Half Yearly Report

29 November 2010

iomart Group plc

("iomart" or the "Group")

Half Yearly Results

iomart Group plc (AIM:IOM), the cloud computing and managed hosting services company, is pleased to report its half yearly results for the period ended 30 September 2010.

FINANCIAL HIGHLIGHTS

·; Revenue up 36% to £11.4m (H1 2010: £8.4m)

·; EBITDA1 up 222% to £2.7m (H1 2010: £0.8m)

·; PAT up 105% to £1.0m (H1 2010: £0.5m2)

·; Net cash at end of period of £5.3m (H1 2010: £4.5m)

OPERATIONAL HIGHLIGHTS

·; Acquisition of Titan Internet Limited for £4.2m in October 2010

·; iomart Hosting customer base increased by over 50% with substantial increase in cloud solutions

·; Rapidswitch adds virtualised dedicated server to product range

·; Easyspace experiences improvement in customer retention and increase in average revenue per user

·; Netintelligence receives prestigious award for successful delivery of Universal Home Access project

1 EBITDA means earnings before interest, tax, depreciation, amortisation, acquisition costs and share based payments

2 before exceptional gain of £1m and related costs of £135k on reduction of deferred consideration on business combination

Angus MacSween, CEO commented,

"In the first half of the financial year we continued to successfully grow both the size and quality of our customer base. iomart is one of the very few, trusted UK providers of complex hosting services and this has led to exceptionally low churn and high recurring revenues from existing and new customers. Our range of high quality services combined with investment in technological innovation means we are very well positioned to continue to deliver strong growth."

For further information:

About iomart Group plc

iomart Group is one of the UK's leading providers of managed hosting and cloud computing services. From a single server through to private cloud networks, iomart specialises in the delivery and management of mission-critical hosting services, enabling customers to reduce the costs, complexity and risks associated with maintaining their own web and online applications.

By physically owning and managing its own network infrastructure, including five state-of-the-art data centres in the UK, iomart offers world-beating levels of service to its customers. The Group offers a unique 100% uptime guarantee with all hosting services being engineered to ensure no single point of failure.

Services offered include: Managed Hosting, Colocation, Complex Hosting solutions, Content Delivery Networks, IP Transit, Data Centre Services and Cloud Computing.

For further information about the Group, please visit www.iomart.com

Chief Executive's Statement

Introduction

I am very pleased to report on another excellent period of trading for the Group. We are now becoming firmly established as one of the UK's leading managed hosting providers, with companies continuing to choose iomart for the provision of the business critical cloud and managed hosting services that they require.

The acquisition of high quality managed hosting companies is an important element of our strategy and we were delighted to have completed the purchase of Titan Internet Limited ("Titan") post the period end on 29 October 2010. Titan brings to the Group a very good customer base and an extremely competent workforce that provide a high level of managed hosting services to these customers.

The movement into profitability which we initially achieved in the first half of the last financial year and which we built on in the second half has continued during this period. Indeed EBITDA for this period of £2.7m (H1 2010 £0.8m) is almost at the level we achieved for the whole of the March 2010 financial year.

Both of our operating segments have contributed to this high level of profit growth. Our Hosting segment has continued to win substantial amounts of new business across all of our brands and the Easyspace segment has also contributed strongly.

Financial Performance

Revenues from our operations grew 36% to £11.4m (H1 2010 £8.4m), with strong contributions from both of our operating segments.

Easyspace grew revenues by 12% to £3.9m (H1 2010 £3.4m) over the period largely through an increase in the average revenue per customer and also through improved rates of customer retention.

Our Hosting segment grew revenues by 53% to £7.5m (H1 2010 £4.9m) through the sustained acquisition of managed hosting contracts by our main trading brands iomart Hosting, which services the needs of the corporate market, and Rapidswitch, which provides dedicated server solutions to the SME market.

The gross profit in the period, which is calculated by deducting variable cost of sales such as domain costs, power and sales commission and the relatively fixed costs of operating our datacentres, from revenue, was £6.8m (H1 2010 £4.4m). This substantial increase in gross profit was a direct result of the contribution from the revenue growth delivered by both segments. In percentage terms the gross margin improved to 60% (H1 2010 53%) with again both segments recording improved gross margin percentages in the period. In Easyspace this was due to the impact of increased revenue per customer and improved customer retention and in Hosting where, due to the fixed nature of some of the operating costs, the contribution from increased revenues improved the percentage margin.

The Group's EBITDA of £2.7m (H1 2010 £0.8m) reflects a vastly improved performance confirming the sustained move into recurring profitability which was achieved for the first time in H1 2010. Once again both segments contributed to this greatly improved performance.

Easyspace improved its EBITDA to £1.4m (H1 2010 £1.1m) and also its margin to 36% from 31%. This improvement is mainly due to the effect of the increased revenue per customer during the period and improved retention of customers.

Hosting improved its EBITDA to £2.4m (H1 2010 £0.8m) and also its margin to 32% from 17%. This significant improvement is largely due to the contribution made by the increased sales from both iomart Hosting and Rapidswitch together with the cost savings achieved in moving Rapidswitch customers to our own datacentre from rented datacentre space post acquisition. Over the period we have continued to incur additional expenditure on resources for the Hosting segment to provide the high level of service our growing customer base has come to expect, and to increase our sales force to further exploit the opportunities afforded by a growing market for these services.

Group overheads, which are not allocated to segments, include the cost of the Board, all the running costs of the headquarters in Glasgow, and Group led functions such as human resource, marketing, finance and design. Group overheads in the period remained unchanged at £1.1m (H1 2010 £1.1m).

Depreciation charges of £1.2m (H1 2010 £0.8m) have increased as we depreciate the equipment purchased to provide services to our new customers and also due to additional datacentre capacity being brought into play. The charge for the amortisation of intangible assets has increased to £0.3m (H1 2010 £0.2m) as we amortise the intangible assets acquired when Rapidswitch was purchased. The share based payment charge has decreased to £0.1m (H1 2010 £0.2m) as a result of both the lapsing of share options and share options issued in previous periods having been fully charged in the Income Statement. Under revised accounting standards it is no longer permissible to include the costs incurred during an acquisition as part of the overall cost of our balance sheet investment. Consequently, during the period the costs we incurred of £0.1m (H1 2010 £nil) in respect of legal and financial services on acquisition related activities have been charged to the income statement.

Finance income in the period of £0.2m (H1 2010 £0.1m) includes interest earned on the deferred consideration due to the Group from a disposal in a previous year which was received in the period and also interest due on a lease rental deposit. Finance costs of £0.1m (H1 2010 £nil) have increased as we make use of leases to fund the purchase of some of the capital equipment needed to provide services to new customers.

As a result the profit for the period before tax was £1.2m (H1 2010 £0.5m, including an exceptional net gain of £0.9m arising from the renegotiation of deferred consideration payable).

There is a small tax charge in the period of £0.1m (H1 2010 tax credit of £0.9m) resulting in a profit for the period from total operations of £1.0m (H1 2010 £1.4m, including an exceptional net gain of £0.9m arising from the renegotiation of deferred consideration payable and a tax credit of £0.9m).

The Group generated cash from operating activities in the period of £3.1m (H1 2010 £0.6m) which after net expenditure on investing activities of £1.3m (H1 2010 £8.6m) and net cash used in financing activities of £0.5m (H1 2010 £0.4m) resulted in a cash and cash equivalent balance at the end of the period of £7.1m (H1 2010 £5.5m).

The net cash position of the Group at the end of September was £5.3m (H1 2010 £4.5m).

After the end of the period the Group acquired the entire issued share capital of Titan for a total consideration of £4.2m of which £3.6m was paid on completion and a further amount of up to £0.6m is payable no earlier than 1 April 2011. At the request of the Group, £3m of the Group's £10m borrowing facility provided by Lloyds, has been made available to finance the acquisition and £2m has been drawn down. At the time of the acquisition, Titan had £0.5m of net cash.

Operational Review

Whilst all our activities involve the provision of managed hosting services we are organised into two segments.

Hosting

Our activities within the Hosting segment have all performed well over the period. We are seeing a continual shift towards the provision of cloud hosting solutions and we are responding to this market opportunity through the provision of a mix of virtual and physical solutions, with many customers selecting an element of both. We have won over 200 new orders in the period through our iomart Hosting division, which provides complex hosting solutions to the corporate market, many of which involve the provision of virtual solutions. As has been our experience in previous periods, a significant number of these orders were placed by existing customers and as ever we are grateful to these customers for the loyalty they continue to place in us as a provider of essential services.

Netintelligence, our provider of cloud security services, has enjoyed a very good period providing the internet security solution for the government sponsored Universal Home Access program through which school children in England and Wales have been provided with a fully enabled laptop. As well as being a commercial success the project has also been a technical success and it was very gratifying to be awarded the Security Project of the Year at the recent UK Computing Security Awards for the work undertaken on this project.

Rapidswitch, which provides dedicated server hosting services to the SME market, has continued to enjoy success over the period. The recent launch of a range of virtual dedicated servers within our product range has been met with an encouraging level of enthusiasm by the marketplace.

We continued our programme of datacentre fit out with the commencement of a further phase of fit out in our Maidenhead datacentre. This will provide an additional 7,000 square feet of datacentre space by the end of this financial year.

All of this activity contributed to an increase in the Hosting segment revenue of 53% to £7.5m (H1 2010 £4.9m) over the prior period.

Easyspace

The Easyspace segment, which provides a range of products and services to the micro and SME market, has enjoyed growth over the period with revenues increasing by 12% to £3.9m (H1 2010 £3.4m). We have seen an increase in the overall number of customers, the average revenue per customer and customer renewal rates over the period all of which have helped to drive the increase in revenues.

Current trading and outlook

Trading in the second half is progressing well with our pipeline of new business continuing to strengthen.

The fundamental shift from companies buying technology and managing it in-house to outsourcing it as a flexible service from strong, trusted suppliers is in its infancy. We are in a market set to grow significantly over the next few years and with a strong asset base and the expertise to deliver a complex set of cloud services, we expect to continue the growth we have enjoyed recently.

We look forward with confidence.

Consolidated Interim Statement of Comprehensive Income

Six months ended 30 September 2010

Consolidated Interim Statement of Financial Position

As at 30 September 2010

Consolidated Interim Statement of Cash Flows

Six months ended 30 September 2010

Consolidated Interim Statement of Changes in Equity

Six months ended 30 September 2010

Notes to the Half Yearly Financial Information

Six months ended 30 September 2010

1. Accounting policies

The financial information for the year ended 31 March 2010 set out in this half yearly report does not constitute statutory financial statements as defined in section 434 of the Companies Act 2006. The figures for the year ended 31 March 2010 have been extracted from the Group financial statements for that year. Those financial statements have been delivered to the Registrar of Companies and included an independent auditors' report, which was unqualified and did not contain a statement under section 493 of the Companies Act 2006.

The half yearly financial information has been prepared using the same accounting policies and estimation techniques as will be adopted in the Group financial statements for the year ending 31 March 2011. The Group financial statements for the year ended 31 March 2010 were prepared under International Financial Reporting Standards as adopted by the European Union. These half yearly financial statements have been prepared on a consistent basis and format with the Group financial statements for the year ended 31 March 2010. The provisions of IAS 34 'Interim Financial Reporting' have not been applied in full.

The Group has adopted IFRS 3(R) 'Business Combinations' in the current year. All expenses incurred in connection with acquisitions have been expensed through the income statement.

2. Operating segments

Revenue by Operating Segment

Geographical Information

In presenting the consolidated information on a geographical basis, revenue is based on the geographical location of customers. The United Kingdom is the place of domicile of the parent company, iomart Group plc. All of the Group's revenue originates from the United Kingdom. No individual country other than the United Kingdom contributes a material amount of revenue therefore revenue from outside the United Kingdom has been shown as from Rest of the World.

Analysis of Revenue by Destination

Profit by Operating Segment

Group overheads, share based payments, acquisition costs, interest and tax are not allocated to segments.

3. Earnings per share

The calculations of earnings per share are based on the following results and numbers:

4. Net finance cost

Other interest income of £112,000 was received in the period relating to interest earned on sums held in escrow which have now been released. In addition, £80,000 was received in the period relating to interest earned on sums held on a rental deposit by a landlord since the inception of the agreement and of this, £40,000 had previously been accrued in interest receivable.

5. Taxation

The Group has a deferred tax asset which has been recognised in respect of tax losses within one of the subsidiary companies, which has generated taxable profits and is expected to continue to do so.

6. Property, plant and equipment

7. Deferred consideration receivable on disposal

The deferred consideration receivable on disposal of Ufindus Limited in July 2008 of £914,000 was received in July 2010 net of costs associated with the disposal of £119,000.

8. Deferred consideration due on acquisitions

On 27 August 2010, the final instalment of deferred consideration of £1,000,000 was paid in relation to the acquisition of Ezee DSL Ltd. The single share in Ezee DSL Limited that had been placed in escrow was transferred to iomart Group plc on payment of this final instalment and consequently iomart Group plc now owns 100% of the share capital of this company.

9. Analysis of change in net cash/(debt)

10. Post balance sheet event

On 29 October 2010, the Group acquired the entire issued share capital of Titan Internet Limited for a total cash consideration of up to £4.2m. Of the total consideration of £4.2m, £3.6m was paid on completion and a further amount of up to £0.6m is payable no earlier than 1 April 2011, subject to the certain performance criteria being met. In addition, at the date of acquisition, Titan Internet Limited had approximately £0.5m of net cash.

11. Availability of half yearly reports

Half yearly reports will be sent to all shareholders on 15 December 2010. Copies of the half yearly report will be available for collection from the offices of Peel Hunt Ltd, 111 Old Broad Street, London, EC2N 1PH, for a period of one month from the date of despatch and in accordance with Rules 20 and 26 of the AIM Rules, available from the company's website at www.iomart.com.

INDEPENDENT REVIEW REPORT TO IOMART GROUP PLC

Introduction

We have been engaged by the company to review the financial information in the half-yearly financial report for the six months ended 30 September 2010 which comprises the consolidated interim statement of comprehensive income, the consolidated interim statement of financial position, the consolidated interim statement of cash flows, the consolidated interim statement of changes in equity and the related notes 1 to 11 set out on pages 6 to 14. We have read the other information contained in the half yearly financial report which comprises only the interim results announcement and the chief executive's statement and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial information.

This report is made solely to the company in accordance with guidance contained in ISRE (UK and Ireland) 2410, "Review of Interim Financial Information performed by the Independent Auditor of the Entity". Our review work has been undertaken so that we might state to the company those matters we are required to state to them in a review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company, for our review work, for this report, or for the conclusion we have formed.

Directors' Responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The AIM rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures are consistent with those which will be adopted in the annual accounts having regard to the accounting standards applicable for such accounts.

As disclosed in Note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The financial information in the half-yearly financial report has been prepared in accordance with the basis of preparation in Note 1.

Our Responsibility

Our responsibility is to express to the Company a conclusion on the financial information in the half-yearly financial report based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

INDEPENDENT REVIEW REPORT TO IOMART GROUP PLC

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the financial information in the half-yearly financial report for the six months ended 30 September 2010 is not prepared, in all material respects, in accordance with the basis of accounting described in Note 1.

GRANT THORNTON UK LLP

REGISTERED AUDITOR

CHARTERED ACCOUNTANTSGlasgow

26 November 2010