23 April 2025

iomart Group plc

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

Pre-close Trading Update

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

Key highlights

Group trading performance

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

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

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

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

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

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

Outlook

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

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

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

Lucy Dimes, CEO of iomart Group plc, commented:

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

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

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

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

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

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

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

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

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

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

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

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

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

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About iomart Group plc

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

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

For further information about the Group, please visit www.iomart.com