Cloud computing company Iomart said it will begin the search for a permanent chief executive later this year after reporting a “mixed” trading year that saw it fall to a £53.2m loss from an £8.7m profit a year earlier.
Delayed results for the 12 months to the end of March included “disappointingly higher than anticipated customer churn” within its self-managed and private cloud businesses.
This adversely impacted revenue and profits, said Richard Last who took on the role of executive chairman after the departure of CEO Lucy Dimes in May.
On the positive side the company has seen good order bookings growth in the year, which gives the board confidence in achieving its medium-term growth strategy.
Actions have been taken to deliver annualised cost savings of around £4 million and the board is looking to more offshoring of operations. It has withheld the dividend payment.
Acquisitions completed in FY24 and the contribution of six months of Atech, acquired in October, delivered overall revenue growth of 13% to £143.5m (2024: £127.0m).
Iomart cloud services revenue declined 7%, mainly due to the customer churn. Growth from new customer wins and increased spend from existing customers helped offset some of the impact.
Group adjusted EBIT reduced to £12.8m (2024: £19.2m), a margin of 8.9% (2024: 15.1%) reflecting evolving revenue mix.
Adjusted pre-tax profit fell to £6.5m from £15m, a 57% fall, reflecting reduction in adjusted EBIT and the higher interest charges on bank debt post the Atech acquisition.
The statutory loss before tax impacted by exceptional non-cash goodwill impairment charge of £52.9m resulted in a loss before tax of £53.2m.
The company said it has good cash generation, with an adjusted EBITDA to operating cash flow (before exceptional items) conversion ratio of 85% (2024: 100%).
The board said it is in the best interest of shareholders to forego the payment of a final dividend, with future dividends restored based on improved operating profitability and a reduced overall level of indebtedness.
Q1 trading was in line with the board’s expectations, recognising that cost reductions are more H2 weighted.
The board is reviewing further medium-term opportunities to enhance efficiency and reduce the cost base and debt position, including a review of the group’s data centre footprint and the expansion of its Indian offshoring operations.
Mr Last said: “The acquisition of Atech during the year was a significant milestone, substantially enhancing the group’s scale, credibility, and capabilities in public cloud and security. Since acquisition, Atech has delivered revenue growth and profitability in line with our expectations, reinforcing the value of this strategic move.
“Our focus for FY26 will be to improve the operating efficiency of the group, address churn in our self-managed and private cloud customer base, increase sales momentum in high-growth service areas, including providing Atech with the support to flourish, and to reduce our level of debt. T
“he board is committed to delivering disciplined execution, operational efficiency, and improved value for shareholders.
“In response to our reduced profitability, we have taken action to improve the efficiency of our operations thereby reducing our ongoing cost base, including targeted adjustments to our workforce, and improvements to the efficiency of our data centres and supply chain operations.
“These actions are expected to deliver annualised cost savings of around £4m, with the benefits becoming visible in the second half of FY26.
“We are also exploring further medium-term opportunities to enhance efficiency and reduce our cost base beyond this first phase, including a review of our data centre footprint and the expansion of our Indian offshoring operations.”
The search for a CEO successor will commence later in the year following a full review of the business.
Net debt increased to £101.9m (31 March 2024: £42.3m) following the cash outflow of approximately £57m associated with the acquisition of Atech.
A £115m revolving credit facility was agreed post year end, with a two-year term to 30 June 2027 and covenants reflecting current leverage levels and plans for the future.
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