Iomart 'resilient' through pandemic as margin remains strong

The AIM-traded managed technology and cloud computing firm said its revenue mix was improving, as growth in its core cloud managed services was offset by a reduction in non-recurring revenue, while prior-year acquisitions also made a positive contribution.

Adjusted EBITDA totalled £41.4m for the year ended 31 March, down from £43.5m, with an adjusted EBITDA margin of 37%, slipping from 38.6%.

That margin was higher than the industry average, the board noted, and was in line with expectations.

Adjusted profit before tax was impacted by a £1.3m increase in the depreciation charge in the year following acquisitions, Iomart said, as it fell 13.8% to £19.6m.

The company generated “high levels” of operating cash in the year at £43.7m, up from £41.3m year-on-year, representing a 106% conversion of adjusted EBITDA, compared to 95% in the 2020 financial year.

Its year-end cash position totalled £23m, rising from £15.5m a year earlier, with net debt standing at £54.6m, narrowing from £57.6m.

That meant the firm remained at a “comfortable level” of 1.3x adjusted EBITDA.

Looking ahead, Iomart said it had traded in line with management expectations at the start of the new financial year, in a manner described as “consistent” with the group's high recurring revenue business model.

It said its sales pipeline provided confidence in increased new customer wins, with a positive impact on revenue expected from the second half.

The board said it was “increasingly confident” in the group’s long-term prospects.

“The year covered by this report coincided almost to the day with the onset of the pandemic in the UK,” said chief executive officer Reece Donovan.

“"We have now begun a new chapter for iomart, and I am proud to be at the helm of this great team.

“We have identified a significant market opportunity, growing our propositions in hybrid cloud, security, the digital workplace and connectivity, supporting our customers as they adapt to new ways of working now and in the future.”

Donovan said the company had “proven” its robustness, underpinned by “high levels” of recurring revenues, breadth of customer base and strong cash generation.

“This is now enhanced with a clear strategic vision and roadmap to reposition the group for growth, both organically and through selective acquisitions, and the board is increasingly confident in the positive outlook for the long-term prospects for the group.”

At 0922 BST, shares in Iomart Group were down 1.12% at 285.76p.