Iomart’s H1 FY26: higher revenue, a swing to loss, and debt now the key focus
Iomart’s half-year numbers are a mixed bag. Revenue jumped 25% to £77.7 million thanks mainly to the Atech acquisition, but the Group slipped to an adjusted loss before tax of £2.5 million and statutory loss before tax of £6.5 million. Net debt rose to £109.6 million, with £97.5 million drawn on a £115 million Revolving Credit Facility.
The strategic pivot is clear: tilt the business toward Microsoft-centric cloud and security services, consolidate brands, and take costs out. That transition is depressing margins in the short term, but order intake and renewal rates are heading the right way and £4 million of annualised cost savings should help the second half.
Key numbers at a glance
| Metric | H1 FY26 | H1 FY25 |
|---|---|---|
| Total revenue | £77.7m | £62.0m |
| Recurring revenue mix | 86% | 91% |
| Adjusted EBITDA | £12.9m | £17.0m |
| Adjusted EBIT | £2.1m | £6.6m |
| Adjusted (loss)/profit before tax | £(2.5)m | £4.3m |
| Statutory (loss)/profit before tax | £(6.5)m | £1.0m |
| Adjusted diluted EPS | (1.9p) | 2.6p |
| Basic EPS | (4.5p) | 0.3p |
| Cash flow from operations | £8.4m | £11.1m |
| Net debt | £109.6m | £48.1m |
| Bank revolver less cash | £92.4m | £29.8m |
Jargon check: EBITDA is earnings before interest, tax, depreciation and amortisation. Recurring revenue is contracted or habitual repeat revenue. ARR is annual recurring revenue. The RCF is a Revolving Credit Facility, priced at SONIA plus a margin. SONIA is the Sterling Overnight Index Average.
What moved the dial in H1
Atech’s contribution lifted the top line but changed the mix
Atech delivered £21.7 million of revenue in the period and has helped push Microsoft-connected services to roughly 30% of Group revenue (H1 FY2024: 7%). That accelerates the repositioning into public cloud, modern workplace and managed security. The flip side is lower near-term margins, because more consultancy and licence resale revenue means a lower recurring mix and a different gross margin profile.
Legacy services still shrinking, but churn trends improved
Organic revenue fell by about £6.0 million, reflecting previously disclosed churn from legacy self-managed infrastructure and some private cloud contracts. In Iomart Cloud Services, revenue declined to £44.5 million (from £49.4 million) and segment EBITDA dropped to £9.1 million (from £15.1 million). The self-managed infrastructure line was down 24% year-on-year to £6.2 million, though the rate of decline slowed versus H2 FY25. Importantly, renewal rates improved and net order bookings turned positive.
Order intake and renewals are encouraging
- New ARR bookings of £10.0 million, similar to last year.
- Net ARR bookings of £4.5 million (H1 FY25: £0.3 million) after churn.
- Non-recurring revenue held steady at £5.2 million in Iomart Cloud Services and accounted for £5.3 million within Atech, including a £3.0 million cyber consultancy engagement.
Costs coming out, but interest costs up sharply
Annualised cost efficiencies of £4 million have been delivered through headcount reductions, infrastructure decommissioning, procurement and scaling offshore operations. These savings benefit H2 onwards.
However, finance costs rose to £4.6 million (H1 FY25: £2.3 million) due to funding for the Atech acquisition and higher interest rates, pushing the Group to an adjusted loss before tax. Leverage stands at 3.65x last-12-months adjusted EBITDA (3.1x excluding IFRS 16 lease liabilities). Iomart refinanced a £115 million RCF to June 2027, with a margin of 3.0% over SONIA at current leverage – sensible liquidity but deleveraging now matters.
Segment performance and mix
- Iomart Cloud Services: revenue £44.5m, EBITDA £9.1m. Managed cloud down 8% to £33.0m; self-managed infrastructure £6.2m; non-recurring £5.2m. Lower utilisation of fixed-cost infrastructure hurt margins.
- Atech: revenue £25.6m, EBITDA £2.6m (10% margin). Recurring £20.2m; non-recurring £5.3m. Market pricing on M365 reduced margins, but Atech’s accreditation base is a strong platform for upsell into security and managed services.
- Domain & Mass Hosting (Easyspace): revenue £7.7m, EBITDA £3.9m (51% margin). Modest decline, largely from Sonassi churn; management sees scope to stabilise and return to modest growth.
Cash, capex and debt
Operating cash flow was £8.4 million. Investment spend totalled £5.1 million, split between £3.6 million of property, plant and equipment and £1.5 million of development. With £5.2 million paid for software licence commitments and £3.4 million of finance charges, net debt edged up to £109.6 million at 30 September 2025.
Management targets positive H2 cash generation, aided by the absence of the large annual Broadcom payment in H2, lower exceptional costs, and ongoing cost actions.
Outlook and guidance range
The Board expects a better H2 and for the full year to land within market expectations. The latest company-compiled sell-side ranges for FY26 are:
- Revenue: £159 million to £160 million
- Adjusted EBITDA: £27.7 million to £29.2 million
- Adjusted PBT: £(1.7) million loss to £0.4 million profit
- Net debt (including IFRS 16): £97.5 million to £107.8 million
Operationally, H2 priorities include onboarding managed security customers, productising AI services, pushing indirect channel sales via Oriium, leveraging Broadcom Pinnacle Partner status for VMware Cloud, and growing data centre services utilisation. Further efficiency work targets structural data centre costs and automation.
My take: a credible pivot with execution risk
There is plenty to like in the strategy. Microsoft-connected services now c.30% of Group revenue, security capability is expanding, and ARR momentum is positive. The £4 million of annualised savings and a simpler business-unit structure should support margin rebuild.
The watch-outs are equally clear: high leverage at 3.65x, rising interest costs, and margin pressure from licence resale and consultancy-heavy revenue. Legacy infrastructure is still shrinking and drags on utilisation. Delivery in H2 needs to translate net order bookings into billed recurring revenue and cash, while nudging adjusted EBITDA back towards guidance to keep the deleveraging story on track.
What to watch in H2
- Conversion of £10m ARR bookings into in-period revenue and cash.
- Adjusted EBITDA margin progression as £4m savings flow through.
- Net debt trajectory and interest cover under the new RCF.
- Growth in managed security and AI-packaged services at Atech.
- Stability in Easyspace and the pace of decline in self-managed infrastructure.
- Progress on migrating Microsoft-related revenue to Atech and any mix-benefit to margins.
- CEO appointment and leadership cohesion after the exceptional costs linked to the change.
Why this matters for investors
Iomart is moving from a data-centre-heavy model to a hybrid and Microsoft-first managed services platform. That can structurally improve capital intensity and open higher-growth routes in security and AI, but the transition period comes with earnings volatility and leverage sensitivity. If the Group hits the mid-to-top of the FY26 ranges, demonstrates cash-led deleveraging and sustains net ARR growth, sentiment should improve. Miss on any of those and the balance sheet becomes the narrative.
Bottom line: a necessary repositioning that is starting to gain commercial traction. Now it needs H2 execution to prove the model and bring the debt down.
