iomart Group Reports FY2025 Results: 13% Revenue Growth Offset by £53.2m Loss and Dividend Omission

The Tale of Two iomarts: Growth Meets Growing Pains

iomart Group’s FY2025 results landed today, painting a picture of strategic ambition colliding with harsh operational realities. On the surface, that 13% revenue jump to £143.5m looks healthy. Dig deeper, however, and you’ll find a £53.2m statutory loss before tax and a conspicuous absence of a final dividend. Let’s dissect the numbers and the narrative.

The Headline Grabbers: Revenue Up, Profits Down

First, the positive momentum:

• Revenue Growth (+13% to £143.5m): Primarily fuelled by the acquisition of Atech (contributing £21.5m for 6 months) and full-year contributions from prior smaller acquisitions. Atech itself delivered impressive unaudited annual revenue growth of 27%.
• Recurring Revenue Resilience (89%): Slightly down from 91% (due to Atech’s higher non-recurring consultancy work), but still the bedrock of the model.
• Strong Order Bookings (£20m Annualised Recurring Revenue): Excluding Atech, bookings grew significantly from £16.5m proforma last year, signalling future pipeline strength, particularly in Microsoft solutions and data protection.

Now, the profitability pain:

• Adjusted EBITDA (-9% to £34.3m) and Adjusted EBIT (-33% to £12.8m): Reflecting a shifting revenue mix (more lower-margin activity) and a significant £2.9m increase in VMware license amortisation costs following Broadcom’s acquisition.
• Adjusted PBT (-57% to £6.5m): Hit by lower EBIT and higher interest costs on debt taken for the Atech deal.
• The Big One: Statutory Loss Before Tax (£53.2m vs £8.7m profit): Dominated by a £52.9m non-cash goodwill impairment charge related to the iomart Cloud Services CGU. More on this below.
• Basic EPS: -49.0p (down from +5.8p). Adjusted Diluted EPS: 3.4p (down 65%).

That £52.9m Goodwill Impairment: What It Means (And What It Doesn’t)

This is the elephant in the data centre. The impairment relates specifically to the legacy iomart Cloud Services Cash Generating Unit (CGU). The Board cites two key drivers:

1. Strategic Shift Away from Legacy Products: Moving focus from lower-growth “heritage” areas (like self-managed infrastructure).
2. Accelerated Customer Churn: Particularly painful in self-managed and certain private cloud services within this CGU.

Crucially:

• This is a non-cash charge. It doesn’t impact day-to-day operations, cash flow, or banking covenants.
• It’s an accounting adjustment reflecting reduced future cash flow expectations from this specific part of the historical business.
• It highlights the challenges in the legacy dedicated server/hosted infrastructure market and validates the strategic pivot towards higher-growth areas (public cloud, security) – exactly where Atech fits.

Management stress-tested the CGU valuation. A plausible downside scenario (11.75% discount rate vs 11.1% base, or 10% lower forecast EBITDA) could necessitate further impairment charges (£6.8m-£19.8m). This bears watching.

The Atech Acquisition: Engine for Growth, Driver of Debt

The £57m acquisition of Atech (completed 1 Oct 2024) is central to iomart’s transformation narrative:

• Strategic Fit: Significantly boosts capabilities in high-growth Microsoft Azure, modern workplace, and security – areas iomart needed to strengthen.
• Performance: Delivered strong growth (27% unaudited annual revenue) and met expectations post-acquisition. Its higher-margin recurring services grew 18% annually.
• Integration: Sales, marketing, and pre-sales teams have been consolidated under the Group CRO, aiming for cross-selling while preserving Atech’s specialist expertise. An expanded India ops base enhances 24/7 service.

The Flipside: Leverage. Funding Atech pushed net debt up dramatically:

• Net Debt: £101.9m (31 Mar 2024: £42.3m)
• Proforma Net Debt Leverage: ~2.7x Adjusted EBITDA (FY24: 1.1x), or ~2.3x excluding lease liabilities.

Post-year-end, a new £115m Revolving Credit Facility (RCF) until June 2027 was secured, with covenants aligned to this higher leverage. The cost? A chunky 300bps over SONIA currently (with a ratchet down as debt reduces).

Dividend Axed: Debt Reduction Takes Priority

In a move signalling the seriousness of the debt position and profitability dip, the Board made a tough call:

• Final Dividend: Omitted. (FY24: 3.0p per share).
• Total FY25 Dividend: Just the 1.3p interim paid in Jan 2025 (vs 4.94p total for FY24).

The message is clear: restoring dividends hinges squarely on “improved operating profitability and a reduced overall level of indebtedness.” Shareholder returns are on pause until the balance sheet is healthier and underlying profits rebound.

Outlook & Strategy: Fixing the Foundations

Executive Chair Richard Last (also interim CEO) outlined the FY26 priorities starkly:

1. Improve Operating Efficiency: Targeting £4m annualised cost savings (40% identified/actioned in Q1). Includes workforce adjustments, data centre optimisation, and supply chain improvements.
2. Address Churn: Stemming losses in self-managed and private cloud customers.
3. Boost Sales Momentum: Focusing on high-growth services (public cloud via Atech, security, data protection).
4. Reduce Debt: The new RCF provides runway, but deleveraging is paramount.

Positively, Q1 FY26 trading was “in line with expectations,” with cost savings weighted to H2 and positive net order bookings achieved. The Board remains confident in the long-term cloud market dynamics supporting their strategy.

The Verdict: A Transition Year, With Work To Do

FY2025 was undeniably messy for iomart. The Atech acquisition is strategically sound and performing well, but it came at a high cost – significantly increased debt and the abandonment of the dividend. The massive goodwill impairment is a stark accounting reminder of the challenges in their legacy business and the urgency of the pivot.

The path forward is clear, but not easy: integrate Atech effectively, execute ruthlessly on cost savings, stabilise the core cloud services revenue base, and generate cash to pay down debt. The strong order bookings offer a glimmer of hope for the top line, but converting that into improved profitability and cash flow is the critical FY26 KPI.

Investors will need patience. The transformation is underway, but the financial statements today reflect the pain of the pivot more than the promise of the destination. Management’s ability to deliver on their efficiency and deleveraging plans will be the story to watch.