RNS Number : 8830R
Iomart Group PLC
11 June 2024
 

11 June 2024

iomart Group plc

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

 

Final Results

Solid financial results provide foundation for a bolder strategy for growth

 

iomart (AIM: IOM), the cloud computing company, is pleased to report its final results for the year ended 31 March 2024 (FY2024).

 

FINANCIAL HIGHLIGHTS

 

 

 

FY2024

FY2023

Change

Revenue

£127.0m

£115.6m

+10%

% of recurring revenue1

91%

92%

-1pp

Adjusted EBITDA2

£37.7m

£36.2m

+4%

Adjusted EBIT3

£19.2m

£17.7m

+8%

Adjusted profit before tax4

£15.0m

£14.8m

+1%

Profit before tax

£8.7m

£8.5m

+2%

Adjusted diluted EPS5

9.8p

10.9p

-10%

Basic EPS

5.8p

6.4p

-9%

Cash generation from operations

£36.6m

£33.8m

+8%

Proposed final dividend per share

3.0p

3.5p

-14%

 

·     

Strong revenue growth of 10%, achieving record revenues of £127.0m (FY23: £115.6m) supported by two acquisitions in the year and a further year of organic growth within cloud managed services, the area which is the key focus of our commercial and product strategy

·     

Cloud managed services revenue, the largest component of the Group, increased by 17% to £75.2m (FY23: £64.1m), driven by around 3% organic growth and approximately £8.9m revenue contribution from the latest three acquisitions

·     

Group adjusted EBITDA margin performance of 29.7% (FY23: 31.3%) reflecting the change in revenue mix and specific timing of inflationary price adjustments during the last financial year. This changing mix is less impactful at the adjusted EBIT margin level which was more stable year on year at 15.1% (FY23: 15.3%)

·     

£1.4m higher interest expense in the year, due to rise in bank interest rates, means adjusted profit before tax in the period of £15.0m (FY23: £14.8m) showed a more modest 1% growth

·     

Strong cash generation with a cash conversion ratio7 of 97% (FY23: 94%) testament to our business model and strong focus on cash

·     

Year-end net debt6 increased by 6% to £42.3m (FY23: £39.8m), a comfortable net debt to adjusted EBITDA ratio of 1.1 times (FY23: 1.1 times)

 

STRATEGIC HIGHLIGHTS

 

We have established a clear strategic vision and renewed sense of purpose to execute around three simple messages: Bigger, Better, Bolder.

 

Key achievements to date and areas of focus:

 

Bigger

·     

Double digit order bookings growth in the year, including an increase in average order values and a higher number of new customer wins

·     

Completed two acquisitions, Extrinsica and Accesspoint, adding significant skills and capabilities to the Group

·     

Selected as one of only seven UK strategic Broadcom Pinnacle Partners, reflecting the pedigree and engineering skills we have in this technology, with first new customer wins secured during March and April 2024 under the new arrangement

 

Better

·     

Appointment of Chief Technology Officer in May 2023, and Chief Portfolio Officer in November 2023 to increase our bandwidth and ensure innovation in our solutions

·     

Fully integrated Cristie Data into iomart and begun the integration of the more recently acquired Pavilion IT, Oriium and Extrinsica to streamline our operating model

·     

Relocated to a new Grade A office in Glasgow city centre and commenced working towards our goal of achieving "Great Place to Work" accreditation

 

Bolder

·     

Cristie Data brand retired and will do the same for other acquired brands over next 12 months, closing/redirecting legacy websites and social media content with the aim of bringing all customer propositions under one brand

·     

Looking ahead the strength of our balance sheet and cash generation, and proven expertise in acquisitions provide strong foundations to take a bolder approach in pivoting our product mix to have a greater exposure to high growth, higher value-added services segments of the hybrid cloud services market

 

BOARD APPOINTMENTS

·     

Appointment during the year of two new non-executive Directors, both with considerable technology services experience, Annette Nabavi and Adrian Chamberlain, ensuring we retained a majority of independent non-executive Directors on the Board

·     

In September 2023, Lucy Dimes, Chair, took over the CEO role following the departure of Reece Donovan

·     

Nomination of Richard Last as Chair of the Board, to take effect from 12 June 2024, bringing a wealth of experience in chair and non-executive roles in many large and successful technology companies

 

OUTLOOK

·     

The first two months of the new financial year has seen trading in line with Board expectations, consistent with our high recurring revenue business model which gives good visibility

·     

The industry-wide change to VMware licensing introduced by Broadcom has resulted in increased costs ahead of associated revenue enhancing opportunities and this, combined with the timing of revenue recognition from the recently secured customer contracts and inflation driven cost and salary increases, means growth is likely to be more second half weighted in FY25

·     

The underlying drivers for cloud computing, increasing complexity of the technical landscape and customers looking for a trusted and experienced service partner gives the Board confidence in the outlook for the long-term prospects for the Group

 

STATUTORY EQUIVALENTS

 

A full reconciliation between adjusted and statutory profit before tax is contained within this statement. The largest item is the consistent add back of the non-cash amortisation of acquired intangible assets. The largest variance, year on year, is a £0.5m exceptional non-recurring charge recorded within administration costs related to the change in CEO during the month of September.

 

Lucy Dimes, CEO commented,

 

"I am delighted to report on a year of revenue growth supported by two acquisitions and organic growth within cloud managed services, the area which is the key focus of our commercial and product strategy. We delivered good profitability and continued strong cash generation, providing us with the strong financial foundation on which to execute our growth strategy.

 

"Our vision is to be the UK's leading secure cloud services provider to the SME market. We want to provide a compelling proposition to customers as cloud optimisation experts and a managed service provider that delivers the right cloud for the right workloads, which is secure by design.

 

"In a world where computing demands are getting ever more intense, and businesses across all sectors and size are looking at how they can harness the very latest technologies, iomart sits in an enviable position. We have a valuable data centre estate and capability connected by a fibre backbone, providing security, resilience and control, underpinned by a talented team of world class technical experts and engineers, combined with proven expertise across a range of customer segments. This and the financial firepower to rapidly expand our offering and scale through selective M&A gives us the confidence to drive for accelerated growth and achieve our vision."

 

 

Notes:

Recurring revenue, as disclosed in note 3, is the revenue that repeats either under long-term contractual arrangement or on a rolling basis by predictable customer habit.  % of recurring revenue is defined as recurring revenue (as disclosed in note 3) / revenue (as disclosed in the consolidated statement of comprehensive income)

Throughout this statement adjusted EBITDA, as disclosed in the consolidated statement of comprehensive income, is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges, acquisition costs and exceptional non-recurring costs. Throughout this statement acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs

Throughout this statement adjusted EBIT is earnings before interest and tax (EBIT) before amortisation charges on acquired intangible assets,  share-based payment charges, acquisition costs and exceptional non-recurring costs. Throughout these financial statements acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

Throughout this statement adjusted profit before tax, as disclosed on page 12, is profit before tax, amortisation charges on acquired intangible assets, share based payment charges, acquisition costs and exceptional non-recurring costs

5     Throughout this statement adjusted diluted earnings per share, as disclosed in note 7, is earnings per share before amortisation charges on acquired intangible assets, share based payment charges, acquisition costs and exceptional non-recurring costs and the taxation effect of these /weighted average number of ordinary shares - diluted (as disclosed in note 7)

6   Net debt being outstanding bank loans, lease liabilities less cash and cash equivalents (as disclosed on page 14). 

7     Cash conversion is calculated as cash flow from operations, as disclosed in the consolidated statement of cash flows, divided by adjusted EBITDA defined above 

 

This announcement contains forward-looking statements, which have been made by the Directors in good faith based on the information available to them up to the time of the approval of this report and such information should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying such forward-looking information.

 

For further information:

 

iomart Group plc

 

Tel: 0141 931 6400

Lucy Dimes, Chief Executive Officer


Scott Cunningham, Chief Financial Officer




Investec Bank PLC (Nominated Adviser and Broker)                                      

Tel: 020 7597 4000

Patrick Robb, Virginia Bull,




Alma Strategic Communications

Tel: 020 3405 0205

Caroline Forde, Hilary Buchanan, Kinvara Verdon


 

About iomart Group plc

iomart Group plc (AIM: IOM) is a cloud computing and IT managed services business providing hybrid cloud infrastructure, data management, protection and cyber security services, and digital workplace capability. Our mission is simple: to make our customers unstoppable by enabling them to connect, secure and scale anywhere, anytime. From our portfolio of data centres we own and operate across the UK to connected sites around the world, our 500-strong team can design and deploy the right cloud solution for our customers.

 

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

 

 

 

   

CHAIR'S STATEMENT

 

Financial year 2024 has been busy for iomart. During the year our previous CEO stepped down and the Board asked me to perform the dual role of Chair and CEO from September 2023, which allowed time for us to perform a diligent external search process for a new Chair. I am delighted, as announced on 11 June 2024, that we were able to nominate Richard Last, to take over as the new independent non-executive chair from 12 June 2024. Richard has a wealth of experience in chair and non-executive roles in many large and successful technology companies. We are very excited to have attracted such an experienced and knowledgeable individual to help guide us through this important period of our strategy's development and implementation.

 

Overview and financial results

 

Our results demonstrate the resilience of the Group in the face of the ongoing challenging economic backdrop for UK businesses. For the year ended 31 March 2024, the Group delivered revenue growth of 10% to £127.0 m (2023: £115.6 m), adjusted EBITDA growth of 4% to £37.7 m (2023: £36.2 m) and adjusted profit before tax of £15.0 m (2023: £14.8 m). The statutory profit before tax in the year was £8.7m (2023: £8.5m). These solid financial results provide the foundation and confidence for us to pursue a bolder strategy for growth, which is set out in detail below.

 

It is clear to me that iomart has the necessary ingredients to establish itself as the UK's leading secure cloud services provider to the SME marketplace. In my first 9 months as CEO, I have been focused on sharpening our corporate vision and customer propositions and streamlining our internal operating model. Good progress has been made in these areas, demonstrated by continued growth in our managed services order bookings, two successful acquisitions completed in the year, the strengthening of our senior management team with the recruitment of a Chief Technology Officer and Chief Portfolio Officer, and ultimately delivering full year profits in line with consensus.

 

Our iomart team is at the heart of the Group's success.  I would like to thank them all for their hard work and commitment during the year. One of the strengths of the Group is the quality of its fantastic workforce and each member's further development and support is one of the central tenets of our strategy. To underpin the importance of our people and the high performance culture we are nurturing, we have signed up to the Great Place to Work programme and will start the journey of accreditation over the coming year.

 

Additional Board changes

 

We were pleased to welcome two new independent non-executive Directors to the Board in the year, Annette Nabavi on 25 May 2023 and Adrian Chamberlain on 1 June 2023 ensuring we retained a majority of independent non-executive Directors on the Board. Adrian has been appointed as the Senior Independent Director and Annette as Chair of the Remuneration Committee. Annette and Adrian both bring considerable experience in the technology services sector. Following six years on the Board, Richard Masters, non-executive Director did not stand for re-election and left the Board following the AGM in September.

 

Dividend

 

We paid an interim dividend of 1.94p per share to shareholders in January 2024 and the Board is now proposing to pay a final dividend of 3.00p per share taking the total for the year to 4.94p. This would represent the maximum pay-out ratio under our stated dividend policy of paying up to 50% of adjusted diluted earnings per share. We believe this is appropriate given our funding position, robust business model and strength of our balance sheet. Subject to shareholder approval this proposed final dividend would be payable on 9 September 2024 to shareholders on the register at close on 16 August 2024.

 

 

Lucy Dimes

Executive Chair

11 June 2024

 

 

 

 

CHIEF EXECUTIVE OFFICER'S REPORT

 

Robust financial performance

 

I am delighted that we delivered a strong revenue growth of 10% and achieved a record revenues of £127.0m (2023: £115.6m) supported by two acquisitions in the year and a further year of organic growth within cloud managed services, the area which is the key focus of our commercial and product strategy.

 

We have delivered good profitability and strong cash generation in the year. Adjusted EBITDA1 grew by 4% to £37.7m (2023: £36.2 m) with adjusted profit before tax2 of £15.0 m (2023: £14.8 m) being flatter due to a £1.4m increase in finance costs due to the higher base rates. Given the strategic focus of growth within hybrid cloud we will, over time, see the Group deploy more public cloud infrastructure in customer solutions.  As a result of this changing mix, the Board is increasingly focused on adjusted EBIT3 which in year increased by 9% to £19.2m (2023: £17.7m).

 

The Group's cash generation continued to be strong with an adjusted EBITDA to operating cash flow conversion ratio of 97% (2023:94%).  This is a real strength of the business as has been demonstrated for more than a decade and is testament to our business model and strong focus on cash. In the year we invested £21.7m of cash (2023: £21.2m) into our datacentre estate, network and selected acquisitions. Despite this, our year-end net debt, only increased by 6% to £42.3m (2023: £39.8m). This represents a comfortable net debt to adjusted EBITDA ratio of 1.1 times (2023: 1.1 times).

 

A clear strategic vision

 

In a world where computing demands are getting ever more intense, and businesses across all sectors and size are looking at how they can harness the very latest technologies, iomart sits in an enviable position. We have a valuable data centre estate and capability connected by a fibre backbone, providing security, resilience and control, underpinned by a talented team of world class technical experts and engineers, combined with proven expertise across a range of customer segments. This and the financial firepower to rapidly expand our offering and scale through selective M&A gives us the confidence to drive for accelerated growth.

 

Our vision is to be the UK's leading secure cloud services provider to the SME market. We want to provide a compelling proposition to customers as cloud optimisation experts and a managed service provider that delivers the right cloud for the right workloads, which is secure by design. We can support our customers through every aspect of their digital transformation journey, provide true digital mobility, resilience and scalability, and become a trusted partner to them and their customers.

While we have many of the ingredients required to achieve this vision, we know we also have some key activities to undertake. These include extending our product offering (organically and through M&A), increasing our brand awareness, and improving our underlying operating model to ensure we deliver outstanding customer service and are a streamlined, commercially minded organisation able to execute at pace.

 

A renewed and sharpened sense of purpose to execute

 

Since I took over as CEO in September 2023 I have worked with our people and teams across the business to sharpen and strengthen our vision, strategy, purpose and values. Taking their feedback, we have honed in on three simple messages to align our execution to our strategic vision: Bigger, Better, Bolder.

 

These three watch words encapsulate the programme of activities we are driving internally, all of which are focused on increasing iomart's ability to drive growth within its cloud managed services segment.

 

Over the last year good progress has been made in key areas with the highlights noted in each of the areas detailed below:

 

Bigger

 

Order growth

 

We previously reported that we started FY24 with a well-inducted and skilled commercial team established after the appointment of a new Chief Sales Officer in February 2022. The commercial team delivered double digit order bookings growth in the year, including an increase in average order values and a higher number of new customer wins.

 

Acquisitive growth

 

We completed two acquisitions in the year which add significant skills and capabilities to the Group. The Extrinsica acquisition accelerated our capabilities and customer references within the Microsoft public cloud domain. We have seen positive trends in this area, including our first +£1m annual order value booking within the Microsoft practice being secured in the final month of the year for a new customer. 

 

Market positioning & partnerships

 

Following the acquisition of VMware by Broadcom, iomart has been selected as one of only seven UK strategic Broadcom Pinnacle Partners. This reflects the pedigree and engineering skills we have in this market leading technology and our strong position within the cloud market in the UK. Initial sales engagement with customers under this new arrangement has been encouraging with several new logos signing contracts during March and April 2024.

 

We have recently invested in additional resource to lead our strategic partnership programme which will ensure we have clearer criteria for designation of our strategic vendor partners and achieve greater leverage from the combined strengths of key relationships.

 

Better

 

Increasing our bandwidth to ensure innovation in our offering

 

We appointed an experienced Chief Technology Officer in late May 2023 to bring focus on the two discrete areas of technology and customer experience. This has proven to be successful in adding greater bandwidth on execution.  We concluded the reshaping of our senior management team with the recruitment of a Chief Portfolio Officer in November 2023.  Since then, we have invested in the product team who work in a collaborative manner across the business, ensuring increased attention to innovating our managed service solutions, leveraging vendor technologies, to meet customer needs and to more closely align iomart's solutions portfolio and positioning with market trends.

 

Streamlining our operating model

 

We made the decision earlier this year to accelerate the streamlining of our operating model which had been started under the previous "one iomart" initiative. During the year we fully integrated Cristie Data into iomart and in the last 3 months have used a similar blueprint to start integration for the more recently acquired businesses of Pavilion IT, Oriium and Extrinsica. These integrations will be fully concluded in the first half of the new financial year and will mean all of our managed services activity will be fully aligned to the same functional model of sales, product, service and technology. Our mass domain and hosting services division looking after the Easyspace and Hosting UK brands remain separate, supported by our technology services team and central support functions. 

 

Improved working environment

 

As the near 500 strong skilled iomart workforce continues to grow, we are increasingly focused on the recruitment, engagement, motivation, productivity, and retention of our people. Recognising the importance of the working environment, we relocated to a new Grade A office in Glasgow city centre in September 2023. Over the next 12 months, we plan to refurbish our key offices in London and Manchester to replicate the modern and welcoming atmosphere of our Glasgow location. The Board has also approved our goal to achieve the Great Place to Work accreditation, committing to continuous investment in fostering an environment where our employees can learn, grow, and thrive. We will continue to focus on strengthening the employee proposition and culture inside iomart and recently rolled out our new values - Purpose, Passion and Pride - which will provide guiding principles underpinning our renewed aspirations.

 

Bolder

 

Bringing all our customer propositions under one brand

 

As well as one singular operating model, we will also move forward with one brand for our secure cloud services activities. In the past we have been hesitant in retiring acquired brands due to concerns around specific customer reactions. While clearly this is a consideration, our belief is that, while we have varying product solutions, we are fundamentally supporting customers with their critical digital transformations and critical operational infrastructure underpinning their businesses and this is best served by an integrated, interoperable and optimised portfolio of solutions under a single brand and aligned organisation. We retired the Cristie Data brand in January 2024 and will do the same with Pavilion IT, Oriium and Extrinsica over the next 12 months. We are also tackling some of the legacy sub-brands which still exist on-line and will be closing these legacy websites and social media content.

 

Targeting acquisitions of greater size & scale

 

We have made 24 acquisitions in the last 14 years of varying size. The average revenue across these 24 acquisitions was around £4m, with the largest being the August 2022 acquisition of Concepta which had around £10m of revenue. We are looking to be bolder with our M&A strategy and target growing businesses in carefully selected areas with revenues of more than £10m in order to accelerate our growth trajectory and ensure more scale and a quicker impact. The strength of our balance sheet and cash generation, and proven expertise in acquisitions provide strong foundations to take this bolder approach. There may be opportunities which are of a smaller size, and these will continue to be considered on a case-by-case basis including consideration as to how easily they can be integrated and how the target company's specialist skills or customer verticals can add to iomart's overall portfolio.

 

FY25 focus

 

Looking ahead, our key areas of focus underpinning the 'Bigger, Better, Bolder' strategy will be:

 

1.    

Streamlined and integrated: Single operating model to drive best practise adoption and unified brand positioning.

2.    

Differentiation enablers: Focused functional transformation programmes to drive high performance and greater impact.

3.    

Bolder M&A focus: Acquisitions of a more substantial nature, with a focus in the areas of cyber, data management & security and extending our skills and scale within the Microsoft and cloud services domain.

 

Our objective through bolder M&A is to pivot the product mix to have a greater exposure to high growth, higher value-added services segments of the broader hybrid cloud services market i.e. higher value managed cloud services and security, cyber and data protection services. We will also strengthen our sector specific focus and positioning through greater tailoring of sector specific benefits of our solutions and expertise and improved customer referenceability.

 

We operate in a structurally growing market

 

With the insatiable growth in data requirements from across all industries, the demand for the three core cloud building blocks of compute power, storage and connectivity continue to expand. The concept of Cloud computing is now globally recognised with the complexity of available options continuing to grow. Within any digital transformation project, the management and security of data is paramount, especially given the ever-increasing security threat landscape. SME's are increasingly having to outsource these requirements to experts, who can help them navigate a constantly evolving and complex technical landscape, providing high levels of reliability, customer support, flexibility, and technical knowledge - areas in which we excel.

 

We do not expect any of the above structural growth drivers to diminish over the long-term and indeed AI is anticipated to fuel another wave of growth and most likely bring increased regulatory focus on business resilience and data governance. While there are signs of an improving UK macroeconomic outlook, there is some offset to the general sector outlook as economic pressures still apply in many parts of the economy. For iomart this materialises primarily in the longer sales cycle for larger orders from new customers undertaking digital transformation projects as greater scrutiny is applied to decision making.

 

Acquisitions undertaken in the year

 

A key element of our growth strategy is continued selective M&A to augment our organic growth. Our roadmap sees us focus on extending our capabilities and skills into closely aligned product and services areas. As well as being complementary to our existing experience, skills, and customer base these are also areas exposed to the higher growth of the wider IT sector.

 

Last year we re-established our M&A activity, after two financial years with no acquisitions, when we purchased Concepta in August 2022. It was pleasing to continue this by making two further acquisitions in the current year as noted below: 

 

·     

Extrinsica, acquired on 5 June 2023, was a significant strategic step providing iomart with deep Microsoft Azure expertise. While we had made some good progress organically in this area, this acquisition accelerates our capabilities and customer references within the Microsoft public cloud domain. This ensures we can confidently offer both existing and new customers strong skills and know-how across the three infrastructure delivery modes of on-premise, private cloud or public cloud or, in what we see as the growing trend in the market, a combination of the three in the form of hybrid cloud.

·     

Accesspoint, acquired on 5 December 2023, provides a suite of managed and hosted services including infrastructure hosting, software licensing, security management, business continuity services and communications provisioning focused on the legal sector. This acquisition provides iomart with deep industry expertise and a highly capable team with a strong reputation within the legal sector. The addition of the new customer base when combined with iomart's existing legal customers consolidates iomart's position in a key sector.  

 

We will maintain our structured and disciplined approach to M&A and remain active in the evaluation of potential targets.

 

Our commitment to ESG and sustainability

 

We believe that integrating environmental, social and governance ("ESG") considerations across our business enables us to accelerate our customers' success whilst looking after the environment and society. 

 

Our ongoing commitment is for iomart to be aligned with UK Government targets and as such we have committed to achieve Net Zero by 2050, or earlier, if possible. We commenced purchasing Renewable Energy Guarantees of Origin ("REGO") certified renewable electricity across our UK data centre estate in 2021, which significantly reduces our carbon emissions. During the last year the largest additional project undertaken was the installation of solar panels on the roof of our largest data centre in Maidenhead. This provides c.300kw peak power which is around 15% of the total average site power use. Full commission was completed in May 2024. We continue to look at ways to increase the energy efficiency across our UK data centre estate, including continuing the upgrades to our battery power systems. 

 

In terms of our Social agenda, we have continued our sponsorship of the "Empowering Woman in Leadership" programme which is designed to address the lack of gender diversity in leadership roles across the technology profession, and continued our support to the charity SmartSTEMs who organise and host events to inspire and engage young people from underprivileged backgrounds with the range of careers in STEM. This also leverages their partnership with Generation, a company that transforms education to employment to prepare, place and support people from disadvantaged backgrounds into careers that would otherwise be inaccessible. We have also set up a new Executive ESG Steering Group which will meet quarterly, and appointed our Chief Customer Officer, Sharon Mars-Leach as our Equality, Diversity and Inclusivity champion.

 

We have continued to strengthen our focus on Governance, with a new Executive Risk Committee which meets quarterly and as at 31 March 2024 we have now seen two full years of the internal audit programme which is managed by EY. Together these bring a heightened awareness and allowed greater embedding of risk management into the operations of the business. The two Non-Executive Directors appointed during the year, and the new Chair appointed post year end, bring a wealth of relevant experience in the technology services sector and bring different and very relevant commercial skills and experience to the Board.

 

Update on our infrastructure investment and energy pricing

 

Our UK-owned infrastructure is an important aspect of the delivery of our recurring revenue services and a critical differentiator in the market, enabling greater control over our resilience and providing control for our customers and importantly also allowing more value-add to be retained by iomart. We have a well-maintained data centre estate as this is core to ensuring a resilient service. We have 12 data centres in the UK, with our two largest data centres in Maidenhead and central London accounting for around half of our UK capacity and over 25 points of presence globally, all connected by a resilient network.

 

During the year we invested £9.5m (2023: £8.9m) in fixed assets. Of this amount around £3.8m was in the fabric of the datacentres and our UK network, with the balance being on compute power and storage for our customers. The largest spend within the infrastructure was £1.2m on cooling systems in the Maidenhead and Nottingham DCs. We are continuing this scheduled upgrade programme including a £1.5m full replacement of the cooling system at our Gosport datacentre in the first half of the new financial year. 

 

The data centre sector as a whole has had to navigate the significant challenges in the energy markets during the prior year. iomart's robust business model and customer arrangements have ensured this additional energy cost has been appropriately passed through to the customer base. Given the profile of the energy costs during the last 24 months and our hedging strategy, our overall energy costs have been fairly stable year on year. This position will continue into the new financial year as we have the majority of the next 12 months energy costs secured under hedging arrangements. 

 

Current trading and outlook

 

The first two months of the new financial year has seen trading in line with Board expectations, consistent with our high recurring revenue business model which gives good visibility. The industry-wide change to VMware licencing introduced by Broadcom has resulted in increased costs ahead of associated revenue enhancing opportunities and this, combined with the timing of revenue recognition from the recently secured customer contracts and inflation driven cost and salary increases, means growth is likely to be more second half weighted.  

 

Our clear strategy for growth is designed to increase our customer portfolio in the higher growth areas of the expanding cloud market.  Unlike many of our peers we are doing this from a position of strength with our secure, resilient cloud and network infrastructure, strong customer base, robust business model and financial position. The underlying drivers for cloud computing, increasing complexity of the technical landscape and customers looking for a trusted and experienced service partner gives the Board confidence in the outlook for the long-term prospects for the Group.

 

 

Lucy Dimes

Chief Executive Officer

11 June 2024

 

 

Definition of alternative performance measures:

1 Throughout these financial statements adjusted EBITDA (disclosed in the consolidated statement of comprehensive income) is earnings before interest, tax, depreciation and amortisation (EBITDA) before share-based payment charges, acquisition costs and exceptional non-recurring costs. Throughout these financial statements acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs

2 Throughout these financial statements adjusted profit before tax (disclosed on page 12) is profit before tax, amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and exceptional non-recurring costs

3 Adjusted EBIT is earnings before interest and tax (EBIT) before amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and exceptional non-recurring costs. Throughout these financial statements acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

4 Recurring revenue is the revenue that repeats either under long-term contractual arrangement or on a rolling basis by predictable customer habit. % of recurring revenue is defined as Recurring Revenue (as disclosed in note 3) / Revenue (as disclosed in the consolidated statement of comprehensive income)

 

 

 

 

CHIEF FINANCIAL OFFICER'S REPORT

 

I am pleased to report on a year of steady financial performance, with good signs of order growth within our focus business area of cloud managed services, reflecting a positive response by customers and the wider market to our growing hybrid cloud offering. Recurring revenues remain high as a % of revenue, across what remains a low customer concentration across wide sectors, but we are focused on further progress on our product portfolio and customer service levels to increase our renewal levels. Steady margins, high levels of recurring revenues, strong cash generation, a well-funded balance sheet and strong financing structure provides the firepower to execute further M&A.

 

Key Performance Indicators

 

 

2024

2023

Revenue



£127.0m

£115.6m

% of recurring revenue1



91%

92%

Gross profit %2



54.8%

55.0%

Adjusted EBITDA3



£37.7m

£36.2m

Adjusted EBITDA margin %4



29.7%

31.3%

Adjusted EBIT5



£19.2m

£17.7m

Adjusted EBIT margin %6



15.1%

15.3%

Adjusted profit before tax7



£15.0m

£14.8m

Adjusted profit before tax margin %8



11.8%

12.8%

EBIT9



£13.0m

£11.4m

Profit before tax



£8.7m

£8.5m

Profit before tax margin %10



6.9%

7.4%

Basic earnings per share



5.8p

6.4p

Adjusted earnings per share (diluted) 11



9.8p

10.9p

Cash flow from operations / Adjusted EBITDA %12



97%

94%

Net debt / Adjusted EBITDA leverage ratio13 



1.1

1.1

     See page 15 for definition of alternative performance measures 

 

Revenue

 

Overall revenue from operations increased by 10% to £127.0m (2023: £115.6m). We saw a consistent share of recurring revenue at 91% (2023: 92%) compared to prior years. We remain focussed on retaining our recurring revenue business model with the combination of multi-year contracts and payments in advance providing us with good revenue visibility. 

 

Cloud Services

 

The following is the disaggregation of Cloud Services revenues of £114.6m (2023: £103.1m):

Disaggregation of Cloud Services revenue



2024

£'000

2023

£'000

Cloud managed services



75,212

64,115

Self-managed infrastructure



28,429

29,616

Non-recurring revenue



10,937

9,359

 


 

114,578

103,090

 

Cloud managed services (recurring revenue)

 

Revenue within cloud managed services increased by £11.1m or 17% to £75.2m (2023: £64.1m). This was driven by 3% organic growth in recurring revenue and approximately £8.9m revenue contribution from the latest three acquisitions. A significant number of moving parts have arisen in the last two years within our pricing and renewal profiles. The energy price adjustments are now, in some cases, over 18 months ago, meaning they have become structurally consumed into our renewals or new business pricing. Our energy hedging strategy will mean a continued stable and predictable energy cost for the business and our customers over the next 12 months. 

 

Our order bookings in this area of the business grew well over the year, which bodes well for the future growth of the business, as both existing customers and prospects have responded positively to our broader solution set and re-invigorated focus on customer service. The year did also see some lower levels of renewals from some existing customers and improving renewal levels continues to be a focus area of the business looking ahead. The timing aspect of these elements will dampen the run-rate entering the first half of the new financial year, especially prior to the deployments and billing of the new orders booked.

 

Self-managed infrastructure (recurring revenue)

 

The self-managed infrastructure revenue of £28.4m (2023: £29.6m) decreased by £1.2m. Our own regional data centre estate and fibre network positions us well to offer such infrastructure as a service which primarily takes the form of the provision of dedicated servers. It is generally recognised that this activity is a lower growth area within the cloud market but continues to offer a cost competitive solution for many use cases and for customers who have retained their own IT skills.

 

Due to the scalable and self-managed nature of the dedicated server customer proposition we do have a larger number of customers within this area, including a very long tail of smaller customers. In this area we have seen more sensitivity to the energy price rises which were applied towards the end of FY23. As the Group continues its evolution towards a broader portfolio of managed service offerings, the impact of potential lower level of renewals in this area in particular will decrease.

 

We will continue to allocate resources to ensure we provide this customer base with resilient, cost effective and increasingly automated solutions.

 

Non-recurring revenue

 

Non-recurring revenue of £10.9m (2023: £9.4m) relates primarily to on premise product and licence reselling plus consultancy projects. Approximately £2.6m revenue contribution related to acquisitions, primarily the Concepta acquisition in August 2022 which included the Pavilion IT brand. This means excluding the acquisition impact, the underlying reduction in non-recurring revenue was £1.1m which mainly arose in the first half of the year.

We continued to simplify our operations in this area with the full integration of the reselling brand Cristie Data. This took place in December 2023 and we plan to take a similar approach with Pavilion IT in the first half of the new financial year. This means all reselling activity will be undertaken by an integrated iomart operation. 

 

Easyspace

 

Our Easyspace segment has performed well over the year with revenues remaining consistent at £12.5m (2023: £12.5m).  The domain name and web hosting business is an area in which we do not invest heavily but it was pleasing to see a solid performance with high level of renewals from our base of c.57,000 customers. The activity remains highly profitable and cash generative.

 

Gross Profit

 

Gross profit in the year, which is calculated by deducting from revenue variable cost of sales such as power, software licences, connectivity charges, domain costs, public cloud costs, sales commission, the relatively fixed costs of operating our data centres plus, for non-recurring revenue, the cost of hardware and software sold, increased by £6.0m to £69.6m (2023: £63.6m). In percentage terms, gross margin2 overall is relatively stable on the prior year at 54.8% (2023: 55.0%) which is positive especially recognising the many moving parts, including the recent acquisition activity and a high inflationary external environment.

 

Adjusted EBITDA3

 

The Group's adjusted EBITDA increased by £1.5m to £37.7m (2023: £36.2m) translating to an adjusted EBITDA margin4 of 29.7% (2023: 31.3%). The administration expense (before depreciation, amortisation, share based payment charges, acquisition costs and exceptional non-recurring costs) of £31.8m (2023: £27.4m) is £4.4m higher than the previous year comparative. However, this includes £4.1m of administrative expenses from the Extrinsica and Accesspoint acquisitions and the full year impact of the Concepta acquisition meaning the underlying increase in administrative expenses is limited to £0.3m or 1%.

 

The Cloud Services segment saw a 5.6% increase in adjusted EBITDA to £36.7m (2023: £34.8m). In percentage terms the Cloud Services margin decreased to 32.1% (2023: 33.8%) primarily due to both the mix impact of the acquisitions and our business model becoming less capital intensive over time. The Easyspace segment's adjusted EBITDA was £6.2m (2023: £6.2m) reflecting the stable revenue performance in the year, which in percentage terms was again stable at 49.4% (2023: 49.2%).

 

Group overheads increased by £0.4m in the year to £5.2m (2023: £4.8m). These are costs which are not allocated to segments, including the cost of the Board, the running costs of the headquarters in Glasgow, Group marketing, human resource, finance, legal, and design functions and professional fees for the year.

 

Adjusted EBIT5

 

The Group depreciation charge of £15.7m (2023: £15.9m) fell by £0.2m in the year and as a percentage of recurring revenue is 13.5% (2023: 14.9%). This is the second year in a row in which we have seen this percentage value drop. The Group charge for amortisation of intangibles, excluding amortisation of intangible assets resulting from acquisitions ("amortisation of acquired intangible assets"), of £2.8m (2023: £2.6m) is consistent year on year. This means that the Group's adjusted EBIT increased by £1.5m to £19.2m (2023: £17.7m) which in adjusted EBIT margin6 terms translates to 15.1% (2023: 15.3%).

 

The strategic focus of growth within hybrid cloud and expected resulting increase in consumption of public cloud infrastructure within customer solutions, meaning no capital requirement on iomart infrastructure, may cause a gradual reduction in our adjusted EBITDA margin4 but a more stable EBIT margin5 as depreciation as a % of our recurring revenue falls. This is why the Board are now viewing this measure as an additional KPI.

 

Adjusted profit before tax7

 

Finance costs of £4.3m (2023: £2.9m) has increased year on year by £1.4m due to the higher SONIA interest rate. Our revolving credit facility has a borrowing cost at the Group's current leverage levels of 180 basis points over SONIA.

 

After deducting the charges for depreciation, amortisation (excluding the charges for the amortisation of acquired intangible assets), exceptional non-recurring costs and finance costs from the adjusted EBITDA, the Group's adjusted profit before tax increased to £15.0m (2023: £14.8m), representing an adjusted profit before tax margin8 of 11.8% (2023: 12.8%).

 

Earnings before interest and tax and Profit before tax

 

The measure of adjusted profit before tax is an alternative profit measure which is commonly used to analyse the performance of companies particularly where M&A activity forms a significant part of their activities.

A reconciliation of adjusted profit before tax to reported profit before tax is shown below:

Reconciliation of adjusted profit before tax to profit before tax



2024

£'000

2023

£'000

Adjusted profit before tax7

 

 

14,956

14,820

Less: Amortisation of acquired intangible assets



(4,226)

(3,880)

Less: Acquisition costs



(1,010)

(922)

Less: Share-based payments



(517)

(696)

Less: Administrative expenses - exceptional non-recurring costs



(462)

-

Less: Cost of sales - exceptional non-recurring costs



-

(820)

Profit before tax


 

8,741

8,502

 

The adjusting items in the current year are:

·     

charges for the amortisation of acquired intangible assets of £4.2m (2023: £3.9m). Acquired intangible assets have increased by £0.3m due to the recent acquisitions;

·     

acquisition costs of £1.0m (2023: £0.9m) which includes £0.5m of professional fees associated with the Extrinsica and Accesspoint acquisitions;

·     

share-based payment charges of £0.5m (2023: £0.7m), the lower charge driven by a higher number of forfeited options in the year; and

·     

£0.5m exceptional non-recurring charge in the current year recorded within administration costs related to the change in CEO in September 2023.

 

In the prior year we had a non-recurring cost of sales item of £0.8m which was related to the energy crisis and specific cost notification timing issues. Given the exceptional and non-recurring nature of this item we felt it required to be drawn out separately to ensure a more meaningful understanding of the financial performance in that year.

 

After deducting these items from the adjusted profit before tax, the reported profit before tax was £8.7m (2023: £8.5m). In percentage terms the profit before tax margin9 was a slight decrease to 6.9% (2023: 7.4%).

 

Earnings before interest and tax ("EBIT") in the year was £13.0m (2023: £11.4m), the increase consistent with the Adjusted EBIT5 movement as the overall variance of the adjusted items year on year is only £0.1m.

 

Taxation

 

The tax charge for the year is £2.3m (2023: £1.5m). The tax charge for the year is made up of a corporation tax charge of £2.7m (2023: £0.9m) with a deferred tax credit of £0.4m (2023: charge of £0.6m). The effective rate of tax for the year is 26% (2023: 18%). In the current year, we have applied the 25% UK corporation tax rate to corporation tax (2023:19%), effective 1st April 2023. In addition, the tax charge in the year is the net result of higher taxable income and the effect of the full expensing relief available for capital investments. Given iomart is very much a UK business, then the UK headline corporate tax is still considered a reasonable recurring effective tax rate for underlying profits.

 

Profit for the year

 

After deducting the tax charge for the year from the profit before tax the Group has recorded a profit for the year of £6.4m (2023: £7.0m).

 

Earnings per share

 

The calculation of both adjusted earnings per share and basic earnings per share is included at note 7.

 

Basic earnings per share from continuing operations was 5.8p (2023: 6.4p), a reduction of 9%.

 

Adjusted diluted earnings per share11, based on profit for the year attributed to ordinary shareholders before amortisation charges of acquired intangible assets, acquisition costs, share-based payment charges, exceptional non-recurring costs, and the tax effect of these items was 9.8p (2023: 10.9p), a reduction of 10%. Given the adjusted profit before tax shows a small increase this reduction in adjusted diluted earnings per share of 10% is mainly driven by the increase in the UK corporation tax to 25%.

 

Dividends

 

Our dividend policy, which has been in place for several years now, is based on the profitability of the business in the period measured with reference to the adjusted diluted earnings per share we deliver in a financial year. For the last few years we have been paying dividends at the maximum level allowed by our stated policy. The current policy is a maximum pay-out of 50% of adjusted diluted earnings per share. The Directors are proposing a final dividend of 3.00p (2023: 3.50p) which is at maximum level set by the dividend policy which we believe is fully appropriate given the recurring revenue nature of the Group, the level of operating cash which we deliver and the low level of indebtedness within the Group. As a result, along with the interim dividend of 1.94p (2023: 1.94p), which was paid in January 2024, the total dividend for the year is 4.94p (2023: 5.44p), the reduction reflecting the movement in the adjusted diluted earnings per share.

 

Acquisitions

 

Extrinsica

 

We completed the acquisition of Extrinsica on 5 June 2023 for an initial consideration of £4.0m, with a further cash payment of £0.4m made after the achievement of certain key customer targets. Of the initial consideration, £2m was satisfied by the issue of 1,562,500 new ordinary shares in iomart. The balance of £2.0m was paid in cash. We also repaid £3.7m of debt acquired on completion.

 

The sale and purchase agreement included the potential for a further £4.0m to £7.0m of contingent earn-out payments based on the profitability for the twelve months ending 31 March 2024. The business has seen growth since the acquisition but not at the pace assumed by the previous management. This was primarily due to slippage of certain assumed new customer project wins.  As a result, no earn-out payments are payable. There was a final deferred payment due of £0.2m on achievement of certain key customer targets. This was paid subsequent to the year end in April 2024.

 

Accesspoint

 

We completed the acquisition of Accesspoint on 5 December 2023 for an initial consideration of £4.5m which was paid in cash on completion on a debt and cash free basis. Subsequent to the year end, a further £0.5m was paid in May 2024 on achievement of the final post acquisitions milestones. The acquisition also includes up to a further £1.4m contingent earn-out payment based on the profitability of Accesspoint for the twelve months ending 31 August 2024. 

 

Cash flow and net debt

 

Net cash flows from operating activities

 

The Group continued to generate high levels of operating cash over the year. Cash flow from operations was £36.6m (2023: £33.8m) which represents a 97% conversion12 of adjusted EBITDA (2023: 94%). This metric in prior year was somewhat distorted by the cash element of the non-recurring adjusting items of around £0.8m which if excluded from cash flow from operations would result in a conversion ratio of 96%. 

 

Cash payments for corporation tax in the year were £0.7m (2023: refund of £0.05m), resulting in net cash flow from operating activities in the year of £35.9m (2023: £33.9m).

 

Cash flow from investing activities

 

Our strategy is to continue to reinvest some of the strong operating cash flow we generate back into the business both in the form of internal investments into our UK infrastructure but also in the continuation of our disciplined acquisition strategy. The Group invested a total of £21.7m (2023: £21.2m) during the year. In the current year, we paid equity consideration on the Extrinsica and Accesspoint acquisitions which, when net with the cash acquired, resulted in a £5.7m net outflow (2023: £10.3m related to the Concepta acquisition). The earn-out consideration on the Concepta and a contingent element of the Extrinsica acquisitions was also paid in the year resulting in an additional outflow of £4.2m (2023: £nil). 

 

The Group continues to invest in property, plant and equipment through expenditure on data centres, network and on equipment required to provide managed services to both its existing and new customers. As a result, the Group spent £9.5m (2023: £8.9m) on assets. Most of the expenditure in the year was on operational items such as servers and storage to support customer deployments.

 

Expenditure was also incurred on development costs of £2.2m (2023: £1.9m) and on intangible assets of £0.1m (2023: £0.1m). 

 

Cash flow from financing activities

 

In the current year, loan drawdowns of £7.6m (2023: £10.4m) were made from the revolving credit facility to support the initial equity consideration for the Extrinsica and Accesspoint acquisitions. We also repaid £3.7m of bank debt acquired from Extrinsica at completion.

 

Bank loan repayments of £2.0m (2023: £10.0m) were made in the year resulting in a closing drawn bank loan of £40.0m (2023: £34.4m). Cash received in the year from issue of shares was £7k (2022: £5k). We also made dividend payments of £6.1m (2023: £6.1m); paid finance costs of £3.1m (2023: £2.2m) and made lease repayments of £5.0m (2023: £4.9m). 

 

Net cash flow

 

As a consequence of the above component elements and working capital movements in the year, our overall cash position was an inflow of £1.9m (2023: £1.5m outflow) which resulted in cash and cash equivalent balances at the end of the year of £15.8m (2023: £13.8m).

 

Net Debt

 

The net debt position of the Group at the end of the year was £42.3m (2023: £39.8m) as shown below. The net debt position represents a multiple of 1.1 times13 our adjusted EBITDA (2023: 1.1 times) which we believe is a comfortable level of debt to carry given the recurring revenue business model and strong cash generation in the business.

 



 

2024

£'000

 

2023

£'000

Bank revolver loan



40,000

34,400

Lease liabilities



18,091

19,180

Less: cash and cash equivalents



(15,755)

(13,818)

Net Debt


 

42,336

39,762

 

The Group has access to a £100m Revolving Credit Facility ("RCF") provided by a banking group consisting of HSBC, Royal Bank of Scotland, Bank of Ireland and Clydesdale Bank, that matures on 30 June 2026 which also benefits from a £50m Accordion Facility.  The RCF has a borrowing cost at the Group's current leverage levels of 180 basis points over SONIA. 

 

The decrease in the lease liability to £18.1m (2023: £19.2m) reflects expected payments on property arrangements and that there were no material revisions to existing leases.

 

Post balance sheet event

 

Following the acquisition of VMware by Broadcom, iomart has been selected as one of only seven UK strategic Broadcom VMware partners. The iomart Board during May 2024 approved the decision to commit to a 5 year licence programme with Broadcom. This commitment ensures our existing customers continue to benefit from our deep VMware know-how and capability and will allow us to support new customers who now require an intermediary partner to support their own requirements. As for many organisations globally, the new licence fees will represent a higher cost burden from that of the previous licence consumption arrangements of the past. Prior to various mitigations actions, and ultimately recovery from our customer base over time, such increase is around 60%.  For iomart we will be seeking to ensure as much platform optimisation takes place as possible but we will also, in combination, seek to ensure the higher cost is recovered at customer renewals. There will be a timing lag on recovery over the coming 12 months which will impact the first half in particular. Our status as a Broadcom VMware Pinnacle partner does offers up a new revenue stream from smaller managed service providers and also end users who can no longer transact directly with VMware but this will be lower margin activity.

 

As at the date of this report, we await final contractual agreements from Broadcom. As a result, at this date, we have not entered into a legally binding arrangement. It is likely that the full 5 year commitment will have an approximate £15m value, with cash payments made during the course of the term. It is likely that, given the different characteristic and length of the licence commitment, rather than a variable operating cost item, the equivalent cost will be recorded as an intangible asset and amortised appropriately over the 5 year period.  Based on this expecting accounting treatment this will change the cost classification within the statement of comprehensive income with what was previously recorded as a cost of sale item now, due to the new arrangements outlined above, going forward being recorded as intangible amortisation.

 

Scott Cunningham

Chief Financial Officer

11 June 2024

 

 

Definition of alternative performance measures:

1 Recurring revenue is the revenue that repeats either under long-term contractual arrangement or on a rolling basis by predictable customer habit. % of recurring revenue is defined as Recurring Revenue (as disclosed in note 3) / Revenue (as disclosed in the consolidated statement of comprehensive income)

2 Gross profit margin % is defined as Gross Profit / Revenue as a % (both as disclosed in the consolidated statement of comprehensive income)

3 Adjusted EBITDA (as disclosed in the consolidated statement of comprehensive income) is earnings before interest, tax, depreciation and amortisation (EBITDA) before share-based payment charges, acquisition costs and exceptional non-recurring costs. Throughout these financial statements acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

4 Adjusted EBITDA margin % is defined as adjusted EBITDA (as disclosed in the consolidated statement of comprehensive income) / Revenue (as disclosed in the consolidated statement of comprehensive income) as a %

5 Adjusted EBIT is earnings before interest and tax (EBIT) before amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and exceptional non-recurring costs. Throughout these financial statements acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.

6 Adjusted EBIT margin% is defined as adjusted EBIT / Revenue (as disclosed in the consolidated statement of comprehensive income) as a %

7 Adjusted profit before tax (as disclosed on page 12) is profit before tax, amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and exceptional non-recurring costs.

8 Adjusted profit before tax margin % is defined as adjusted profit before tax (as disclosed on page 12) / Revenue (as disclosed in the consolidated statement of comprehensive income) as a %

9 Profit before tax margin % is defined as Profit before Tax / Revenue (both as disclosed in the consolidated statement of comprehensive income) as a %

10 EBIT is earnings before interest and tax 

11 Adjusted diluted earnings per share is earnings before amortisation charges on acquired intangible assets, share-based payment charges, acquisition costs and exceptional non-recurring costs and the tax impact of adjusted items /weighted average number of ordinary shares - diluted (as disclosed in note 7)

12 Cash flow from operations / Adjusted EBITDA % is defined as cash flow from operations (as disclosed in the consolidated statement of cash flows) / Adjusted EBITDA (as disclosed in the consolidated statement of comprehensive income) as a %

13 Net debt / Adjusted EBIDTA level ratio is defined as Net Debt (as disclosed on page 14) / Adjusted EBITDA (as disclosed in the consolidated statement of comprehensive income)

 

 

 

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

YEAR ENDED 31 MARCH 2024

 

 

 


Note

2024

 £'000

2023

 £'000

Revenue



3

127,049

115,638

 

 





Cost of sales

 



(57,469)

(52,080)


 





Gross profit

 



69,580

63,558

 

 





Administrative expenses

 



(56,552)

(52,141)


 





 

 





Operating profit

 


     

13,028

11,417

 

 





Analysed as:

 





Earnings before interest, tax, depreciation, amortisation, acquisition costs, share-based payments and exceptional non-recurring costs

 



37,728

36,161

Share-based payments

 



(517)

(696)

Acquisition costs

 



(1,010)

(922)

Administrative expenses - exceptional non-recurring costs

 



(462)

-

Cost of sales- exceptional non-recurring costs

 



-

(820)

Depreciation

 


9

(15,715)

(15,861)

Amortisation - acquired intangible assets

 


8

(4,226)

(3,880)

Amortisation - other intangible assets

 


8

(2,770)

(2,565)


 





 

 





Finance costs - net

 



(4,287)

(2,915)

 

 





Profit before taxation

 



8,741

8,502

 

 





Taxation



4

(2,300)

(1,507)

 

 





Profit for the year attributable to equity holders of the parent

 

 

 

6,441

6,995

 

 

 

 



 

 

 

 



Other comprehensive income

 

 

 



 

 

 

 



Amounts which may be reclassified to profit or loss

 

 

 



Currency translation differences

 

 

 

(25)

60

Other comprehensive income for the year

 

 

 

(25)

60

 

 

 

 



Total comprehensive income for the year attributable to equity holders of the parent

 



6,416

7,055

 

 



 

 

 

 

 

 



 

 

 

 



Basic and diluted earnings per share

 





Basic earnings per share

 


7

5.8p

6.4p

Diluted earnings per share

 


7

5.6p

6.2p

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 MARCH 2024

 

 

 

 

 

2024

2023

 

 

Note

 

£'000

£'000

ASSETS

 

 

 

 

 

Non-current assets

 

 

 

 

 

Intangible assets - goodwill


8


109,821

99,950

Intangible assets - other


8


15,231

12,981

Trade and other receivables




111

177

Property, plant and equipment


9


63,492

64,959

 

 

 

 

188,655

178,067

Current assets

 

 

 

 

 

Cash and cash equivalents




15,755

13,818

Trade and other receivables




26,460

25,804

Current tax asset




-

987

 

 

 

 

42,215

40,609







Total assets

 

 

 

230,870

218,676

 




 

 

LIABILITIES




 

 

Non-current liabilities




 

 

Trade and other payables




(2,834)

(2,666)

Non-current borrowings


11


(55,582)

(50,203)

Provisions




(3,052)

(2,755)

Deferred tax


5


(4,884)

(3,221)

 

 

 

 

(66,352)

(58,845)

Current liabilities

 

 

 

 

 

Contingent consideration due on acquisitions


10


(2,080)

(4,000)

Trade and other payables




(35,728)

(31,898)

Current tax liability




(804)

-

Current borrowings


11


(2,509)

(3,377)

 

 

 

 

(41,121)

(39,275)







Total liabilities

 

 

 

(107,473)

(98,120)







Net assets

 

 

 

123,397

120,556







EQUITY

 

 

 

 

 

Share capital




1,124

1,106

Own shares




(70)

(70)

Capital redemption reserve




1,200

1,200

Share premium




22,500

22,495

Merger reserve




6,967

4,983

Foreign currency translation reserve




21

46

Retained earnings




91,655

 

90,796

 







 Total equity

 

 

 

123,397

120,556

 

 

 

 


 

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED 31 MARCH 2024

 

 

 

 

 

Note

2024

£'000

2023

£'000




 



Profit before taxation

 

 

 

8,741

8,502

Finance costs - net

 

 

 

4,287

2,915

Depreciation



9

15,764

16,492

Amortisation



8

6,996

6,445

Share-based payments




517

696

Research and development tax credit




(364)

-

Movement in trade receivables




1,620

(3,256)

Movement in trade payables




(914)

2,045

Cash flow from operations

 

 

 

36,647

33,839

Taxation (paid)/received




(710)

48

Net cash flow from operating activities

 



35,937

33,887

 

 

 




Cash flow from investing activities

 

 




Purchase of property, plant and equipment



9

(9,513)

(8,918)

Development costs




(2,178)

(1,887)

Purchase of intangible assets



8

(113)

(44)

Payment for current period acquisitions net of cash acquired


(5,710)

(10,307)

Payment of contingent consideration

10

(4,180)

-

Net cash used in investing activities




(21,694)

(21,156)

 

 

 




Cash flow from financing activities

 

 




Issue of shares




7

5

Drawdown of bank loans




7,600

10,400

Payments under lease liabilities



12

(5,017)

(4,902)

Repayment of bank loans




(2,000)

(10,000)

Repayment of debt acquired on acquisition




(3,728)

(1,508)

Finance costs paid




(3,069)

(1,900)

Refinancing costs paid




-

(249)

Dividends paid




(6,099)

(6,091)

Net cash used in financing activities




(12,306)

(14,245)







Net increase/(decrease) in cash and cash equivalents

 

 

1,937

(1,514)




 

Cash and cash equivalents at the beginning of the year



13,818

15,332




 

Cash and cash equivalents at the end of the year


15,755

13,818

 

 

 

 

 


 

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

YEAR ENDED 31 MARCH 2024

 

 

 

 

 

 

 

Share capital

 

Own shares EBT

Foreign currency translation reserve

 

Capital redemption reserve

 

Share premium account

 

 

Merger reserve

 

 

Retained earnings

 

 

 

Total

 

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

£'000








 



Balance at 1 April 2022


1,101

(70)

(14)

1,200

22,495

4,983

89,196

118,891

 







 


 

Profit for the year


-

-

-

-

-

-

6,995

6,995

Currency translation differences


-

-

60

-

-

-

-

60

Total comprehensive income


-

-

60

-

-

-

6,995

7,055

 


 



 

 

 

 

 

Dividends - final (paid)


-

-

-

-

-

-

(3,957)

(3,957)

Dividends - interim (paid)


-

-

-

-

-

-

(2,134)

(2,134)

Share-based payments


-

-

-

-

-

-

696

696

Issue of share capital


5

-

-

-

-

-

-

5

Total transactions with owners


5

-

-

-

-

-

(5,395)

(5,390)

 

 

 

 

 

 

 

 

 

 

Balance at 31 March 2023

 

1,106

(70)

46

1,200

22,495

4,983

90,796

120,556

 

 

 

 

 

 

 

 

 

 

 


 



 

 

 

 

 

Profit for the year


-

-

-

-

-

-

6,441

6,441

Currency translation differences


-

-

(25)

-

-

-

-

(25)

Total comprehensive income


-

-

(25)

-

-

-

6,441

6,416

 


 



 

 

 

 

 

Dividends - final (paid)


-

-

-

-

-

-

(3,922)

(3,922)

Dividends - interim (paid)


-

-

-

-

-

-

(2,177)

(2,177)

Share-based payments


-

-

-

-

-

-

517

517

Issue of share capital


18

-

-

-

5

1,984

-

2,007

Total transactions with owners


18

-

-

-

5

1,984

(5,582)

(3,575)







 

 



Balance at 31 March 2024

 

1,124

(70)

21

1,200

22,500

6,967

91,655

123,397

 

 

 

 


 

NOTES TO THE FINANCIAL INFORMATION          

YEAR ENDED 31 MARCH 2024

 

1.         GENERAL INFORMATION

 

iomart Group plc is a public listed company listed on the Alternative Investment Market ("AIM"), incorporated and domiciled in the United Kingdom and registered in Scotland under the Companies Act 2006. The address of the registered office is 6 Atlantic Quay, 55 Robertson Street, Glasgow, G2 8JD.

 

2.         ACCOUNTING POLICIES

Basis of preparation

The financial information set out in the announcement does not constitute the Group's statutory accounts for the years ended 31 March 2024 and 31 March 2023 within the meaning of section 434 of the Companies Act 2006. The financial information for the year ended 31 March 2023 is derived from the statutory accounts for that year which have been delivered to the Registrar of Companies. The financial information for the year ended 31 March 2024 is derived from the statutory accounts for that year which were approved by the Directors on 11 June 2024. The statutory accounts for the year ended 31 March 2024 will be delivered to the Registrar of Companies following the Company's Annual General Meeting. The auditors reported on those accounts; their report was unqualified and did not contain a statement under Section 498(2) or (3) of the Companies Act 2006.

 

The Group's financial statements have been prepared in accordance accordance with applicable law and UK-adopted international accounting standards.

 

The Group's financial statements have been prepared on the historical cost basis.

 

Adoption of new and revised Standards - Amendments to IFRS that are mandatorily effective for the current year

There are no new accounting policies applied in the year ended 31 March 2024 which have had a material effect on these accounts.  In addition, the Directors do not consider that the adoption of new and revised standards and interpretations issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2023 has had any material impact on the financial statements of the Group.

 

Operating segments - prior period reclassification (note 3 only)

During the year we moved the financial results of the brand SimpleServers into the Easyspace division as the nature of the services provided and the profile of the customer base are aligned better with the mass market hosting sector which we address in the Easyspace division. As a result, operating segment disclosures for the year ended 31 March 2023 have been reclassified resulting in an increase in Easyspace revenue and adjusted EBITDA with the opposite impact in Self-managed infrastructure in Cloud Services (Revenue impact 2023: £864k, EBITDA impact 2023: £55k).

 

3.     sEGMENTAL ANALYSIS

 

The Chief Operating Decision-Maker has been identified as the Chief Executive Officer ("CEO") of the Company. The Group has two operating segments and the CEO reviews the Group's internal reporting which recognises these two segments in order to assess performance and to allocate resources. The Group has determined its reportable segments are also its operating segments based on these reports.

The Group currently has two operating and reportable segments being Easyspace and Cloud Services.

Easyspace - this segment provides a range of shared hosting and domain registration services to micro and SME companies.

Cloud Services - this segment provides managed cloud computing facilities and services, through a network of owned data centres, to the larger SME and corporate markets.

Information regarding the operation of the reportable segments is included below. The CEO assesses the performance of the operating segments based on revenue and a measure of earnings before interest, tax, depreciation and amortisation (EBITDA) before any allocation of Group overheads, charges for share-based payments, costs associated with acquisitions, any gain or loss on revaluation of contingent consideration and material non-recurring items. This segment EBITDA is used to measure performance as the CEO believes that such information is the most relevant in evaluating the results of the segment.

The Group's EBITDA for the year has been calculated after deducting Group overheads from the EBITDA of the two segments as reported internally. Group overheads include the cost of the Board, all the costs of running the premises in Glasgow, the Group marketing, human resource, finance and design functions and legal and professional fees.

The segment information is prepared using accounting policies consistent with those of the Group as a whole. 

The assets and liabilities of the Group are not reviewed by the Chief Operating Decision-Maker on a segment basis. Therefore none of the Group's assets and liabilities are segmental assets and liabilities and are all unallocated for segmental disclosure purposes. For that reason the Group has not disclosed details of segmental assets and liabilities.

All segments are continuing operations. No customer accounts for 10% or more of external revenues. Inter-segment transactions are accounted for using an arms-length commercial basis.

Operating Segments

 

Revenue by Operating Segment

 

 

 

 

 

 

 

2023

 

 

 

 

 

2024

£'000

£'000

(restated

note 2)

Easyspace





12,471

12,548

Cloud Services





114,578

103,090

 

 

 

 

127,049

115,638

 

 

 

 

 

 

 

2023

 

 

 

 

 

 

2024

£'000

£'000

(restated

note 2)

Cloud managed services




75,212

64,115

Self-managed infrastructure




28,429

29,616

Non-recurring revenue




10,937

9,359

 

 

 

 

114,578

103,090

 

The nature of these three offerings are explained within the Chief Executive Officer report on pages 10 and 11.

Recurring and Non-recurring Revenue

The amount of recurring and non-recurring revenue recognised during the year can be summarised as follows:

 

 

 

 

 

 

2024

2023

 

 

 

 

 

£'000

£'000

Recurring - over time





116,112

106,279

Non-recurring - point in time



10,937

9,359

 

 

 

 

127,049

115,638

 

Geographical Information

In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. There is no single country where revenues are individually material other than the United Kingdom. The United Kingdom is the place of domicile of the parent company, iomart Group plc.

Analysis of Revenue by Destination

 

 

 

 

 

2024

2023

 

 

 

 

 

£'000

£'000

United Kingdom





107,864

99,961

Rest of the World





19,185

15,677

Revenue from operations

 

 

 

127,049

115,638

 

 

 

Profit by Operating Segment

 


2024

2023 (restated note 2)


Adjusted EBITDA

Depreciation,  amortisation, acquisition costs, share-based payments and exceptional non-recurring costs

Operating profit/(loss)

Adjusted EBITDA

Depreciation,  amortisation, acquisition costs, share-based payments and exceptional non-recurring costs

Operating profit/(loss)

 

£'000

£'000

£'000

 £'000

£'000

£'000

Easyspace

6,161

(570)

5,591

6,173

(698)

Cloud Services

36,729

(22,141)

14,588

34,796

(22,428)

Group overheads

(5,162)

-

(5,162)

(4,808)

-

Administrative expenses - exceptional non recurring cost

-

(462)

(462)

-

-

Acquisition costs

-

(1,010)

(1,010)

-

(922)

Share-based payments

-

(517)

(517)

-

(696)

(696)


37,728

(24,700)

13,028

36,161

(24,744)

Group interest and tax



(6,587)



(4,422)

Profit for the year

 

 

6,441

 

 

6,995

 

Group overheads, acquisition costs, share-based payments, interest and tax are not allocated to segments.

 

4.     TAXATION

 

 

 

 

 

2024

£'000

2023

£'000

Corporation Tax:





Tax charge for the year



(2,536)

(935)

Adjustment relating to prior years



(130)

-

Total current taxation charge



(2,666)

(935)






Deferred Tax:

Origination and reversal of temporary differences



 

380

 

(597)

Adjustment relating to prior years



(21)

36

   Effect of different statutory tax rates of overseas jurisdictions


7

(11)

Total deferred taxation credit/(charge)



366

(572)






Total taxation charge



(2,300)

(1,507)

The differences between the total taxation charge shown above and the amount calculated by applying the standard rate of UK corporation tax to the profit before tax are as follows:

 

 

 

 

 

 

2024

£'000

 

 

2023

£'000






Profit before tax



8,741

8,502






Tax charge @ 25% (2023: 19%)



2,185

1,615






Expenses disallowed for tax purposes and non-taxable income



135

28

Adjustments in current tax relating to prior years



130

-

Tax effect of different statutory tax rates of overseas jurisdictions



(7)

11

Movement in tax relating to changes in tax rates



-

95

Tax effect of share-based remuneration



(207)

253

Effect of super-deduction



-

(505)

   Movement in deferred tax related to property, plant and equipment

43

46

Movement in deferred tax relating to prior years



21

(36)

Total taxation charge for the year



2,300

1,507

The weighted average applicable tax rate for the year ended 31 March 2024 was 25% (2023: 19%).  The effective rate of tax for the year, based on the taxation charge for the year as a percentage of the profit before tax is 26% (2023: 18%).  The effective rate of tax has increased largely driven by the adoption of the UK Corporation tax rate of 25% (2023: 19%), effective 1 April 2023, to corporation tax, the net result of higher taxable income and the effect of the "full expensing relief" available for capital investments.

Deferred tax assets and liabilities at 31 March 2024 have been calculated based on the rate of 25% enacted at the balance sheet date (2023: 25%). 

 

5.         DEFERRED TAX

 

The Group recognised deferred tax assets/(liabilities) as follows:

 

 

 

 

2024

£'000

2023

£'000







Share-based remuneration




891

638

Capital allowances temporary differences




(1,687)

(319)

  Deferred tax on development costs


(720)

(648)

Deferred tax on customer relationships




(3,286)

(2,762)

Deferred tax on intangible software




(82)

(130)

Deferred tax liability

 

 

 

(4,884)

(3,221)

At the year end, the Group had £2.4m (2023: £nil) of brought forward tax losses acquired through an acquisition in the year, no deferred tax asset has been recorded against these tax losses.

 

Share-based remuneration

£'000

Capital allowances temporary differences

£'000

Development costs

£'000

Deferred tax on acquired assets with no capital allowances

£'000

Customer relationships

£'000

Intangible software

£'000

Brought forward Tax Losses

£'000

Total

£'000










Balance at 1 April 2022

884

843

(542)

(19)

(2,499)

(177)

-

(1,510)

Acquired on acquisition of subsidiary

-

(133)

-

-

(1,074)

-

68

(1,139)

Movement relating to prior year

-

36

-

-

-

-

-

36

Credited/(charged) to statement of comprehensive income

(246)

(1,065)

(106)

19

822

47

(68)

(597)

Effect of different tax rates of overseas jurisdictions

-

-

-

-

(11)

-

-

(11)

Balance at 31 March 2023

638

(319)

(648)

-

(2,762)

(130)

-

(3,221)

Acquired on acquisition of subsidiary

-

(578)

-

-

(1,451)

-

-

(2,029)

Movement relating to prior year

-

(21)

-

-

-

-

-

(21)

Credited/(charged) to statement of comprehensive income

253

(769)

(72)

-

927

48

-

387

Balance at 31 March 2024

891

(1,687)

(720)

-

(3,286)

(82)

-

(4,884)

The movement in the deferred tax account during the year was:

 

The deferred tax asset in relation to share-based remuneration arises from the anticipated future tax relief on the exercise of share options.

The deferred tax on capital allowances temporary differences arises mainly from plant and equipment in the Cloud Services segment where the tax written down value varies from the net book value.

The deferred tax on development costs arose from development expenditure on which tax relief was received in advance of the amortisation charge.

The deferred tax on customer relationships and intangible software arises from permanent differences on acquired intangible assets.

 

6.         ACQUISITIONS

 

Extrinsica Global Holdings Limited

On 5 June 2023, the Group acquired the entire issued share capital of Extrinsica Global Holdings Limited ("Extrinsica"), the holding company of Extrinsica Global Limited. Extrinsica is a Microsoft Azure Cloud solution services provider with offerings including managed Azure Cloud, Azure solution design and implementation services, support & optimisation services and licencing.

During the current year, the Group incurred £307,000 of third party acquisition related costs in respect of this acquisition. These expenses are included in administrative expenses in the Group's consolidated statement of comprehensive income and in cash flow from operating activities for the period ended 31 March 2024.

The following table summarises the consideration to acquire Extrinsica, the amounts of identified assets acquired, and liabilities assumed at the acquisition date.


 

£'000

Recognised amounts of net assets acquired and liabilities assumed:

 

Cash and cash equivalents

628

Trade and other receivables

1,439

Property, plant and equipment

44

Intangible assets

4,879

Borrowings

(3,728)

Trade and other payables

(2,326)

Deferred tax liability

(1,451)

Identifiable net liabilities

(515)

Goodwill

4,943

Total consideration

4,428

 

 

Satisfied by:


Cash - paid on acquisition

1,853

Deferred consideration on acquisition paid

215

Shares - issued on acquisition

2,000

Contingent consideration

360

Total consideration to be transferred

4,428

 

The acquisition of Extrinsica was completed using a "completion accounts" mechanism, on a no cash, no debt, and normalised working capital basis.

The initial consideration for the acquisition was £4,068,000.  Of the initial consideration, £1,853,000 was settled by cash, £215,000 was deferred pending finalisation of the completion accounts and was paid in October 2023 and £2,000,000 was satisfied by the issue of 1,562,500 new ordinary shares in iomart Group plc, which under the terms of the Sale and Purchase Agreement (SPA) are subject to a 12 month "lock in" provision and based on a fixed share price of £1.28, being the volume weighted average price for the 90 days prior to completion. This has resulted in an increase to share capital of £16,000 and an increase to the merger reserve of £1,984,000.

Under the terms of the SPA, a potential further £360,000 in cash was payable on the achievement of certain key customer targets, £180,000 of this amount was settled during the year ended 31 March 2024 and £180,000 is included in contingent consideration at 31 March 2024 (note 10) and was paid subsequent to the year end in April 2024.

At the date of acquisition, Extrinsica had bank debt of £3,728,000 which was taken on by iomart and settled as part of the completion process.

The fair value of the financial assets acquired includes trade receivables with a fair value of £673,000. The Gross amount due under contracts is £678,000.

The SPA included a provision requiring the Company to pay the former shareholders of Extrinsica a further £4,000,000 to £7,000,000 of contingent earn-out payments which are calculated based on Extrinsica's profitability for the 12 months ending 31 March 2024 ("the earn-out payment"). The level of profitability for the earn-out payment was not achieved during the year. As such, there is no contingent earn-out consideration payable.

The goodwill arising on the acquisition of Extrinsica is attributable to the premium payable for a pre-existing, well positioned business specialising in Microsoft's Azure cloud platform, together with the benefits to the Group in merging the business with its existing infrastructure and the anticipated future revenue synergies from the combination.  The goodwill is not expected to be deductible for tax purposes.

The trading name "Extrinsica" is not actively advertised or promoted. Extrinsca's standard terms and conditions restrict the ability of Extrinsica to sell, distribute or lease any personal information it holds on customers. As a consequence, there is no significant value in either the trade name/brand or customer lists acquired at the acquisition date and therefore no value has been attributed to either intangible asset.

Included in intangible assets is the fair value included in respect of the acquired customer relationships intangible asset of £3,824,000. To estimate the fair value of the customer relationships intangible asset, a discounted cash flow method, specifically the income approach, was used with reference to the directors' estimates of the level of revenue, which will be generated from them. A pre-tax discount rate of 14.11% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 8 years.

Extrinsica earned revenue of £6,966,000 and generated profit, before allocation of group overheads, share based payments and tax, of £95,000 in the period since acquisition.

If Extrinsca had been part of the iomart group from 1 April 2023, revenue earned for the twelve month period for iomart would have been £8,363,643 and profit after tax of £29,346 for the year ended 31 March 2024.

 

Accesspoint Group Holdings Limited

On 5 December 2023, iomart Group plc acquired the entire issued share capital of Accesspoint Group Holdings Limited ("Accesspoint"), the holding company of Accesspoint Technologies Limited. Based in North East London, Accesspoint is an IT hosting partner focused on the UK legal industry since 2009. Accesspoint provides a suite of managed and hosted services including infrastructure hosting, software licensing, security management, business continuity services and communications provisioning

During the current year, the Group incurred £230,000 of third party acquisition related costs in respect of this acquisition. These expenses are included in administrative expenses in the Group's consolidated statement of comprehensive income and in cash flow from operating activities for the year ended 31 March 2024.

The following table summarises the consideration to acquire Accesspoint, the amounts of identified assets acquired, and liabilities assumed at the acquisition date.


 

£'000

Recognised amounts of net assets acquired and liabilities assumed:

 

Cash and cash equivalents

322

Trade and other receivables

772

Property, plant and equipment

342

Intangible assets

2,077

Trade and other payables

(1,249)

Corporation tax liability

(215)

Deferred tax liability

(578)

Identifiable net assets

1,471

Goodwill

4,928

Total consideration

6,399

 

 

Satisfied by:


Cash - paid on acquisition

4,499

Deferred consideration (included in contingent consideration note 10)

500

Contingent consideration (note 10)

1,400

Total consideration to be transferred

6,399

 

The acquisition of Accesspoint was completed using a "completion accounts" mechanism, on a no cash, no debt, and normalised working capital basis. At the date of acquisition, Accesspoint had no bank debt.

The initial consideration for the acquisition was £4,480,000 paid in cash on completion on a debt and cash free basis, with a potential further £500,000 in cash payable on the achievement of certain post-acquisition milestones. These milestones were achieved and subsequent to the year end, in May 2024, the £500,000 was paid in cash.

In line with the SPA, the total consideration payable was adjusted based on the level of cash, debt and working capital shown in the agreed set of accounts (the Completion Accounts) made up to 30 November 2023. Following agreement of the Completion Accounts an additional payment of £19,000 was paid to the former shareholders of Accesspoint on 19 March 2024.

The SPA included a provision requiring the Company to pay the former shareholders of Accesspoint a further £1,400,000 of contingent earn-out payments which are calculated based on Accesspoint's profitability for the twelve months ending 31 August 2024 ("the earn-out payment").

The potential undiscounted amount of the earn-out payment that the Company could be required to pay is between £nil and £1,400,000.  The amount of contingent earn-out consideration payable, which is recognised as of 31 March 2024, is £1,400,000 (note 10). The level of profitability for the earn-out payment was estimated taking into account actual performance to date and management's estimates of profitability for the remaining months to August 2024.

The goodwill arising on the acquisition of Accesspoint is attributable to the premium payable for a Company with deep industry expertise and a highly capable team with a strong reputation within the legal sector. The addition of the new customer base when combined with iomart's existing legal customers consolidates iomart's position in a key sector.  The goodwill is not expected to be deductible for tax purposes.

The trading name "Accesspoint" is not actively advertised or promoted. Accesspoint's standard terms and conditions restrict the ability of Accesspoint to sell, distribute or lease any personal information it holds on customers. As a consequence, there is no significant value in either the trade name/brand or customer lists acquired at the acquisition date and therefore no value has been attributed to either intangible asset.

Included in intangible assets is the fair value included in respect of the acquired customer relationships intangible asset of £2,105,000. To estimate the fair value of the customer relationships intangible asset, a discounted cash flow method, specifically the income approach, was used with reference to the directors' estimates of the level of revenue, which will be generated from them. A pre-tax discount rate of 12.82% was used for the valuation. Customer relationships are being amortised over an estimated useful life of 8 years.

The fair value of the financial assets acquired includes trade receivables with a fair value of £682,000. The Gross amount due under contracts is £682,000.

Accesspoint earned revenue of £1,390,000 and generated profit, before allocation of group overheads, share based payments and tax, of £202,000 in the period since acquisition.

If Accesspoint had been part of the iomart group from 1 April 2023, revenue earned for the twelve month period for iomart would have been £4,763,000 and profit after tax of £536,000 for the year ended 31 March 2024.

 

7.         EARNINGS PER SHARE

 

Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, after deducting any own shares held in Treasury and held by the Employee Benefit Trust.  Diluted earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the total of the weighted average number of ordinary shares in issue during the year, after deducting any own shares, and adjusting for the dilutive potential ordinary shares relating to share options. 

 

 

 

 

 

 

 

2024

£'000

 

 

2023

£'000

Profit for the financial year and basic earnings attributed to ordinary shareholders



6,441

6,995

 




No

No

Weighted average number of ordinary shares:



000

000





 

 

Called up, allotted and fully paid at start of year



110,422

110,065

Own shares held by Employee Benefit Trust



(141)

(141)

Issued share capital in the year



1,391

170

Weighted average number of ordinary shares - basic



111,672

110,094

 





Dilutive impact of share options



2,710

2,575






Weighted average number of ordinary shares - diluted

 

114,382

112,669






Basic earnings per share 



5.8 p

6.4 p

Diluted earnings per share


5.6 p

6.2 p

 

Adjusted earnings per share




2024

£'000

2023

£'000






Profit for the financial year and basic earnings attributed to ordinary shareholders



6,441

6,995

-       Amortisation of acquired intangible assets



4,226

3,880

-       Acquisition costs



1,010

922

-          Administrative expenses - exceptional non-recurring costs

462

-

-       Cost of sales - exceptional non-recurring costs



-

820

-       Share-based payments



517

696

-       Tax impact of adjusted items



(1,421)

(1,025)

Adjusted profit for the financial year and adjusted earnings attributed to ordinary shareholders

 

 

11,235

12,288

 

 

 


 

Adjusted basic earnings per share



10.0 p

11.2 p

Adjusted diluted earnings per share


9.8 p

10.9 p

 

 

8.         INTANGIBLE ASSETS

 

 

 

 Goodwill

 

Development costs

Acquired customer relationships

 Software

 

Beneficial contracts

 Domain names & IP addresses

 Total

 

 £'000

£'000

£'000

 £'000

£'000

 £'000

£'000

Cost








At 1 April 2022

86,479

13,256

57,299

10,945

86

336

168,401

Acquired on acquisition of subsidiary

13,471

159

4,462

-

-

-

18,092

Additions

-

-

-

44

-

-

44

Currency translation differences

-

-

48

39

-

-

87

Development cost capitalised

-

1,887

-

-

-

-

1,887

At 31 March 2023

99,950

15,302

61,809

11,028

86

336

188,511

Acquired on acquisition of subsidiary

9,871

1,055

5,803

97

-

-

16,826

Additions

-

-

-

113

-

-

113

Disposals


(112)





(112)

Currency translation differences

-

-

(16)

(12)

-

-

(28)

Development cost capitalised

-

2,178

-

-

-

-

2,178

At 31 March 2024

109,821

18,423

67,596

11,226

86

336

207,488









Accumulated amortisation:








At 1 April 2022

-

(11,166)

(49,396)

(8,142)

(69)

(297)

(69,070)

Charge for the year

-

(1,434)

(3,880)

(1,116)

(8)

(7)

(6,445)

Currency translation differences

-

-

(49)

(16)

-

-

(65)

At 31 March 2023

-

(12,600)

(53,325)

(9,274)

(77)

(304)

(75,580)

Disposals

-

112

-

-

-

-

112

Charge for the year

-

(1,892)

(4,226)

(864)

(6)

(8)

(6,996)

Currency translation differences

-

-

14

14

-

-

287

At 31 March 2024

-

(14,380)

(57,537)

(10,125)

(83)

                (312)

(82,436)









Carrying amount:








 








At 31 March 2024

109,821

4,043

10,059

1,102

3

24

125,052









At 31 March 2023

99,950

2,702

8,484

1,754

9

32

112,931

Of the total additions in the year of £114,000 (2023: £44,000), no amounts related to leases under IFRS 16 (note 12) (2023: £nil). There were no amounts included in trade payables at the year end (2023: £nil). Consequently, the consolidated statement of cash flows discloses a figure of £114,000 (2023: £44,000) as the cash outflow in respect of the purchase of intangible asset in the year.

All amortisation and impairment charges are included in the depreciation, amortisation and impairment of non-financial assets classification, which is disclosed as administrative expenses in the statement of comprehensive income.

Included within customer relationships are the following significant net book values: £3.4m in relation to the acquisition of Extrinsica Global Holdings Limited and £1.7m in relation to the acquisition of Accesspoint Group Holdings Limited both with a remaining useful life of 7 years, £2.6m in relation to the acquisition of Concepta Capital Limited with a remaining useful life of 6 years, £0.6m in relation to the acquisitions of Memset Limited with a remaining useful life of 4 years, Bytemark Limited with a net book value of £0.2m and LDeX Group Limited of £0.6 both with a remaining useful life of 3 years, Sonassi Limited of £0.7m, Dediserve Limited of £0.1m, SimpleServers Limited of £0.1m all three with a remaining useful life of 2 years.

During the year, goodwill was reviewed for impairment in accordance with IAS 36 "Impairment of Assets". No impairment charges (2023: £nil) arose as a result of this review. For this review goodwill was allocated to individual Cash Generating Units (CGU) on the basis of the Group's operations.

The carrying value of goodwill by each CGU is as follows:

Cash Generating Units (CGU)

 

 

 

2024

£'000

2023

£'000

Easyspace

 

 

 

26,685

23,315

Cloud Services




83,136

76,635


 

 

 

109,821

99,950

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use post-tax cash flow projections based on financial budgets approved by the Board covering a five year period.  These projections are the result of detailed planning and assume similar levels of organic growth as the Group has experienced in the previous years.

The growth rates and margins used to extrapolate estimated future performance continue to be based on past growth performance adjusted downwards to take into account the additional risk due to the passage of time. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates. The growth rates used to estimate future performance beyond the periods covered by the annual and strategic planning processes do not exceed the long-term average growth rates for similar products.

In determining the value-in-use, the estimated post-tax future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Management continue to apply the judgement that there are two distinct CGUs within the Group, namely Cloud Services and Easyspace which have been derived with due consideration to IAS 36. The assumptions used for the CGU included within the impairment reviews are as follows:

 

 

 

 

Easyspace

Cloud Services

 

 

 

31 March 2024

31 March 2023

31 March 2024

31 March 2023

 

 

 

 

 

 

 

Discount rate (pre-tax)

 



14.9%

14.3%

14.9%

14.3%

Discount rate (post-tax)




11.2%

10.7%

11.2%

10.7%

Future perpetuity rate




0.0%

0.0%

2.5%

2.5%

Initial period for which cash flows are estimated (years)

5

5

5

5

 

Based on an analysis of the impairment calculation's sensitivities to changes in key parameters (growth rate, discount rate and pre-tax cash flow projections) there was no reasonably possible scenario where the CGU's recoverable amount would fall below its carrying amount.

 

9.     PROPERTY, PLANT AND EQUIPMENT

 

 

 

Freehold property

Leasehold property and improvements

Data centre equipment

Computer equipment

Office equipment

Motor vehicles

Total

 

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

 

 

 

 

 

 

 

Cost:

 







At 1 April 2022

8,236

40,424

30,524

114,268

2,840

23

196,315

Acquired on acquisition of subsidiary

-

300

872

1

30

-

1,203

Additions in the year

-

969

1,849

6,591

116

23

9,548

Disposals in the year

-

(309)

(1,402)

-

-

-

(1,711)

Currency translation differences

-

132

-

378

-

-

510

At 31 March 2023

8,236

41,516

31,843

121,238

2,986

46

205,865

Acquired on acquisition of subsidiary

-

16

-

345

25

-

386

Additions in the year

-

6,316

2,624

5,876

83

48

14,947

Disposals in the year

-

(2,129)

-

-

-

(5)

(2,134)

Currency translation differences

-

(49)

-

(167)

-

-

(216)

At 31 March 2024

8,236

45,670

34,467

127,292

3,094

89

218,848









Accumulated depreciation:








At 1 April 2022

(1,054)

(16,214)

(18,041)

(87,750)

(2,340)

(23)

(125,422)

Charge for the year

(241)

(4,663)

(2,072)

(9,333)

(180)

(3)

(16,492)

Disposals in the year

-

-

1,402

-

-

-

1,402

Currency translation differences

-

(74)

-

(320)

-

-

(394)

At 31 March 2023

(1,295)

(20,951)

(18,711)

(97,403)

(2,520)

(26)

(140,906)

Charge for the year

(238)

(4,984)

(1,591)

(8,754)

(184)

(13)

(15,764)

Disposals in the year

-

1,117

-

-

-

5

1,122

Currency translation differences

-

41

-

151

-

-

192

At 31 March 2024

(1,533)

(24,777)

(20,302)

(106,006)

(2,704)

(34)

(155,356)

 

 

 

 

 

 

 

 

Carrying amount:








At 31 March 2024

6,703

20,893

14,165

21,286

390

55

63,492









At 31 March 2023

6,941

20,565

13,132

23,835

466

20

64,959

Depreciation charge in the current year is comprised of £15,715,000 as disclosed in the statement of comprehensive income and £49,000 of accelerated depreciation in respect of the closure of a data centre in the prior year, as included in non-recurring acquisition integration costs.

During the year there were additions of £231,000 (2023: £70,000) in respect of reinstatement provisions and additions of £4,270,000 (2023: £666,000) in respect of leases under IFRS 16 (note 12). Of the total remaining additions in the year of £10,446,000 (2023: £8,812,000), £1,247,000 (2023: £314,000) was included in trade payables as unpaid invoices at the year end resulting in a net increase of £933,000 (2023: net decrease of £106,000) in trade payables. Consequently, the consolidated statement of cash flows discloses a figure of £9,513,000 (2023: £8,918,000) as the cash outflow in respect of property, plant and equipment additions in the year.

Additions of £1,400,000 included in computer equipment are under construction and are not yet being depreciated.

See note 12 for movements in the year relating to right-of-use assets under IFRS 16 as included in the above table.

 

10.       CONTINGENT CONSIDERATION DUE ON ACQUISITIONS

 

 

 

2024

£'000

2023

£'000






Contingent consideration due on acquisitions within one year:





-       Concepta Capital Limited



-

(4,000)

-       Extrinsica Global Holdings Limited



(180)

-

-       Accesspoint Group Holdings Limited



(1,900)

-






Total contingent consideration due on acquisitions


 

(2,080)

(4,000)

 

Contingent consideration recognised in the prior year on Concepta Capital Limited of £4,000,000 was paid during the year as disclosed in the consolidated cash flow statement.

Contingent consideration of £360,000 was recognised on the acquisition of Extrinsica Global Holdings Limited (note 6). £180,000 was paid during the year as disclosed in the consolidated cash flow statement and the remaining £180,000 was paid subsequent to the year end in April 2024.

£500,000 of the £1,900,000 in relation to Accesspoint Group Holdings Limited was paid subsequent to the year end in May 2024. The remaining £1,400,000 recognised is based on the Directors' best estimate due at 31 March 2024. Under the Sale and Purchase Agreement, the earn-out range from £nil to £1,400,000 consideration is represented by a narrow EBITDA range of £100,000. This means for every £1 of additional EBITDA above a target EBITDA, then £9.00 consideration is earned. This means the forecasted estimate is sensitive to small variances.  

11.       BORROWINGS

 

 

 

 

 

2024

£'000

2023

£'000

 






Current:





Lease liabilities (note 10)



(2,509)

(3,377)

Current borrowings



(2,509)

(3,377)

 




 

Non-current:





Lease liabilities (note 10)



(15,582)

(15,803)

Bank loans



(40,000)

(34,400)

Total non-current borrowings



 

(55,582)

(50,203)







Total borrowings



 

(58,091)

(53,580)

The carrying amount of borrowings approximates to their fair value.

At the start of the year there was £34.4m (2023: £34.0m) outstanding on the multi option revolving credit facility and drawdowns of £7.6m (2023: £10.4m) were made from the facility during the year. Repayments totalling £2.0m (2023: £10.0m) were made in the year resulting in a balance outstanding at the end of the year of £40.0m (2023: £34.4m).

At the year end, the Group has access to a £100m multi option revolving credit facility that matures on 30 June 2026, which also benefits from a £50m Accordion Facility. The directors are of the opinion that the Group can operate within the current facility and comply with its banking covenants. The RCF has a borrowing cost at the Group's current leverage levels of 1.8% margin over SONIA The revolving credit facility incurs a non-utilisation fee of 35% of the 1.8% margin. The effective interest rate for the multi option revolving credit facility in the current year was 6.85% (2023: 4.26%). 

The RCF and the Accordion Facility (if exercised) provide the Group with additional liquidity which will be used for general business purposes and to fund investments, in accordance with the Group's three-year strategic plan.

Given the terms of the revolving credit facility and the ability for any drawdowns made to be extended beyond 31 March 2024 at the discretion of the Group, the total amount outstanding has been classified as non-current.

The obligations under the multi option revolving credit facility are repayable as follows:

 


2024

2023


Capital

Interest

Total

Capital

Interest

Total


£'000

£'000

£'000

£'000

£'000

£'000

Due within one year

-

(698)

(698)

-

(540)

(540)

Due within two to five years

(40,000)

-

(40,000)

(34,400)

-

(34,400)

 

(40,000)

(698)

(40,698)

(34,400)

(540)

(34,940)

 

The Directors estimate that the fair value of the Group's borrowing is not significantly different to the carrying value.

 

 

Analysis of change in net debt

 

Cash and cash equivalents

£'000

 

 

Bank

loans

£'000

Lease liabilities

£'000

 

 

Total liabilities

£'000

Total net debt

£'000


 

 

 


 

At 1 April 2022

15,332

(34,000)

(22,623)

(56,623)

(41,291)






 

Acquired on acquisition of subsidiary

-

-

(235)

(235)

(235)

Additions to lease liabilities

-

-

(666)

(666)

(666)

Disposals from lease liabilities

-

-

449

449

449

Drawdown of bank loans

-

(10,400)

-

(10,400)

(10,400)

Repayment of bank loans

-

10,000

-

10,000

10,000

Currency translation

-

-

(33)

(33)

(33)

Cash and cash equivalent cash outflow

(1,514)

-

-

-

(1,514)

Lease liabilities cash outflow

-

-

3,928

3,928

3,928

At 31 March 2023

13,818

(34,400)

(19,180)

(53,580)

(39,762)






 

Acquired on acquisition of subsidiary

-

(3,728)

-

(3,977)

(3,977)

Repayment of debt acquired on acquisition


3,728

-

3,728

3,728

Additions to lease liabilities

-

-

(4,148)

(4,148)

(4,148)

Disposals from lease liabilities

-

-

1,063

1,063

1,063

Drawdown of bank loans

-

(7,600)

-

(7,600)

(7,600)

Repayment of bank loans

-

2,000

-

2,000

2,000

Currency translation

-

-

11

11

11

Cash and cash equivalent cash inflow

1,937

-

-

-

1,937

Lease liabilities cash outflow*

-

-

4,163

4,163

4,163

At 31 March 2024

15,755

(40,000)

(18,091)

(58,091)

(42,336)

* Lease liabilities cash outflow in the year is reconciled as £5,017,000 payments to lease provider as disclosed in the consolidated cash flow statement netted with lease interest of £854,000.

 

 

12.          LEASES

The Group leases assets including buildings, fibre contracts, colocation and software contracts. Information about leases for which the Group is a lessee is presented below:

 

 

Right-of-use assets

 

 

Leasehold Property

£'000

Data centre equipment

£'000

 

 

Software

£'000

Total

£'000

 







Balance at 1 April 2023


16,127

1,813

380

18,320

Additions


2,380

1,890

-

4,270

Disposals


(462)

(550)

-

(1,012)

Currency translation differences


-

(23)

-

(23)

Depreciation


(2,130)

(1,803)

-

(3,933)

Amortisation


-

-

(285)

(285)








Balance at 31 March 2024



15,915

1,327

95

17,337

 

The right-of-use assets in relation to leasehold property and data centre equipment are disclosed as non-current assets and are disclosed within property, plant and equipment (note 8). The right-of-use assets in relation to software are disclosed as non-current assets and are disclosed within intangibles (note 9).

Disposals in the year relate to lease modifications in the year on the exit of a property lease and a co-location lease.

Lease liabilities

Lease liabilities are presented in the balance sheet within borrowings as follows:

 

 

 

 

 

2024

£'000

2023

£'000

 

 

 






 

 

Current:





 

 

Lease liabilities (note 11)



(2,509)

(3,377)

 

 





 

 

 

Non-current:





 

 

Lease liabilities (note 11)



(15,582)

(15,803)

 

 







 

 

Total lease liabilities



 

(18,091)

(19,180)

 

 

The maturity analysis of undiscounted lease liabilities are shown in the table below:

 

 

 

 

2024

£'000

2023

£'000

 






Amounts payable under leases:





Within one year



(3,332)

(3,880)

Between two to five years



(9,294)

(8,239)

After more than five years



(9,477)

(9,780)







 



 

(22,103)

(21,899)

Add: unearned interest




4,012

2,719

Total lease liabilities



 

(18,091)

(19,180)

 

 

The Group has elected not to recognise a lease liability for short-term leases (leases with an expected term of 12 months or less) or for leases of low value assets. Payments made under such leases are expensed on a straight line basis. During the year, in relation to leases under IFRS 16, the Group recognised the following amounts in the consolidated statement of comprehensive income:

 

 

 

 

2024

£'000

2023

£'000

 






Short-term and low value lease expense



(1,711)

(1,750)

Depreciation charge



(3,933)

(3,685)

Amortisation charge



(285)

(285)

Interest expense



(854)

(586)







 



 

(6,783)

(6,306)

 

Amounts recognised in the consolidated statement of cash flows:

 

 

 

 

2024

£'000

2023

£'000

 






Amounts payable under leases:





Short-term and low value lease expense



(1,711)

(1,750)

   Payments under lease liabilities within cash flows from financing activities

(5,017)

(4,902)

 



 

(6,728)

(6,652)

 

 

 

 

 

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