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(Sharecast News) - Iomart reported a steep drop in profit for the first half of its financial year on Wednesday, as higher borrowing costs and reduced legacy revenues offset the contribution from its largest-ever acquisition, Atech.
However, the cloud services provider said it expected performance to improve in the second half, adding that it remained on track to meet full-year market expectations.
For the six months ended 30 September, group revenue rose 25% to 77.7m, boosted by 21.7m from Atech, which was acquired in 2024.
Organic revenue fell by about 6m due to the customer churn flagged last year.
Adjusted EBITDA declined to 12.9m from 17m, reflecting a shift in mix and lower recurring income from older services.
The AIM-traded company posted an adjusted loss before tax of 2.5m, compared with a 4.3m profit a year earlier, while the statutory loss before tax widened to 6.5m from a 1m profit.
Net debt increased to 109.6m from 48.1m a year earlier and 101.9m at the March year-end, with 97.5m drawn against the group's 115m revolving credit facility.
Cash flow from operations fell to 8.4m from 11.1m.
Iomart pointed to operational improvements that it said underpin a more positive second-half outlook.
Customer renewal rates improved during the period, and net order bookings remained consistently positive.
Microsoft-linked services now account for around 30% of group revenue, up from 7% in the first half of 2024, as the acquisition of Atech accelerated the company's strategic shift into higher-growth segments of the cloud market.
Iomart also reported 4m in annualised cost savings that would benefit results in the remainder of the year, with further efficiency measures under way.
The board reiterated that full-year results should land within the current range of analyst expectations, including revenue of 159m to 160m and adjusted EBITDA of 27.7m to 29.2m for the year to March.
At 1304 GMT, shares in Iomart Group were down 6.2% at 24.2p.
Reporting by Josh White for Sharecast.com.