Scottish cloud computing firm Iomart will slump to a loss for the half-year after a fall in its core business caused by customer churn in the previous period.
The Glasgow-based group said order bookings have picked up and it expects a stronger second half.
In a trading update for the six months ended 30 September, it noted the significance of its Atech business, acquired last year, which accounted for almost a quarter of revenue in the first half.
In line with board expectations the Glasgow-based group said revenue grew 25%, to £77.7 million (H1 FY25: £62m). This includes £21.7m from the Atech acquisition, which completed on 1 October last year.
Excluding the impact of acquisitions, the traditional Iomart business experienced a £6m fall in revenue, reflecting the churn of customers in the prior year which impacted the monthly run rate entering into this current financial year.
Adjusted EBITDA is expected to be approximately £12.7m, down from £17m in the first half of the previous year. This reflects lower recurring revenues within the traditional private cloud and data centre services, alongside a shift in the Group’s mix towards higher-growth, but lower-margin, Microsoft product services.
Cost efficiency improvements of £4 million on an annualised basis have been achieved, which will benefit the second half and beyond.
The adjusted loss before tax is expected to be about £2.3m, compared with a £4.3m adjusted profit before tax in the first half of the previous year. This follows the lower adjusted EBITDA, a depreciation and amortisation charge, and £2m in higher interest expense, due to the funding of the Atech acquisition.
Order bookings have remained robust, consistent with the higher levels achieved last year and customer renewal rates have improved resulting in consistently positive net order bookings, supporting the board’s expectation for a stronger performance in the second half.
Approximately 30% of group revenue now originates from Microsoft-connected activities, up from around 7% two years ago, demonstrating the increasing relevance of our skills and capabilities to customers in this high demand space and the positive evolution of the Group.
The board said it anticipates an improved performance in the second half of the financial year, in line with current market expectations.
This is supported by ongoing positive order bookings, reduced churn within the self-managed infrastructure segment and the achievement of £4m in annualised cost reductions. Further efficiency savings are being progressed as well as new focussed sales initiatives.
First half results will be released on 26 November.
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