TIDMIOM
RNS Number : 6746I
Iomart Group PLC
06 December 2022
6 December 2022
iomart Group plc
("iomart" or the "Group" or the "Company")
Half Yearly Results
Proven recurring revenue, cash generation and expanding offering
provides foundation for growth
iomart (AIM: IOM), the cloud computing company, is pleased to
report its consolidated half yearly results for the period ended 30
September 2022 (H1 2023).
FINANCIAL HIGHLIGHTS
H1 2023 H1 2022 Change
Revenue GBP52.6m GBP51.9m +1%
--------- --------- -------
% of recurring revenue(1) 94% 93% +1pp
--------- --------- -------
Adjusted EBITDA(2) GBP17.8m GBP19.6m -9%
--------- --------- -------
Adjusted profit before tax(3) GBP7.4m GBP9.1m -19%
--------- --------- -------
Profit before tax GBP4.9m GBP6.0m -18%
--------- --------- -------
Adjusted diluted EPS(4) 5.2p 6.5p -20%
--------- --------- -------
Basic EPS 3.5p 4.4p -20%
--------- --------- -------
Cash generation from operations GBP14.5m GBP17.9m -19%
--------- --------- -------
Interim dividend per share 1.94p 2.42p -20%
--------- --------- -------
-- Results in line with the pre-close trading update published in early October 2022
-- Revenue grew 1% YoY, with the Group continuing to benefit
from very strong levels of recurring revenues (94%(1) of Group
revenues)
-- Concepta acquisition, completed on 15 August 2022, provided
GBP1.3m of revenue and a small positive profit contribution in the
final 6 weeks of the period and is performing well
-- Stronger customer retention levels in the period provides an
improved backdrop as we see pipeline growth from our wider product
offering
-- Reduction in adjusted EBITDA(2) and adjusted profit before
tax(3) reflects the revenue mix and higher staff costs in the
period necessary to retain the skills and capabilities that are
important for our growth strategy
-- Profitability margins, as expected, reflect the changes in
revenue mix and the inflationary environment with adjusted EBITDA
margin and adjusted profit before tax margin at 33.8% (H1 2022:
37.7%) and 14.1% (H1 2022: 17.5%), respectively
-- Cash conversion ratio(6) of 81% is lower than prior period
(H1 2022: 91%) due to the specific timing of some vendor payments
overlapping period ends, it remains at 95% on a 12-month basis
-- Period end net debt of GBP47.8m, comfortable at 1.3 times annualised EBITDA(5)
-- 12-month extension option within the existing GBP100m
revolving bank facility taking expiry to 30 June 2026 agreed post
period end, underpinning the Group's five-year growth strategy
OPERATIONAL HIGHLIGHTS
-- New security partnership with cyber security specialist
e2e-assure in operation with two live customers and a healthy
pipeline established
-- Acquisition of Concepta was an important step in
strengthening our indirect routes to market, while extending the
Group's products, skills and capabilities
-- Business model and customer arrangements have ensured that
wholesale energy price rises have been appropriately passed to our
customer base and included in our pricing plans for renewals and
new business
-- New regional sales leadership team has reshaped the sales
structure to align resources with the market opportunities
-- New iomart group website launched to support improved online
presence and opportunity capture
-- Product management team expanded to support portfolio
development. In final stages of completing iomart's new
multi-tenant cloud platform based on the latest industry leading
technology
-- Re-contracted our core UK fibre network, refreshing the
resilient network that securely connects our data centres, and we
have accelerated the upgrade to UPS battery power systems,
providing for greater energy efficiency in the future
-- Launched a full learning management system internally to
support our skills development programmes
-- Lucy Dimes appointed as new independent Chair of the Board,
bringing a wealth of industry experience
OUTLOOK
-- H2 will include the full extent of the energy price uplifts passed onto customers
-- As a consequence, the Board expects revenues for the year
ending 31 March 2023 will be ahead of their original
expectations
-- Full year profits are expected to be in line with
expectations, with the second half profit showing progress on
H1
STATUTORY EQUIVALENTS
A full reconciliation between adjusted and statutory profit
before tax is contained within this statement. The largest item is
the consistent add back of the non-cash amortisation of acquired
intangible assets. The largest variance, period on period, is a
GBP0.6m lower amortisation of acquired intangible assets as the
amortisation periods expire on historic acquisitions.
Reece Donovan, CEO commented,
"This has been another period of considerable operational
activity, against the backdrop of ongoing macro-economic
challenges. The steps we have taken to strengthen our capabilities
and offering, increase effectiveness of our sales activities and
our clear focus on execution gives us a stronger foundation to
accelerate growth.
We believe the diversity and limited concentration of our
customer base, high level of recurring revenue, and strong cash
flow generation should shelter us from the worst of the expected
economic pressures as the UK enters a recessionary period. The
critical nature of the infrastructure and digital services we
provide in a growing cloud market will allow us to support
businesses well into the future.
Our stronger customer retention levels provide an improved
backdrop as we see pipeline growth from our wider product offering,
and the Board remains confident in the outlook for the long-term
prospects for the Group."
(1) Recurring revenue, as disclosed in note 2, is the revenue
that repeats either under long-term contractual arrangement or on a
rolling basis by predictable customer habit.
(2) Throughout this statement adjusted EBITDA, as disclosed in
the consolidated interim statement of comprehensive income, is
earnings before interest, tax, depreciation and amortisation
(EBITDA) before share based payment charges and acquisition costs.
Throughout this statement acquisition costs are defined as
acquisition related costs and non-recurring acquisition integration
costs.
(3) Throughout this statement adjusted profit before tax, as
disclosed on page 8, is profit before tax, amortisation charges on
acquired intangible assets, share based payment charges and
acquisition costs.
(4) Throughout this statement adjusted diluted earnings per
share, as disclosed in note 3, is earnings per share before
amortisation charges on acquired intangible assets, share based
payment charges, acquisition costs and the taxation effect of
these.
(5) Annualised EBITDA is the last 12 months of EBITDA for the period ended 30 September 2022.
(6) Cash conversion is calculated as cash flow from operations,
as disclosed in the consolidated interim statement of cash flows,
divided by adjusted EBITDA defined above. The 12-month basis
aggregates the second half of the year to 31 March 2022 and the
current 6 month reported period on the same basis of
calculation.
This interim 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
Reece Donovan, Chief Executive Officer
Scott Cunningham, Chief Financial Officer
Peel Hunt LLP (Nominated Adviser and Joint Tel: 020 7418
Broker) 8900
Paul Gillam, James Smith
Investec Bank PLC (Joint Broker) Tel: 020 7597
4000
Patrick Robb, Virginia Bull, Nick Prowting
Alma PR Tel: 020 3405
0205
Caroline Forde, Hilary Buchanan, Joe Pederzolli
About iomart Group plc
iomart Group plc (AIM: IOM) is a cloud computing and IT managed
services business providing hybrid cloud infrastructure, network
connectivity, security, 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 400-strong team can design
and deploy the right cloud solution for our customers.
For further information about the Group, please visit www.iomart.com
Chief Executive's Statement
Introduction
We have continued to make positive progress against our strategy
to build on our existing strong position in the private cloud
space, at the same time as re-positioning our offering around the
growing hybrid cloud market. We are confident in our strategy and
our teams are firmly in execution mode, with a wider product
offering and increasing skill set.
The economic outlook represents a period of uncertainty for all,
but as we have historically shown, iomart's high levels of
recurring revenue, sticky customer base and strong levels of cash
generation mean the Group is well positioned to successfully
navigate through such turbulences.
Continuing the good progress from the second half of last year,
we have seen customer renewal levels return to long-term historic
averages which, when combined with our high levels of recurring
revenue, provides visibility over our full year financial targets
and a solid foundation as we transition towards a secure hybrid
cloud offering.
Inflationary challenges are impacting all businesses and we have
seen this across most of our cost areas to varying degrees. In
particular, the volatility in the wholesale energy market has
required significant management focus over the past months to
protect the business. iomart's robust business model and customer
arrangements have ensured price uplifts have been appropriately
passed to our customer base and the framework is now well tested in
ensuring pricing can be flexed to match the energy cost base.
The results for the period are in line with our pre-close
statement, with revenues up 1% on the prior period to GBP52.6m, and
an adjusted EBITDA of GBP17.8m reflecting both the revenue mix in
the period and our continued investment in upskilling our
workforce. We achieved continued strong cash flow, which even after
the acquisition, sees us close the period with GBP17.8m of cash and
a comfortable level of leverage with net debt of GBP47.8m.
We were pleased to resume M&A activity, in line with our
strategic plans, with the completion of the Concepta acquisition on
15 August 2022. This fits within our growth plan by extending the
Group's product, skills and capabilities, strengthening our direct
and indirect routes to market, and complementing the Group's strong
financial model.
There have been some changes to the Board in the period with
Lucy Dimes joining us on 30 August 2022 as our new Chair. Lucy is
an accomplished business leader having operated in senior executive
positions in FTSE 100, FTSE 250 and private equity owned companies
spanning telecoms, technology, business services and financial
services. Her considerable experience and insight will be
invaluable to us as we continue to pursue a successful growth
strategy. Andrew Taylor, independent Non-Executive Director, will
be leaving us on 31 December 2022. The Nomination Committee is
undertaking a search for a replacement independent Non-Executive
Director, with the intention for the search to be completed by the
Company's financial year end.
Strategy
We have a clearly communicated vision which is to position
iomart for the next phase of its growth as a recognised leading
secure hybrid cloud business. We have been bold by stating in 2021
our aspiration to become a GBP200m revenue business within five
years. Underpinning this was a roadmap with a focus on three main
activities:
-- New services - focusing on four new service areas - hybrid
cloud, security, the future digital workplace and connectivity;
-- Complementary acquisitions - to expand the customer base, to
acquire new skillsets, and to extend our go-to-market channels;
and
-- Protect and expand the existing base of run rate revenue and
EBITDA, which is underpinned by our existing core private cloud
infrastructure.
We have made good progress in each area of the business
improvement areas necessary to support growth and realising the
milestones that we laid out for delivery in FY23.
Our marketing efforts under the revised branding and simplified
value proposition have continued to support iomart brand awareness
and improved the level of engagement with new and existing
customers. In the period a new iomart group website was launched to
support improved online presence and opportunity capture. The last
six months has seen an improvement in marketing metrics and a
larger pipeline of prospects generating a stronger sales
pipeline.
By the end of last year, our newly established product team had
fully supported specific campaigns around the growth areas of
Digital Workplace, Secure Connectivity and Managed Microsoft Azure.
In the last six months, following the signing of our e2e-assure
partnership a significant effort has been made in the
productisation of our offering for managed cyber security. This has
involved full product documentation, sales enablement training plus
supporting our marketing efforts with events and publications.
Following a few months of up front internal enablement efforts, it
is pleasing to see we now have two live customers taking this new
service and have developed a healthy pipeline of opportunities. We
commissioned an independent research report on the State of UK
Cyber and the resulting published report has supported a
significant amount of recent business development activities.
Globally, cyber instances are on the rise and we now have a highly
credible offering for customers to address this everyday threat. We
will continue to look to expand this cyber portfolio with a strong
focus on Microsoft. During the last six months we have put a large
amount of effort into finalisation of the development of iomart's
new multi-tenant cloud platform based on the latest industry
leading technology. This will provide customers with a cost
effective, easy-to-use and resilient cloud solution.
As previously reported, we strengthened our commercial
leadership with the appointment in February 2022 of a new Chief
Commercial Officer. Since then, the commercial team has seen new
regional sales leaders join the business, investment made into a
sales operations support team and revised account allocation
structure to allow a recently established inside sales team to
focus on the long tail of smaller customers. We have made
incremental investments in these changes but all within an agreed
cost envelope, which we believe is sensible to support our growth
strategy by releasing commercial teams to focus on selling.
During the period, we invested in a Learning Management System
("LMS") which will support our skills development programmes and
employee engagement. This is an important step, as we strongly
believe a continuous learning culture will underpin our future
success. In a period of skills shortages, we believe, attracting,
developing and retaining our young talent is critical.
Acquisition of Concepta
As announced on 15 August 2022, we successfully completed the
first acquisition under our refreshed strategy, acquiring Concepta
Capital Limited, a holding company for the ORIIUM and Pavilion IT
brands, for an initial cash consideration of GBP10.5m with the
potential of a further GBP4.0m contingent earn-out payment based on
profitability for the 12-months ending 30 June 2023. We also repaid
GBP1.5m of bank debt acquired on completion. This acquisition
provides complementary solution capabilities and deep technical
expertise in line with iomart's hybrid cloud strategy and a
significant new channel partner network, strengthening iomart's
indirect route to market.
ORIIUM, established in 2007, is a channel-only organisation
working with value added resellers and managed service providers to
deliver best in class data and application management solutions to
end users. With this acquisition, iomart gains an independent
wholesale operation that understands the UK IT channel deeply and
has built trust through long-standing strategic partner
relationships. Data management is a core element of the Group's
hybrid cloud proposition, and ORIIUM materially strengthens
iomart's indirect sales channel capabilities, while extending the
Group's product and technical skills and capabilities, with an
additional 45 technical engineers joining the Group.
Concepta acquired Pavilion IT, a business established for over
30 years, in 2018 and subsequently in 2021 acquired P2
Technologies, a business focussed on the legal & accounting
professional services sector to add vertical specialisation. This
created a strong direct sales organisation with over 250 customers
under one unified operational delivery team offering a range of
hybrid and cloud infrastructure technology solutions plus
professional services and on-going customer support arrangements.
This customer base will have access to iomart's hybrid cloud
solutions and services.
Concepta's trading since the acquisition has been in line with
management's plan and we continue to stay focussed on our active
M&A programme and the identification of appropriate bolt-on
acquisitions.
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 continues to expand. The
concept of "Cloud" computing is now globally recognised although
the complexity of available options continues to grow. The "public
cloud" giants such as Amazon, Microsoft and Google have vastly
contributed to this general awareness and consequently, as is well
documented, have seen high growth globally as many organisations
look for cloud infrastructure, connectivity and enhanced
capabilities.
The reality of the situation is that the vast majority of the
world's IT infrastructure is complex and untidy in nature which
means a hybrid cloud model, using the best combination of on
premise, private and public cloud infrastructure will remain a key
market feature for businesses. Even if businesses want to use
Public Cloud infrastructure fully, many lack the detailed
expertise, skills and resources required to manage all the
elements. iomart is well positioned to meet this demand given a
long-established capability in designing and running private clouds
and supporting on premise solutions along with the steps we have
taken to continue to complement this with skills and capabilities
for public cloud provisioning and management.
Many organisations are increasingly outsourcing 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.
These requirements increasingly come with greater security and
compliance needs especially as government regulations grow. Many
customers are looking for a single point of accountability for all
their cloud needs and iomart is well positioned to provide this
service going forward particularly for medium to large
enterprises.
Operational Review
Cloud Services
Cloud Services revenues increased by GBP0.6m (1%) to GBP46.7m
(H1 2022: GBP46.1m). This included GBP1.3m of revenue for the 6
weeks of trading from the Concepta acquisition. Cloud Services
EBITDA (before share-based payments, acquisition costs and central
group overheads) was GBP17.3m being 37.0% of cloud services revenue
(H1 2022: GBP18.9m (40.9% of cloud services revenue)). The
reduction of GBP1.6m in absolute Cloud Services EBITDA is a
combination of many moving parts, including timing aspects
associated with the inflationary environment, the lower margin of
some of our new offerings in comparison to the self-managed
infrastructure only deals of earlier years plus greater stability
in our team numbers than in the prior period.
The volatility and increases to electricity wholesale prices is
a significant challenge for our whole sector. Our business model
and customer arrangements have ensured that wholesale energy price
rises have been appropriately passed on to our customer base and
included in our pricing plans for renewals and new business. The
specific timing of price changes means that such increases will
have a significantly larger impact in the second half of the year
in terms of the related revenue uplift. The government support for
businesses, along with hedging put in place, gives certainty for
both us and our customers for the next six months. Supported by our
energy procurement advisors, we have commenced an appropriate
hedging strategy for 2023/24 and onwards. Ensuring pricing is
flexed to match the energy cost base remains a high priority and
one we see as best practice amongst our competitors.
The following is the disaggregation of Cloud Services revenues
of GBP46.7m (H1 2022: GBP46.1m):
Year to
6 months 6 months 31
to 30 September to 30 September March
Disaggregation of Cloud Services 2022 2021 2022
revenue GBP'000 GBP'000 GBP'000
---------------------------------- ------------------ ----------------- ----------
Cloud managed services 29,220 28,037 55,745
Self-managed infrastructure 14,308 14,408 28,363
Non-recurring revenue 3,219 3,703 7,128
46,747 46,148 91,236
---------------------------------- ------------------ ----------------- ----------
Cloud managed services (recurring revenue)
Cloud managed services includes the provision of fully managed,
complex, bespoke and resilient solutions involving private, public
and hybrid cloud infrastructure. Over the long-term, we anticipate
this will be the highest growth area for iomart due to the market
drivers described above.
Customer renewal levels have returned to long-term historic
averages which was very positive for the 6-month period and
provides a solid foundation as we transition towards a secure
hybrid cloud offering. New order bookings remain flat versus the
prior period, with the largest contribution continuing to be from
our existing customer base. New customer wins have longer sales
cycles and we do see caution on commencing large data
transformation projects in the current environment. Our pipeline is
growing at a reasonable pace giving confidence that our new product
launches and marketing approach is paying dividends and the pillars
of our growth strategy remain sound.
The Concepta acquisition (mainly the ORIIUM brand) contributed
GBP0.6m of cloud managed services revenue in the 6-week period
following the acquisition. We are very pleased to add ORIIUM's
strong indirect channel as an additional route to market.
Self-managed infrastructure (recurring revenue)
We have a large customer base of around 6,000 customers, across
a number of brands, who wish to source compute power and
connectivity mainly through the provision of dedicated servers and
manage these directly. Our own regional data centre estate and
fibre network positions us well to offer such infrastructure as a
service. 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.
In the first half of this financial year, the self-managed
infrastructure revenue of GBP14.3m represented a small reduction of
GBP0.1m in comparison to the first half of last year. This is a
combination of a reduction in the number of our long tail of
smaller customers, partially offset by energy price rises passed
onto customers, which are more intensive within this area, plus
higher new order bookings from an inside sales team established to
retain dedicated focus on this area. We will continue to allocate
resources to ensure we provide this customer base with resilient,
cost effective and increasingly automated solutions.
Our UK owned infrastructure is an important part of the delivery
of our recurring revenue services, a differentiator in the market
and allows more of the value add to be retained by iomart. During
the period we re-contracted our core UK fibre network. This
refreshes the resilient network that securely connects our data
centres together, with the implementation to be undertaken during
the course of 2023. We had already commenced the upgrade to our
uninterruptible power systems ("UPS") in our core data centres last
year. However, given the increase in energy costs we have
accelerated this as the new systems offer improved energy
efficiencies. This programme is around GBP3.5m of spend and will be
part of a rolling programme over the coming 18 months.
Non-recurring revenue
Non-recurring revenue of GBP3.2m (H1 2022: GBP3.7m) relates
primarily to on premise product reselling via our Cristie Data
brand plus consultancy projects. Often these non-recurring
activities provide an interesting initial introduction to the wider
iomart Group and evolve customers into a higher level of recurring
services. The Concepta acquisition in August 2022 included the
Pavilion IT brand, which primarily undertakes similar reselling and
professional services activity. This added GBP0.7m of non-recurring
revenue post acquisition, meaning excluding acquisition impact, the
underlying reduction in non-recurring revenue was GBP1.2m. The
economic situation in some of our customer base has slowed down
hardware refresh activity but we are also reviewing our specific
product proposition to ensure it avoids the more commoditised
areas, matches our deeper skills, for example in data management,
and at the same time will allow facilitation over time to iomart's
core recurring revenues.
Easyspace
The Easyspace segment has performed well during the period,
delivering stable revenues and improved EBITDA (before share based
payments, acquisition costs and central group overheads) of GBP5.8m
(H1 2022: GBP5.8m) and GBP2.9m (H1 2022: GBP2.6m),
respectively.
The global domain name and mass market hosting sector continues
to grow, supported by the increasing importance of an internet
presence and ecommerce for all areas of the economy, including the
small and micro business community represented within our Easyspace
division. A smaller number of large global operators increasingly
dominates this sector, and we recognised a long time ago that the
marketing spends required to compete for new business in this
specific area was not the best use of iomart's resources. However,
we do ensure our customer base of around 60,000 customers are well
served with a good range of products and importantly a high level
of customer service. This level of attention is ensuring a strong
level of renewal rates with customers.
Financial Performance
Revenue
Overall revenue from our operations increased by 1% to GBP52.6m
(H1 2022: GBP51.9m). We saw a greater share of recurring revenue at
94% (H1 2022: 93%) compared to prior periods as non-recurring
activity levels reduced. 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. Our Cloud Services segment revenues increased by 1% to
GBP46.7m (H1 2022: GBP46.1m). Our Easyspace segment has performed
well over the period, with revenues for the first half stable at
GBP5.8m (H1 2022: GBP5.8m).
Gross Profit
The gross profit in the period was relatively flat at GBP31.2m
(H1 2022: GBP31.3m) with the gross profit as a percentage of
revenue of 59.3% being only a small reduction from prior period (H1
2022: 60.3% of revenue). Our key vendor relationships have remained
stable in the period and we are seeking to consolidate and enhance
these where possible. As would be expected in the current
inflationary environment, we have seen general cost increases
across most areas of our supply chain. As noted earlier, the
volatility in the wholesale energy market has dominated our
attention in terms of ensuring we have an appropriate response.
Adjusted EBITDA
The Group's adjusted EBITDA reduced by GBP1.8m (9%) to GBP17.8m
(H1 2022: GBP19.6m) which in EBITDA margin terms translates to
33.8% (H1 2022: 37.7%). Administration expenses (before
depreciation, amortisation, share based payment charges and
acquisition costs) of GBP13.4m are GBP1.6m higher than the previous
period. This includes GBP0.5m from the addition of the c.70 staff
plus overhead costs from the Concepta acquisition. As highlighted
in prior reporting, financial year 2022 saw an unusual profile of
staff costs. Like the wider sector, we saw a period of higher staff
attrition during the mid-part of the prior financial year with
subsequent recruitment activity building the team back up to the
required level. The last 6 months has been more stable on
headcount, which accounts for a large element of the overall
increase (GBP0.6m). Other factors include a salary award/NI levy
increase (GBP0.5m). All other overhead costs categories are broadly
in line with the prior period.
Cloud Services saw an 8% reduction in its adjusted EBITDA to
GBP17.3m (H1 2022: GBP18.9m), giving a margin of 37.0% (H1 2022:
40.9%). Adjusted EBITDA for Easyspace improved slightly to GBP2.9m
(H1 2022: GBP2.6m) and EBITDA margin increased to 49.5% (H1 2022:
45.8%).
Group overheads, which are not allocated to segments, include
the cost of the Board, all the running costs of the headquarters in
Glasgow, and Group led functions such as human resources,
marketing, finance and design. Group overheads saw an increase of
GBP0.5m to GBP2.4m (H1 2022: GBP1.9m) driven by some increases in
professional fees and by the staff related increases for central
functions, for the same reasons noted above.
Adjusted profit before tax
Depreciation charges of GBP8.0m (H1 2022: GBP8.2m) have
decreased slightly in absolute terms which also means it is
slightly down as a percentage of our recurring revenue in the
period to 16.2% (H1 2022: 17.1%). The charge for the amortisation
of intangible assets, excluding amortisation of intangible assets
resulting from acquisitions ("amortisation of acquired intangible
assets") has decreased to GBP1.2m (H1 2022: GBP1.3m) simply due to
the specific historic timing of investments made.
Net finance costs have increased by GBP0.3m to GBP1.2m (H1 2022:
GBP0.9m) reflecting the increase in the SONIA interest rate.
After deducting the charges for depreciation, amortisation,
excluding the amortisation of acquired intangible assets, and
finance costs from the adjusted EBITDA, the adjusted profit for the
period before tax decreased by GBP1.7m to GBP7.4m (H1 2022:
GBP9.1m) representing an adjusted profit before tax margin of 14.1%
(H1 2022: 17.5%).
Profit before tax
The measure of adjusted profit before tax is a non-statutory
measure, which is commonly used to analyse the performance of
companies 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:
Year
6 months 6 months to 31
to 30 September to 30 September March
Reconciliation of adjusted profit 2022 2021 2022
before tax to profit before tax GBP'000 GBP'000 GBP'000
Adjusted profit before tax 7,360 9,104 17,109
Less: Share based payments (418) (620) (480)
Less: Amortisation of acquired intangible
assets (1,748) (2,312) (4,044)
Less: Acquisition costs (252) (136) (315)
Less: Accelerated write off of arrangement
fee on bank facility - - (102)
Profit before tax 4,942 6,036 12,168
--------------------------------------------- ------------------ ----------------- ----------
The larger adjusting items in the current period are:
-- share based payment charges in the period which decreased
slightly to GBP0.4m (H1 2022: GBP0.6m) as a result of the timing of
share options vesting; and
-- charges for the amortisation of acquired intangible assets of
GBP1.7m (H1 2022: GBP2.3m) which have decreased by GBP0.6m
reflecting the expiry of the amortisation period from older
historic acquisitions.
After deducting the charges for share based payments, the
amortisation of acquired intangible assets and acquisition costs,
the reported profit before tax is GBP4.9m (H1 2022: GBP6.0m).
Taxation and profit for the period
There is a tax charge in the period of GBP1.1m (H1 2022:
GBP1.2m), which comprises a current taxation charge of GBP1.0m (H1
2022: GBP1.9m), and a deferred taxation charge of GBP0.1m (H1 2022:
credit of GBP0.6m). The headline effective tax rate is 22.6% (H1
2022: 20.3%). The future increase to a 25% UK corporation tax rate
has been reflected at 30 September 2022 on the deferred tax
balances. In the prior period, the deferred tax balances were
calculated with a 19% rate.
The lower tax charge in the year is a result of the positive
effect of the higher "super deduction" available for capital
investments and lower taxable income and results in a profit for
the period from total operations of GBP3.8m (H1 2022: GBP4.8m).
Earnings per share
Adjusted diluted earnings per share, which is based on profit
for the period attributed to ordinary shareholders before share
based payment charges, amortisation of acquired intangible assets,
acquisition costs and the tax effect of these items, was 5.2p (H1
2022: 6.5p).
The measure of adjusted diluted earnings per share as described
above is a non-statutory measure that is commonly used to analyse
the performance of companies where M&A activity forms a
significant part of their activities. Basic earnings per share from
continuing operations was 3.5p (H1 2022: 4.4p). The calculation of
both adjusted diluted earnings per share and basic earnings per
share is included at note 3.
Cash flow
The Group generated cash from operations in the period of
GBP14.5m (H1 2022: GBP17.9m) with an adjusted EBITDA conversion to
cash ratio in the period of 81% (H1 2022: 91%). The first half year
typically has a lower conversion ratio but in addition, in this
specific 6-month period we had a small number of larger vendor
payments, which overlapped the period ends causing the ratio in
this period to be below 90%. At 30 September 2022, the conversion
ratio over the last 12 months remains at 95%. Cash payments for
corporation taxation in the period were limited (H1 2022: GBP1.4m),
due to overpayments from prior years which could be offset against
the first two quarterly instalments, resulting in net cash flow
from operating activities in the period of GBP14.5m (H1 2022:
GBP16.4m).
Expenditure on investing activities of GBP13.8m (H1 2022:
GBP5.3m) was incurred in the period. GBP3.1m (H1 2022: GBP4.7m) was
incurred on the acquisition of property, plant and equipment,
principally to provide specific services to our customers. We
incurred GBP0.6m (H1 2022: GBP0.6m) in respect of development costs
during the period. In August we paid the initial equity
consideration on the Concepta acquisition and paid professional
services fees which combined with the cash acquired, resulted in a
GBP10.0m net outflow. There were no payments made concerning
M&A activity in the prior period.
During the first half of the year, net cash generated from
financing activities was GBP1.7m (H1 2022: (GBP7.9m) used). All
shares issued in the current period under share options were issued
at nominal value. In the current period we made a GBP10.4m drawdown
on the revolving credit facility to support the initial equity
consideration for the Concepta acquisition. We repaid GBP1.5m of
bank debt acquired from Concepta on completion. In the current
period we repaid GBP2.5m of lease liabilities (H1 2022: GBP2.5m),
paid GBP0.7m (H1 2022: GBP0.5m) of finance charges and made a
dividend payment of GBP4.0m (H1 2022: GBP4.9m). As a result, cash
and cash equivalent balances at the end of the period were GBP17.8m
(H1 2022: GBP26.3m).
Net Debt
The net debt position of the Group at the end of the period was
GBP47.8m, compared to GBP41.3m at 31 March 2022, with the increase
driven by the payment of the initial consideration for the Concepta
acquisition. Our multiple of the last 12 months of adjusted EBITDA
to net debt is 1.3 times which remains a comfortable level of
leverage. The analysis of the net debt is shown below:
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Bank revolver loan 44,400 52,791 34,000
Lease liabilities 21,196 22,792 22,623
Less: cash and cash equivalents (17,770) (26,273) (15,332)
Net Debt 47,826 49,310 41,291
---------------------------------- -------------- -------------- ----------
We have a GBP100m Revolving Credit Facility ("RCF") provided by
a four-bank group consisting of HSBC, Royal Bank of Scotland, Bank
of Ireland and Clydesdale Bank. The facility had an initial
maturity date of 30 June 2025, but subsequent to the period end we
have executed an option which was approved by the banks to see this
extended by 12 months to 30 June 2026. The facility also benefits
from a GBP50m Accordion Facility. The RCF has a borrowing cost at
the Group's current leverage levels of 180 basis points over
SONIA.
Dividend
We have a dividend policy to a maximum pay-out of 50% of
adjusted diluted earnings per share. Given the high recurring
revenue nature of the Group, the level of operating cash that we
have delivered and low level of indebtedness within the Group we
have applied the maximum pay-out ratio in our assessment of the
appropriate level of interim dividend to be made. Therefore, we
will pay an interim dividend of 1.94p per share (H1 2022: 2.42p) on
27 January 2023 to shareholders on the register on 6 January 2023,
with an ex-dividend date of 5 January 2023. This interim dividend
represents a pay-out ratio of 37% (H1 2022: 37%) of the adjusted
diluted earnings per share for the period.
Current trading and outlook
The second half of the year has started well, with underlying
trading for the first two months in line with expectations. We
expect to see an increase in revenue in the second half as the full
extent of energy price increases passed on to customers flows into
our financial reporting. While this will not affect profitability
expectations for the year end, it will see revenues being ahead of
the Board's original expectations.
We believe the diversity and limited concentration of our
customer base, high level of recurring revenue, and strong cash
flow generation should shelter us from the worst of the expected
economic pressures as the UK enters a recessionary period. The
critical nature of the infrastructure and digital services we
provide in a growing cloud market will allow us to support
businesses well into the future.
The steps we have taken to strengthen our capabilities and
offering, increase effectiveness of our sales activities and our
clear focus on execution gives us a stronger foundation to
accelerate growth. Our stronger customer retention levels provide
an improved backdrop as we see pipeline growth from our wider
product offering, and the Board remains confident in the outlook
for the long-term prospects for the Group.
Reece Donovan
Chief Executive Officer
6 December 2022
Consolidated Interim Statement of Comprehensive Income
Six months ended 30 September 2022
Unaudited Unaudited Audited
6 months 6 months Year to
to 30 September to 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------------- ----------------- ----------
Revenue 52,557 51,930 103,018
Cost of sales (21,355) (20,591) (41,712)
------------------------------------------- ----------------- ----------------- ----------
Gross profit 31,202 31,339 61,306
Administrative expenses (25,047) (24,401) (47,076)
Operating profit 6,155 6,938 14,230
Analysed as:
Earnings before interest, tax,
depreciation, amortisation, acquisition
costs and share based payments 17,794 19,568 38,009
Share based payments (418) (620) (480)
Acquisition costs 4 (252) (136) (315)
Depreciation 9 (7,980) (8,227) (16,296)
Amortisation - acquired intangible
assets 8 (1,748) (2,312) (4,044)
Amortisation - other intangible
assets 8 (1,241) (1,335) (2,644)
------------------------------------------- ----------------- ----------------- ----------
Finance costs 5 (1,213) (902) (2,062)
------------------------------------------- ----------------- ----------------- ----------
Profit before taxation 4,942 6,036 12,168
Taxation 6 (1,119) (1,224) (2,772)
------------------------------------------- ----------------- ----------------- ----------
Profit for the period/year 3,823 4,812 9,396
Other comprehensive income
Currency translation differences 166 59 30
------------------------------------------- ----------------- ----------------- ----------
Other comprehensive income for
the period/year 166 59 30
------------------------------------------- ----------------- ----------------- ----------
Total comprehensive income for
the period/year attributable to
equity holders of the parent 3,989 4,871 9,426
Basic and diluted earnings per
share
Basic earnings per share 3 3.5p 4.4 p 8.6 p
Diluted earnings per share 3 3.4p 4.3 p 8.4 p
------------------------------------------- ----------------- ----------------- ----------
Consolidated Interim Statement of Financial Position
As at 30 September 2022
Unaudited Unaudited Audited
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
--------------------------------------- ----- -------------- -------------- ----------
ASSETS
Non-current assets
Intangible assets - goodwill 8 99,710 86,479 86,479
Intangible assets - other 8 15,153 15,052 12,852
Trade and other receivables 597 194 531
Property, plant and equipment 9 67,790 73,494 70,893
Deferred tax asset - 721 -
183,250 175,940 170,755
Current assets
Cash and cash equivalents 17,770 26,273 15,332
Trade and other receivables 23,708 23,161 20,592
Current tax asset 789 - 1,658
42,267 49,434 37,582
Total assets 225,517 225,374 208,337
LIABILITIES
Non-current liabilities
Trade and other payables (2,978) (1,882) (2,643)
Non-current borrowings 11 (62,030) (19,420) (53,063)
Provisions for other liabilities
and charges (2,626) (2,335) (2,438)
Deferred tax liability (2,694) - (1,510)
--------------------------------------- ----- -------------- -------------- ----------
(70,328) (23,637) (59,654)
Current liabilities
Contingent consideration due on
acquisitions 7 (4,000) - -
Trade and other payables (28,282) (28,392) (26,232)
Current tax liabilities - (51) -
Current borrowings 11 (3,566) (56,163) (3,560)
(35,848) (84,606) (29,792)
Total liabilities (106,176) (108,243) (89,446)
Net assets 119,341 117,131 118,891
--------------------------------------- ----- -------------- -------------- ----------
EQUITY
Share capital 1,101 1,097 1,101
Own shares (70) (70) (70)
Capital redemption reserve 1,200 1,200 1,200
Share premium 22,495 22,495 22,495
Merger reserve 4,983 4,983 4,983
Foreign currency translation reserve 152 15 (14)
Retained earnings 89,480 87,411 89,196
--------------------------------------- ----- -------------- -------------- ----------
Total equity 119,341 117,131 118,891
--------------------------------------- ----- -------------- -------------- ----------
Consolidated Interim Statement of Cash Flows
Six months ended 30 September 2022
Unaudited Unaudited Audited
6 months 6 months Year to
to 30 September to 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------------- ----------------- ----------
Profit before tax 4,942 6,036 12,168
Finance costs - net 1,213 902 2,062
Depreciation 7,980 8,227 16,296
Amortisation 2,989 3,647 6,688
Share based payments 418 620 480
Professional fees on acquisition 232 - -
Gain on disposal of property - - (338)
Movement in trade receivables (1,579) 126 3,257
Movement in trade payables (1,722) (1,710) (2,702)
Cash flow from operations 14,473 17,848 37,911
Taxation paid (6) (1,434) (2,455)
----------------- ----------------- ----------
Net cash flow from operating activities 14,467 16,414 35,456
Cash flow from investing activities
Purchase of property, plant and equipment (3,130) (4,673) (9,492)
Proceeds received from disposal of
property, plant and equipment - - 700
Development costs (627) (601) (1,352)
Purchase of intangible assets (31) (1) (91)
Payment for acquisition of subsidiary (9,963) - -
net of cash acquired
Net cash used in investing activities (13,751) (5,275) (10,235)
Cash flow from financing activities
Issue of shares - - 4
Drawdown of bank loans 10,400 - -
Repayment of bank loans - - (4,410)
Repayment of lease liabilities (2,509) (2,466) (18,840)
Repayment of debt acquired on acquisition (1,508) - -
Finance costs paid (704) (506) (1,100)
Refinancing costs paid - - (990)
Dividends paid (3,957) (4,932) (7,591)
Net cash generated from/(used in)
financing activities 1,722 (7,904) (32,927)
Net increase in cash and cash equivalents 2,438 3,235 (7,706)
Cash and cash equivalents at the
beginning of the period 15,332 23,038 23,038
----------------- ----------------- ----------
Cash and cash equivalents at the
end of the period 17,770 26,273 15,332
================= ================= ==========
Consolidated Interim Statement of Changes in Equity
Six months ended 30 September 2022
Foreign
Capital Share currency
Share Own redemption premium Merger translation Retained
capital shares reserve account reserve reserve earnings Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance at
1 April 2021 1,097 (70) 1,200 22,495 4,983 (44) 86,911 116,572
Profit in the
period - - - - - - 4,812 4,812
Currency
translation
differences - - - - - 59 - 59
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Total
comprehensive
income - - - - - 59 4,812 4,871
Dividends - - - - - - (4,932) (4,932)
Share based
payments - - - - - - 620 620
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Total
transactions
with owners - - - - - - (4,312) (4,312)
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Balance at 30
September
2021
(unaudited) 1,097 (70) 1,200 22,495 4,983 15 87,411 117,131
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Profit in the
period - - - - - - 4,584 4,584
Currency
translation
differences - - - - - (29) - (29)
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Total
comprehensive
income - - - - - (29) 4,584 4,555
Dividends - - - - - - (2,659) (2,659)
Share based
payments - - - - - - (140) (140)
Issue of share
capital 4 - - - - - - 4
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Total
transactions
with owners 4 - - - - - (2,799) (2,795)
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Balance at
31 March 2022
(audited) 1,101 (70) 1,200 22,495 4,983 (14) 89,196 118,891
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Profit in the
period - - - - - - 3,823 3,823
Currency
translation
differences - - - - - 166 - 166
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Total
comprehensive
income - - - - - 166 3,823 3,989
Dividends - - - - - - (3,957) (3,957)
Share based
payments - - - - - - 418 418
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Total
transactions
with owners - - - - - - (3,539) (3,539)
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Balance at 30
September
2022
(unaudited) 1,101 (70) 1,200 22,495 4,983 152 89,480 119,341
---------------- ---------- --------- ------------ --------------- ---------- ------------ ----------- --------
Notes to the Half Yearly Financial Information
Six months ended 30 September 2022
1. Basis of preparation
The half yearly financial information does not constitute
statutory financial statements as defined in section 434 of the
Companies Act 2006. The statutory accounts for the year ended 31
March 2022 have been delivered to the Registrar of Companies and
included an independent auditor's report, which was unqualified and
did not contain a statement under section 493 of the Companies Act
2006.
The half yearly financial information has been prepared using
the same accounting policies and estimation techniques as will be
adopted in the Group financial statements for the year ending 31
March 2023. The Group financial statements for the year ended 31
March 2022 were prepared in accordance with the international
accounting standards in conformity with the requirements of the
Companies Act 2006. These half yearly financial statements have
been prepared on a consistent basis and format with the Group
financial statements for the year ended 31 March 2022. The
provisions of IAS 34 'Interim Financial Reporting' have not been
applied in full.
Going concern
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Chief Executive's Statement.
At the period end, the Group has access to a GBP100m multi
option revolving credit facility that matures on 30 June 2025,
which also benefits from a GBP50m Accordion Facility. On 17
November 2022, the Group enacted the extension option which was
approved by the lenders. This extends the termination date of the
RCF facility to 30 June 2026. The directors are of the opinion that
the Group can operate within the current facility and comply with
its banking covenants.
At the end of the half year, the Group had net debt of GBP47.8m
(H1 2022: GBP49.3m). The Board is comfortable with the net debt
position given the strong cash generation and considerable
financial resources of the Group, together with long -- term
contracts with a number of customers and suppliers across different
geographic areas and industries. As a consequence, the directors
believe that the Group is well placed to manage its business
risks.
After making enquiries, the directors have a reasonable
expectation that the Group will be able to meet its financial
obligations and has adequate resources to continue in operational
existence for the foreseeable future. For this reason, they
continue to adopt the going concern basis in preparing the
financial statements.
2. Operating segments
Revenue by Operating Segment
Year
6 months 6 months to 31
to 30 September to 30 September March
2022 2021 2022
GBP'000 GBP'000 GBP'000
---------------- ----------------- ----------------- --------
Easyspace 5,810 5,782 11,782
Cloud Services 46,747 46,148 91,236
----------------- ----------------- --------
52,557 51,930 103,018
----------------- ----------------- ----------------- --------
Cloud Services revenue during the period/year can be further
disaggregated as follows:
Year
6 months 6 months to 31
to 30 September to 30 September March
2022 2021 2022
GBP'000 GBP'000 GBP'000
----------------------------- ----------------- ----------------- --------
Cloud managed
services 29,220 28,037 55,745
Self-managed infrastructure 14,308 14,408 28,363
Non-recurring
revenue 3,219 3,703 7,128
----------------- ----------------- --------
46,747 46,148 91,236
------------------------------ ----------------- ----------------- --------
Geographical Information
In presenting the consolidated information on a geographical
basis, revenue is based on the geographical location of customers.
The United Kingdom is the place of domicile of the parent company,
iomart Group plc. No individual country other than the United
Kingdom contributes a material amount of revenue therefore revenue
from outside the United Kingdom has been shown as from Rest of the
World.
Analysis of Revenue by Destination
6 months
to 30 September 6 months to 30 September
2022 2021 Year to 31 March 2022
GBP'000 GBP'000 GBP'000
------------------- ----------------- ------------------------- ----------------------
United Kingdom 45,147 44,202 88,692
Rest of the World 7,410 7,728 14,326
----------------- ------------------------- ----------------------
52,557 51,930 103,018
-------------------- ----------------- ------------------------- ----------------------
Recurring and Non-Recurring Revenue
The amount of recurring and non-recurring revenue recognised
during the year can be summarised as follows:
6 months
to 30 September 6 months to 30 September
2022 2021 Year to 31 March 2022
GBP'000 GBP'000 GBP'000
------------------ ----------------- ------------------------- ----------------------
Recurring - over
time 49,338 48,227 95,890
Non-recurring
- point in time 3,219 3,703 7,128
----------------- ------------------------- ----------------------
52,557 51,930 103,018
------------------- ----------------- ------------------------- ----------------------
Profit by Operating Segment
6 months to 30 September 6 months to 30 September
2022 2021 Year to 31 March 2022
EBITDA Share based EBITDA Share based EBITDA Share based
before payments, before payments, before payments,
share acquisition share acquisition Operating share acquisition
based costs, Operating based costs, profit/(loss) based costs, Operating
payments depreciation profit/(loss) payments depreciation payments depreciation profit/(loss)
and & and & and &
acquisition amortisation acquisition amortisation acquisition amortisation
costs costs costs
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------- -------------- --------------- ------------- -------------- --------------- ------------- -------------- ---------------
Easyspace 2,876 (177) 2,699 2,647 (453) 2,194 5,674 (665) 5,009
Cloud Services 17,276 (10,792) 6,484 18,854 (11,421) 7,433 36,641 (22,319) 14,322
Group
overheads (2,358) - (2,358) (1,933) - (1,933) (4,306) - (4,306)
Share based
payments - (418) (418) - (620) (620) - (315) (315)
Acquisition
costs - (252) (252) - (136) (136) - (480) (480)
--------------- ------------- -------------- --------------- ------------- -------------- --------------- ------------- -------------- ---------------
Profit before
tax and
interest 17,794 (11,639) 6,155 19,568 (12,630) 6,938 38,009 (23,779) 14,230
---------------
Gain on
revaluation
of contingent
consideration - - -
Group interest
and tax (2,332) (2,126) (4,834)
--------------- ------------- -------------- --------------- ------------- -------------- --------------- ------------- -------------- ---------------
Profit for
the
period/year 3,823 4,812 9,396
--------------- ------------- -------------- --------------- ------------- -------------- --------------- ------------- -------------- ---------------
Group overheads, share based payments, acquisition costs,
interest and tax are not allocated to segments.
3. 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
shares 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 adjusting for the
dilutive potential ordinary shares relating to share options. The
calculations of earnings per share are based on the following
results:
6 months 6 months Year
to 30 September to 30September to 31
2022 2021 March
GBP'000 GBP'000 2022
GBP'000
----------------------------------------------- ----------------- --------------- ---------
Profit for the period/year and basic
earnings attributed to ordinary shareholders 3,823 4,812 9,396
No No No
Weighted average number of ordinary
shares: 000 000 000
Called up, allotted and fully paid at
start of period 110,065 109,671 109,671
Shares held by Employee Benefit Trust (141) (141) (141)
Issued share capital in the period 4 29 181
Weighted average number of ordinary
shares - basic 109,928 109,559 109,711
Dilutive impact of share options 2,686 3,086 2,210
Weighted average number of ordinary
shares - diluted 112,614 112,645 111,921
------------------------------------------------- ----------------- --------------- -----------
Basic earnings per share 3.5 p 4.4 p 8.6 p
Diluted earnings per share 3.4 p 4.3 p 8.4 p
------------------------------------------------- ----------------- --------------- -----------
iomart Group plc assess the performance of the Group by
adjusting earnings per share, calculated in accordance with IAS 33,
to exclude certain non-trading items. The calculation of the
earnings per ordinary share on a basis which excludes such items is
based on the following adjusted earnings:
Adjusted earnings per share
6 months 6 months Year
to 30 September to 30 to 31
2022 September March
GBP'000 2021 2022
GBP'000 GBP'000
------------ -------------------------------------------------------- ----------- ---------
Profit for the period/year and basic
earnings attributed to ordinary shareholders 3,823 4,812 9,396
- Amortisation of acquired intangible
assets 1,748 2,312 4,044
- Acquisition costs 252 136 315
- Share based payments 418 620 480
- Accelerated write off of arrangement
fee on bank facility - - 102
- Tax impact of adjusted items (412) (557) (879)
-------------------------------------------------------------- ------- ----------- -----------
Adjusted profit for the period/year
and adjusted basic earnings attributed
to ordinary shareholders 5,829 7,323 13,458
12.2
Adjusted basic earnings per share 5.3 p 6.7 p p
Adjusted diluted earnings per share 5.2 p 6.5 p 12.0 p
-------------------------------------------------------------- ------- ----------- -----------
4. Acquisition costs
Year
6 months 6 months to 31
to 30 September to 30 September March
2022 2021 2022
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------------- ----------------- --------
Professional fees (232) - -
Non-recurring acquisition integration
costs (20) (136) (315)
----------------- ----------------- --------
(252) (136) (315)
---------------------------------------- ----------------- ----------------- --------
5. Finance costs
Year
6 months 6 months to 31
to 30 September to 30 September March
2022 2021 2022
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------------- ----------------- --------
Bank loans (855) (526) (1,222)
Accelerated write off of arrangement
fee on bank facility - - (102)
Lease finance
costs (304) (332) (646)
Other interest
charges (54) (44) (92)
----------------- ----------------- --------
(1,213) (902) (2,062)
---------------------------------------- ----------------- ----------------- --------
6. Taxation
6 months 6 months Year to 31
to 30 September to 30 September March
2022 2021 2022
GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------------- ----------------- -----------
Corporation Tax:
Tax charge for the period/year (1,050) (1,802) (1,333)
Adjustment relating to prior periods - - 209
--------------------------------------------- ----------------- ----------------- -----------
Total current taxation charge (1,050) (1,802) (1,124)
Deferred Tax:
--------------------------------------------- ----------------- ----------------- -----------
Origination and reversal of temporary
differences (58) 379 (1,517)
Adjustment relating to prior periods - - (137)
Effect of different statutory tax
rates of overseas jurisdictions (11) 20 (4)
Effect of changes in tax rates - 179 10
--------------------------------------------- ----------------- ----------------- -----------
Total deferred taxation (charge)/credit (69) 578 (1,648)
Total taxation charge for the period/year (1,119) (1,224) (2,772)
--------------------------------------------- ----------------- ----------------- -----------
Deferred tax assets and liabilities at 30 September 2022 have
been calculated based on the rate enacted at the balance sheet date
of 25% (2021: 19%).
7. Acquisitions
Concepta Capital Limited
On 15 August 2022, the Group acquired the entire issued share
capital of Concepta Capital Limited ("Concepta"). Concepta is
principally a holding company which owns 100% of the issued share
capital of Oriium Consulting Limited ("ORIIUM"), PAV I.T. Services
Limited ("Pavilion IT"), P2 Technologies Limited ("P2") Datanics
Limited ("Datanics") and Add3 Limited ("Add3").
ORIIUM is a channel only IT service provider specialising in
data management solutions, and Pavilion IT is a provider of cloud
and hybrid infrastructure solutions and support services.
During the current period, the Group incurred GBP233,000 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 investing activities for the period ended 30
September 2022.
The following table summarises the consideration to acquire
Concepta, the amounts of identified assets acquired, and
liabilities assumed at the acquisition date, which are
provisional.
GBP'000
----------------------------------------------------------- ----------
Recognised amounts of net assets acquired and liabilities
assumed:
Cash and cash equivalents 1,017
Trade and other receivables 1,603
Property, plant and equipment 1,203
Intangible assets 4,621
Borrowings (1,742)
Trade and other payables (4,323)
Corporation tax asset 77
Deferred tax liability (1,139)
----------------------------------------------------------- ----------
Identifiable net assets 1,317
Goodwill 13,231
----------------------------------------------------------- ----------
Total consideration 14,548
----------------------------------------------------------- ----------
Satisfied by:
Cash - paid on acquisition 10,548
Contingent consideration - payable 4,000
Total consideration to be transferred 14,548
----------------------------------------------------------- ----------
The acquisition of Concepta was completed using a "completion
accounts" mechanism, on a no cash, no debt, and normalised working
capital basis. An initial payment of GBP10,548,000 was made at
completion. This initial payment was net of a GBP422,000 inflow
from the vendors being an estimate of the adjustment needed for the
completion account mechanism. This value will be subject to a final
amendment in due course when completion accounts are prepared. At
the date of acquisition, Concepta had bank debt of GBP1,508,000
which was taken on by iomart and settled as part of the completion
process.
The share purchase agreement (SPA) included a provision
requiring the Company to pay the former shareholders of Concepta an
additional amount contingent on the level of profitability
delivered by Concepta in the twelve months ended 30 June 2023 ("the
earn-out payment").
The potential undiscounted amount of the earn-out payment that
the Company could be required to pay is between GBPnil and
GBP4,000,000. The amount of contingent consideration payable, which
was recognised as of the acquisition date, was GBP4,000,000. The
level of profitability for the earn-out payment was estimated based
on management's estimates of the profitability of Concepta for the
twelve months ended June 2023, taking into account actual
performance to date.
The goodwill arising on the acquisition of Concepta is
attributable to the premium payable for a pre-existing, well
positioned business and the specialised, industry specific
knowledge, including the indirect channel, of the management and
staff, 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 names "ORIIUM", "Pavilion IT" and "P2" are not
actively advertised or promoted. The Concepta group's standard
terms and conditions restrict the ability of the Concepta Group 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
GBP4,462,000. 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 13.06% was used for
the valuation. Customer relationships are being amortised over an
estimated useful life of 8 years.
The Concepta group earned revenue of GBP1,286,000 and generated
profits, before allocation of group overheads, share based payments
and tax, of GBP121,000 in the period since acquisition.
8. Intangible assets
Domain
Acquired Acquired names
customer Development beneficial & IP
Goodwill relationships costs Software contract addresses Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- --------- ---------------- ------------ --------- ------------ ----------- ----------
Cost:
At 1 April 2021 86,479 57,263 11,904 10,827 86 336 166,895
Additions in the
period - - 601 1 - - 602
Currency translation
differences - 18 - 13 - - 31
--------- ---------------- ------------ --------- ------------ ----------- ----------
At 30 September
2021 86,479 57,281 12,505 10,841 86 336 167,528
Additions in the
period - - 751 90 - - 841
Currency translation
differences - 18 - 14 - - 32
--------- ---------------- ------------ --------- ------------ ----------- ----------
At 31 March 2022 86,479 57,299 13,256 10,945 86 336 168,401
Acquired on acquisition
of subsidiary 13,231 4,462 159 - - - 17,852
Additions in the
period - - 627 31 - - 658
Currency translation
differences - 137 - 105 - - 242
At 30 September
2022 99,710 61,898 14,042 11,081 86 336 187,153
------------------------- --------- ---------------- ------------ --------- ------------ ----------- ----------
Accumulated
amortisation:
At 1 April 2021 - (45,316) (9,819) (6,829) (62) (289) (62,315)
Charge for the
period - (2,312) (667) (660) (4) (4) (3,647)
Currency translation
differences - (18) - (17) - - (35)
At 30 September
2021 - (47,646) (10,486) (7,506) (66) (293) (65,997)
Charge for the
period - (1,732) (680) (622) (3) (4) (3,041)
Currency translation
differences - (18) - (14) - - (32)
At 31 March 2022 - (49,396) (11,166) (8,142) (69) (297) (69,070)
Charge for the
period - (1,748) (655) (578) (4) (4) (2,989)
Currency translation
differences - (138) - (93) - - (231)
At 30 September
2022 - (51,282) (11,821) (8,813) (73) (301) (72,290)
------------------------- --------- ---------------- ------------ --------- ------------ ----------- ----------
Carrying amount:
At 30 September
2022 99,710 10,616 2,221 2,268 13 35 114,863
------------------------- --------- ---------------- ------------ --------- ------------ ----------- ----------
At 31 March 2022 86,479 7,903 2,090 2,803 17 39 99,331
At 30 September
2021 86,479 9,635 2,019 3,335 20 43 101,531
------------------------- --------- ---------------- ------------ --------- ------------ ----------- ----------
Note 12 provides the movements in the period relating to IFRS 16
right-of-use assets included in the above table.
9. Property, plant and equipment
Leasehold
Freehold property Datacentre Computer Office Motor
property and improve-ments equipment equipment equipment vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ---------- ------------------- ----------- ----------- ----------- ---------- ----------
Cost:
At 1 April 2021 8,731 38,694 28,079 108,223 2,811 23 186,561
Additions in
the period - 307 1,321 3,250 37 - 4,915
Disposals in
the period - (201) - (48) (13) - (262)
Currency
translation
differences - 48 - 119 - - 167
At 30 September
2021 8,731 38,848 29,400 111,544 2,835 23 191,381
Additions in
the period - 1,527 1,569 2,657 6 - 5,759
Disposals in
the period (495) (2) (445) - (1) - (943)
Currency
translation
differences - 51 - 67 - - 118
At 31 March
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 period - 481 468 2,456 40 - 3,445
Currency
translation
differences - 350 - 861 - - 1,211
At 30 September
2022 8,236 41,555 31,864 117,586 2,910 23 202,174
-------------------- ---------- ------------------- ----------- ----------- ----------- ---------- ----------
Accumulated
depreciation:
At 1 April 2021 (937) (11,675) (17,223) (77,547) (2,150) (17) (109,549)
Charge for the
period (128) (2,218) (616) (5,160) (101) (4) (8,227)
Disposals in
the period - - - 15 - - 15
Currency
translation
differences - (28) - (98) - - (126)
At 30 September
2021 (1,065) (13,921) (17,839) (82,790) (2,251) (21) (117,887)
Charge for the
period (127) (2,263) (647) (4,941) (89) (2) (8,069)
Disposals in
the period 138 - 445 - - - 583
Currency
translation
differences - (30) - (19) - - (49)
At 31 March
2022 (1,054) (16,214) (18,041) (87,750) (2,340) (23) (125,422)
Charge for the
period (121) (2,252) (723) (4,796) (88) - (7,980)
Currency
translation
differences - (260) - (722) - - (982)
At 30 September
2022 (1,175) (18,726) (18,764) (93,268) (2,428) (23) (134,384)
-------------------- ---------- ------------------- ----------- ----------- ----------- ---------- ----------
Carrying amount:
At 30 September
2022 7,061 22,829 13,100 24,318 482 - 67,790
-------------------- ---------- ------------------- ----------- ----------- ----------- ---------- ----------
At 31 March 2022 7,182 24,210 12,483 26,518 500 - 70,893
At 30 September
2021 7,666 24,927 11,561 28,754 584 2 73,494
-------------------- ---------- ------------------- ----------- ----------- ----------- ---------- ----------
Note 12 provides the movements in the period relating to IFRS 16
right-of-use assets included in the above table.
10. Analysis of change in net debt
Cash and
cash equivalents Bank Total net
GBP'000 loans Lease liabilities debt
GBP'000 GBP'000 GBP'000
--------------------------------- ------------------ --------- ----------------- ---------
At 1 April 2021 23,038 (52,791) (24,867) (54,620)
Additions to lease liabilities - - (33) (33)
Disposal of lease liabilities - - 179 179
Currency translation - - (22) (22)
Cash and cash equivalents
cash inflow 3,235 - - 3,235
Lease liabilities cash outflow - - 1,951 1,951
---------------------------------- ------------------ --------- ----------------- ---------
At 30 September 2021 26,273 (52,791) (22,792) (49,310)
Additions to lease liabilities - - (1,458) (1,458)
Settlement of commitment
fee on loan - (49) - (49)
Repayment of bank loans - 18,840 - 18,840
Currency translation - - (27) (27)
Cash and cash equivalents
cash outflow (10,941) - - (10,941)
Lease liabilities cash outflow - - 1,654 1,654
---------------------------------- ------------------ --------- ----------------- ---------
At 31 March 2022 15,332 (34,000) (22,623) (41,291)
Acquired on acquisition
of subsidiary - - (235) (235)
Additions to lease liabilities - - (269) (269)
New bank loans - (10,400) - (10,400)
Currency translation - - (104) (104)
Cash and cash equivalents
cash inflow 2,438 - - 2,438
Lease liabilities cash outflow - - 2,035 2,035
At 30 September 2022 17,770 (44,400) (21,196) (47,826)
---------------------------------- ------------------ --------- ----------------- ---------
11. Borrowings
30 30 31
September September March
2022 2021 2022
GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- --------
Current:
Lease liabilities (note 12) (3,566) (3,372) (3,560)
Bank loans - (52,791) -
Total current borrowings (3,566) (56,163) (3,560)
Non-current:
Lease liabilities (note 12) (17,630) (19,420) (19,063)
Bank loans (44,400) - (34,000)
Total non-current borrowings (62,030) (19,420) (53,063)
Total borrowings (65,596) (75,583) (56,623)
--------------------------------- ---------- ---------- --------
At 30 September 2022, the Group has a GBP100m multi option
revolving credit facility which has an initial maturity date of 30
June 2025, with a 12 month extension option and benefits from a
GBP50m Accordion facility. 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 five-year strategic plan. Each draw
down made under this facility can be for either 3 or 6 months and
can either be repaid or continued at the end of the period. During
the year, the Group made a drawdown of GBP10.4m (H1 2022:
GBPnil).
On 17 November 2022, the Group enacted the extension option
which was approved by the lenders. This extends the termination
date of the RCF facility to 30 June 2026.
Details of the Group's lease liabilities are included in note
12.
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:
Right-of-use assets
Leasehold Datacentre Software Total
property equipment
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------------- ---------- ----------- --------- ---------
Cost at 1 April 2021 18,859 4,222 950 24,031
Additions - 33 - 33
Disposals - (179) - (179)
Depreciation charge (1,024) (703) - (1,727)
Amortisation charge - - (143) (143)
---------------------------------------- ---------- ----------- --------- ---------
Net book value at 30 September 2021 17,835 3,373 807 22,015
Additions 1,412 46 - 1,458
Currency translation differences - 36 - 36
Depreciation charge (1,060) (646) - (1,706)
Amortisation charge - - (142) (142)
---------------------------------------- ---------- ----------- --------- ---------
Net book value at 31 March 2022 18,187 2,809 665 21,661
Acquired on acquisition of subsidiary 123 112 - 235
Additions - 269 - 269
Currency translation differences - 106 - 106
Depreciation charge (1,052) (740) - (1,792)
Amortisation charge - - (143) (143)
Net book value at 30 September 2022 17,258 2,556 522 20,336
The right-of-use assets in relation to leasehold property and
datacentre equipment are disclosed as non-current assets and are
disclosed within property, plant and equipment at 30 September 2022
(note 9). The right-of-use assets in relation to software are
disclosed as non-current assets and are disclosed within
intangibles at 30 September 2022 (note 8).
Lease liabilities
Lease liabilities for right-of-use assets are presented in the
balance sheet within borrowings as follows:
30 September 30 September 31 March
2022 2021 2022
GBP'000 GBP'000 GBP'000
Lease liabilities (current) (note
11) (3,566) (3,372) (3,560)
Lease liabilities (non-current) (note
11) (17,630) (19,420) (19,063)
Total lease liabilities (21,196) (22,792) (22,623)
The maturity analysis of undiscounted lease liabilities is shown
in the table below:
30 September 30 September 31 March
2022 2021 2022
Amounts payable under leases: GBP'000 GBP'000 GBP'000
Within one year (4,252) (3,945) (4,127)
Between two to five years (9,330) (10,166) (10,244)
After more than five years (10,685) (12,193) (11,585)
(24,267) (26,304) (25,956)
Add: unearned interest 3,071 3,512 3,333
Total lease liabilities (21,196) (22,792) (22,623)
13. Availability of half yearly reports
The Company's Interim Report for the six months ended 30
September 2022 will shortly be available to view on the Company's
website (www.iomart.com).
INDEPENDENT REVIEW REPORT TO iomart Group plc
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2022 which comprises the Consolidated
Interim Statement of Comprehensive Income, the Consolidated Interim
Statement of Financial Position, the Consolidated Interim Statement
of Cash Flows, the Consolidated Interim Statement of Changes in
Equity and related notes 1 to 13. We have read the other
information contained in the half-yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the AIM Rules of the London Stock Exchange.
As disclosed in note 1, the annual financial statements of the
group will be prepared in accordance with United Kingdom adopted
international accounting standards. The condensed set of financial
statements included in this half-yearly financial report have been
prepared in accordance with the accounting policies the group
intends to use in preparing its next annual financial
statements.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the set of financial statements in the half-yearly financial report
based on our review.
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 "Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity" issued by the Financial Reporting Council for use in
the United Kingdom. A review of interim financial information
consists of making inquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2022 is not prepared, in all material respects, in
accordance with the accounting policies the group intends to use in
preparing its next annual financial statements and the AIM Rules of
the London Stock Exchange.
Use of our report
This report is made solely to the company in accordance with
International Standard on Review Engagements (UK and Ireland) 2410
"Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. Our work has been undertaken so that we might
state to the company those matters we are required to state to it
in an independent review report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company, for our review
work, for this report, or for the conclusions we have formed.
Deloitte LLP
Statutory Auditor
Glasgow, United Kingdom
6 December 2022
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END
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