Glasgow cloud computing firm Iomart 'energised' as reboot brings in new customers

Iomart, the Glasgow-headquartered cloud computing group, has insisted that its growth strategy is on track and beginning to deliver “tangible results” after a mixed first-half performance.

Chief executive Reece Donovan said the firm was “energised” by its refreshed strategy, new branding and “clear focus” as he revealed flat pre-tax profits of £6 million for the six months to the end of September.

Revenues were down 8 per cent at £51.9m, in line with an autumn trading update and reflecting lower non-recurring equipment and consultancy sales, along with lower customer renewals.

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Bosses said they were confident that this “short-term impact” on sales will be reversed.

Iomart CEO Reece Donovan. Picture: Peter Devlin

The latest results showed that adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) dipped 6 per cent to £19.6m. An interim dividend of 2.42p was declared, down from 2.6p a year earlier.

Donovan said: “We are energised by our refreshed strategy, new brand and clear focus. The early customer wins from the new sales campaigns are excellent signs that the strategy is on track and starting to deliver tangible results.

“Iomart's high level of recurring revenue remains a considerable strength, providing good visibility for the remainder of the year. Current trading is in line with the board's expectations for the full year.”

Chief financial officer Scott Cunningham said it would “take time” for the customer wins to feed through to stronger earnings.

Analysts at house brokerage Peel Hunt, which has a “buy” recommendation on the shares, said: “The new offer launches are going well. This is perhaps the most important takeaway from the [results statement].

“For example, recently launched ‘Secure Connectivity Services’ not only has a well-qualified pipeline, but there are already notable wins, such as a Scottish housing association, won against some key peers.

“Over time, layering these managed services contract wins should build up a tidy revenue stream in secure connectivity from customers who do not have the in-house skills to do so.”

Martin O’Sullivan, an analyst at Shore Capital, noted: “Given the backdrop of Omicron, we view the unchanged full-year outlook and early customer wins from Iomart’s new sales campaigns as incrementally positive for the investment case.

“Overall we do not expect material changes to consensus expectations, with a chance of upside as we move through the second half given the initial success of the new sales campaigns.”

Last week, Iomart secured a £100m financing facility to back its growth plans with the funding earmarked for future M&A activity.

The firm said it had agreed a refinancing, replacing an existing single bank revolving credit facility of £80m that was due to mature at the end of next September, with a new £100m facility.

It is being provided by a group of four banks - HSBC UK, Royal Bank of Scotland, Bank of Ireland and Clydesdale Bank, part of Virgin Money group.

The new facility has an initial maturity date of June 30, 2025, with a 12-month extension option.

Last month, Iomart said it was trialling a “first of its kind” cooling system that could slash data centre carbon emissions.

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