Iomart : 6 months ended 30th September 2021

On track - Strategy implemented and progressing well

FINANCIAL HIGHLIGHTS

	H1 2022	H1 2021	Change
Revenue	£51.9m	£56.3m	-8%
% of recurring revenue1	93%	90%	+3%
Adjusted EBITDA2	£19.6m	£20.8m	-6%
Adjusted profit before tax3	£9.1m	£9.8m	-7%
Profit before tax	£6.0m	£6.0m	0%
Adjusted diluted EPS4	6.5p	7.0p	-7%
Basic EPS	4.4p	4.4p	0%
Cash generation from operations	£17.9m	£23.1m	-23%
Interim dividend per share	2.42p	2.60p	-7%

• The Group continues to benefit from very strong levels of recurring revenues of 93%1 of Group revenues
• Reduction in revenue reflects lower non-recurring equipment and consultancy sales, along with lower customer renewals. The Board is confident that this short-term impact on revenue will be reversed
• Profitability percentile remains positive and stable with adjusted EBITDA2 and adjusted profit before tax3 at 37.7% (H1 2021: 36.9%) and 17.5% (H1 2021: 17.3%) of revenue, respectively with the absolute reductions of £1.2m and £0.7m, respectively a function of the revenue trend
• Strong cash generation from operations in the period of £17.9m with a consistent cash conversion6 (91%), after recognising one-off items with a value of £4m in the prior period
• Period end net debt of £49.3m, comfortable at 1.2 times annualised EBITDA5
• Successful refinancing with an increased £100m revolving bank facility from a new group of four leading banks, underpinning the Group's five-year growth strategy

OPERATIONAL HIGHLIGHTS

• Launch of the new iomart brand well received by all stakeholders, providing a core foundation for current and future growth initiatives
• Established a new Group product team and launched new products targeted at both new and existing customers
  o Successful Microsoft Azure campaign launched in September which resulted in securing a multi-year, six figure annual revenue managed Azure customer, alongside a well-qualified pipeline of additional opportunities
  o Secure Connectivity Services offering developed and sales campaign launched in September, and developed a well-qualified pipeline with first sales targeted within the current financial year
• Enhancements made to core operational and service-based systems and tools, with a primary focus on improved levels of service excellence
• Ongoing investment in the Group's datacentre estate as previously announced, to strengthen this valuable strategic and operational capability
• All electricity for our UK data centres is now sourced under Renewable Energy Guarantees of Origin ("REGO") certified renewable electricity
• M&A - positive progress in evaluating targeted opportunities to extend the Group's technology and product capabilities, while enhancing revenue, profitability and EPS

OUTLOOK

• High degree of confidence in achieving results in line with the Board's expectations and executing against the Group's five-year growth strategy
• The launch of the enhanced set of product offering, coupled with a clearly defined brand and targeted go to market capability has provided for a positive sales environment to deliver future growth

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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, period on period, is a £0.5m lower amortisation of acquired intangible assets as the amortisation periods expire on historic acquisitions.

Reece Donovan, CEO commented,

"We are energised by our refreshed strategy, new brand and clear focus. The early customer wins from the new sales campaigns are excellent signs that the strategy is on track and starting to deliver tangible results. iomart's high level of recurring revenue remains a considerable strength, providing good visibility for the remainder of the year. Current trading is in line with the Board's expectations for the full year.

"The journey to the cloud for many is long and complex and iomart is well positioned to support existing and new customers on the multiple paths open to them, ensuring we respond to their specific business requirements and provide exceptional service and reliability. It is the blend of our straightforward approach,

owned infrastructure assets, people and relationship focus, and agile technology-agnostic solution model, along with extensive customer base and more than 20 years' experience, that gives us confidence that we will continue to participate successfully within the wider growing Cloud sector."

1. Recurring revenue is the revenue that repeats either under long-term contractual arrangement or on a rolling basis by predictable customer habit.
2. Throughout this statement adjusted EBITDA is earnings before interest, tax, depreciation and amortisation (EBITDA) before share based payment charges, acquisition costs and gain on revaluation of contingent consideration. Throughout this statement acquisition costs are defined as acquisition related costs and non-recurring acquisition integration costs.
3. Throughout this statement adjusted profit before tax is profit before tax, amortisation charges on acquired intangible assets, share based payment charges, acquisition costs and gain on revaluation of contingent consideration.
4. Throughout this statement adjusted diluted earnings per share is earnings per share before amortisation charges on acquired intangible assets, share based payment charges, acquisition costs, gain on revaluation of contingent consideration and the taxation effect of these.
5. Annualised EBITDA is the last 12 months of EBITDA for the period ended 30 September 2021.
6. Cash conversion is calculated as cash flow from operations divided by adjusted EBITDA.

This interim 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.

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Chief Executive's Statement

Introduction

We have continued to make positive progress against the key milestones announced in May, as part of the refreshed strategy to build on our existing strong position in the private cloud space at the same time as repositioning our offering around the growing hybrid cloud market. This includes the launch of a new iomart brand, the release of new products and our first larger managed Azure customer win. Our teams are firmly in execution mode and following the launch of several new sales campaigns we can see momentum building.

The results for the period are in line with our pre-close statement, and while revenue shows a decline against prior periods, our profit margins remain strong and we continue to benefit from a large base of recurring revenue and high levels of cash generation. These are strong foundations on which to build, and we are confident the strategic progress being achieved will flow through into future growth.

The successful refinancing of our revolving bank facility with four new banks post period end underpins our five-year plan and this ongoing support from top tier global financial institutions is a clear endorsement of our strategy.

We were delighted to announce in July the appointment to the Board of Andrew Taylor as a Non-Executive Director of the Company, with effect from 1 August 2021. We described in our Final Results announcement in June, our desire to appoint a fourth independent Non-Executive Director to add additional sector skills to support the execution of the Group's refreshed medium term strategic plan and we are delighted to have secured an executive of Andrew's experience and calibre. Andrew has over 25 years' experience in the telecommunications industry, and has a demonstrable track record of achievement in previous roles, both in the UK and internationally. He is the CEO of Gamma Communications plc, a leading provider of unified communication services to the business market in Western Europe.

Strategy

At the start of the year we announced our vision to position iomart for the next phase of its growth as a recognised leading secure hybrid cloud business. We were bold by stating our aspiration to become a £200m revenue business within five years. Underpinning this was a roadmap with a focus on three main activities:

• New services and geographies - we will focus on four new service areas - hybrid cloud, security, the future digital workplace and connectivity;
• Complementary acquisitions - to expand the customer base and to acquire new skillsets; and
• Protect and expand the existing base of run rate revenue and EBITDA which is underpinned by our existing core private cloud infrastructure.

We are on track to achieve the key strategic milestones which we laid out for delivery in FY22. For the first half of the year our focus was on brand development, new product launches and restructuring the organisation to drive "one iomart". These are important building blocks of success and we have made good progress.

Brand development

We delivered a successful launch of our new iomart brand in early September, which has been well received by all stakeholders and provides a strong foundation for ensuring our value proposition and marketing collateral are impactful for both existing and potential new customers, as well as a guide for our internal operations and ethos. Our new strapline "welcome to straightforward" encapsulates our mission to deliver a customer-focused service which makes the complicated world of secure hybrid cloud simple for our customers, gives them peace of mind, and allows them to focus on what's important to them. Our aim is to make our brand relatable and memorable in order to increase familiarity in the market and, ultimately, drive inbound sales.

New product development

We have established a new product team and have redefined and launched a number of new product initiatives. These are targeted at both new customers and upselling and cross-selling to our existing customers. They include specific campaigns around the growth areas of Digital Workplace, Secure Connectivity and Managed Microsoft Azure. Pipelines are being developed from each of these campaigns and we are confident our refined approach will give a greater success rate. Further product releases will be made over the coming months.

We were delighted to secure our first six figure annual recurring revenue customer for Managed Microsoft Azure following our successful sales campaign. The customer's IT workload will be deployed on Azure infrastructure on a managed basis over the next 4 years. A well-qualified pipeline of other sales opportunities

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is building. We are now successfully working more closely with Microsoft and anticipate this relationship continuing to strengthen.

The Secure Connectivity Services proposition was fully developed and rolled out in the period, with the marketing campaign live in September with extremely positive customer feedback. We are confident in customer wins in this area by the end of the financial year.

Operations, processes and values

• one iomart team: demand for talent is high and in an effort to both retain and attract the best possible talent, we have updated our benefits package, formalised flexible working options and delivered a number of wellbeing, technical and management training programmes across the business.
• Core Systems: we have enhanced and introduced a new control panel to streamline our customer interaction. This enhancement allows us to automatically align customer requests to the right team. We have reorganised the customer support teams behind this to ensure the right people, with the right expertise, are available from the start of any customer support event.

M&A

As we have successfully completed in the past, we plan to use selective M&A to augment our organic growth. As well as acquiring new customer bases operating in recurring revenue business models we also plan to strengthen our technology and product capabilities. During the period we have started to evaluate potential targets and we are pleased with the positive progress made so far in the identification of opportunities; providing verification that the market remains fragmented. The timing of M&A closure is hard to predict, and we will at all times maintain our disciplined approach.

ESG

We have had a period of high activity in terms of our commitments to our environmental, social and governance ("ESG") programme in the period. The main highlights include:

• Environmental: all of the electricity used in our UK data centres is now sourced under Renewable Energy Guarantees of Origin ("REGO") certified renewable electricity. In early November, under our Alliance agreement signed last year with Glasgow based Katrick Technologies, we commissioned a passive cooling system at our Glasgow data centre. Early test results for the new cooling system indicate the potential for a significant reduction in electrical power consumption.
• Social: we have committed to two new initiatives in the period - the first providing sponsorship for the 2022 cohort, in conjunction with ScotlandIS, of Empowering Women in Leadership, and the second to work with a UK charity, SmartSTEMS to create more opportunities for children from underprivileged backgrounds.
• Governance: under remit of our Audit Committee we are in the process of appointing an outsourced internal audit resource to further support our risk management framework and assurance programme.

Market

With the insatiable growth in data requirements from across all industries, the demand for the three core building blocks of compute power, storage and connectivity continues to expand. Organisations are increasingly outsourcing 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. These requirements increasingly come with greater security and compliance needs. The Covid- 19 pandemic and working from home has accelerated a number of the drivers.

The concept of "Cloud" computing is now globally recognised. The "public cloud" giants such as Amazon, Microsoft and Google have vastly contributed to this general awareness and consequently, as is well documented, have seen high growth globally as many organisations look for Cloud infrastructure and capabilities. The reality of the situation is that a vast majority of the world's IT infrastructure is complex and untidy in nature which means hybrid cloud models will remain a key market feature for many use cases. Even if businesses want to use Public Cloud infrastructure fully, then many lack the detailed know-how, skills and resources required to manage all the elements. iomart is well positioned to meet this demand given a long established capability in designing and running private clouds and supporting on premise solutions along with our plans to continue to complement this with skills and capabilities for public cloud provisioning and management.

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