REG - Iomart Group PLC - Pre-close Trading Update

iomartAnnouncement

23/04/2025 07:00

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RNS Number : 7563F  Iomart Group PLC  23 April 2025

23 April 2025

iomart Group plc

("iomart" or the "Group" or the "Company")

 

Pre-close Trading Update

 

iomart Group plc (AIM: IOM), the secure cloud services company, provides its
pre-close trading statement for the year ended 31 March 2025 ("FY25") ahead of
the announcement of its full year results in the latter part of June 2025.

 

Key highlights

 

 ·         Full-year results for the year ended 31 March 2025 expected to be in line with
           market expectations, including a positive six-month performance from Atech.
 ·         Core iomart business ended the year with strong order bookings, reflecting the
           positive impact of recent investments in both service offerings and
           go-to-market strategy.
 ·         Acquisition of Atech marked a strategic milestone in iomart's evolution into
           the higher growth area of the cloud computing market and extended the Group's
           ability to serve existing and new customers across the full public and private
           cloud infrastructure.

 

Group trading performance

 

For the year ended 31 March 2025, the Group expects to report revenue growth
of 13% to approximately £143 million (FY24: £127.0 million). This growth
includes contributions from acquisitions, including approximately £21 million
from Atech and an estimated £4 million from the full-year impact of small
acquisitions completed in FY24. Excluding acquisitions, the core business
experienced a revenue decline of approximately £9 million or 7% year-on-year.
As previously disclosed, this decline was driven by elevated churn levels
among the Group's self-managed customer base and certain private cloud managed
services.

 

Adjusted EBITDA((1)) is expected to be approximately £34.3 million (FY24:
£37.7 million), including a strong six-month EBITDA contribution from Atech
of approximately £3 million. Whilst the underlying cost base has remained
broadly consistent during the year, previously disclosed cumulative customer
losses in our more traditional service lines, such as dedicated servers and
data centre services, have impacted overall profitability as they are reliant
on largely fixed-cost infrastructure and have an inherently higher EBITDA
margin given their more capital intensive nature.

 

Adjusted profit before tax((2)) is expected to be approximately £6.5 million
(FY24: £15.0 million), reflecting the lower adjusted EBITDA alongside the
increased adjusted depreciation & amortisation charge((3)) and interest
expense in the year of approximately £21.4 million (FY24: £18.5m) and £6.4
million (FY24: £4.3 million), respectively. Depreciation & amortisation
increased due to a new £2.9m charge related to revised VMware licensing
arrangements under Broadcom (comparable £1.5m recognised as Opex in FY24). In
addition, a £0.5m effective interest charge has been introduced due to the
long-term nature of the Broadcom commitment.

 

Order bookings for recurring revenue activity in the year, excluding any Atech
contribution, grew strongly, totaling approximately £20 million((5)) in
annualised recurring revenue (FY24: £16.5 million proforma equivalent).
Growth was led by Microsoft related solutions, with demand for the Group's
core offerings in managed private cloud and back-up & data protection
services providing a stable foundation. This performance indicates that the
Group's strategic shift toward higher-growth cloud segments is progressing
faster than expected and while this shift brings margin dilution, it is also
building a more scalable, resilient revenue base that aligns with our
long-term growth strategy.

 

The Group's strategic shift toward higher growth cloud segments was further
accelerated with the acquisition of Atech on 1 October 2024, marking a
significant strategic milestone in iomart's evolution into a leading secure
cloud services provider in the UK. Atech has strengthened the Group's
Microsoft and managed security services offerings and extended its global
delivery capabilities.

 

The Group's operating cash generation improved from the first half of the year
and net debt at 31 March 2025 is expected to be approximately £102 million
(31 March 2024: £42.3 million), reflecting M&A-related cash payments of
approximately £57 million. This represents a proforma net debt leverage
ratio((4)) of approximately 2.7 times (FY24: 1.1 times) or 2.3 times
(excluding IFRS lease liabilities of approximately £18m).

 

Outlook

 

The Board remains focused on delivering the Group's long-term growth
trajectory, supported by continued positive momentum in strategic focus areas
such as public cloud infrastructure, modern workplace solutions, back-up &
data protection, and cyber security managed services. These areas will
continue to underpin the Group's evolving value proposition to customers.

 

We see the upcoming financial year as an important transitional phase, during
which we will continue to invest in aligning the business towards these
higher-growth, scalable areas of the market, to realise our ambition of
becoming the UK's leading secure cloud services provider. As we continue this
transformation, and in line with market trends, we anticipate overall revenue
to further shift away from mature, higher margin, capital-intensive dedicated
servers and data centre services, resulting in some further margin dilution at
a similar level of the last 12 months.

 

We are actively pursuing initiatives to optimise costs and margins, including
reviewing our data centre estate, increasing operational efficiencies such as
expanding capacity through our team in India, and investing in systems
standardisation and automation, including AI, to lay the foundations for
future efficient scalability.

 

Lucy Dimes, CEO of iomart Group plc, commented:

 

"This has been a pivotal year for iomart in executing the first phase of our
'Bigger Better Bolder' strategy. Our acquisition of Atech has been game
changing, delivering a strong performance in its first six months, validating
the valuation paid and enabling us to reposition the Group as a scale hybrid
cloud services provider with market leading managed security services and SOC
capabilities.

 

We have also made substantial progress on our integration programme, refreshed
and streamlined our branding, transformed service deployment and assurance
capability, strengthened our three global technology partnerships, and
significantly increased sales order bookings.

 

As we build our wider hybrid cloud capabilities to counter the declining but
higher margin mature dedicated servers and data centre services business, we
are taking proactive steps to streamline operations and address our fixed cost
base at the same time as investing in our growth portfolios and markets, to
lay the foundations for sustainable, long-term growth and value creation."

 

 

Note: Company compiled range is based on known sell-side analyst estimates.
The latest known sell-side analyst estimates for the full year ended 31 March
2025 are:

·        Revenue in the range of £138m to £143m;

·        Adjusted EBITDA((1)) in the range of £33.1m to £33.8m; and

·        Adjusted PBT ((2) in the range of £6.0m to £6.8m

·        Net Debt (including IFRS 16 finance lease liabilities) in the
range of £94.8m to £101.3m

 

(1))adjusted EBITDA means earnings before interest, tax, depreciation,
amortisation, share based payment charges, forex gains or losses on long term
cash flow hedges , acquisition costs and exceptional non-recurring items.
Throughout this statement acquisition costs are defined as acquisition related
costs and non-recurring acquisition integration costs.

((2))adjusted profit before tax means profits before, tax, share based payment
charges, amortisation of acquired intangibles, forex gains or losses on long
term cash flow hedges, acquisition costs and exceptional non-recurring items.

((3))adjusted depreciation & amortisation means depreciation and
amortisation excluding amortisation of acquired intangibles.

((4))proforma leverage ratio being net debt divided by adjusted EBITDA plus
the appropriate pre-acquisition adjusted EBITDA of any acquisitions in the
year to establish a proforma annual equivalent of adjusted EBITDA.

((5))Order booking value being the annual revenue value of the customer order
at the time of booking, as opposed to the total contract value or the actual
revenue realised in the reporting period, which will be influenced by the
timing of order booking and the billing commencement date.

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 one of the UK's leading providers of secure
cloud managed services, simplifying the complexities of modern technology for
businesses, with the majority of Group revenue derived from the UK. Our team
of 650+ experts deliver cutting-edge solutions in cloud infrastructure, modern
workplace management, and managed security services that enable our customers
to innovate, protect, and scale their businesses.

 

We proudly hold one of the UK's most extensive sets of Microsoft credentials,
including Azure Expert MSP, six Solution Designations, and membership in
Microsoft's Intelligent Security Association (MISA). As well as being a
top-tier Broadcom Pinnacle Partner for VMware Cloud. Which means we can bring
the latest technologies in hybrid cloud, data protection, and cyber resiliency
to meet the evolving needs of our customers.

 

For further information about the Group, please visit www.iomart.com
(http://www.iomart.com/)

 

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