TIDMIOM
RNS Number : 6418V
Iomart Group PLC
05 December 2023
5 December 2023
iomart Group plc
("iomart" or the "Group" or the "Company")
Half Yearly Results
Continued momentum in the execution of its growth strategy
iomart (AIM: IOM), the cloud computing company, is pleased to
report its consolidated half yearly results for the six months
ended 30 September 2023 (H1 2024).
FINANCIAL HIGHLIGHTS
H1 2024 H1 2023 Change
Revenue GBP62.0m GBP52.6m +18%
--------- --------- -------
% of recurring revenue(1) 94% 94% -
--------- --------- -------
Adjusted EBITDA(2) GBP18.6m GBP17.8m +5%
--------- --------- -------
Adjusted profit before tax(3) GBP7.6m GBP7.4m +3%
--------- --------- -------
Profit before tax GBP4.4m GBP4.9m -10%
--------- --------- -------
Adjusted diluted EPS(4) 5.2p 5.2p -
--------- --------- -------
Basic EPS 3.1p 3.5p -11%
--------- --------- -------
Cash generation from operations GBP16.8m GBP14.5m +16%
--------- --------- -------
Interim dividend per share 1.94p 1.94p -
--------- --------- -------
-- Revenue grew 18%, with strong levels of recurring revenues maintained (94%(1) of Group revenues).
The Concepta and Extrinsica acquisitions provided GBP6.0m of additional revenue in the period
-- Cloud managed services revenue, the largest component of the Group, increased strongly, by
27% to GBP37.0m (H1 2023: GBP29.2m), from a combination of modest organic growth, price adjustments
from last year's energy cost increases, plus approximately GBP4.3m contribution from the latest
two acquisitions
-- Group EBITDA margin performance of 30.0% is a reduction from H1 2023 of 33.8% but it is slightly
ahead of H2 2023 of 29.1%. This trend in margin performance reflects the change in revenue
mix and specific timing of inflationary price adjustments during the last financial year
-- Our energy hedging strategy is giving the Company and customers good cost certainty
-- GBP0.8m higher interest expense in the period, due to rise in bank interest rates, means adjusted
profit before tax in the period of GBP7.6m showed a more modest 3% growth
-- Cash conversion ratio(6) of 90% is higher than the prior period (H1 2023: 81%) which had included
the timing impact of some vendor payments overlapping period ends
-- Net debt of GBP48.0m (31 March 2023: GBP39.8m), comfortable at 1.3 times annualised EBITDA(5)
OPERATIONAL HIGHLIGHTS
-- Focus on sales and marketing resulted in improving order bookings and pipeline development
-- Acquisitions of Concepta and Extrinsica have enhanced the Group's routes to market and depth
of skills, improving iomart's overall customer proposition
-- Acquisition of Accesspoint Technologies post period end, providing deep legal industry expertise
and a highly capable team with a strong reputation
-- Appointment of experienced CTO, providing increased focus on our technical platforms, product
management, infrastructure and networks
-- Move of head office to a modern city centre location in Glasgow, providing greater ability
for the retention and attraction of talented team members
-- Committed to solar panel installation on our Maidenhead data centre which will provide c.300kw
peak power yield being around 15% of the total average site power use
-- Two new independent non-executive Directors appointed to the Board, bringing relevant commercial
and industry experience
OUTLOOK
-- Ongoing sales channel and services initiatives combined with contributions from recent acquisitions
will allow our full year results to demonstrate continued year on year momentum
-- Current trading is in line with the Board's expectations
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
GBP0.5m exceptional non-recurring charge recorded within
administration costs related to the change in CEO during the month
of September.
Lucy Dimes, CEO commented,
"I'm pleased to report on another period of progress at iomart.
We continue to build on our existing strong foundations as a
well-established and trusted service provider within the private
cloud space, at the same time as extending our service offering
across the wider and higher growth hybrid cloud market.
We see great opportunity ahead. For the UK to thrive as an
economic powerhouse, its businesses will need to increase
efficiency, operate at pace and adapt - leveraging cloud, data and
digital technologies. Our blend of both IT and connectivity skills
combined with our secure, scalable, resilient cloud and network
infrastructure uniquely positions us to support the ambitions of
our customer base, giving us confidence in our ability to
participate successfully in the growing cloud sector."
Notes:
(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. % of recurring revenue
is defined as Recurring Revenue (as disclosed in note 2) / Revenue
(as disclosed in the consolidated statement of comprehensive
income).
(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, 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 profit before tax, as
disclosed on page 7, is profit before tax, amortisation charges on
acquired intangible assets, share based payment charges,
acquisition costs and exceptional non-recurring 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, exceptional non-recurring costs
and the taxation effect of these.
(5) Annualised EBITDA is the last 12 months of EBITDA for the
period ended 30 September 2023.
(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 2023 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
Lucy Dimes, Chief Executive Officer
Scott Cunningham, Chief Financial Officer
Investec Bank PLC (Nominated Adviser and Tel: 020 7597
Broker) 4000
Patrick Robb, Virginia Bull, Nick Prowting
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 480-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
I am pleased to be presenting our half year results for the
first time as iomart's CEO. We have continued to make positive
progress against our strategy to build on our existing strong
foundations as a well-established and trusted service provider
within the private cloud space, at the same time as extending our
service offering across the wider and higher growth hybrid cloud
market.
The results demonstrate an encouraging level of recurring
revenues and successful execution of our M&A strategy,
delivering revenues up 18% on the prior period to GBP62.0m, and an
adjusted EBITDA of GBP18.6m. We achieved continued strong cash
flow, which even after GBP9.3m of M&A related cash outflows,
sees us close the period with a comfortable level of leverage with
net debt of GBP48.0m. The increase in interest rates means that the
growth in our profitability was held back somewhat due to the
GBP0.8m higher interest expense in the period. Our adjusted profit
before tax in the period of GBP7.6m was a modest 3% growth on the
prior period.
The external environment for us was relatively more stable than
in the year to 31 March 2023, primarily due to lower volatility in
the wholesale energy markets. Our business model over the last few
years has been regularly challenged, be that by Covid or the Energy
Crisis, and we have consistently proven the resilience of the team
and business. It is this foundation which gives us strong
confidence on our ability to expand our offering around the growing
hybrid cloud market.
We were pleased to continue with M&A activity, in line with
our strategic plans, with the completion of the acquisition of
Extrinsica Global Holdings Limited ("Extrinsica") on 5 June 2023,
extending the Group's products, skills and capabilities within the
Microsoft Azure environment.
Subsequent to the period end, on 4 December 2023, we completed
our second acquisition of the financial year, acquiring the entire
issued share capital of Accesspoint Group Holdings Limited
("Accesspoint"), the holding company of Accesspoint Technologies
Limited. Accesspoint provides a suite of managed and hosted
services, including infrastructure hosting, software licensing,
security management, business continuity services and
communications provisioning, focused solely on the legal
sector.
Strategy
We see great opportunity ahead. For the UK to thrive as an
economic powerhouse, its businesses will need to increase
efficiency, operate at pace and be able to adapt in order to stay
ahead of the pack leveraging cloud, data and digital technologies
both for their internal productivity, and as a means to develop,
launch and grow their offerings. We have the skills and
infrastructure to provide this. The continued huge growth in demand
for cloud computing is a persistent underlying growth driver, which
we are focused on harnessing through a clear strategy.
Our growth strategy is underpinned by our deep private cloud
infrastructure heritage and solid existing core business, which
continues to operate in a growth market, delivering market leading
profitability and strong cash generation. To accelerate our organic
growth, our roadmap sees us focused 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. The new services can be categorised into three
broad groupings of hybrid cloud, data management and security
services plus, modern workplace.
We were delighted to welcome David Gammie to the Group as CTO in
the period who brings a wealth of experience to the role. Following
a successful career for a number of large consultancy businesses,
he spent time in CIO roles in industry, with his most recent role
leading the infrastructure and cloud elements at a UK managed
services provider.
We have a successful track record of sourcing complementary
acquisitions and we expect to continue to identify such
acquisitions to expand the customer base, to acquire new skillsets,
and to extend our go-to-market channels. The IT managed service
sector remains highly fragmented and our strong balance sheet and
existing bank facilities puts us in a good position to supplement
our organic growth with a disciplined M&A programme.
The acquisition of Extrinsica 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.
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 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. 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.
Areas in which we excel.
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.
We are seeing that macroeconomic uncertainty is translating into
greater scrutiny by customers, which is generally resulting in
extended decision making timeframes. For iomart that has
materialised in the period in some lower non-recurring activity
such as hardware refreshes or consultancy projects and, while we
have seen continued momentum in order levels from existing
customers, we have seen a slightly lower order level from new
customers as digital transformation projects continue to be
delayed. Our long-standing financial stability provides a point of
differentiation in these cautious times, giving comfort to
potential customers.
Acquisitions
Extrinsica
We completed the acquisition of Extrinsica on 5 June 2023 for an
initial consideration of GBP4.0m, with a potential further GBP0.4m
in cash payable on the achievement of certain key customer targets
during the calendar year. Of the initial consideration, GBP2m was
satisfied by the issue of 1,562,500 new ordinary shares in iomart.
The balance of GBP2.0m was paid in cash. We also repaid GBP3.7m of
debt acquired on completion. A further GBP4.0m to GBP7.0m of
contingent earn-out payments was included in the share purchase
agreement based on the profitability for the 12 months ending 31
March 2024. Given the ongoing macroeconomic uncertainty impacting
the timing of certain customer projects, the Board does not
currently expect that any additional earn-out payment will be
triggered. Prior to our acquisition, Extrinsica generated revenues
of GBP7.4m, being year on year growth of c.40%, and EBITDA of
GBP0.1m (unaudited).
Accesspoint
Subsequent to the period end, we completed the acquisition of
Accesspoint on 4 December 2023. 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. The 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.
The initial consideration of GBP4.5m was paid in cash on
completion on a debt and cash free basis, with a potential further
GBP0.5m in cash payable on the achievement of certain
post-acquisition milestones. The acquisition also includes up to a
further GBP1.4m contingent earn-out payment based on the
profitability of Accesspoint for the 12 months ending 31 August
2024. The initial consideration was financed through a combination
of existing bank facilities and cash on the Company's balance
sheet. For the year ended 31 August 2023, Accesspoint generated
revenues of GBP3.8m and adjusted EBITDA of GBP0.8m (unaudited).
Board Changes
We were pleased to welcome two new independent non-executive
Directors to the Board in the period, Annette Nabavi on 25 May 2023
and Adrian Chamberlain on 1 June 2023. Adrian has been appointed as
the senior independent Director. 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 at the
AGM in September.
On 18 September 2023, after three years in role, Reece Donovan
stepped down as Chief Executive Officer and I replaced him, on a
full time basis. The Nomination Committee is undertaking a search
for an independent Chair, with the intention for the search to be
completed by the Company's financial year end announcement. Until
that point I will continue to act as Chair.
The changes made to the Board during the period bring different
and very relevant commercial skills and experience to the Board,
and will be extremely valuable in helping guide and drive the
execution of our growth strategy.
Operational Review*
Cloud Services
Cloud Services revenues increased by GBP9.5m (20%) to GBP55.8m
(H1 2023: GBP46.3m ). This included GBP6.0m of additional revenue
from the positive impact of our M&A activities over the last 12
months. Cloud Services EBITDA (before share-based payments,
acquisition costs, exceptional items and central group overheads)
was GBP18.2m being 32.6% of cloud services revenue (H1 2023:
GBP17.0m (36.7% of cloud services revenue)). The increase of
GBP1.2m in absolute Cloud Services EBITDA is a combination of many
moving parts, including the contribution from owning Concepta for
the full period. Margin performance of 32.6% in the current period
is a reduction from H1 2023 of 36.7% but it is slightly ahead of H2
2023 of 31.3%. This trend in margin performance reflects the change
in revenue mix and specific timing of inflationary price
adjustments during the last financial year. Energy costs in the
first half are GBP3.4m higher than the equivalent period last year.
Given our energy hedging strategy and the timing of energy cost
increases during the prior year, the second half will not
experience such high energy cost base period on period variances,
nor the resulting impact on revenue.
The following is the disaggregation of Cloud Services revenues
of GBP55.8m (H1 2023: GBP46.3m):
Year to
6 months 31
to 30 September March
6 months 2022 2023
to 30 September GBP'000 GBP'000
Disaggregation of Cloud Services 2023 (restated, (restated,
revenue GBP'000 note1) note 1)
---------------------------------- ------------------ ----------------- -------------
Cloud managed services 37,022 29,220 64,115
Self-managed infrastructure 14,730 13,891 29,617
Non-recurring revenue 4,026 3,219 9,359
55,778 46,330 103,091
---------------------------------- ------------------ ----------------- -------------
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. We anticipate this will be the
highest growth area for iomart due to the market drivers described
above.
Cloud managed services revenue increased strongly, by 27% to
GBP37.0m (H1 2023: GBP29.2m). This was a combination of modest
organic growth, approximately GBP4.3m contribution from the latest
two acquisitions and the price adjustments for last year's energy
cost increases taking place. A significant number of moving parts
have arisen in the last 18 months within our pricing and renewal
profiles. The energy price adjustments are now, in some cases, over
12 months ago, meaning they have become structurally consumed into
our renewals or new business pricing. This is also the case for our
competitors.
Self-managed infrastructure (recurring revenue)
We have a large customer base, across a number of brands, the
largest by far being our Rapidswitch brand, who wish to source
compute power and connectivity mainly through the provision of
dedicated servers and self-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 GBP14.7m represented an increase of
GBP0.8m 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, offset by the energy price rises passed onto
customers, plus encouragingly some higher new order bookings. 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. We have
a well maintained data centre estate and this is core to our
resilient private cloud services in the UK. We have 12 UK data
centres, with Maidenhead and London Central being our two larger
sites accounting for around half of our capacity, with the other 10
spread across the regions offering infrastructure with close
proximity to customers. During the period, the larger areas of
spend on our own infrastructure included GBP1.4m upgrade to fibre
network equipment, GBP0.6m upgrade to our Nottingham data centre
plus GBP0.8m investment to fully outfit the new Glasgow office. The
Board committed to the installation of solar panels on our
Maidenhead data centre which provides c.300kw of peak power yield
to the site being around 15% of the total average site power usage.
Installation will be completed in the second half. In the period we
successfully achieved the triannual recertification from our UKAS
accredited certification body which covered five ISO standards,
notably 9001, 20000, 270001, 22301 and 14001.
Non-recurring revenue
Non-recurring revenue of GBP4.0m (H1 2023: GBP3.2m) relates
primarily to on premise product reselling via our Cristie Data and
now the Pavilion IT brand, plus consultancy projects. Often these
non-recurring activities provide a useful 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 is mainly involved in
reselling activity. With a full period of trading (as opposed to
only 6 weeks) it added GBP1.5m additional non-recurring revenue,
meaning that, if you exclude the acquisition, the underlying
reduction in non-recurring revenue was GBP0.7m. We have seen in the
last 18 months that some of our customer base has slowed down its
hardware refresh activity. To address this changing market we have
recently decided to fully consolidate Cristie Data into iomart
which will be completed during the second half. Cristie Data's
heritage is data management which will be enhanced in a fully
integrated operation and give a higher probability of transitioning
customers over time to iomart's core recurring services.
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 GBP6.3m
(H1 2023: GBP6.2m) and GBP3.2m (H1 2023: GBP3.1m),
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 strong
renewal rates by customers.
*During the period we moved the financial reporting of the brand
Simple Servers which has annual revenues of around GBP0.8m across
c.800 customers into this business unit, see note 1 for the
financial impact of the reclassification on the prior periods. This
customer base was sourced from an acquisition in 2017. 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.
Financial Performance
Revenue
Overall revenue from our operations increased significantly by
18% to GBP62.0m (H1 2023: GBP52.6m) with a consistent high level of
recurring revenue at 94% (H1 2023: 94%). 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 20% to GBP55.8m (H1 2023: GBP46.3m). Our Easyspace
segment has performed well over the period, with revenues for the
first half stable at GBP6.3m (H1 2023: GBP6.2m).
Gross Profit
The gross profit in the period improved to GBP34.5m (H1 2023:
GBP31.2m) with the gross profit as a percentage of revenue of
55.6%, as expected being a reduction from prior period (H1 2023:
59.4% of revenue) but more consistent with the second half of last
year reflecting the heavy impact and specific timing from pass
through of energy costs and to a lesser extent the recent corporate
acquisitions. Our key vendor relationships have remained stable in
the period with general cost increases across most areas of our
supply chain due to the general inflationary environment. Our
hedging strategy on energy costs means we have seen stability in
the costs and have a good level of certainty in the medium
term.
Adjusted EBITDA
The Group's adjusted EBITDA increased by 5% to GBP18.6m (H1
2023: GBP17.8m) which in EBITDA margin terms translates to 30.0%
(H1 2023: 33.8%). The lower margin percentage versus the first half
of last year was expected given the timing of the energy cost
impact and represents a slight improvement on the level delivered
in the second half of last year. Administration expenses (before
depreciation, amortisation, share based payment charges,
acquisition costs and exceptional non-recurring costs) of GBP15.9m
are GBP2.5m higher than the previous period due to the inclusion of
staff plus overhead costs from the Concepta and Extrinsica
acquisitions. Outside of the acquisitions, we have seen a period of
relatively stable overall headcount numbers and other overhead
costs.
Cloud Services saw a 7% increase in its adjusted EBITDA to
GBP18.2m (H1 2023: GBP17.0m), giving a margin of 32.6% (H1 2023:
36.7%). Adjusted EBITDA for Easyspace was consistent at GBP3.2m (H1
2023: GBP3.1m) and EBITDA margin at 50.6% (H1 2023: 50.4%).
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
GBP0.3m to GBP2.7m (H1 2023: GBP2.4m) driven by staff related
increases for central functions plus the move of our head office to
a modern city centre location in Glasgow, providing greater ability
for the retention and attraction of talented new team members.
Adjusted profit before tax
Depreciation charges of GBP7.7m (H1 2023: GBP8.0m) have
decreased slightly in absolute terms which also means it is down as
a percentage of our recurring revenue in the period to 13.3% (H1
2023: 16.2%). This reduction in depreciation charge as a percentage
of recurring revenue is a reflection of recent acquisitions and
also some of the mix of the business which is less capital
intensive, or in the case of Extrinsica, has no associated owned
infrastructure with Microsoft Azure public cloud being consumed in
the customer solution. The charge for the amortisation of
intangible assets, excluding amortisation of intangible assets
resulting from acquisitions ("amortisation of acquired intangible
assets"), has increased slightly to GBP1.3m (H1 2023: GBP1.2m) due
to the specific historic timing of investments made.
Net finance costs have increased to GBP2.0m (H1 2023: GBP1.2m)
reflecting the increase in our borrowing cost from the rise in bank
rates.
After deducting the charges for depreciation, amortisation,
excluding the amortisation of acquired intangible assets, and
finance costs from the adjusted EBITDA, the adjusted profit before
tax for the period increased by GBP0.2m to GBP7.6m (H1 2023:
GBP7.4m) representing an adjusted profit before tax margin of 12.2%
(H1 2023: 14.1%). The overall profit benefit of GBP1.0m from growth
in the adjusted EBITDA and lower depreciation charge has been
mainly offset by the higher bank interest rates in the period.
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 2023 2022 2023
before tax to profit before tax GBP'000 GBP'000 GBP'000
Adjusted profit before tax 7,581 7,360 14,820
Less: Share based payments (206) (418) (696)
Less: Amortisation of acquired intangible
assets (1,982) (1,748) (3,880)
Less: Acquisition costs (538) (252) (922)
Less: Administrative costs - exceptional
non-recurring costs (462) - -
Less: Cost of sales - exceptional
non-recurring costs - - (820)
Profit before tax 4,393 4,942 8,502
-------------------------------------------- ------------------ ----------------- ----------
The larger adjusting items in the current period are:
-- non-cash charges for the amortisation of acquired intangible
assets of GBP2.0m (H1 2023: GBP1.7m). Acquired intangible assets
have increased by GBP0.3m due to the recent acquisitions and
introduction of new intangible assets around customer
relationships;
-- acquisition costs of GBP0.5m (H1 2023: GBP0.3m); and
-- GBP0.5m exceptional non-recurring charge recorded within
administration costs related to the change in CEO during the month
of September.
After deducting the charges for share based payments, the
amortisation of acquired intangible assets, acquisition costs and
exceptional non-recurring costs, the reported profit before tax is
GBP4.4m (H1 2023: GBP4.9m).
Taxation and profit for the period
There is a tax charge in the period of GBP1.0m (H1 2023:
GBP1.1m), which comprises a current taxation charge of GBP1.1m (H1
2023: GBP1.0m), and a deferred taxation credit of GBP0.1m (H1 2023:
charge of GBP0.1m). The headline effective tax rate is 22.0% (H1
2023: 22.6%). The increase to a 25% UK corporation tax rate,
effective from 1 April 2023, has been applied to corporation tax at
30 September 2023. The tax charge in the year is the net result of
the higher corporation tax rate, the positive effect of the "full
expensing relief" available for capital investments and lower
taxable income.
After deducting the tax charge from the profit before tax, the
Group has recorded a profit for the period from total operations of
GBP3.4m (H1 2023: GBP3.8m).
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
2023: 5.2p).
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 3.1p (H1 2023: 3.5p). 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
GBP16.8m (H1 2023: GBP14.5m) with an adjusted EBITDA conversion to
cash ratio in the period of 90% (H1 2023: 81%). The first half year
typically has a lower conversion ratio and in the prior period
there was a small number of larger vendor payments which overlapped
the period end causing the ratio in this period to be below 90%.
Cash payments for corporation taxation in the period were GBP0.8m
(H1 2023: limited to only GBP6,000), resulting in net cash flow
from operating activities in the period of GBP16.0m (H1 2023:
GBP14.5m).
Expenditure on investing activities of GBP12.8m (H1 2023:
GBP13.8m) was incurred in the period. GBP5.3m (H1 2023: GBP3.1m)
was incurred on the acquisition of property, plant and equipment,
principally to provide specific services to our customers and
GBP1.4m to upgrade fibre network equipment. We incurred GBP0.9m (H1
2023: GBP0.6m) in respect of development costs during the period.
In early June 2023 we paid the initial equity consideration on the
Extrinsica acquisition which combined with the cash acquired,
resulted in a GBP1.2m net cash outflow. In addition, in September
2023 we paid in cash the full value of the GBP4.0m earn-out
consideration on the Concepta acquisition. The prior period
included the initial equity consideration on the Concepta
acquisition plus professional fees which, combined with the cash
acquired, resulted in a GBP10.0m net outflow.
During the first half of the year, net cash used in financing
activities was GBP6.4m (H1 2023: GBP1.7m generated). All shares
issued in the current period under share options were issued at
nominal value. In the current period we made a GBP5.5m (H1 2023:
GBP10.4m) drawdown on the revolving credit facility solely to
support the acquisition related payments. We repaid GBP3.7m of bank
debt acquired from Extrinsica on completion (H1 2023: GBP1.5m on
Concepta acquisition). In the current period we repaid GBP2.8m of
lease liabilities (H1 2023: GBP2.5m), paid GBP1.4m (H1 2023:
GBP0.7m) of finance charges and made a dividend payment of GBP3.9m
(H1 2023: GBP4.0m). As a result, cash and cash equivalent balances
at the end of the period were GBP10.7m (30 September 2023:
GBP17.8m).
Net Debt
The net debt position of the Group at the end of the period was
GBP48.0m, compared to GBP39.8m at 31 March 2023, with the increase
driven by the payment of the initial consideration (including
repayment of debt acquired) for the Extrinsica acquisition and the
earn-out payment on 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
2023 2022 2023
GBP'000 GBP'000 GBP'000
Bank revolver loan 39,900 44,400 34,400
Lease liabilities 18,757 21,196 19,180
Less: cash and cash equivalents (10,673) (17,770) (13,818)
Net Debt 47,984 47,826 39,762
---------------------------------- -------------- -------------- ----------
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 with a maturity date of 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 where the maximum pay-out is 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 comfortable 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,
the Board has approved an interim dividend of 1.94p per share (H1
2023: 1.94p) payable on 26 January 2024 to shareholders on the
register on 5 January 2024, with an ex-dividend date of 4 January
2024. This interim dividend represents a pay-out ratio of 38% (H1
2023: 37%) of the adjusted diluted earnings per share for the
period.
Current trading and outlook
Ongoing initiatives to improve sales channel effectiveness and
service delivery will continue to be implemented, which along with
the positive contribution from our most recent acquisitions, will
allow our full year results to demonstrate continued year on year
momentum. Current trading is in line with the Board's
expectations.
iomart continues to be very well positioned to support customers
in their digital transformation journeys including the complex
multi-year process of migrating to a modern multi-cloud based
infrastructure and becoming data driven businesses. Our blend of
both IT and connectivity skills combined with our secure, scalable,
resilient cloud and network infrastructure uniquely positions us to
support the ambitions of our customer base. These factors combined
with our strong technology vendor partnerships, 20+ years'
experience and financial stability give us confidence that we will
participate successfully in the growing cloud sector.
Lucy Dimes
Chief Executive Officer
5 December 2023
Consolidated Interim Statement of Comprehensive Income
Six months ended 30 September 2023
Unaudited Unaudited Audited
6 months 6 months Year to
to 30 September to 30 September 31
2023 2022 March 2023
GBP'000 GBP'000 GBP'000
-------------------------------------------- ----------------- ----------------- ------------
Revenue 62,037 52,557 115,638
Cost of sales (27,550) (21,355) (52,080)
-------------------------------------------- ----------------- ----------------- ------------
Gross profit 34,487 31,202 63,558
Administrative expenses (28,068) (25,047) (52,141)
Operating profit 6,419 6,155 11,417
Analysed as:
Earnings before interest, tax,
depreciation, amortisation, acquisition
costs, exceptional non-recurring
costs and share based payments 18,598 17,794 36,161
Share based payments (206) (418) (696)
Acquisition costs 4 (538) (252) (922)
Administrative expenses - exceptional
non-recurring costs 4 (462) - -
Cost of sales - exceptional non-recurring
costs - - (820)
Depreciation 9 (7,713) (7,980) (15,861)
Amortisation - acquired intangible
assets 8 (1,982) (1,748) (3,880)
Amortisation - other intangible
assets 8 (1,278) (1,241) (2,565)
-------------------------------------------- ----------------- ----------------- ------------
Finance costs 5 (2,026) (1,213) (2,915)
-------------------------------------------- ----------------- ----------------- ------------
Profit before taxation 4,393 4,942 8,502
Taxation 6 (968) (1,119) (1,507)
-------------------------------------------- ----------------- ----------------- ------------
Profit for the period/year 3,425 3,823 6,995
Other comprehensive income
Currency translation differences 11 166 60
-------------------------------------------- ----------------- ----------------- ------------
Other comprehensive income for
the period/year 11 166 60
-------------------------------------------- ----------------- ----------------- ------------
Total comprehensive income for
the period/year attributable to
equity holders of the parent 3, 436 3,989 7,055
Basic and diluted earnings per
share
Basic earnings per share 3 3.1p 3.5p 6.4 p
Diluted earnings per share 3 3.0p 3.4p 6.2 p
-------------------------------------------- ----------------- ----------------- ------------
Consolidated Interim Statement of Financial Position
As at 30 September 2023
Unaudited Unaudited Audited
30 September 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
ASSETS
Non-current assets
Intangible assets - goodwill 8 104,293 99,710 99,950
Intangible assets - other 8 15,460 15,153 12,981
Trade and other receivables 111 597 177
Property, plant and equipment 9 65,833 67,790 64,959
185,697 183,250 178,067
Current assets
Cash and cash equivalents 10,673 17,770 13,818
Trade and other receivables 25,381 23,708 25,804
Current tax asset 704 789 987
36,758 42,267 40,609
Total assets 222,455 225,517 218,676
LIABILITIES
Non-current liabilities
Trade and other payables (3,330) (2,978) (2,666)
Non-current borrowings 11 (56,274) (62,030) (50,203)
Provisions for other liabilities
and charges (2,946) (2,626) (2,755)
Deferred tax liability (3,936) (2,694) (3,221)
(66,486) (70,328) (58,845)
Current liabilities
Contingent consideration due on
acquisitions 7 (360) (4,000) (4,000)
Trade and other payables (30,950) (28,282) (31,898)
Current borrowings 11 (2,383) (3,566) (3,377)
(33,693) (35,848) (39,275)
Total liabilities (100,179) (106,176) (98,120)
Net assets 122,276 119,341 120,556
EQUITY
Share capital 1,122 1,101 1,106
Own shares (70) (70) (70)
Capital redemption reserve 1,200 1,200 1,200
Share premium 22,495 22,495 22,495
Merger reserve 6,967 4,983 4,983
Foreign currency translation reserve 57 152 46
Retained earnings 90,505 89,480 90,796
Total equity 122,276 119,341 120,556
Consolidated Interim Statement of Cash Flows
Six months ended 30 September 2023
Unaudited Unaudited Audited
6 months 6 months Year to
to 30 September to 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
------------------------------------------- ----------------- ----------------- ----------
Profit before tax 4,393 4,942 8,502
Finance costs - net 2,026 1,213 2,915
Depreciation 7,713 7,980 16,492
Amortisation 3,260 2,989 6,445
Share based payments 206 418 696
Professional fees on acquisition - 232 -
Movement in trade receivables 1,928 (1,579) (3,256)
Movement in trade payables (2,702) (1,722) 2,045
Cash flow from operations 16,824 14,473 33,839
Taxation paid (813) (6) 48
----------------- ----------------- ----------
Net cash flow from operating activities 16,011 14,467 33,887
Cash flow from investing activities
Purchase of property, plant and equipment (5,346) (3,130) (8,918)
Development costs (860) (627) (1,887)
Purchase of intangible assets (1,358) (31) (44)
Payment for acquisition of subsidiary
net of cash acquired (1,225) (9,963) (10,307)
Payment of contingent consideration (4,000) - -
Net cash used in investing activities (12,789) (13,751) (21,156)
Cash flow from financing activities
Issue of shares 16 - 5
Drawdown of bank loans 5,500 10,400 10,400
Repayment of bank loans - - (10,000)
Repayment of lease liabilities (2,792) (2,509) (4,902)
Repayment of debt acquired on acquisition (3,728) (1,508) (1,508)
Finance costs paid (1,441) (704) (1,900)
Refinancing costs paid - - (249)
Dividends paid (3,922) (3,957) (6,091)
Net cash (used in)/generated from
financing activities (6,367) 1,722 (14,245)
Net (decrease)/increase in cash
and cash equivalents (3,145) 2,438 (1,514)
Cash and cash equivalents at the
beginning of the period 13,818 15,332 15,332
----------------- ----------------- ----------
Cash and cash equivalents at the
end of the period 10,673 17,770 13,818
================= ================= ==========
Consolidated Interim Statement of Changes in Equity
Six months ended 30 September 2023
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 2022 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
---------------- ---------- --------- ------------ --------------- ---------- ------------ ---------- --------
Profit in the
period - - - - - - 3,172 3,172
Currency
translation
differences - - - - - (106) - (106)
---------------- ---------- --------- ------------ --------------- ---------- ------------ ---------- --------
Total
comprehensive
income - - - - - (106) 3,172 3,066
Dividends - - - - - - (2,134) (2,134)
Share based
payments - - - - - - 278 278
Issue of share
capital 5 - - - - - - 5
---------------- ---------- --------- ------------ --------------- ---------- ------------ ---------- --------
Total
transactions
with owners 5 - - - - - (1,856) (1,851)
---------------- ---------- --------- ------------ --------------- ---------- ------------ ---------- --------
Balance at
31 March 2023
(audited) 1,106 (70) 1,200 22,495 4,983 46 90,796 120,556
---------------- ---------- --------- ------------ --------------- ---------- ------------ ---------- --------
Profit in the
period - - - - - - 3,425 3,425
Currency
translation
differences - - - - - 11 - 11
---------------- ---------- --------- ------------ --------------- ---------- ------------ ---------- --------
Total
comprehensive
income - - - - - 11 3,425 3,436
Dividends - - - - - - (3,922) (3,922)
Share based
payments - - - - - - 206 206
Issue of share
capital 16 - - - 1,984 - - 2,000
---------------- ---------- --------- ------------ --------------- ---------- ------------ ---------- --------
Total
transactions
with owners 16 - - - 1,984 - (3,716) (1,716)
---------------- ---------- --------- ------------ --------------- ---------- ------------ ---------- --------
Balance at 30
September
2023
(unaudited) 1,122 (70) 1,200 22,495 6,967 57 90,505 122,276
---------------- ---------- --------- ------------ --------------- ---------- ------------ ---------- --------
Notes to the half yearly financial information
Six months ended 30 September 2023
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 2023 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 2024. The Group financial statements for the year ended 31
March 2023 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 2023. The
provisions of IAS 34 'Interim Financial Reporting' have not been
applied in full.
Operating segments (note 2 only) - prior period
reclassification
As noted in the Chief Executive's statement on page 6, during
the period we moved the financial reporting 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 in
note 2 in H1 2023 and year to 31 March 2023 (FY23) 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 H1 2023: GBP436k,
FY23: GBP864k, EBITDA impact H1 2023: GBP264k, FY23: GBP535k).
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 2026,
which also benefits from a GBP50m Accordion Facility. 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 GBP48.0m
(H1 2023: GBP47.8m). 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 to 31
to 30 September March
2022 2023
6 months to
30 September (restated, (restated,
note
2023 note 1) 1)
GBP'000 GBP'000 GBP'000
Easyspace 6,259 6,228 12,548
Cloud Services 55,778 46,329 103,090
62,037 52,557 115,638
Cloud Services revenue during the period/year can be further
disaggregated as follows:
Year
6 months to 31
to 30 September March
2022 2023
6 months
to 30 September (restated, (restated,
note
2023 note 1) 1)
GBP'000 GBP'000 GBP'000
Cloud managed
services 37,022 29,220 64,115
Self-managed infrastructure 14,730 13,891 29,617
Non-recurring
revenue 4,026 3,219 9,359
55,778 46,330 103,091
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
Year
6 months 6 months to 31
to 30 September to 30 September March
2023 2022 2023
GBP'000 GBP'000 GBP'000
United Kingdom 52,845 45,147 99,961
Rest of the World 9,192 7,410 15,677
62,037 52,557 115,638
Recurring and Non-Recurring Revenue
The amount of recurring and non-recurring revenue recognised
during the year can be summarised as follows:
Year
6 months 6 months to 31
to 30 September to 30 September March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Recurring - over
time 58,011 49,338 106,279
Non-recurring
- point in time 4,026 3,219 9,359
62,037 52,557 115,638
Profit by Operating Segment
6 months to 30 September
2022 Year to 31 March 2023
6 months to 30 September
2023 (restated, note 1) (restated, note 1)
EBITDA Share based EBITDA Share based EBITDA Share based
before share payments, before share payments, before share payments,
based acquisition based acquisition Operating based acquisition
payments, costs, Operating payments, costs, profit/(loss) payments, costs, Operating
acquisition exceptional-non profit/(loss) acquisition exceptional acquisition exceptional profit/(loss)
costs & recurring costs & non-recurring costs & non-recurring
exceptional costs, exceptional costs, exceptional costs,
non-recurring depreciation non-recurring depreciation non-recurring depreciation
costs & amortisation costs & costs &
amortisation amortisation
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- --------------- ----------------- --------------- --------------- --------------- ---------------- --------------- --------------- ----------------
Easyspace 3,167 (301) 2,866 3,140 (184) 2,956 6,173 (698) 5,475
Cloud Services 18,167 (10,672) 7,495 17,012 (10,785) 6,227 34,796 (22,428) 12,368
Group overheads (2,736) - (2,736) (2,358) - (2,358) (4,808) - (4,808)
Administrative
expenses -
exceptional
non-recurring
costs - (462) (462)
Share based
payments - (206) (206) - (418) (418) - (696) (696)
Acquisition
costs - (538) (538) - (252) (252) - (922) (922)
---------------- --------------- ----------------- --------------- --------------- --------------- ---------------- --------------- --------------- ----------------
Profit before
tax and
interest 18,598 (12,179) 6,419 17,794 (11,639) 6,155 36,161 (24,744) 11,417
----------------
Group interest
and tax (2,994) (2,332) (4,422)
---------------- --------------- ----------------- --------------- --------------- --------------- ---------------- --------------- --------------- ----------------
Profit for
the
period/year 3,425 3,823 6,995
---------------- --------------- ----------------- --------------- --------------- --------------- ---------------- --------------- --------------- ----------------
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
to 30 September to 30 September 31 March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Profit for the period/year and basic
earnings attributed to ordinary shareholders 3,425 3,823 6,995
No No No
Weighted average number of ordinary
shares: 000 000 000
Called up, allotted and fully paid at
start of period 110,422 110,065 110,065
Shares held by Employee Benefit Trust (141) (141) (141)
Issued share capital in the period 1,016 4 170
Weighted average number of ordinary
shares - basic 111,297 109,928 110,094
Dilutive impact of share options 2,496 2,686 2,575
Weighted average number of ordinary
shares - diluted 113,793 112,614 112,669
Basic earnings per share 3.1 p 3.5 p 6.4 p
Diluted earnings per share 3.0 p 3.4 p 6.2 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
2023 September March
GBP'000 2022 2023
GBP'000 GBP'000
Profit for the period/year and basic
earnings attributed to ordinary shareholders 3,425 3,823 6,995
- Amortisation of acquired intangible
assets 1,982 1,748 3,880
- Acquisition costs 538 252 922
- Administrative expenses - exceptional 462 - -
non-recurring costs
- Share based payments 206 418 696
- Cost of sales - exceptional non-recurring
costs - - 820
- Tax impact of adjusted items (716) (412) (1,025)
Adjusted profit for the period/year
and adjusted basic earnings attributed
to ordinary shareholders 5,897 5,829 12,288
11.2
Adjusted basic earnings per share 5.3 p 5.3 p p
Adjusted diluted earnings per share 5.2 p 5.2 p 10.9 p
4. Acquisition costs and administrative expenses - exceptional non-recurring costs
Year
6 months 6 months to 31
to 30 September to 30 September March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Professional fees (307) (232) (236)
Non-recurring acquisition integration
costs (231) (20) (686)
Acquisition costs (538) (252) (922)
Year
6 months 6 months to 31
to 30 September to 30 September March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Administrative expenses - exceptional
non-recurring costs (462) - -
In the current period, the Group incurred GBP0.5m (H1 2023:
GBPnil) of administrative expenses - exceptional non-recurring
costs in
relation to the change of CEO during September which we consider
to be material in nature and size.
5. Finance costs
Year
6 months 6 months to 31
to 30 September to 30 September March
2023 2022 2023
GBP'000 GBP'000 GBP'000
Bank loans (1,588) (855) (2,216)
Lease finance
costs (379) (304) (586)
Other interest
charges (59) (54) (113)
(2,026) (1,213) (2,915)
6. Taxation
6 months 6 months Year to
to 30 September to 30 September 31
2023 2022 March
GBP'000 GBP'000 2023
GBP'000
Corporation Tax:
Tax charge for the period/year (1,104) (1,050) (935)
Total current taxation charge (1,104) (1,050) (935)
Deferred Tax:
Origination and reversal of temporary
differences 136 (58) (597)
Adjustment relating to prior periods - - 36
Effect of different statutory tax
rates of overseas jurisdictions - (11) (11)
Total deferred taxation credit/(charge) 136 (69) (572)
Total taxation charge for the period/year (968) (1,119) (1,507)
Deferred tax assets and liabilities at 30 September 2023 have
been calculated based on the rate enacted at the balance sheet date
of 25% (H1 2023: 25%).
7. 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 GBP307,000 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
2023.
The following table summarises the consideration to acquire
Extrinsica, the amounts of identified assets acquired, and
liabilities assumed at the acquisition date.
GBP'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 (851)
------------------------------------------------------------- ----------
Identifiable net assets 85
Goodwill 4,343
------------------------------------------------------------- ----------
Total consideration 4,428
------------------------------------------------------------- ----------
Satisfied by:
Cash - paid on acquisition 1,853
Deferred consideration included in trade and other payables 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 GBP4,028,000,
with a potential further GBP360,000 in cash payable on the
achievement of certain key customer targets during the year ended
31 March 2024, GBP180,000 of which has since been settled on 12
October 2023 with the remaining balance due in early 2024. Of the
initial consideration, GBP175,000 was deferred pending finalisation
of the completion accounts and GBP2,000,000 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 GBP1.28, being the volume weighted average price for
the 90 days prior to completion. This has resulted in an increase
to share capital of GBP16,000 and an increase to the merger reserve
of GBP1,984,000.
At the date of acquisition, Extrinsica had bank debt of
GBP3,728,000 which was taken on by iomart and settled as part of
the completion process.
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
31 May 2023. Following agreement of the Completion Accounts an
additional payment of GBP40,000 was paid to the former shareholders
of Extrinsica on 12 October 2023, alongside the GBP175,000 deferred
consideration mentioned above.
The SPA included a provision requiring the Company to pay the
former shareholders of Extrinsica a further GBP4,000,000 to
GBP7,000,000 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"). Of any earn-out payment that
becomes due, GBP1,000,000 will be satisfied by the issue of iomart
Group plc shares (the number of shares to be issued will be based
on the same share price as the initial consideration).
The potential undiscounted amount of the earn-out payment that
the Company could be required to pay is between GBPnil and
GBP7,000,000. The amount of contingent earn-out consideration
payable, which is recognised as of 30 September 2023, is GBPnil.
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 March
2024.
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
GBP3,824,000. 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 GBP2,691,000 and generated losses,
before allocation of group overheads, share based payments and tax,
of GBP85,000 in the period since acquisition.
If Extrinsca had been part of the iomart group from 1 April
2023, revenue earned would have been GBP4,019,000 and loss after
tax of GBP162,000 for the period ended 30 September 2023.
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 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
Additions in the
period 240 - 1,260 13 - - 1,513
Currency translation
differences - (89) - (66) - - (155)
At 31 March 2023 99,950 61,809 15,302 11,028 86 336 188,511
Acquired on acquisition
of subsidiary 4,343 3,823 1,055 - - - 9,221
Additions in the
period - - 860 - - - 860
Currency translation
differences - 11 - 9 - - 20
Disposals - - (112) - - - (112)
At 30 September
2023 104,293 65,643 17,105 11,037 86 336 198,500
Accumulated amortisation:
At 1 April 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)
Charge for the
period - (2,132) (779) (538) (4) (3) (3,456)
Currency translation
differences - 89 - 77 - - 166
At 31 March 2023 - (53,325) (12,600) (9,274) (77) (304) (75,580)
Charge for the
period - (1,982) (777) (493) (4) (4) (3,260)
Currency translation
differences - (11) - (8) - - (19)
Disposals - - 112 - - - 112
At 30 September
2023 - (55,318) (13,265) (9,775) (81) (308) (78,747)
Carrying amount:
At 30 September
2023 104,293 10,325 3,840 1,262 5 28 119,753
At 31 March 2023 99,950 8,484 2,702 1,754 9 32 112,931
At 30 September
2022 99,710 10,616 2,221 2,268 13 35 114,863
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 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
Additions in
the period - 488 1,381 4,135 76 23 6,103
Disposals in
the period - (309) (1,402) - - - (1,711)
Currency
translation
differences - (218) - (483) - - (701)
At 31 March
2023 8,236 41,516 31,843 121,238 2,986 46 205,865
Acquired on
acquisition
of subsidiary - 6 - 31 7 - 44
Additions in
the period - 3,466 1,580 3,715 202 43 9,006
Disposals in
the period - (462) - - - (5) (467)
Currency
translation
differences - 28 - 22 - - 50
At 30 September
2023 8,236 44,554 33,423 125,006 3,195 84 214,498
-------------------- ------------ ------------------- ----------- ----------- ----------- ---------- ----------
Accumulated depreciation:
At 1 April 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)
Charge for the
period (120) (2,411) (1,349) (4,537) (92) (3) (8,512)
Disposals in
the period - - 1,402 - - - 1,402
Currency
translation
differences - 186 - 402 - - 588
At 31 March
2023 (1,295) (20,951) (18,711) (97,403) (2,520) (26) (140,906)
Charge for the
period (119) (2,262) (797) (4,428) (102) (5) (7,713)
Disposals in
the period - - - - - 5 5
Currency
translation
differences - (31) - (20) - - (51)
At 30 September
2023 (1,414) (23,244) (19,508) (101,851) (2,622) (26) (148,665)
-------------------- ------------ ------------------- ----------- ----------- ----------- ---------- ----------
Carrying amount:
At 30 September
2023 6,822 21,310 13,915 23,155 573 58 65,833
-------------------- ------------ ------------------- ----------- ----------- ----------- ---------- ----------
At 31 March 2023 6,941 20,565 13,132 23,835 466 20 64,959
At 30 September
2022 7,061 22,829 13,100 24,318 482 - 67,790
-------------------- ------------ ------------------- ----------- ----------- ----------- ---------- ----------
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 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)
Additions to lease liabilities - - (397) (397)
Disposals from lease liabilities - - 449 449
Repayment of bank loans - 10,000 - 10,000
Currency translation - - 71 71
Cash and cash equivalents
cash outflow (3,952) - - (3,952)
Lease liabilities cash outflow - - 1,893 1,893
At 31 March 2023 13,818 (34,400) (19,180) (39,762)
Additions to lease liabilities - - (2,197) (2,197)
Disposals from lease liabilities - - 476 476
New bank loans - (5,500) - (5,500)
Currency translation - - 16 16
Cash and cash equivalents
cash outflow (3,145) - - (3,145)
Lease liabilities cash outflow - - 2,129 2,129
At 30 September 2023 10,673 (39,900) (18,756) (47,983)
11. Borrowings
30 30 31
September September March
2023 2022 2023
GBP'000 GBP'000 GBP'000
------------------------------- ---------- ---------- --------
Current:
Lease liabilities (note 12) (2,383) (3,566) (3,377)
Total current borrowings (2,383) (3,566) (3,377)
Non-current:
Lease liabilities (note 12) (16,374) (17,630) (15,803)
Bank loans (39,900) (44,400) (34,400)
Total non-current borrowings (56,274) (62,030) (50,203)
Total borrowings (58,657) (65,596) (53,580)
--------------------------------- ---------- ---------- --------
At 30 September 2023, the Group has a GBP100m multi option
revolving credit facility which has a maturity date of 30 June 2026
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
GBP5.5m (H1 2023: GBP10.4m).
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 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
Additions 269 128 - 397
Disposals (309) - - (309)
Currency translation differences 7 (76) - (69)
Depreciation charge (1,098) (795) - (1,893)
Amortisation charge - - (142) (142)
--------------------------------------- ---------- ----------- --------- ---------
Net book value at 31 March 2023 16,127 1,813 380 18,320
Additions 2,197 - - 2,197
Disposals (462) - - (462)
Currency translation differences - (21) - (21)
Depreciation charge (1,078) (725) - (1,803)
Amortisation charge - - (143) (143)
Net book value at 30 September 2023 16,784 1,067 237 18,088
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 2023
(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 2023 (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
2023 2022 2023
GBP'000 GBP'000 GBP'000
Lease liabilities (current) (note
11) (2,383) (3,566) (3,377)
Lease liabilities (non-current) (note
11) (16,374) (17,630) (15,803)
Total lease liabilities (18,757) (21,196) (19,180)
The maturity analysis of undiscounted lease liabilities is shown
in the table below:
30 September 30 September 31 March
2023 2022 2023
Amounts payable under leases: GBP'000 GBP'000 GBP'000
Within one year (2,661) (4,252) (3,880)
Between two to five years (9,532) (9,330) (8,239)
After more than five years (10,935) (10,685) (9,780)
(23,128) (24,267) (21,899)
Add: unearned interest 4,371 3,071 2,719
Total lease liabilities (18,757) (21,196) (19,180)
13. Post balance sheet events
Subsequent to the period end, we completed the acquisition of
Accesspoint on 4 December 2023. The initial consideration of
GBP4.5m was paid in cash on completion on a debt and cash free
basis, with a potential further GBP0.5m in cash payable on the
achievement of certain post-acquisition milestones. The acquisition
also includes up to a further GBP1.4m contingent earn-out payment
based on the profitability of Accesspoint for the 12 months ending
31 August 2024. The initial consideration was financed through a
combination of existing bank facilities and cash on the Company's
balance sheet.
14. Availability of half yearly reports
The Company's Interim Report for the six months ended 30
September 2023 will shortly be available to view on the Company's
website (www.iomart.com).
INDEPENT REVIEW REPORT TO iOMART GROUP PLC
Conclusion
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 2023 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 14.
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 2023 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.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements (UK) 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 (ISRE (UK) 2410). 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.
As disclosed in note 1, the annual financial statements of the
group are 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.
Conclusion Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis for
Conclusion section of this report, nothing has come to our
attention to suggest that the directors have inappropriately
adopted the going concern basis of accounting or that the directors
have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This Conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410; however future events or conditions
may cause the entity to cease to continue as a going concern.
Responsibilities of the Directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the AIM rules of the London
Stock Exchange.
In preparing the half-yearly financial report, the directors are
responsible for assessing the group's ability to continue as a
going concern, disclosing as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditors' Responsibilities for the review of the financial
information
In reviewing the half-yearly financial report, we are
responsible for expressing to the company a conclusion on the
condensed set of financial statements in the half-yearly financial
report. Our Conclusion, including our Conclusion Relating to Going
Concern, are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
ISRE (UK) 2410. 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
5 December 2023
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