Oriium and Extrinsica over the next 12
months. We are also tackling some of the legacy sub-brands which still exist
on-line and will be closing these legacy websites and social media content.
Targeting acquisitions of greater size & scale
We have made 24 acquisitions in the last 14 years of varying size. The average
revenue across these 24 acquisitions was around £4m, with the largest being
the August 2022 acquisition of Concepta which had around £10m of revenue. We
are looking to be bolder with our M&A strategy and target growing
businesses in carefully selected areas with revenues of more than £10m in
order to accelerate our growth trajectory and ensure more scale and a quicker
impact. The strength of our balance sheet and cash generation, and proven
expertise in acquisitions provide strong foundations to take this bolder
approach. There may be opportunities which are of a smaller size, and these
will continue to be considered on a case-by-case basis including consideration
as to how easily they can be integrated and how the target company's
specialist skills or customer verticals can add to iomart's overall portfolio.
FY25 focus
Looking ahead, our key areas of focus underpinning the 'Bigger, Better,
Bolder' strategy will be:
1. Streamlined and integrated: Single operating model to drive best practise
adoption and unified brand positioning.
2. Differentiation enablers: Focused functional transformation programmes to
drive high performance and greater impact.
3. Bolder M&A focus: Acquisitions of a more substantial nature, with a focus
in the areas of cyber, data management & security and extending our skills
and scale within the Microsoft and cloud services domain.
Our objective through bolder M&A is to pivot the product mix to have a
greater exposure to high growth, higher value-added services segments of the
broader hybrid cloud services market i.e. higher value managed cloud services
and security, cyber and data protection services. We will also strengthen our
sector specific focus and positioning through greater tailoring of sector
specific benefits of our solutions and expertise and improved customer
referenceability.
We operate in a structurally growing market
With the insatiable growth in data requirements from across all industries,
the demand for the three core cloud building blocks of compute power, storage
and connectivity continue to expand. The concept of Cloud computing is now
globally recognised with the complexity of available options continuing to
grow. Within any digital transformation project, the management and security
of data is paramount, especially given the ever-increasing security threat
landscape. SME's are increasingly having to outsource these requirements to
experts, who can help them navigate a constantly evolving and complex
technical landscape, providing high levels of reliability, customer support,
flexibility, and technical knowledge - areas in which we excel.
We do not expect any of the above structural growth drivers to diminish over
the long-term and indeed AI is anticipated to fuel another wave of growth and
most likely bring increased regulatory focus on business resilience and data
governance. While there are signs of an improving UK macroeconomic outlook,
there is some offset to the general sector outlook as economic pressures still
apply in many parts of the economy. For iomart this materialises primarily in
the longer sales cycle for larger orders from new customers undertaking
digital transformation projects as greater scrutiny is applied to decision
making.
Acquisitions undertaken in the year
A key element of our growth strategy is continued selective M&A to augment
our organic growth. Our roadmap sees us focus on extending our capabilities
and skills into closely aligned product and services areas. As well as being
complementary to our existing experience, skills, and customer base these are
also areas exposed to the higher growth of the wider IT sector.
Last year we re-established our M&A activity, after two financial years
with no acquisitions, when we purchased Concepta in August 2022. It was
pleasing to continue this by making two further acquisitions in the current
year as noted below:
· Extrinsica, acquired on 5 June 2023, was a significant strategic step
providing iomart with deep Microsoft Azure expertise. While we had made some
good progress organically in this area, this acquisition accelerates our
capabilities and customer references within the Microsoft public cloud domain.
This ensures we can confidently offer both existing and new customers strong
skills and know-how across the three infrastructure delivery modes of
on-premise, private cloud or public cloud or, in what we see as the growing
trend in the market, a combination of the three in the form of hybrid cloud.
· Accesspoint, acquired on 5 December 2023, provides a suite of managed and
hosted services including infrastructure hosting, software licensing, security
management, business continuity services and communications provisioning
focused on the legal sector. This acquisition provides iomart with deep
industry expertise and a highly capable team with a strong reputation within
the legal sector. The addition of the new customer base when combined with
iomart's existing legal customers consolidates iomart's position in a key
sector.
We will maintain our structured and disciplined approach to M&A and remain
active in the evaluation of potential targets.
Our commitment to ESG and sustainability
We believe that integrating environmental, social and governance ("ESG")
considerations across our business enables us to accelerate our customers'
success whilst looking after the environment and society.
Our ongoing commitment is for iomart to be aligned with UK Government targets
and as such we have committed to achieve Net Zero by 2050, or earlier, if
possible. We commenced purchasing Renewable Energy Guarantees of Origin
("REGO") certified renewable electricity across our UK data centre estate in
2021, which significantly reduces our carbon emissions. During the last year
the largest additional project undertaken was the installation of solar panels
on the roof of our largest data centre in Maidenhead. This provides c.300kw
peak power which is around 15% of the total average site power use. Full
commission was completed in May 2024. We continue to look at ways to increase
the energy efficiency across our UK data centre estate, including continuing
the upgrades to our battery power systems.
In terms of our Social agenda, we have continued our sponsorship of the
"Empowering Woman in Leadership" programme which is designed to address the
lack of gender diversity in leadership roles across the technology profession,
and continued our support to the charity SmartSTEMs who organise and host
events to inspire and engage young people from underprivileged backgrounds
with the range of careers in STEM. This also leverages their partnership with
Generation, a company that transforms education to employment to prepare,
place and support people from disadvantaged backgrounds into careers that
would otherwise be inaccessible. We have also set up a new Executive ESG
Steering Group which will meet quarterly, and appointed our Chief Customer
Officer, Sharon Mars-Leach as our Equality, Diversity and Inclusivity
champion.
We have continued to strengthen our focus on Governance, with a new Executive
Risk Committee which meets quarterly and as at 31 March 2024 we have now seen
two full years of the internal audit programme which is managed by
EY. Together these bring a heightened awareness and allowed greater embedding
of risk management into the operations of the business. The two Non-Executive
Directors appointed during the year, and the new Chair appointed post year
end, bring a wealth of relevant experience in the technology services sector
and bring different and very relevant commercial skills and experience to the
Board.
Update on our infrastructure investment and energy pricing
Our UK-owned infrastructure is an important aspect of the delivery of our
recurring revenue services and a critical differentiator in the market,
enabling greater control over our resilience and providing control for our
customers and importantly also allowing more value-add to be retained by
iomart. We have a well-maintained data centre estate as this is core to
ensuring a resilient service. We have 12 data centres in the UK, with our two
largest data centres in Maidenhead and central London accounting for around
half of our UK capacity and over 25 points of presence globally, all connected
by a resilient network.
During the year we invested £9.5m (2023: £8.9m) in fixed assets. Of this
amount around £3.8m was in the fabric of the datacentres and our UK network,
with the balance being on compute power and storage for our customers. The
largest spend within the infrastructure was £1.2m on cooling systems in the
Maidenhead and Nottingham DCs. We are continuing this scheduled upgrade
programme including a £1.5m full replacement of the cooling system at our
Gosport datacentre in the first half of the new financial year.
The data centre sector as a whole has had to navigate the significant
challenges in the energy markets during the prior year. iomart's robust
business model and customer arrangements have ensured this additional energy
cost has been appropriately passed through to the customer base. Given the
profile of the energy costs during the last 24 months and our hedging
strategy, our overall energy costs have been fairly stable year on year. This
position will continue into the new financial year as we have the majority of
the next 12 months energy costs secured under hedging arrangements.
Current trading and 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 licencing
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.
Our clear strategy for growth is designed to increase our customer portfolio
in the higher growth areas of the expanding cloud market. Unlike many of our
peers we are doing this from a position of strength with our secure, resilient
cloud and network infrastructure, strong customer base, robust business model
and financial position. 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.
Lucy Dimes
Chief Executive Officer
11 June 2024
Definition of alternative performance measures:
(1) Throughout these financial statements adjusted EBITDA (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
these financial statements acquisition costs are defined as acquisition
related costs and non-recurring acquisition integration costs
(2) Throughout these financial statements adjusted profit before tax
(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
(3) 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.
(4) Recurring revenue 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)
( )
( )
CHIEF FINANCIAL OFFICER'S REPORT
I am pleased to report on a year of steady financial performance, with good
signs of order growth within our focus business area of cloud managed
services, reflecting a positive response by customers and the wider market to
our growing hybrid cloud offering. Recurring revenues remain high as a % of
revenue, across what remains a low customer concentration across wide sectors,
but we are focused on further progress on our product portfolio and customer
service levels to increase our renewal levels. Steady margins, high levels of
recurring revenues, strong cash generation, a well-funded balance sheet and
strong financing structure provides the firepower to execute further M&A.
Key Performance Indicators 2024 2023
Revenue £127.0m £115.6m
% of recurring revenue(1) 91% 92%
Gross profit %(2) 54.8% 55.0%
Adjusted EBITDA(3) £37.7m £36.2m
Adjusted EBITDA margin %(4) 29.7% 31.3%
Adjusted EBIT(5) £19.2m £17.7m
Adjusted EBIT margin %(6) 15.1% 15.3%
Adjusted profit before tax(7) £15.0m £14.8m
Adjusted profit before tax margin %(8) 11.8% 12.8%
EBIT(9) £13.0m £11.4m
Profit before tax £8.7m £8.5m
Profit before tax margin %(10) 6.9% 7.4%
Basic earnings per share 5.8p 6.4p
Adjusted earnings per share (diluted) (11) 9.8p 10.9p
Cash flow from operations / Adjusted EBITDA %(12) 97% 94%
Net debt / Adjusted EBITDA leverage ratio(13) 1.1 1.1
See page 15 for definition of alternative performance measures
Revenue
Overall revenue from operations increased by 10% to £127.0m (2023: £115.6m).
We saw a consistent share of recurring revenue at 91% (2023: 92%) compared to
prior years. We remain focussed on retaining our recurring revenue business
model with the combination of multi-year contracts and payments in advance
providing us with good revenue visibility.
Cloud Services
The following is the disaggregation of Cloud Services revenues of £114.6m
(2023: £103.1m):
Disaggregation of Cloud Services revenue 2024 2023
£'000 £'000
Cloud managed services 75,212 64,115
Self-managed infrastructure 28,429 29,616
Non-recurring revenue 10,937 9,359
114,578 103,090
Cloud managed services (recurring revenue)
Revenue within cloud managed services increased by £11.1m or 17% to £75.2m
(2023: £64.1m). This was driven by 3% organic growth in recurring revenue and
approximately £8.9m revenue contribution from the latest three acquisitions.
A significant number of moving parts have arisen in the last two years within
our pricing and renewal profiles. The energy price adjustments are now, in
some cases, over 18 months ago, meaning they have become structurally consumed
into our renewals or new business pricing. Our energy hedging strategy will
mean a continued stable and predictable energy cost for the business and our
customers over the next 12 months.
Our order bookings in this area of the business grew well over the year, which
bodes well for the future growth of the business, as both existing customers
and prospects have responded positively to our broader solution set and
re-invigorated focus on customer service. The year did also see some lower
levels of renewals from some existing customers and improving renewal levels
continues to be a focus area of the business looking ahead. The timing aspect
of these elements will dampen the run-rate entering the first half of the new
financial year, especially prior to the deployments and billing of the new
orders booked.
Self-managed infrastructure (recurring revenue)
The self-managed infrastructure revenue of £28.4m (2023: £29.6m) decreased
by £1.2m. Our own regional data centre estate and fibre network positions us
well to offer such infrastructure as a service which primarily takes the form
of the provision of dedicated servers. It is generally recognised that this
activity is a lower growth area within the cloud market but continues to offer
a cost competitive solution for many use cases and for customers who have
retained their own IT skills.
Due to the scalable and self-managed nature of the dedicated server customer
proposition we do have a larger number of customers within this area,
including a very long tail of smaller customers. In this area we have seen
more sensitivity to the energy price rises which were applied towards the end
of FY23. As the Group continues its evolution towards a broader portfolio of
managed service offerings, the impact of potential lower level of renewals in
this area in particular will decrease.
We will continue to allocate resources to ensure we provide this customer base
with resilient, cost effective and increasingly automated solutions.
Non-recurring revenue
Non-recurring revenue of £10.9m (2023: £9.4m) relates primarily to on
premise product and licence reselling plus consultancy projects. Approximately
£2.6m revenue contribution related to acquisitions, primarily the Concepta
acquisition in August 2022 which included the Pavilion IT brand. This means
excluding the acquisition impact, the underlying reduction in non-recurring
revenue was £1.1m which mainly arose in the first half of the year.
We continued to simplify our operations in this area with the full integration
of the reselling brand Cristie Data. This took place in December 2023 and we
plan to take a similar approach with Pavilion IT in the first half of the new
financial year. This means all reselling activity will be undertaken by an
integrated iomart operation.
Easyspace
Our Easyspace segment has performed well over the year with revenues remaining
consistent at £12.5m (2023: £12.5m). The domain name and web hosting
business is an area in which we do not invest heavily but it was pleasing to
see a solid performance with high level of renewals from our base of c.57,000
customers. The activity remains highly profitable and cash generative.
Gross Profit
Gross profit in the year, which is calculated by deducting from revenue
variable cost of sales such as power, software licences, connectivity charges,
domain costs, public cloud costs, sales commission, the relatively fixed costs
of operating our data centres plus, for non-recurring revenue, the cost of
hardware and software sold, increased by £6.0m to £69.6m (2023: £63.6m). In
percentage terms, gross margin(2) overall is relatively stable on the prior
year at 54.8% (2023: 55.0%) which is positive especially recognising the many
moving parts, including the recent acquisition activity and a high
inflationary external environment.
Adjusted EBITDA(3)
The Group's adjusted EBITDA increased by £1.5m to £37.7m (2023: £36.2m)
translating to an adjusted EBITDA margin(4) of 29.7% (2023: 31.3%). The
administration expense (before depreciation, amortisation, share based payment
charges, acquisition costs and exceptional non-recurring costs) of £31.8m
(2023: £27.4m) is £4.4m higher than the previous year comparative. However,
this includes £4.1m of administrative expenses from the Extrinsica and
Accesspoint acquisitions and the full year impact of the Concepta acquisition
meaning the underlying increase in administrative expenses is limited to
£0.3m or 1%.
The Cloud Services segment saw a 5.6% increase in adjusted EBITDA to £36.7m
(2023: £34.8m). In percentage terms the Cloud Services margin decreased to
32.1% (2023: 33.8%) primarily due to both the mix impact of the acquisitions
and our business model becoming less capital intensive over time. The
Easyspace segment's adjusted EBITDA was £6.2m (2023: £6.2m) reflecting the
stable revenue performance in the year, which in percentage terms was again
stable at 49.4% (2023: 49.2%).
Group overheads increased by £0.4m in the year to £5.2m (2023: £4.8m).
These are costs which are not allocated to segments, including the cost of the
Board, the running costs of the headquarters in Glasgow, Group marketing,
human resource, finance, legal, and design functions and professional fees for
the year.
Adjusted EBIT(5)
The Group depreciation charge of £15.7m (2023: £15.9m) fell by £0.2m in the
year and as a percentage of recurring revenue is 13.5% (2023: 14.9%). This is
the second year in a row in which we have seen this percentage value drop. The
Group charge for amortisation of intangibles, excluding amortisation of
intangible assets resulting from acquisitions ("amortisation of acquired
intangible assets"), of £2.8m (2023: £2.6m) is consistent year on year. This
means that the Group's adjusted EBIT increased by £1.5m to £19.2m (2023:
£17.7m) which in adjusted EBIT margin(6) terms translates to 15.1% (2023:
15.3%).
The strategic focus of growth within hybrid cloud and expected resulting
increase in consumption of public cloud infrastructure within customer
solutions, meaning no capital requirement on iomart infrastructure, may cause
a gradual reduction in our adjusted EBITDA margin(4) but a more stable EBIT
margin(5) as depreciation as a % of our recurring revenue falls. This is why
the Board are now viewing this measure as an additional KPI.
Adjusted profit before tax(7)
Finance costs of £4.3m (2023: £2.9m) has increased year on year by £1.4m
due to the higher SONIA interest rate. Our revolving credit facility has a
borrowing cost at the Group's current leverage levels of 180 basis points over
SONIA.
After deducting the charges for depreciation, amortisation (excluding the
charges for the amortisation of acquired intangible assets), exceptional
non-recurring costs and finance costs from the adjusted EBITDA, the Group's
adjusted profit before tax increased to £15.0m (2023: £14.8m), representing
an adjusted profit before tax margin(8) of 11.8% (2023: 12.8%).
Earnings before interest and tax and Profit before tax
The measure of adjusted profit before tax is an alternative profit measure
which is commonly used to analyse the performance of companies particularly
where M&A activity forms a significant part of their activities.
A reconciliation of adjusted profit before tax to reported profit before tax
is shown below:
Reconciliation of adjusted profit before tax to profit before tax 2024 2023
£'000 £'000
Adjusted profit before tax(7) 14,956 14,820
Less: Amortisation of acquired intangible assets (4,226) (3,880)
Less: Acquisition costs (1,010) (922)
Less: Share-based payments (517) (696)
Less: Administrative expenses - exceptional non-recurring costs (462) -
Less: Cost of sales - exceptional non-recurring costs - (820)
Profit before tax 8,741 8,502
The adjusting items in the current year are:
· charges for the amortisation of acquired intangible assets of £4.2m (2023:
£3.9m). Acquired intangible assets have increased by £0.3m due to the recent
acquisitions;
· acquisition costs of £1.0m (2023: £0.9m) which includes £0.5m of
professional fees associated with the Extrinsica and Accesspoint acquisitions;
· share-based payment charges of £0.5m (2023: £0.7m), the lower charge driven
by a higher number of forfeited options in the year; and
· £0.5m exceptional non-recurring charge in the current year recorded within
administration costs related to the change in CEO in September 2023.
In the prior year we had a non-recurring cost of sales item of £0.8m which
was related to the energy crisis and specific cost notification timing issues.
Given the exceptional and non-recurring nature of this item we felt it
required to be drawn out separately to ensure a more meaningful understanding
of the financial performance in that year.
After deducting these items from the adjusted profit before tax, the reported
profit before tax was £8.7m (2023: £8.5m). In percentage terms the profit
before tax margin(9) was a slight decrease to 6.9% (2023: 7.4%).
Earnings before interest and tax ("EBIT") in the year was £13.0m (2023:
£11.4m), the increase consistent with the Adjusted EBIT(5) movement as the
overall variance of the adjusted items year on year is only £0.1m.
Taxation
The tax charge for the year is £2.3m (2023: £1.5m). The tax charge for the
year is made up of a corporation tax charge of £2.7m (2023: £0.9m) with a
deferred tax credit of £0.4m (2023: charge of £0.6m). The effective rate of
tax for the year is 26% (2023: 18%). In the current year, we have applied the
25% UK corporation tax rate to corporation tax (2023:19%), effective 1(st)
April 2023. In addition, the tax charge in the year is the net result of
higher taxable income and the effect of the full expensing relief available
for capital investments. Given iomart is very much a UK business, then the UK
headline corporate tax is still considered a reasonable recurring effective
tax rate for underlying profits.
Profit for the year
After deducting the tax charge for the year from the profit before tax the
Group has recorded a profit for the year of £6.4m (2023: £7.0m).
Earnings per share
The calculation of both adjusted earnings per share and basic earnings per
share is included at note 7.
Basic earnings per share from continuing operations was 5.8p (2023: 6.4p), a
reduction of 9%.
Adjusted diluted earnings per share(11), based on profit for the year
attributed to ordinary shareholders before amortisation charges of acquired
intangible assets, acquisition costs, share-based payment charges, exceptional
non-recurring costs, and the tax effect of these items was 9.8p (2023: 10.9p),
a reduction of 10%. Given the adjusted profit before tax shows a small
increase this reduction in adjusted diluted earnings per share of 10% is
mainly driven by the increase in the UK corporation tax to 25%.
Dividends
Our dividend policy, which has been in place for several years now, is based
on the profitability of the business in the period measured with reference to
the adjusted diluted earnings per share we deliver in a financial year. For
the last few years we have been paying dividends at the maximum level allowed
by our stated policy. The current policy is a maximum pay-out of 50% of
adjusted diluted earnings per share. The Directors are proposing a final
dividend of 3.00p (2023: 3.50p) which is at maximum level set by the dividend
policy which we believe is fully appropriate given the recurring revenue
nature of the Group, the level of operating cash which we deliver and the low
level of indebtedness within the Group. As a result, along with the interim
dividend of 1.94p (2023: 1.94p), which was paid in January 2024, the total
dividend for the year is 4.94p (2023: 5.44p), the reduction reflecting the
movement in the adjusted diluted earnings per share.
Acquisitions
Extrinsica
We completed the acquisition of Extrinsica on 5 June 2023 for an initial
consideration of £4.0m, with a further cash payment of £0.4m made after the
achievement of certain key customer targets. Of the initial consideration,
£2m was satisfied by the issue of 1,562,500 new ordinary shares in iomart.
The balance of £2.0m was paid in cash. We also repaid £3.7m of debt acquired
on completion.
The sale and purchase agreement included the potential for a further £4.0m to
£7.0m of contingent earn-out payments based on the profitability for the
twelve months ending 31 March 2024. The business has seen growth since the
acquisition but not at the pace assumed by the previous management. This was
primarily due to slippage of certain assumed new customer project wins. As a
result, no earn-out payments are payable. There was a final deferred payment
due of £0.2m on achievement of certain key customer targets. This was paid
subsequent to the year end in April 2024.
Accesspoint
We completed the acquisition of Accesspoint on 5 December 2023 for an initial
consideration of £4.5m which was paid in cash on completion on a debt and
cash free basis. Subsequent to the year end, a further £0.5m was paid in May
2024 on achievement of the final post acquisitions milestones. The acquisition
also includes up to a further £1.4m contingent earn-out payment based on the
profitability of Accesspoint for the twelve months ending 31 August 2024.
Cash flow and net debt
Net cash flows from operating activities
The Group continued to generate high levels of operating cash over the year.
Cash flow from operations was £36.6m (2023: £33.8m) which represents a 97%
conversion(12) of adjusted EBITDA (2023: 94%). This metric in prior year was
somewhat distorted by the cash element of the non-recurring adjusting items of
around £0.8m which if excluded from cash flow from operations would result in
a conversion ratio of 96%.
Cash payments for corporation tax in the year were £0.7m (2023: refund of
£0.05m), resulting in net cash flow from operating activities in the year of
£35.9m (2023: £33.9m).
Cash flow from investing activities
Our strategy is to continue to reinvest some of the strong operating cash flow
we generate back into the business both in the form of internal investments
into our UK infrastructure but also in the continuation of our disciplined
acquisition strategy. The Group invested a total of £21.7m (2023: £21.2m)
during the year. In the current year, we paid equity consideration on the
Extrinsica and Accesspoint acquisitions which, when net with the cash
acquired, resulted in a £5.7m net outflow (2023: £10.3m related to the
Concepta acquisition). The earn-out consideration on the Concepta and a
contingent element of the Extrinsica acquisitions was also paid in the year
resulting in an additional outflow of £4.2m (2023: £nil).
The Group continues to invest in property, plant and equipment through
expenditure on data centres, network and on equipment required to provide
managed services to both its existing and new customers. As a result, the
Group spent £9.5m (2023: £8.9m) on assets. Most of the expenditure in the
year was on operational items such as servers and storage to support customer
deployments.
Expenditure was also incurred on development costs of £2.2m (2023: £1.9m)
and on intangible assets of £0.1m (2023: £0.1m).
Cash flow from financing activities
In the current year, loan drawdowns of £7.6m (2023: £10.4m) were made from
the revolving credit facility to support the initial equity consideration for
the Extrinsica and Accesspoint acquisitions. We also repaid £3.7m of bank
debt acquired from Extrinsica at completion.
Bank loan repayments of £2.0m (2023: £10.0m) were made in the year resulting
in a closing drawn bank loan of £40.0m (2023: £34.4m). Cash received in the
year from issue of shares was £7k (2022: £5k). We also made dividend
payments of £6.1m (2023: £6.1m); paid finance costs of £3.1m (2023: £2.2m)
and made lease repayments of £5.0m (2023: £4.9m).
Net cash flow
As a consequence of the above component elements and working capital movements
in the year, our overall cash position was an inflow of £1.9m (2023: £1.5m
outflow) which resulted in cash and cash equivalent balances at the end of the
year of £15.8m (2023: £13.8m).
Net Debt
The net debt position of the Group at the end of the year was £42.3m (2023:
£39.8m) as shown below. The net debt position represents a multiple of 1.1
times(13) our adjusted EBITDA (2023: 1.1 times) which we believe is a
comfortable level of debt to carry given the recurring revenue business model
and strong cash generation in the business.
2024 2023
£'000 £'000
Bank revolver loan 40,000 34,400
Lease liabilities 18,091 19,180
Less: cash and cash equivalents (15,755) (13,818)
Net Debt 42,336 39,762
The Group has access to a £100m Revolving Credit Facility ("RCF") provided by
a banking group consisting of HSBC, Royal Bank of Scotland, Bank of Ireland
and Clydesdale Bank, that matures on 30 June 2026 which also benefits from a
£50m Accordion Facility. The RCF has a borrowing cost at the Group's
current leverage levels of 180 basis points over SONIA.
The decrease in the lease liability to £18.1m (2023: £19.2m) reflects
expected payments on property arrangements and that there were no material
revisions to existing leases.
Post balance sheet event
Following the acquisition of VMware by Broadcom, iomart has been selected as
one of only seven UK strategic Broadcom VMware partners. The iomart Board
during May 2024 approved the decision to commit to a 5 year licence programme
with Broadcom. This commitment ensures our existing customers continue to
benefit from our deep VMware know-how and capability and will allow us to
support new customers who now require an intermediary partner to support their
own requirements. As for many organisations globally, the new licence fees
will represent a higher cost burden from that of the previous licence
consumption arrangements of the past. Prior to various mitigations actions,
and ultimately recovery from our customer base over time, such increase is
around 60%. For iomart we will be seeking to ensure as much platform
optimisation takes place as possible but we will also, in combination, seek to
ensure the higher cost is recovered at customer renewals. There will be a
timing lag on recovery over the coming 12 months which will impact the first
half in particular. Our status as a Broadcom VMware Pinnacle partner does
offers up a new revenue stream from smaller managed service providers and also
end users who can no longer transact directly with VMware but this will be
lower margin activity.
As at the date of this report, we await final contractual agreements from
Broadcom. As a result, at this date, we have not entered into a legally
binding arrangement. It is likely that the full 5 year commitment will have an
approximate £15m value, with cash payments made during the course of the
term. It is likely that, given the different characteristic and length of the
licence commitment, rather than a variable operating cost item, the equivalent
cost will be recorded as an intangible asset and amortised appropriately over
the 5 year period. Based on this expecting accounting treatment this will
change the cost classification within the statement of comprehensive income
with what was previously recorded as a cost of sale item now, due to the new
arrangements outlined above, going forward being recorded as intangible
amortisation.
Scott Cunningham
Chief Financial Officer
11 June 2024
Definition of alternative performance measures:
(1) Recurring revenue 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)
(2) Gross profit margin % is defined as Gross Profit / Revenue as a % (both as
disclosed in the consolidated statement of comprehensive income)
(3) 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 these financial statements
acquisition costs are defined as acquisition related costs and non-recurring
acquisition integration costs.
(4) Adjusted EBITDA margin % is defined as adjusted EBITDA (as disclosed in
the consolidated statement of comprehensive income) / Revenue (as disclosed in
the consolidated statement of comprehensive income) as a %
(5) 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.
(6) Adjusted EBIT margin% is defined as adjusted EBIT / Revenue (as disclosed
in the consolidated statement of comprehensive income) as a %
(7) 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.
(8) Adjusted profit before tax margin % is defined as adjusted profit before
tax (as disclosed on page 12) / Revenue (as disclosed in the consolidated
statement of comprehensive income) as a %
(9) Profit before tax margin % is defined as Profit before Tax / Revenue (both
as disclosed in the consolidated statement of comprehensive income) as a %
(10) EBIT is earnings before interest and tax
(11) Adjusted diluted earnings per share is earnings before amortisation
charges on acquired intangible assets, share-based payment charges,
acquisition costs and exceptional non-recurring costs and the tax impact of
adjusted items /weighted average number of ordinary shares - diluted (as
disclosed in note 7)
(12) Cash flow from operations / Adjusted EBITDA % is defined as cash flow
from operations (as disclosed in the consolidated statement of cash flows) /
Adjusted EBITDA (as disclosed in the consolidated statement of comprehensive
income) as a %
(13) Net debt / Adjusted EBIDTA level ratio is defined as Net Debt (as
disclosed on page 14) / Adjusted EBITDA (as disclosed in the consolidated
statement of comprehensive income)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 MARCH 2024
Note 2024 2023
£'000 £'000
Revenue 3 127,049 115,638
Cost of sales (57,469) (52,080)
Gross profit 69,580 63,558
Administrative expenses (56,552) (52,141)
Operating profit 13,028 11,417
Analysed as:
Earnings before interest, tax, depreciation, amortisation, acquisition costs, 37,728 36,161
share-based payments and exceptional non-recurring costs
Share-based payments (517) (696)
Acquisition costs (1,010) (922)
Administrative expenses - exceptional non-recurring costs (462) -
Cost of sales- exceptional non-recurring costs - (820)
Depreciation 9 (15,715) (15,861)
Amortisation - acquired intangible assets 8 (4,226) (3,880)
Amortisation - other intangible assets 8 (2,770) (2,565)
Finance costs - net (4,287) (2,915)
Profit before taxation 8,741 8,502
Taxation 4 (2,300) (1,507)
Profit for the year attributable to equity holders of the parent 6,441 6,995
Other comprehensive income
Amounts which may be reclassified to profit or loss
Currency translation differences (25) 60
Other comprehensive income for the year (25) 60
Total comprehensive income for the year attributable to equity holders of the 6,416 7,055
parent
Basic and diluted earnings per share
Basic earnings per share 7 5.8p 6.4p
Diluted earnings per share 7 5.6p 6.2p
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
2024 2023
Note £'000 £'000
ASSETS
Non-current assets
Intangible assets - goodwill 8 109,821 99,950
Intangible assets - other 8 15,231 12,981
Trade and other receivables 111 177
Property, plant and equipment 9 63,492 64,959
188,655 178,067
Current assets
Cash and cash equivalents 15,755 13,818
Trade and other receivables 26,460 25,804
Current tax asset - 987
42,215 40,609
Total assets 230,870 218,676
LIABILITIES
Non-current liabilities
Trade and other payables (2,834) (2,666)
Non-current borrowings 11 (55,582) (50,203)
Provisions (3,052) (2,755)
Deferred tax 5 (4,884) (3,221)
(66,352) (58,845)
Current liabilities
Contingent consideration due on acquisitions 10 (2,080) (4,000)
Trade and other payables (35,728) (31,898)
Current tax liability (804) -
Current borrowings 11 (2,509) (3,377)
(41,121) (39,275)
Total liabilities (107,473) (98,120)
Net assets 123,397 120,556
EQUITY
Share capital 1,124 1,106
Own shares (70) (70)
Capital redemption reserve 1,200 1,200
Share premium 22,500 22,495
Merger reserve 6,967 4,983
Foreign currency translation reserve 21 46
Retained earnings 91,655 90,796
Total equity 123,397 120,556
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 31 MARCH 2024
2024 2023
Note £'000 £'000
Profit before taxation 8,741 8,502
Finance costs - net 4,287 2,915
Depreciation 9 15,764 16,492
Amortisation 8 6,996 6,445
Share-based payments 517 696
Research and development tax credit (364) -
Movement in trade receivables 1,620 (3,256)
Movement in trade payables (914) 2,045
Cash flow from operations 36,647 33,839
Taxation (paid)/received (710) 48
Net cash flow from operating activities 35,937 33,887
Cash flow from investing activities
Purchase of property, plant and equipment 9 (9,513) (8,918)
Development costs (2,178) (1,887)
Purchase of intangible assets 8 (113) (44)
Payment for current period acquisitions net of cash acquired (5,710) (10,307)
Payment of contingent consideration 10 (4,180) -
Net cash used in investing activities (21,694) (21,156)
Cash flow from financing activities
Issue of shares 7 5
Drawdown of bank loans 7,600 10,400
Payments under lease liabilities 12 (5,017) (4,902)
Repayment of bank loans (2,000) (10,000)
Repayment of debt acquired on acquisition (3,728) (1,508)
Finance costs paid (3,069) (1,900)
Refinancing costs paid - (249)
Dividends paid (6,099) (6,091)
Net cash used in financing activities (12,306) (14,245)
Net increase/(decrease) in cash and cash equivalents 1,937 (1,514)
Cash and cash equivalents at the beginning of the year 13,818 15,332
Cash and cash equivalents at the end of the year 15,755 13,818
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 MARCH 2024
Foreign currency translation reserve
Own shares EBT Capital redemption reserve Share premium account
Share capital Merger reserve Retained earnings
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2022 1,101 (70) (14) 1,200 22,495 4,983 89,196 118,891
Profit for the year - - - - - - 6,995 6,995
Currency translation differences - - 60 - - - - 60
Total comprehensive income - - 60 - - - 6,995 7,055
Dividends - final (paid) - - - - - - (3,957) (3,957)
Dividends - interim (paid) - - - - - - (2,134) (2,134)
Share-based payments - - - - - - 696 696
Issue of share capital 5 - - - - - - 5
Total transactions with owners 5 - - - - - (5,395) (5,390)
Balance at 31 March 2023 1,106 (70) 46 1,200 22,495 4,983 90,796 120,556
Profit for the year - - - - - - 6,441 6,441
Currency translation differences - - (25) - - - - (25)
Total comprehensive income - - (25) - - - 6,441 6,416
Dividends - final (paid) - - - - - - (3,922) (3,922)
Dividends - interim (paid) - - - - - - (2,177) (2,177)
Share-based payments - - - - - - 517 517
Issue of share capital 18 - - - 5 1,984 - 2,007
Total transactions with owners 18 - - - 5 1,984 (5,582) (3,575)
Balance at 31 March 2024 1,124 (70) 21 1,200 22,500 6,967 91,655 123,397
NOTES TO THE FINANCIAL INFORMATION
YEAR ENDED 31 MARCH 2024
1. GENERAL INFORMATION
iomart Group plc is a public listed company listed on the Alternative
Investment Market ("AIM"), incorporated and domiciled in the United Kingdom
and registered in Scotland under the Companies Act 2006. The address of the
registered office is 6 Atlantic Quay, 55 Robertson Street, Glasgow, G2 8JD.
2. ACCOUNTING POLICIES
Basis of preparation
The financial information set out in the announcement does not constitute the
Group's statutory accounts for the years ended 31 March 2024 and 31 March 2023
within the meaning of section 434 of the Companies Act 2006. The financial
information for the year ended 31 March 2023 is derived from the statutory
accounts for that year which have been delivered to the Registrar of
Companies. The financial information for the year ended 31 March 2024 is
derived from the statutory accounts for that year which were approved by the
Directors on 11 June 2024. The statutory accounts for the year ended 31 March
2024 will be delivered to the Registrar of Companies following the Company's
Annual General Meeting. The auditors reported on those accounts; their report
was unqualified and did not contain a statement under Section 498(2) or (3) of
the Companies Act 2006.
The Group's financial statements have been prepared in accordance accordance
with applicable law and UK-adopted international accounting standards.
The Group's financial statements have been prepared on the historical cost
basis.
Adoption of new and revised Standards - Amendments to IFRS that are
mandatorily effective for the current year
There are no new accounting policies applied in the year ended 31 March 2024
which have had a material effect on these accounts. In addition, the
Directors do not consider that the adoption of new and revised standards and
interpretations issued by the International Accounting Standards Board (IASB)
that are mandatorily effective for an accounting period that begins on or
after 1 January 2023 has had any material impact on the financial statements
of the Group.
Operating segments - prior period reclassification (note 3 only)
During the year we moved the financial results of the brand SimpleServers into
the Easyspace division as the nature of the services provided and the profile
of the customer base are aligned better with the mass market hosting sector
which we address in the Easyspace division. As a result, operating segment
disclosures for the year ended 31 March 2023 have been reclassified resulting
in an increase in Easyspace revenue and adjusted EBITDA with the opposite
impact in Self-managed infrastructure in Cloud Services (Revenue impact 2023:
£864k, EBITDA impact 2023: £55k).
3. sEGMENTAL ANALYSIS
The Chief Operating Decision-Maker has been identified as the Chief Executive
Officer ("CEO") of the Company. The Group has two operating segments and the
CEO reviews the Group's internal reporting which recognises these two segments
in order to assess performance and to allocate resources. The Group has
determined its reportable segments are also its operating segments based on
these reports.
The Group currently has two operating and reportable segments being Easyspace
and Cloud Services.
Easyspace - this segment provides a range of shared hosting and domain
registration services to micro and SME companies.
Cloud Services - this segment provides managed cloud computing facilities and
services, through a network of owned data centres, to the larger SME and
corporate markets.
Information regarding the operation of the reportable segments is included
below. The CEO assesses the performance of the operating segments based on
revenue and a measure of earnings before interest, tax, depreciation and
amortisation (EBITDA) before any allocation of Group overheads, charges for
share-based payments, costs associated with acquisitions, any gain or loss on
revaluation of contingent consideration and material non-recurring items. This
segment EBITDA is used to measure performance as the CEO believes that such
information is the most relevant in evaluating the results of the segment.
The Group's EBITDA for the year has been calculated after deducting Group
overheads from the EBITDA of the two segments as reported internally. Group
overheads include the cost of the Board, all the costs of running the premises
in Glasgow, the Group marketing, human resource, finance and design functions
and legal and professional fees.
The segment information is prepared using accounting policies consistent with
those of the Group as a whole.
The assets and liabilities of the Group are not reviewed by the Chief
Operating Decision-Maker on a segment basis. Therefore none of the Group's
assets and liabilities are segmental assets and liabilities and are all
unallocated for segmental disclosure purposes. For that reason the Group has
not disclosed details of segmental assets and liabilities.
All segments are continuing operations. No customer accounts for 10% or more
of external revenues. Inter-segment transactions are accounted for using an
arms-length commercial basis.
Operating Segments
Revenue by Operating Segment
2023
2024 £'000
£'000 (restated
note 2)
Easyspace 12,471 12,548
Cloud Services 114,578 103,090
127,049 115,638
2023
£'000
2024 (restated
£'000 note 2)
Cloud managed services 75,212 64,115
Self-managed infrastructure 28,429 29,616
Non-recurring revenue 10,937 9,359
114,578 103,090
The nature of these three offerings are explained within the Chief Executive
Officer report on pages 10 and 11.
Recurring and Non-recurring Revenue
The amount of recurring and non-recurring revenue recognised during the year
can be summarised as follows:
2024 2023
£'000 £'000
Recurring - over time 116,112 106,279
Non-recurring - point in time 10,937 9,359
127,049 115,638
Geographical Information
In presenting the consolidated information on a geographical basis, revenue is
based on the geographical location of customers. There is no single country
where revenues are individually material other than the United Kingdom. The
United Kingdom is the place of domicile of the parent company, iomart Group
plc.
Analysis of Revenue by Destination
2024 2023
£'000 £'000
United Kingdom 107,864 99,961
Rest of the World 19,185 15,677
Revenue from operations 127,049 115,638
Profit by Operating Segment
2024 2023 (restated note 2)
Adjusted EBITDA Depreciation, amortisation, acquisition costs, share-based payments and Operating profit/(loss) Adjusted EBITDA Depreciation, amortisation, acquisition costs, share-based payments and Operating profit/(loss)
exceptional non-recurring costs exceptional non-recurring costs
£'000 £'000 £'000 £'000 £'000 £'000
Easyspace 6,161 (570) 5,591 6,173 (698) 5,475
Cloud Services 36,729 (22,141) 14,588 34,796 (22,428) 12,368
Group overheads (5,162) - (5,162) (4,808) - (4,808)
Administrative expenses - exceptional non recurring cost - (462) (462) - - -
Acquisition costs - (1,010) (1,010) - (922) (922)
Share-based payments - (517) (517) - (696) (696)
37,728 (24,700) 13,028 36,161 (24,744) 11,417
Group interest and tax (6,587) (4,422)
Profit for the year 6,441 6,995
Group overheads, acquisition costs, share-based payments, interest and tax are
not allocated to segments.
4. TAXATION
2024 2023
£'000 £'000
Corporation Tax:
Tax charge for the year (2,536) (935)
Adjustment relating to prior years (130) -
Total current taxation charge (2,666) (935)
Deferred Tax:
Origination and reversal of temporary differences 380 (597)
Adjustment relating to prior years (21) 36
Effect of different statutory tax rates of overseas jurisdictions 7 (11)
Total deferred taxation credit/(charge) 366 (572)
Total taxation charge (2,300) (1,507)
The differences between the total taxation charge shown above and the amount
calculated by applying the standard rate of UK corporation tax to the profit
before tax are as follows:
2024 2023
£'000 £'000
Profit before tax 8,741 8,502
Tax charge @ 25% (2023: 19%) 2,185 1,615
Expenses disallowed for tax purposes and non-taxable income 135 28
Adjustments in current tax relating to prior years 130 -
Tax effect of different statutory tax rates of overseas jurisdictions (7) 11
Movement in tax relating to changes in tax rates - 95
Tax effect of share-based remuneration (207) 253
Effect of super-deduction - (505)
Movement in deferred tax related to property, plant and equipment 43 46
Movement in deferred tax relating to prior years 21 (36)
Total taxation charge for the year 2,300 1,507
The weighted average applicable tax rate for the year ended 31 March 2024 was
25% (2023: 19%). The effective rate of tax for the year, based on the
taxation charge for the year as a percentage of the profit before tax is 26%
(2023: 18%). The effective rate of tax has increased largely driven by the
adoption of the UK Corporation tax rate of 25% (2023: 19%), effective 1 April
2023, to corporation tax, the net result of higher taxable income and the
effect of the "full expensing relief" available for capital investments.
Deferred tax assets and liabilities at 31 March 2024 have been calculated
based on the rate of 25% enacted at the balance sheet date (2023: 25%).
5. DEFERRED TAX
The Group recognised deferred tax assets/(liabilities) as follows:
2024 2023
£'000 £'000
Share-based remuneration 891 638
Capital allowances temporary differences (1,687) (319)
Deferred tax on development costs (720) (648)
Deferred tax on customer relationships (3,286) (2,762)
Deferred tax on intangible software (82) (130)
Deferred tax liability (4,884) (3,221)
At the year end, the Group had £2.4m (2023: £nil) of brought forward tax
losses acquired through an acquisition in the year, no deferred tax asset has
been recorded against these tax losses.
Share-based remuneration Capital allowances temporary differences Development costs Deferred tax on acquired assets with no capital allowances Customer relationships Intangible software Brought forward Tax Losses Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 April 2022 884 843 (542) (19) (2,499) (177) - (1,510)
Acquired on acquisition of subsidiary - (133) - - (1,074) - 68 (1,139)
Movement relating to prior year - 36 - - - - - 36
Credited/(charged) to statement of comprehensive income (246) (1,065) (106) 19 822 47 (68) (597)
Effect of different tax rates of overseas jurisdictions - - - - (11) - - (11)
Balance at 31 March 2023 638 (319) (648) - (2,762) (130) - (3,221)
Acquired on acquisition of subsidiary - (578) - - (1,451) - - (2,029)
Movement relating to prior year - (21) - - - - - (21)
Credited/(charged) to statement of comprehensive income 253 (769) (72) - 927 48 - 387
Balance at 31 March 2024 891 (1,687) (720) - (3,286) (82) - (4,884)
The movement in the deferred tax account during the year was:
The deferred tax asset in relation to share-based remuneration arises from the
anticipated future tax relief on the exercise of share options.
The deferred tax on capital allowances temporary differences arises mainly
from plant and equipment in the Cloud Services segment where the tax written
down value varies from the net book value.
The deferred tax on development costs arose from development expenditure on
which tax relief was received in advance of the amortisation charge.
The deferred tax on customer relationships and intangible software arises from
permanent differences on acquired intangible assets.
6. ACQUISITIONS
Extrinsica Global Holdings Limited
On 5 June 2023, the Group acquired the entire issued share capital of
Extrinsica Global Holdings Limited ("Extrinsica"), the holding company of
Extrinsica Global Limited. Extrinsica is a Microsoft Azure Cloud solution
services provider with offerings including managed Azure Cloud, Azure solution
design and implementation services, support & optimisation services and
licencing.
During the current year, the Group incurred £307,000 of third party
acquisition related costs in respect of this acquisition. These expenses are
included in administrative expenses in the Group's consolidated statement of
comprehensive income and in cash flow from operating activities for the period
ended 31 March 2024.
The following table summarises the consideration to acquire Extrinsica, the
amounts of identified assets acquired, and liabilities assumed at the
acquisition date.
£'000
Recognised amounts of net assets acquired and liabilities assumed:
Cash and cash equivalents 628
Trade and other receivables 1,439
Property, plant and equipment 44
Intangible assets 4,879
Borrowings (3,728)
Trade and other payables (2,326)
Deferred tax liability (1,451)
Identifiable net liabilities (515)
Goodwill 4,943
Total consideration 4,428
Satisfied by:
Cash - paid on acquisition 1,853
Deferred consideration on acquisition paid 215
Shares - issued on acquisition 2,000
Contingent consideration 360
Total consideration to be transferred 4,428
The acquisition of Extrinsica was completed using a "completion accounts"
mechanism, on a no cash, no debt, and normalised working capital basis.
The initial consideration for the acquisition was £4,068,000. Of the
initial consideration, £1,853,000 was settled by cash, £215,000 was deferred
pending finalisation of the completion accounts and was paid in October 2023
and £2,000,000 was satisfied by the issue of 1,562,500 new ordinary shares in
iomart Group plc, which under the terms of the Sale and Purchase Agreement
(SPA) are subject to a 12 month "lock in" provision and based on a fixed share
price of £1.28, being the volume weighted average price for the 90 days prior
to completion. This has resulted in an increase to share capital of £16,000
and an increase to the merger reserve of £1,984,000.
Under the terms of the SPA, a potential further £360,000 in cash was payable
on the achievement of certain key customer targets, £180,000 of this amount
was settled during the year ended 31 March 2024 and £180,000 is included in
contingent consideration at 31 March 2024 (note 10) and was paid subsequent to
the year end in April 2024.
At the date of acquisition, Extrinsica had bank debt of £3,728,000 which was
taken on by iomart and settled as part of the completion process.
The fair value of the financial assets acquired includes trade receivables
with a fair value of £673,000. The Gross amount due under contracts is
£678,000.
The SPA included a provision requiring the Company to pay the former
shareholders of Extrinsica a further £4,000,000 to £7,000,000 of contingent
earn-out payments which are calculated based on Extrinsica's profitability for
the 12 months ending 31 March 2024 ("the earn-out payment"). The level of
profitability for the earn-out payment was not achieved during the year. As
such, there is no contingent earn-out consideration payable.
The goodwill arising on the acquisition of Extrinsica is attributable to the
premium payable for a pre-existing, well positioned business specialising in
Microsoft's Azure cloud platform, together with the benefits to the Group in
merging the business with its existing infrastructure and the anticipated
future revenue synergies from the combination. The goodwill is not expected
to be deductible for tax purposes.
The trading name "Extrinsica" is not actively advertised or promoted.
Extrinsca's standard terms and conditions restrict the ability of Extrinsica
to sell, distribute or lease any personal information it holds on customers.
As a consequence, there is no significant value in either the trade name/brand
or customer lists acquired at the acquisition date and therefore no value has
been attributed to either intangible asset.
Included in intangible assets is the fair value included in respect of the
acquired customer relationships intangible asset of £3,824,000. To estimate
the fair value of the customer relationships intangible asset, a discounted
cash flow method, specifically the income approach, was used with reference to
the directors' estimates of the level of revenue, which will be generated from
them. A pre-tax discount rate of 14.11% was used for the valuation. Customer
relationships are being amortised over an estimated useful life of 8 years.
Extrinsica earned revenue of £6,966,000 and generated profit, before
allocation of group overheads, share based payments and tax, of £95,000 in
the period since acquisition.
If Extrinsca had been part of the iomart group from 1 April 2023, revenue
earned for the twelve month period for iomart would have been £8,363,643 and
profit after tax of £29,346 for the year ended 31 March 2024.
Accesspoint Group Holdings Limited
On 5 December 2023, iomart Group plc acquired the entire issued share capital
of Accesspoint Group Holdings Limited ("Accesspoint"), the holding company of
Accesspoint Technologies Limited. Based in North East London, Accesspoint is
an IT hosting partner focused on the UK legal industry since 2009. Accesspoint
provides a suite of managed and hosted services including infrastructure
hosting, software licensing, security management, business continuity services
and communications provisioning
During the current year, the Group incurred £230,000 of third party
acquisition related costs in respect of this acquisition. These expenses are
included in administrative expenses in the Group's consolidated statement of
comprehensive income and in cash flow from operating activities for the year
ended 31 March 2024.
The following table summarises the consideration to acquire Accesspoint, the
amounts of identified assets acquired, and liabilities assumed at the
acquisition date.
£'000
Recognised amounts of net assets acquired and liabilities assumed:
Cash and cash equivalents 322
Trade and other receivables 772
Property, plant and equipment 342
Intangible assets 2,077
Trade and other payables (1,249)
Corporation tax liability (215)
Deferred tax liability (578)
Identifiable net assets 1,471
Goodwill 4,928
Total consideration 6,399
Satisfied by:
Cash - paid on acquisition 4,499
Deferred consideration (included in contingent consideration note 10) 500
Contingent consideration (note 10) 1,400
Total consideration to be transferred 6,399
The acquisition of Accesspoint was completed using a "completion accounts"
mechanism, on a no cash, no debt, and normalised working capital basis. At the
date of acquisition, Accesspoint had no bank debt.
The initial consideration for the acquisition was £4,480,000 paid in cash on
completion on a debt and cash free basis, with a potential further £500,000
in cash payable on the achievement of certain post-acquisition milestones.
These milestones were achieved and subsequent to the year end, in May 2024,
the £500,000 was paid in cash.
In line with the SPA, the total consideration payable was adjusted based on
the level of cash, debt and working capital shown in the agreed set of
accounts (the Completion Accounts) made up to 30 November 2023. Following
agreement of the Completion Accounts an additional payment of £19,000 was
paid to the former shareholders of Accesspoint on 19 March 2024.
The SPA included a provision requiring the Company to pay the former
shareholders of Accesspoint a further £1,400,000 of contingent earn-out
payments which are calculated based on Accesspoint's profitability for the
twelve months ending 31 August 2024 ("the earn-out payment").
The potential undiscounted amount of the earn-out payment that the Company
could be required to pay is between £nil and £1,400,000. The amount of
contingent earn-out consideration payable, which is recognised as of 31 March
2024, is £1,400,000 (note 10). The level of profitability for the earn-out
payment was estimated taking into account actual performance to date and
management's estimates of profitability for the remaining months to August
2024.
The goodwill arising on the acquisition of Accesspoint is attributable to the
premium payable for a Company with deep industry expertise and a highly
capable team with a strong reputation within the legal sector. The addition of
the new customer base when combined with iomart's existing legal customers
consolidates iomart's position in a key sector. The goodwill is not expected
to be deductible for tax purposes.
The trading name "Accesspoint" is not actively advertised or promoted.
Accesspoint's standard terms and conditions restrict the ability of
Accesspoint to sell, distribute or lease any personal information it holds on
customers. As a consequence, there is no significant value in either the trade
name/brand or customer lists acquired at the acquisition date and therefore no
value has been attributed to either intangible asset.
Included in intangible assets is the fair value included in respect of the
acquired customer relationships intangible asset of £2,105,000. To estimate
the fair value of the customer relationships intangible asset, a discounted
cash flow method, specifically the income approach, was used with reference to
the directors' estimates of the level of revenue, which will be generated from
them. A pre-tax discount rate of 12.82% was used for the valuation. Customer
relationships are being amortised over an estimated useful life of 8 years.
The fair value of the financial assets acquired includes trade receivables
with a fair value of £682,000. The Gross amount due under contracts is
£682,000.
Accesspoint earned revenue of £1,390,000 and generated profit, before
allocation of group overheads, share based payments and tax, of £202,000 in
the period since acquisition.
If Accesspoint had been part of the iomart group from 1 April 2023, revenue
earned for the twelve month period for iomart would have been £4,763,000 and
profit after tax of £536,000 for the year ended 31 March 2024.
7. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the earnings attributable
to ordinary shareholders by the weighted average number of ordinary shares in
issue during the year, after deducting any own shares held in Treasury and
held by the Employee Benefit Trust. Diluted earnings per share is calculated
by dividing the earnings attributable to ordinary shareholders by the total of
the weighted average number of ordinary shares in issue during the year, after
deducting any own shares, and adjusting for the dilutive potential ordinary
shares relating to share options.
2024 2023
£'000 £'000
Profit for the financial year and basic earnings attributed to ordinary 6,441 6,995
shareholders
No No
Weighted average number of ordinary shares: 000 000
Called up, allotted and fully paid at start of year 110,422 110,065
Own shares held by Employee Benefit Trust (141) (141)
Issued share capital in the year 1,391 170
Weighted average number of ordinary shares - basic 111,672 110,094
Dilutive impact of share options 2,710 2,575
Weighted average number of ordinary shares - diluted 114,382 112,669
Basic earnings per share 5.8 p 6.4 p
Diluted earnings per share 5.6 p 6.2 p
Adjusted earnings per share 2024 2023
£'000 £'000
Profit for the financial year and basic earnings attributed to ordinary 6,441 6,995
shareholders
- Amortisation of acquired intangible assets 4,226 3,880
- Acquisition costs 1,010 922
- Administrative expenses - exceptional non-recurring costs 462 -
- Cost of sales - exceptional non-recurring costs - 820
- Share-based payments 517 696
- Tax impact of adjusted items (1,421) (1,025)
Adjusted profit for the financial year and adjusted earnings attributed to 11,235 12,288
ordinary shareholders
Adjusted basic earnings per share 10.0 p 11.2 p
Adjusted diluted earnings per share 9.8 p 10.9 p
8. INTANGIBLE ASSETS
Acquired customer relationships Software Domain names & IP addresses Total
Goodwill Development costs Beneficial contracts
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost
At 1 April 2022 86,479 13,256 57,299 10,945 86 336 168,401
Acquired on acquisition of subsidiary 13,471 159 4,462 - - - 18,092
Additions - - - 44 - - 44
Currency translation differences - - 48 39 - - 87
Development cost capitalised - 1,887 - - - - 1,887
At 31 March 2023 99,950 15,302 61,809 11,028 86 336 188,511
Acquired on acquisition of subsidiary 9,871 1,055 5,803 97 - - 16,826
Additions - - - 113 - - 113
Disposals (112) (112)
Currency translation differences - - (16) (12) - - (28)
Development cost capitalised - 2,178 - - - - 2,178
At 31 March 2024 109,821 18,423 67,596 11,226 86 336 207,488
Accumulated amortisation:
At 1 April 2022 - (11,166) (49,396) (8,142) (69) (297) (69,070)
Charge for the year - (1,434) (3,880) (1,116) (8) (7) (6,445)
Currency translation differences - - (49) (16) - - (65)
At 31 March 2023 - (12,600) (53,325) (9,274) (77) (304) (75,580)
Disposals - 112 - - - - 112
Charge for the year - (1,892) (4,226) (864) (6) (8) (6,996)
Currency translation differences - - 14 14 - - 287
At 31 March 2024 - (14,380) (57,537) (10,125) (83) (312) (82,436)
Carrying amount:
At 31 March 2024 109,821 4,043 10,059 1,102 3 24 125,052
At 31 March 2023 99,950 2,702 8,484 1,754 9 32 112,931
Of the total additions in the year of £114,000 (2023: £44,000), no amounts
related to leases under IFRS 16 (note 12) (2023: £nil). There were no amounts
included in trade payables at the year end (2023: £nil). Consequently, the
consolidated statement of cash flows discloses a figure of £114,000 (2023:
£44,000) as the cash outflow in respect of the purchase of intangible asset
in the year.
All amortisation and impairment charges are included in the depreciation,
amortisation and impairment of non-financial assets classification, which is
disclosed as administrative expenses in the statement of comprehensive income.
Included within customer relationships are the following significant net book
values: £3.4m in relation to the acquisition of Extrinsica Global Holdings
Limited and £1.7m in relation to the acquisition of Accesspoint Group
Holdings Limited both with a remaining useful life of 7 years, £2.6m in
relation to the acquisition of Concepta Capital Limited with a remaining
useful life of 6 years, £0.6m in relation to the acquisitions of Memset
Limited with a remaining useful life of 4 years, Bytemark Limited with a net
book value of £0.2m and LDeX Group Limited of £0.6 both with a remaining
useful life of 3 years, Sonassi Limited of £0.7m, Dediserve Limited of
£0.1m, SimpleServers Limited of £0.1m all three with a remaining useful life
of 2 years.
During the year, goodwill was reviewed for impairment in accordance with IAS
36 "Impairment of Assets". No impairment charges (2023: £nil) arose as a
result of this review. For this review goodwill was allocated to individual
Cash Generating Units (CGU) on the basis of the Group's operations.
The carrying value of goodwill by each CGU is as follows:
Cash Generating Units (CGU) 2024 2023
£'000 £'000
Easyspace 26,685 23,315
Cloud Services 83,136 76,635
109,821 99,950
The recoverable amount of a CGU is determined based on value-in-use
calculations. These calculations use post-tax cash flow projections based on
financial budgets approved by the Board covering a five year period. These
projections are the result of detailed planning and assume similar levels of
organic growth as the Group has experienced in the previous years.
The growth rates and margins used to extrapolate estimated future performance
continue to be based on past growth performance adjusted downwards to take
into account the additional risk due to the passage of time. The growth rate
does not exceed the long-term average growth rate for the business in which
the CGU operates. The growth rates used to estimate future performance beyond
the periods covered by the annual and strategic planning processes do not
exceed the long-term average growth rates for similar products.
In determining the value-in-use, the estimated post-tax future cash flows are
discounted to their present value using a post-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the asset.
Management continue to apply the judgement that there are two distinct CGUs
within the Group, namely Cloud Services and Easyspace which have been derived
with due consideration to IAS 36. The assumptions used for the CGU included
within the impairment reviews are as follows:
Easyspace Cloud Services
31 March 2024 31 March 2023 31 March 2024 31 March 2023
Discount rate (pre-tax) 14.9% 14.3% 14.9% 14.3%
Discount rate (post-tax) 11.2% 10.7% 11.2% 10.7%
Future perpetuity rate 0.0% 0.0% 2.5% 2.5%
Initial period for which cash flows are estimated (years) 5 5 5 5
Based on an analysis of the impairment calculation's sensitivities to changes
in key parameters (growth rate, discount rate and pre-tax cash flow
projections) there was no reasonably possible scenario where the CGU's
recoverable amount would fall below its carrying amount.
9. PROPERTY, PLANT AND EQUIPMENT
Freehold property Leasehold property and improvements Data centre equipment Computer equipment Office equipment Motor vehicles Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Cost:
At 1 April 2022 8,236 40,424 30,524 114,268 2,840 23 196,315
Acquired on acquisition of subsidiary - 300 872 1 30 - 1,203
Additions in the year - 969 1,849 6,591 116 23 9,548
Disposals in the year - (309) (1,402) - - - (1,711)
Currency translation differences - 132 - 378 - - 510
At 31 March 2023 8,236 41,516 31,843 121,238 2,986 46 205,865
Acquired on acquisition of subsidiary - 16 - 345 25 - 386
Additions in the year - 6,316 2,624 5,876 83 48 14,947
Disposals in the year - (2,129) - - - (5) (2,134)
Currency translation differences - (49) - (167) - - (216)
At 31 March 2024 8,236 45,670 34,467 127,292 3,094 89 218,848
Accumulated depreciation:
At 1 April 2022 (1,054) (16,214) (18,041) (87,750) (2,340) (23) (125,422)
Charge for the year (241) (4,663) (2,072) (9,333) (180) (3) (16,492)
Disposals in the year - - 1,402 - - - 1,402
Currency translation differences - (74) - (320) - - (394)
At 31 March 2023 (1,295) (20,951) (18,711) (97,403) (2,520) (26) (140,906)
Charge for the year (238) (4,984) (1,591) (8,754) (184) (13) (15,764)
Disposals in the year - 1,117 - - - 5 1,122
Currency translation differences - 41 - 151 - - 192
At 31 March 2024 (1,533) (24,777) (20,302) (106,006) (2,704) (34) (155,356)
Carrying amount:
At 31 March 2024 6,703 20,893 14,165 21,286 390 55 63,492
At 31 March 2023 6,941 20,565 13,132 23,835 466 20 64,959
Depreciation charge in the current year is comprised of £15,715,000 as
disclosed in the statement of comprehensive income and £49,000 of accelerated
depreciation in respect of the closure of a data centre in the prior year, as
included in non-recurring acquisition integration costs.
During the year there were additions of £231,000 (2023: £70,000) in respect
of reinstatement provisions and additions of £4,270,000 (2023: £666,000) in
respect of leases under IFRS 16 (note 12). Of the total remaining additions in
the year of £10,446,000 (2023: £8,812,000), £1,247,000 (2023: £314,000)
was included in trade payables as unpaid invoices at the year end resulting in
a net increase of £933,000 (2023: net decrease of £106,000) in trade
payables. Consequently, the consolidated statement of cash flows discloses a
figure of £9,513,000 (2023: £8,918,000) as the cash outflow in respect of
property, plant and equipment additions in the year.
Additions of £1,400,000 included in computer equipment are under construction
and are not yet being depreciated.
See note 12 for movements in the year relating to right-of-use assets under
IFRS 16 as included in the above table.
10. CONTINGENT CONSIDERATION DUE ON ACQUISITIONS
2024 2023
£'000 £'000
Contingent consideration due on acquisitions within one year:
- Concepta Capital Limited - (4,000)
- Extrinsica Global Holdings Limited (180) -
- Accesspoint Group Holdings Limited (1,900) -
Total contingent consideration due on acquisitions (2,080) (4,000)
Contingent consideration recognised in the prior year on Concepta Capital
Limited of £4,000,000 was paid during the year as disclosed in the
consolidated cash flow statement.
Contingent consideration of £360,000 was recognised on the acquisition of
Extrinsica Global Holdings Limited (note 6). £180,000 was paid during the
year as disclosed in the consolidated cash flow statement and the remaining
£180,000 was paid subsequent to the year end in April 2024.
£500,000 of the £1,900,000 in relation to Accesspoint Group Holdings Limited
was paid subsequent to the year end in May 2024. The remaining £1,400,000
recognised is based on the Directors' best estimate due at 31 March
2024. Under the Sale and Purchase Agreement, the earn-out range from £nil to
£1,400,000 consideration is represented by a narrow EBITDA range of
£100,000. This means for every £1 of additional EBITDA above a target
EBITDA, then £9.00 consideration is earned. This means the forecasted
estimate is sensitive to small variances.
11. BORROWINGS
2024 2023
£'000 £'000
Current:
Lease liabilities (note 10) (2,509) (3,377)
Current borrowings (2,509) (3,377)
Non-current:
Lease liabilities (note 10) (15,582) (15,803)
Bank loans (40,000) (34,400)
Total non-current borrowings (55,582) (50,203)
Total borrowings (58,091) (53,580)
The carrying amount of borrowings approximates to their fair value.
At the start of the year there was £34.4m (2023: £34.0m) outstanding on the
multi option revolving credit facility and drawdowns of £7.6m (2023: £10.4m)
were made from the facility during the year. Repayments totalling £2.0m
(2023: £10.0m) were made in the year resulting in a balance outstanding at
the end of the year of £40.0m (2023: £34.4m).
At the year end, the Group has access to a £100m multi option revolving
credit facility that matures on 30 June 2026, which also benefits from a £50m
Accordion Facility. The directors are of the opinion that the Group can
operate within the current facility and comply with its banking covenants. The
RCF has a borrowing cost at the Group's current leverage levels of 1.8% margin
over SONIA The revolving credit facility incurs a non-utilisation fee of 35%
of the 1.8% margin. The effective interest rate for the multi option revolving
credit facility in the current year was 6.85% (2023: 4.26%).
The RCF and the Accordion Facility (if exercised) provide the Group with
additional liquidity which will be used for general business purposes and to
fund investments, in accordance with the Group's three-year strategic plan.
Given the terms of the revolving credit facility and the ability for any
drawdowns made to be extended beyond 31 March 2024 at the discretion of the
Group, the total amount outstanding has been classified as non-current.
The obligations under the multi option revolving credit facility are repayable
as follows:
2024 2023
Capital Interest Total Capital Interest Total
£'000 £'000 £'000 £'000 £'000 £'000
Due within one year - (698) (698) - (540) (540)
Due within two to five years (40,000) - (40,000) (34,400) - (34,400)
(40,000) (698) (40,698) (34,400) (540) (34,940)
The Directors estimate that the fair value of the Group's borrowing is not
significantly different to the carrying value.
Lease liabilities Total net debt
Cash and cash equivalents £'000 £'000
Analysis of change in net debt £'000 Bank Total liabilities
loans £'000
£'000
At 1 April 2022 15,332 (34,000) (22,623) (56,623) (41,291)
Acquired on acquisition of subsidiary - - (235) (235) (235)
Additions to lease liabilities - - (666) (666) (666)
Disposals from lease liabilities - - 449 449 449
Drawdown of bank loans - (10,400) - (10,400) (10,400)
Repayment of bank loans - 10,000 - 10,000 10,000
Currency translation - - (33) (33) (33)
Cash and cash equivalent cash outflow (1,514) - - - (1,514)
Lease liabilities cash outflow - - 3,928 3,928 3,928
At 31 March 2023 13,818 (34,400) (19,180) (53,580) (39,762)
Acquired on acquisition of subsidiary - (3,728) - (3,977) (3,977)
Repayment of debt acquired on acquisition 3,728 - 3,728 3,728
Additions to lease liabilities - - (4,148) (4,148) (4,148)
Disposals from lease liabilities - - 1,063 1,063 1,063
Drawdown of bank loans - (7,600) - (7,600) (7,600)
Repayment of bank loans - 2,000 - 2,000 2,000
Currency translation - - 11 11 11
Cash and cash equivalent cash inflow 1,937 - - - 1,937
Lease liabilities cash outflow* - - 4,163 4,163 4,163
At 31 March 2024 15,755 (40,000) (18,091) (58,091) (42,336)
* Lease liabilities cash outflow in the year is reconciled as £5,017,000
payments to lease provider as disclosed in the consolidated cash flow
statement netted with lease interest of £854,000.
12. LEASES
The Group leases assets including buildings, fibre contracts, colocation and
software contracts. Information about leases for which the Group is a lessee
is presented below:
Leasehold Property Data centre equipment Total
Right-of-use assets £'000 £'000 £'000
Software
£'000
Balance at 1 April 2023 16,127 1,813 380 18,320
Additions 2,380 1,890 - 4,270
Disposals (462) (550) - (1,012)
Currency translation differences - (23) - (23)
Depreciation (2,130) (1,803) - (3,933)
Amortisation - - (285) (285)
Balance at 31 March 2024 15,915 1,327 95 17,337
The right-of-use assets in relation to leasehold property and data centre
equipment are disclosed as non-current assets and are disclosed within
property, plant and equipment (note 8). The right-of-use assets in relation to
software are disclosed as non-current assets and are disclosed within
intangibles (note 9).
Disposals in the year relate to lease modifications in the year on the exit of
a property lease and a co-location lease.
Lease liabilities
Lease liabilities are presented in the balance sheet within borrowings as
follows:
2024 2023
£'000 £'000
Current:
Lease liabilities (note 11) (2,509) (3,377)
Non-current:
Lease liabilities (note 11) (15,582) (15,803)
Total lease liabilities (18,091) (19,180)
The maturity analysis of undiscounted lease liabilities are shown in the table
below:
2024 2023
£'000 £'000
Amounts payable under leases:
Within one year (3,332) (3,880)
Between two to five years (9,294) (8,239)
After more than five years (9,477) (9,780)
(22,103) (21,899)
Add: unearned interest 4,012 2,719
Total lease liabilities (18,091) (19,180)
The Group has elected not to recognise a lease liability for short-term leases
(leases with an expected term of 12 months or less) or for leases of low value
assets. Payments made under such leases are expensed on a straight line basis.
During the year, in relation to leases under IFRS 16, the Group recognised the
following amounts in the consolidated statement of comprehensive income:
2024 2023
£'000 £'000
Short-term and low value lease expense (1,711) (1,750)
Depreciation charge (3,933) (3,685)
Amortisation charge (285) (285)
Interest expense (854) (586)
(6,783) (6,306)
Amounts recognised in the consolidated statement of cash flows:
2024 2023
£'000 £'000
Amounts payable under leases:
Short-term and low value lease expense (1,711) (1,750)
Payments under lease liabilities within cash flows from financing (5,017) (4,902)
activities
(6,728) (6,652)
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