Iomart 'very much on front foot' as Glasgow cloud computing group seals latest takeover

Iomart is “very much on the front foot”, according to its recently-appointed chief executive, after the Glasgow-headquartered cloud computing group sealed a fresh multi-million-pound acquisition and posted robust first-half results.

Lucy Dimes, who took up the top post in September following the abrupt departure of previous incumbent Reece Donovan, said the group had a “sound strategy that is working” as it agreed to acquire Accesspoint Technologies, a London-based IT hosting partner that has been focused on the UK legal industry since 2009. Iomart said the deal would provide it with “deep industry expertise and a highly capable team with a strong reputation within the legal sector”.

The Scots firm is paying up to £6.4 million for Accesspoint, which generated revenues of £3.8m in the year to the end of August and adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of about £800,000. The initial amount for the acquisition is £4.5m in cash, with a potential further £500,000 payable on the achievement of certain post-acquisition milestones. The agreement also includes up to a further £1.4m in an earn-out payment based on the profitability of the newly-acquired business for the 12 months ending August 31, 2024.

News of the deal came as Iomart posted an 18 per cent hike in half-year revenues, up from £52.6m in the first-half of last year to a previously flagged £62m for the period covering the six months to the end of September 2023. Some £6m of revenues resulted from the recent acquisitions of Concepta and Extrinsica. Cloud managed services revenue, the largest component of the group, jumped by 27 per cent to £37m thanks to a combination of “modest” organic growth, price rises from last year’s energy cost increases and a contribution of about £4.3m from the two acquisitions.

Glasgow-headquartered Iomart is a cloud computing and IT managed services business providing hybrid cloud infrastructure, network connectivity, security and digital workplace capability.

Adjusted Ebitda grew by 5 per cent, year on year, to £18.6m but at the bottom line profit before tax fell 10 per cent to £4.4m. The interim dividend was maintained at 1.94p per share.

Dimes said: “We have a sound strategy that is working and we have renewed momentum. The acquisitions that we made last year and the one that we have just announced extend our depth and breadth. These set us up for the second half and the next 18 months.”

She added: “All businesses are continuing with their digital transformation journeys, which can be everything from extended storage and hybrid cloud opportunities through to digital workflows. No matter how you look at it, our market is very much growing globally and with our latest acquisitions we have a one-stop shop for the SME [small and medium-sized enterprise] and mid market. We are very much on the front foot. We want to up our focus and pace as there is obviously a lot of competition out there.”

The latest results also revealed that the group Ebitda margin of 30 per cent was down on last year’s first-half figure of 33.8 per cent but slightly ahead of the second-half’s 29.1 per cent. Chief financial officer Scott Cunningham said the trend in margin performance reflected the change in revenue mix and specific timing of inflationary price adjustments during the previous financial year.

Reece Donovan had been chief executive until this September when he was replaced by Lucy Dimes.

“In the most recent period we have seen quite a bit more stability in costs and margins,” he told The Scotsman. “One of the things last year that diluted those margins was the passing through of energy costs. Energy was by far our biggest increase. It’s probably about 12 months since we did some larger price increasing in the customer base so it’s been a lot more stable through the first half of this year.”

In September, Aim-quoted Iomart, which has an overall headcount of about 500, announced the sudden departure of Donovan, who joined the board as chief operating officer in March 2020 and became chief executive in September of the same year. He replaced Angus MacSween, who had been at the helm for more than two decades making him one of Scotland’s longest serving chief executives. Dimes became chief executive on a full-time basis, with immediate effect.

She said: “We had a founder running the business for more than 20 years. Reece joined in 2020 and took the company through a period of transition and the pandemic and the energy crisis. It was a very difficult period. We got to the point and he got to the point where we agreed that there needed to be new leadership to take things into the future.”

Martin O’Sullivan, an analyst at brokerage Shore Capital, said: “We agree that Iomart’s blend of both IT and connectivity skills combined with its secure, scalable, resilient cloud and network infrastructure uniquely positions the company to support the ambitions of customers. The board has confidence that Iomart will participate successfully in the growing cloud sector.”

O’Sullivan, who has a buy rating on the shares, added: “The share price is discounting a near-term uncertainty, high interest rates and low expectations; absent is any bullish sentiment around ‘Iomart 2.0’ and the growth prospects therein. If, as we expect, Iomart can successfully build upon its core foundations, the results ought to be materially value enhancing.

“Essentially Iomart is looking to build on its core strengths and by so doing accelerate future growth. Whilst the plan will take time to ‘prove out’, we see attractive risk/reward for the medium term based on the market recovery and self-help, and we welcome [this] update, and acquisition, as incrementally positive.”

Glasgow's Iomart makes 'sound choice' for new CEO after sudden change at top